Monday, May 31, 2010

Got your Chinese fries today?

China pins food-security hopes on humble potato
By Lauren Keane
Washington Post Foreign Service
Monday, May 31, 2010; A01

JIUTIAOLONG, HUNAN PROVINCE, CHINA -- In the land of rice, China is looking at an unlikely tool for maintaining growth and social harmony: the potato.

The Chinese government has begun ramping up research, production and training related to the humble spud, and hopes are high that it could help alleviate poverty and serve as a bulwark against famine.

The challenge of feeding a growing nation on a shrinking supply of arable land while confronting severe water shortages has long been a major concern here. China has to feed one-fifth of the world's population on one-tenth of its arable land, and the nation's expanding cities are consuming farmland at breakneck speed. China estimates that by 2030, when its population is expected to level off at roughly 1.5 billion, it will need to produce an additional 100 million tons of food each year.

That statistical reality could change eating habits here. Potatoes need less water to grow than rice or wheat, and they yield far more calories per acre. In rice-cultivating regions of southern China, farmers can squeeze a round of fast-growing potatoes into their rice fields in between planting seasons. In some of the poorest parts of arid northern China, potatoes are among the few crops that grow.

"Potatoes have so much potential here," said Xie Kaiyun, a leading potato scientist at the Chinese Academy of Agricultural Sciences, a government think tank. "Rice, wheat, corn -- we've gone about as far as we can go with them. But not the potato."

Ever keen to seize opportunity, Chinese entrepreneurs are turning potatoes into forms more familiar to Chinese palates: buns, noodles, cakes. They are developing exotic varieties and have even sent seeds into orbit, saying that zero gravity makes them more nutritious and charging astronomical premiums for the seeds' offspring back on Earth.

Potatoes won't replace rice or wheat as mainstays of Chinese cuisine anytime soon, if ever. They are eaten as side dishes, and the government has not yet named them a staple, a distinction that would mean preferential treatment in domestic markets and would carry significant cultural weight.

But they are increasingly seen here as an underutilized resource.

With that in mind, the government in February signed an agreement with the International Potato Center, a research organization, to jointly launch a major potato research center in Beijing. Part of the center's broad mandate will be to develop varieties that grow quickly and dependably in specific regions throughout China. Last month, the State Council announced subsidies for farmers who grow high-yield seed potatoes. And government-funded pilot programs have been expanding in nearly every province, training farmers in innovative methods that raise crop yields and, with them, rural incomes.
Eye on the future

"It's unusual to see a country explicitly name a commodity as an instrument of development," said Pamela K. Anderson, director general of the International Potato Center. "It shows how seriously the Chinese government is taking its commitment to food security."

China has a long-standing policy of food self-sufficiency, growing 95 percent of the grain required to feed its people. The country's sheer size means that a major crop failure or other food emergency here could have international ramifications, overwhelming world food markets with sudden demand. "Were China to need to import a large amount of grain, it would have a very dramatic impact on world food prices," said Anthea Webb, director of World Food Program China.

China produces and consumes more potatoes than any other country. But that's largely because of its huge population. The Chinese lag in per capita terms, eating one-third the amount of potatoes that Russians do and two-thirds the amount Americans eat.

The average acre of potato plants in China yields far fewer edible spuds than in other developing countries, mostly because farmers plant cheap, disease-prone seed. China's national and local governments are trying to change that by increasing potato funding, hoping the investments will raise rural incomes and help maintain social stability by keeping farmers on their land in the country's poorest areas.

Researchers from Hunan Agricultural University started working with the province's potato farmers in 2005 and last year used government grant funds to provide training and seeds. Farmers plant in rice fields during the winter, when the land would otherwise produce nothing; potato plants then improve the soil for the next season's rice cultivation.

It's a good time to be in the Chinese potato business. Wholesale prices increased 85 percent from November to April, thanks in part to a severe drought in the nation's southwest that has limited supply.

"We earn the same from one potato crop that we get from three rice crops" or 10 cabbage crops, said Huang Weihua, 40, the leader of the local farmers association. He pointed across a terraced field of flowering potato plants to his house, a two-story brick-and-tile structure. His son was hard at work remodeling the first floor -- potato money, Huang said.
Market potential

But if potatoes are to become a key to China's food security, the market for them must expand even more.

"Chinese don't know enough about potatoes and their nutritional benefits," said Xie, the potato scientist. "If they eat one more potato dish every day -- well, there are 1.3 billion of us. That's a huge new market."

Liang Xisen was dubbed China's "potato king" last year. The lifelong entrepreneur, who made it into a 2006 list of the nation's richest men, has poured his wealth into potatoes. His company churned out 150,000 tons of high-quality seed potatoes last year, assisted by government subsidies, and sold them to farmers nationwide for a profit of about $22 million, according to company statistics.

Liang has even opened China's first Potato Museum. An altar outside presents burned offerings to a giant plaster statue of a Peruvian potato god. A red banner pulled taut above the entrance proclaims: "Little potatoes, big industry."

Premier Wen Jiabao has joined the cause. He shared a meal of steamed potatoes with farmers last fall in Gansu, one of China's poorest and most significant potato-growing provinces. He donned tennis shoes to shovel out spuds, with the video footage running on China's most-watched nightly news broadcast.

In China, where government endorsements mean business, Wen's message has trickled down to the Hunan potato fields. On a recent afternoon, Huang stood calf-deep in an irrigation ditch, surveying his ripening crop in a downpour from under a blue polka-dot umbrella.

"Wen Jiabao said potatoes are important -- on national television!" Huang said, wide-eyed. "I figure that's a good sign for us, right?"

Researcher Liu Liu contributed to this report.

Sunday, May 30, 2010

Strike at Honda plant in China

Strike in China Highlights Gap in Workers’ Pay
The New York Times, May 28, 2010

FOSHAN, China — After years of being pushed to work 12-hour days, six days a week on monotonous low-wage assembly line tasks, China’s workers are starting to push back.

A strike at an enormous Honda transmission factory here in southeastern China has suddenly and unexpectedly turned into a symbol of this nation’s struggle with income inequality, rising inflation and soaring property prices that have put home ownership beyond the reach of all but the most affluent.

And perhaps most remarkably, Chinese authorities let the strike happen — up to a point.

In the kind of scene that more often plays out at strikes in America than at labor actions in China, print and television reporters from state-controlled media across the country have started covering the walkout here, even waiting outside the nearly deserted front gate on Thursday and Friday in hope of any news. All the Chinese reporters disappeared on Saturday morning, however, as the government, apparently nervous, suddenly imposed without explanation a blanket ban on domestic media coverage of the strike.

A worker at a factory dormitory said on Saturday afternoon that the strike continued, and police were nowhere in sight at the factory or the dormitory. The authorities have been leery of letting the media report on labor disputes, fearing that it could encourage workers elsewhere to rebel. The new permissiveness, however temporary, coincides with growing sentiment among some officials and economists that Chinese workers deserve higher wages for their role in the country’s global export machine.

And without higher incomes, hundreds of millions of Chinese will be unable to play their part in the domestic consumer spending boom on which this nation hopes to base its next round of economic growth.

“This is all because there is a major political debate going on about how to deal with the nation’s growing income gap, and the need to do something about wages,” said Andreas Lauffs, a lawyer at Baker & McKenzie who specializes in Chinese labor issues.

If wages do rise, that could bring higher prices for Western consumers for goods as diverse as toys at Wal-Mart and iPads from Apple.

The Chinese media may also have found it a little easier, politically, to cover this strike because Honda is a Japanese company, and anti-Japanese sentiment still simmers in China as a legacy of World War II. Certainly, the strike is hitting Honda hard, as the resulting shortage of transmissions and other engine parts has forced the company to halt production at all four of its assembly plants in China.

Honda has an annual capacity of 650,000 cars and minivans in China, like Jazz subcompacts for export to Europe and Accord sedans for the Chinese market. Because Honda’s prices in China are similar to what it charges in the United States, the cars tend to be far out of reach financially for most of the workers who make them.

A Honda spokeswoman declined to discuss specific issues in the strike negotiations.

The intense media coverage may evoke historical memories of the 1980 shipyard strike in Gdansk, Poland, that gave rise to the Solidarity movement and paved the way for the fall of Communism in Eastern Europe. But the reality here is much different.

Instead of tens of thousands of grizzled and angry shipyard workers, the Honda strike involves about 1,900 mostly cheerful young people. And the employees interviewed say their goal is more money, not a larger political agenda.

“If they give us 800 renminbi a month, we’ll go back to work right away,” said one young man, describing a pay increase that would add about $117 a month to an average pay that is now around $150 monthly. He said he had read on the Internet of considerably higher wages at other factories in China and expected Honda to match them with an immediate pay increase.

Many workers at other factories in southeastern China already earn $300 a month, but they do so only through considerable overtime. And even that higher income is not enough to embark on the middle-class dream in China of owning a small apartment and subcompact car. Officially, though, the government is discouraging heavy reliance on overtime, and workers here said that Honda was not assigning much.

The strikers said that Honda mainly hired recent graduates of high schools or vocational schools. And so, most are in their late teens or early 20s, representing a new generation of employees, many of whom had not been born when the Chinese authorities suppressed protests by students and workers in Tiananmen Square in 1989 — a watershed event whose 21st anniversary falls next Friday.

The profile of striking workers seems to run more along the lines of slightly bookish would-be engineers — perhaps without the grades or money to attend college — rather than political activists. Besides their low wages, the workers seem focused on issues like the factory’s air-conditioning not being cool enough, and the unfairness of having to rise from their dormitories as early as 5:30 for a 7 a.m. shift.

Workers said that in addition to their pay, they also received free lodging in rooms that slept four to six in bunk beds. They also get free lunches, subsidized breakfasts for the equivalent of 30 cents and dinners for about $1.50.

The striking employees said that some senior workers, known as team leaders, had allied themselves with management. But they insisted that the rank-and-file workers were solidly in favor of walkout — a claim impossible to verify.

Although China is run by the Communist Party and has state-controlled unions, the unions are largely charged with overseeing workers, not bargaining for higher wages or pressing for improved labor conditions. And they are not allowed to strike, although China’s laws do not have explicit prohibitions against doing so.

Workers at the Honda factory dormitory said that the official union at the factory was not representing them but was serving as an intermediary between them and management. Li Jianming, the national spokesman for the All China Federation of Trade Unions, declined to comment.

The workers here have been on strike since May 21, with no resolution in sight. But the strike did not come to broader notice until Thursday and Friday as Japanese media began reporting the shutdown of Honda assembly plants, and as Chinese media and Internet sites were allowed to report extensively on those activities.

The unusually permissive approach of the authorities toward media coverage of the strike follows a decision to tolerate extensive coverage this month of suicides by workers at the Taiwanese-owned Foxconn factory complex in nearby Shenzhen that supplies Apple and Hewlett-Packard.

The official China Daily newspaper ran a lead editorial on Friday that cited the Honda strike as evidence that government inaction on wages might be fueling tensions between workers and employers. The editorial criticized the Ministry of Human Resources and Social Security for not moving faster to draft a promised amendment to current wage regulations because of what the newspaper described as opposition from employers.

Zheng Qiao, the associate director of the department of employment relations at the China Institute of Industrial Relations in Beijing, said the strike was a significant development in China’s labor relations history and that “such a large-scale, organized strike will force China’s labor union system to change, to adapt to the market economy.”

Keith Bradsher reported from Foshan, China, and David Barboza from Shanghai. Bao Beibei contributed research.

Saturday, May 29, 2010

China and North Korea: not yet sanctions

China toughens stance toward North Korea, but doesn't back sanctions
By Blaine Harden
Washington Post, Saturday, May 29, 2010; A12

SEOUL -- China toughened its position toward North Korea Friday but fell short of the support for a U.N. Security Council rebuke that South Korean leaders had hoped for during Chinese Premier Wen Jiabao's high-profile visit.

Wen told South Korean President Lee Myung-bak that China has not concluded whether North Korea is responsible for the March 26 sinking of a South Korean naval ship that killed 46 sailors. The incident has triggered one of the worst security crises on this divided peninsula since the 1950-53 Korean War.

That stance, in stark contrast to an international investigation blaming Pyongyang for the torpedo attack, reflects China's traditional kid-gloves approach to the isolated, impoverished and heavily armed dictatorship on its far eastern border.

Still, Wen signaled a shift in position by not simply supporting North Korea and by telling Lee that China would not defend anyone responsible for the sinking of the 1,200-ton Cheonan.

"It is a modest shift, but a pretty disappointing one," said Michael J. Green, a top adviser on North Korea in President George W. Bush's administration.

Green said that among China's leaders, Wen is one of the most sympathetic to South Korea's position and that his remarks indicate that China ultimately would support a U.N. resolution -- but "will do everything to water it down" and press for a return to negotiations. He noted that "Beijing never before has been under such pressure to choose between North and South," which is a major trading partner.

"We certainly hope that, you know, through this visit, China will recognize and support the conclusions of the investigation," State Department spokesman P.J. Crowley said. "We think that the evidence is compelling. And we think that it's time for the international community to come together in a united and demonstrated way and send a clear message to North Korea."

North Korea adamantly denies sinking the ship and has threatened war if there is any move to punish it. Pyongyang also said this week that it is severing relations with the South, a move that followed Seoul's imposition of trade, diplomatic and military measures to punish North Korea.
The North: Sinking 'faked'

On Friday, a senior North Korean general said the sinking was a hoax perpetrated by Seoul, and he warned of war. At a rare news conference for a member of the powerful National Defense Commission, Maj. Gen. Pak Rim Su reportedly said South Korea had "faked" the sinking.

Wen said China is examining the international investigation that blamed North Korea, whose state-run economy depends almost exclusively on China for fuel, food aid and trade. The investigation, conducted by South Korea and experts from the United States and three other countries, found evidence that a North Korean-made torpedo fired by a North Korean mini-submarine sank the ship.

China "always opposes and condemns any acts detrimental to peace and stability on the peninsula," Wen said, according to the official New China News Agency. He added that Beijing "takes serious note of the results of a joint investigation by South Korea and other countries, as well as the reactions of all parties."

Wen is in South Korea for a three-day visit that presents a difficult diplomatic challenge. China has to balance its historically protective stance toward North Korea against the surging importance of its economic ties to South Korea and Japan. This weekend, Wen meets again with Lee and with Japanese Prime Minister Yukio Hatoyama.

The South Korean government is working with the United States to secure Security Council condemnation of North Korea. In their meeting in Seoul, Lee pressed Wen "to play an active role in making North Korea admit its wrongdoing," the president's spokesman said.

Wen did not go nearly that far, according to accounts of their meeting. Yet his careful comments appeared to recalibrate the rules in Beijing's treatment of North Korea, which would almost certainly collapse without China's concessionary aid. Before Friday, China had confined its comments on the ship's sinking to expressions of sympathy for the loss of life while cautioning all governments to remain calm.
More consultations

China appears to be standing alone among veto-wielding members of the Security Council in questioning the findings of the investigation into the ship's sinking.

Russia announced this week that it will send a team of experts to examine evidence gathered by investigators. South Korean officials said they think that Russia is likely to accept their findings.

China has made no similar commitment to send its scientists to look at the evidence. But South Korean Foreign Minister Yu Myung-hwan said in an interview Friday that it is his "expectation" that such a commitment will be made after officials "consult with the Chinese a bit more."

Yu said South Korea needs to move carefully in dealing with China on the ship incident, nudging Beijing to accept the "facts" of the investigation without derailing "very good relations" between the two countries.

"I don't want to push them," Yu said.

China is South Korea's most important trading partner, the primary focus of its foreign investment and its leading tourist destination. About 5 million people travel between the two countries every year.

Yu said his government understands that the warship's sinking has pushed Beijing into an awkward corner.

"China has a very special linkage and interest" in North Korea, Yu said. "So I presume that it is not that easy to ignore the North Koreans' appeal to support their position."

"If China will do anything, it will be done in a very quiet manner," Yu said. "China will never say in public what they are going to do."

Amid all the fiery rhetoric this week, an important door was left open: Both countries have not shut down the Kaesong industrial complex, a factory park just inside the North Korean border. More than 40,000 North Koreans work there for South Korean companies. Over the past six years, the complex has pumped hundreds of millions of dollars into the North's struggling economy.

"We don't want to spoil a good kind of showcase for North-South economic cooperation," Yu said.

As it moved this week to punish the North, South Korea said it would install propaganda loudspeakers along the border. In response, North Korea threatened to blow up the speakers and close down Kaesong.

But Yu said South Korea is open to delaying its psychological warfare operations if the North sends the right signals.

The North Korean government of Kim Jong Il also has been "very careful" not to use rhetoric that would force Kaesong to close, said a high-ranking South Korean official who briefed foreign reporters Friday.

"It is a kind of verbal chicken game," the official said. But he said North Korean authorities understand that the factory park supports the livelihoods of 200,000 people in the Kaesong area and that shutting it down could lead to unrest that might spread to other cities.

Beijing's Most Embarrassing Allies

Beijing's Most Embarrassing Allies
Foreign Policy, MAY 24, 2010

As China has grown into a major economic and military power in the last two decades, its mad scramble for energy resources and trading partners has led it into alliances with some of the world's most unsavory governments. Here are five regimes that couldn't survive without Beijing.

Beijing's interests: Stability, bilateral trade, and a buffer between China and South Korea

The relationship: Chinese support for North Korea dates back to the 1950s, when Beijing loaned military aid and fighters to Kim Il Sung's communist government during the Korean War. China quickly became North Korea's primary benefactor and trading partner, a relationship that has continued under the rule of Kim Jong Il. Ninety percent of North Korea's energy imports, 80 percent of its consumer goods, and 45 percent of its food now come from China.

The relationship isn't all one-sided. An increasing number of Chinese firms are investing in North Korea to take advantage of its rock-bottom labor costs and large coal and mineral deposits. Bilateral trade between the two countries reached $2.79 billion in 2008, up more than 40 percent from the year before. More importantly for Beijing, North Korea provides a friendly buffer zone between China's northeast and capitalist, democratic South Korea -- as well as the 37,500 U.S. troops based there.

China has frequently used its position on the U.N. Security Council to block harsher sanctions against Kim's regime. Since North Korea began its pursuit of nuclear weapons, Beijing has seemed more exasperated with Kim's belligerence and at times, has even supported international sanctions. Although the support is not as unconditional as it once was, China remains North Korea's most important ally, as evidenced by the reclusive Kim Jong Il's recent trip to Beijing, where he met with President Hu Jintao and Premier Wen Jiabao and reportedly suggested once again that he might be willing to return to the negotiating table.

Most embarrassing moment: China was instrumental in cajoling North Korea into participating in the 2003-2005 six-party talks aimed at denuclearizing the Korean Peninsula, which culminated in a 2005 agreement by North Korea to dismantle its nuclear program in exchange for foreign aid. So when Pyongyang tore up the agreement and tested a nuclear weapon in October 2006, it was widely perceived as a "slap in the face" to a Chinese government that had repeatedly stuck its neck out for its troublesome southeastern neighbor. One week after the tests, China agreed for the first time to support U.N. sanctions on North Korea, and the political relationship between the two countries has been strained ever since. Fearing the chaos and potential refugee crisis that might result if the Kim regime were to fall, however, China is still wary about applying too much pressure, and trade between the countries continues to increase.

Beijing's interests: Oil and gas
The relationship: The economic relationship between Iran and China dates back to the days of the Silk Road, but has taken on a new geopolitical importance in the last decade, as China has sought out reliable sources of oil to fuel its growing economy, and an increasingly isolated Iran has looked eastward as relations with the United States and Europe have deteriorated.

Iran is China's third-largest source of oil, supplying about 11.4 percent of its oil imports. Bilateral trade between the two countries totaled $21.2 billion in 2009, up from 10.1 billion in 2005. The China National Petroleum Corp. (CNPC) has reached deals to develop new oil and natural gas fields throughout the country. Because Iran lacks the capacity to refine its own oil into gasoline, it's also a major importer of Chinese petroleum products.

As Iran has, over strong U.S. and European opposition, continued to develop its nuclear program, China has repeatedly opposed, on the Security Council, international sanctions against its new business partner, generally proposing that diplomatic efforts be given more time.

Most embarrassing moment: China's stated position, that the Iranian nuclear issue could be resolved through negotiations, took a hit in November 2009, when Iran rejected a deal to ship its uranium abroad for enrichment. China joined with the other members of the Security Council in expressing disappointment with Iran's decision and has publicly urged Iran to accept the new agreement. China welcomed a similar fuel-swap deal negotiated by Brazil and Turkey this May, but it was apparntely too little too late. The United States quickly announced that China had finally agreed to tougher sanctions, but the devil is in the details, and it's still unclear whether Beijing will sign on to the most punitive measures backed by the other big powers.

Beijing's interests: Oil
The relationship: As China's insatiable demand for energy has led it to invest more and more in Africa, it has come under frequent criticism for its relationship with unstable and unsavory regimes -- but none has been more controversial than Sudan. Cooperation between the two countries began during the 1970s, when Mao Zedong provided the country's then-Marxist government with loans and medical aid. But it wasn't until the 1990s that energy cooperation between the two countries took off, after American oil companies pulled out due to U.S. sanctions.

The international sanctions applied to Sudan following the country's bloody civil war and the ongoing violence in Darfur have allowed China overwhelming dominance over the country's energy sector. CNPC is the largest investor in Sudan's state-owned oil company, and China purchases 40 percent of the country's oil output, accounting for about 6 percent of China's imports.

Even more controversially, human rights groups allege that China has sold Sudan more than $55 million in small arms -- weapons that have been used to kill more than 300,000 people in the Darfur region. Chinese cooperation with Sudan has continued even as Sudanese President Omar Hassan al-Bashir has been charged with crimes against humanity by the International Criminal Court. China, along with Russia, has blocked sanctions against Sudan on the Security Council.

Most embarrassing moment: Next to Tibet, China's relationship with Sudan is the most frequent cause of anti-Chinese ire from human rights activists. In the run-up to the 2008 Beijing Olympics, for instance, Darfur activists disrupted the the Olympic torch relay and then U.S. Senator Hillary Clinton called on President George W. Bush to boycott the opening ceremony. Bush went, but another high-profile guest, American film director Steven Spielberg, who had signed on as a consultant to the opening ceremonies, pulled out of the project over his objections to China's policies in Sudan.

Beijing's interests: Natural gas and mining
The relationship: Burma has traditionally exported raw materials like timber and gemstones to China, but nowadays Beijing has its eyes on a much bigger prize: Burma's estimated 21.19 trillion cubic feet of natural gas reserves. CNPC signed a 30-year natural gas deal with Burma in 2008, and a pipeline carrying gas to China's Yunnan province is expected to come online in 2012. China has also begun work on an oil pipeline through Burma that will save Chinese tankers a costly trip through the politically sensitive Strait of Malacca. China gave Burma about $2 billion in military aid between 1995 and 2005, including fighter jets and naval vessels.

Although China has been more than willing to turn a blind eye to Burma's crackdowns on political opposition and has stood up for the Burmese junta in the Security Council, there are signs that the relationship has begun to deteriorate. Burma's long-running military campaign against ethnic minorities in its northeast has sent thousands across the border into China, bringing narcotics and HIV/AIDS with them. China expressed its "deep concern," in August 2009, prompting the junta to issue a rare apology. Above all, China is looking for stability from its southern neighbor and energy provider, and the increasingly isolated junta seems unable to provide it.

Most Embarrassing moment: Burma's 2007 anti-government protests were a wake-up call to China. The images of Buddhist monks taking to the streets en masse to challenge the junta's authority was not a sight that Chinese leaders particularly wanted to see replicated throughout the region, particularly in Tibet. Burmese Foreign Minister U Nyan Win was publicly admonished on a trip to Beijing that year by senior Chinese diplomat Tang Jiaxuan, who told him to "restore internal stability" and "push forward a democracy process that is appropriate for the country." Perhaps hedging its bets, China has lately begun to reach out to imprisoned Burmese democracy leader Aung San Suu Kyi. China's wavering commitment to the junta will likely be tested again later this year, when the government has tentatively planned to hold elections with Suu Kyi's party banned from participating.

Beijing's interests: Precious metals
The relationship: Zimbabwean President Robert Mugabe is a long-time Sinophile, dating back to his days as a rebel leader fighting the white-dominated Rhodesian government, when he received arms, training, and funding from Beijing. Mugabe made a point of visiting China in 1980, the first year of his leadership, to thank the Chinese for their support.

The Chinese government has publicly supported Mugabe's controversial land-reform policies and has granted the country billions in agricultural aid. China has also sold Mugabe's regime the latest military technology, including FC-1 fighter jets, 100 military vehicles, and a state-of-the-art radar system at Mugabe's mansion in the suburbs of Harare.

In exchange, Mugabe has opened up Zimbabwe's vast mineral deposits, including the world's second-largest supply of platinum, to Chinese investment. Chinese companies have pumped millions into rebuilding the country's struggling mining sector, expanding economic cooperation as Western governments have slapped increasingly harsh sanctions on Mugabe's regime.

Most embarrassing moment: During the Zimbawean government's 2008 crackdown following a disputed presidential election, China was caught red-handed when a ship carrying small arms intended for Zimbabwe -- including 3 million rounds of ammunition and 1,500 rocket-propelled grenades -- was turned away by South African authorities at the port of Durban. After it was prevented from unloading at several African ports, the ship was eventually forced to return to China.

Tuesday, May 25, 2010

China-US relations: strategic talks (May 2010)

Summit Shows Superpowers' Shifting Dynamic
The Wall Street Journal, May 25, 2010

BEIJING — The most wide-ranging dialogue in the history of modern U.S.-China relations ended with some accord on contentious issues of currency and trade, but underlined a fundamental shift in the relationship between Washington and a newly assertive Beijing.

Although China offered few major concessions in two days of discussions at the annual Strategic and Economic Dialogue, which ended on Tuesday, the U.S. praised the outcome.

China pledged to gradually reform its currency-exchange rate, but without offering any timetable. On Beijing's drive to promote "indigenous innovation," which foreign companies fear is a protectionist ploy, China held out hope of a resolution within the World Trade Organization—repeating a pledge it had made before. And Beijing promised to "work together with the U.S. and other parties" to resolve the crisis over allegations that North Korea torpedoed a Southern patrol vessel, but it gave no specifics.

"This is progress," said U.S. Treasury Secretary Timothy Geithner, referring to China's response to American complaints about "indigenous innovation" policies that threaten to exclude foreign companies from a government-procurement market worth billions of dollars each year. "It does not fully resolve our concerns, but it gives us a set of basic principles on which to move forward," he told a closing ceremony at the Great Hall of the People.

The optimistic language reflects an upturn in what is arguably the most important bilateral relationship in the world, but also masks U.S. frustration with China's engagement on several fronts. The Obama administration's early expectations for an all-embracing and energetic partnership, with the potential to address global challenges such as climate change and reshape the world economy, has been tempered by plodding progress on key issues.

Pressure is likely to grow on Mr. Geithner to secure more than just soothing words from Beijing on the yuan. U.S. lawmakers may allow China more latitude given the sovereign-debt crisis in Europe and the fall in the value of the euro, which have combined to damage Chinese exports to its largest market. But lawmakers who say China is weakening its currency to benefit exporters are likely to press for it to be formally declared a currency manipulator if there is no movement by Beijing.

U.S. Secretary of State Hillary Clinton alluded Tuesday to tensions in the relationship, citing China's furious reaction to U.S. arms sales to Taiwan, which China regards as a renegade province, and to President Barack Obama's meeting with the Dalai Lama. Beijing accuses Tibet's spiritual leader of fomenting independence for the Himalayan region.

"In an earlier era we might have experienced a lasting setback," she said. "This dialogue…helped put us rapidly back on a positive track." Chinese Vice Premier Wang Qishan had a similar spin: "We are now able to manage the differences and problems arising in the course of our relationship in a more rational and mature manner," he said.

The choreographed theater surrounding the dialogue, which involved some 200 U.S. officials, illustrated China's new sophistication in managing its public image. Without any significant compromise, the Chinese government garnered plaudits from top U.S. officials and signaled to a domestic audience its new importance in global affairs.

For its part, Washington's gestures of gratitude were partly designed to give cover to Chinese officials as they prepare to give real ground on issues such as the currency-exchange rate.

Instead of openly prodding China over issues such as currency, U.S. officials are pursuing patient diplomacy, offering China wide latitude to set its own timetable. In part, this reflects the reality that Chinese officials are less likely to budge if they are seen by a domestic audience to be caving to American pressure.

Iran illustrates the opportunities and the limits of the collaboration. Even though Washington won Beijing's agreement on a draft United Nations sanctions resolution against Iran this month, it did so only after watering down its original proposal to suit China, making it appear that China was a reluctant follower and sending an ambiguous signal to Tehran about Chinese resolve.

In Beijing, the gap between Chinese and U.S. strategic interests was on stark display over North Korea. On Tuesday, Mrs. Clinton said the U.S. and China must "work together to address the crisis provoked by the sinking of a South Korean ship," referring to North Korea's alleged torpedoing of a patrol vessel in March.

Chinese State Councilor Dai Bingguo wouldn't be drawn out, offering only stock phrases of concern. "Relevant parties should proceed on the basis of safeguarding the overall interest of peace and stability in the region and calmly and appropriately handle the issue and avoid escalation of the situation," he said.

Later, Vice Foreign Minister Cui Tiankai went slightly further, offering to "work together with the U.S. and other parties and continue to stay in close touch on the situation in the Korean peninsula." China has yet to comment on the findings last week of an international investigation that the Cheonan corvette was sunk by a North Korean torpedo.

Whatever differences were aired behind closed doors at the dialogue were papered over in public remarks. Mr. Geithner gave a positive assessment of China's response to virtually the entire list of prominent complaints that the U.S. brought to the meeting.

He singled out China's commitment to submit a revised offer to join the WTO Agreement on Government Procurement by July, a move that would apply international standards to the Chinese government's purchases from the private sector, including foreign companies. China missed a similar self-imposed deadline in 2009 after the first Strategic and Economic Dialogue in Washington.

The U.S. State Department announced a list of 26 specific results from the dialogue, which ranged from training for maritime search and rescue operations to a safety accord for nuclear reactors to a conference on illegal logging.

U.S.-China relations started to mend in April after a one-hour telephone call between Messrs. Obama and Hu, which was followed by Mr. Hu's trip to the U.S. to attend a nuclear-security summit.

Both sides have made concessions. The U.S. Treasury department delayed a crucial decision on whether to label China a currency manipulator just prior to Mr. Hu's April trip to Washington. The Obama administration is planning to ease controls on some high-tech exports, a move long sought by China.

Leaders of the U.S. delegation went out of their way to add a homey touch to their serious business in Beijing. On Sunday, Mr. Geithner played basketball with Chinese high school students before he and Mrs. Clinton sat for a joint interview on the Chinese-language Phoenix TV channel. The host, Chen Luyu, teased Mr. Geithner by asking him whether he is really "one of the best looking guys in the administration," and got Mrs. Clinton to talk about her and her husband's taste in movies (she likes romance, he likes action).

After the dialogue, said Eswar Prasad, a professor at Cornell University and former head of the China desk at the International Monetary Fund, "both sides can claim victory for having raised their concerns clearly and making progress on issues their respective domestic constituencies care about."

On the yuan's exchange rate, President Hu Jintao on Monday went no further than to repeat a longstanding pledge to gradually implement reform. Some in the U.S. argue that Beijing, by keeping the yuan pegged to the dollar, weakens its currency to aid Chinese exporters, to the detriment of U.S. manufacturers. Yet Mr. Hu's comment was sufficient to elicit a warm response from the U.S. side. China's Assistant Finance Minister Zhu Guangyao said that Mr. Geithner had characterized Mr. Hu's comments on the yuan as "very, very, very" encouraging and important. There was no immediate confirmation from the U.S. side on the accuracy of Mr. Zhu's portrayal.Mr. Geithner has been at pains to argue that exchange-rate reform is in China's own interest, and up to China to decide. Whether China makes a move, he said on Tuesday, "is, of course, China's choice."

—Deborah Solomon contributed to this article

Dalai Lama conversa com chineses pelo Twitter

Dalai Lama conversa com chineses pelo Twitter
Por Leticia Nunes (edição), com Larriza Thurler em 25/5/2010

Dalai Lama, líder espiritual exilado do Tibete, participou, na semana passada, de seu primeiro videochat com internautas chineses. A conversa online foi transmitida pelo Twitter e sites na China, mesmo com esforços do governo comunista de censurar a web e silenciar o ganhador do Nobel da Paz de 1989.

Durante os 90 minutos de chat, Dalai Lama disse que as negociações com Pequim sobre a autonomia do Tibete e seu eventual retorno não foram adiante porque o governo recusou-se a reconhecer os problemas enfrentados pela região. "A falta de progresso ocorre porque o governo central insiste que não há problemas no Tibete – que só há problemas com o Dalai Lama", afirmou.

Segundo a China, Dalai Lama é um "lobo em pele de monge". O líder espiritual é acusado de lutar pela separação do país, mas ele já afirmou diversas vezes que aceita o governo de Pequim e quer apenas que o Tibete tenha "autonomia significativa". "Pessoalmente, não tenho demandas – minhas principais preocupações são os problemas com a cultura e a religião tibetanas", disse durante a conversa. "Em algumas áreas, por conta do aumento da população de chineses Han, o idioma e a cultura tibetanas enfrentam uma crise".

Mais de 12.500 pessoas selecionaram 289 perguntas para o Dalai Lama por meio de uma votação online em um site do Google – que foi bloqueado posteriormente na China, segundo informou um dos moderadores do chat. Mesmo com o Twitter proibido na China, internautas chineses puderam ter acesso ao chat porque a rede social permite o uso de aplicativos de terceiros e os servidores podem usar informações tanto de dentro quanto de fora da China. Estima-se que mais de 150 mil chineses tenham contas no Twitter, sendo que 100 mil deles devem viver no país. Dalai Lama abriu sua conta no Twitter no começo do ano. Informações de Robert Saiget [AFP, 21/5/10].

West readjusts to China’s strong hand - Financial Times

West readjusts to China’s strong hand
By Patti Waldmeir in Shanghai
Financial Times, May 25 2010

Jacob Wallenberg’s family controls a big chunk of the Swedish economy and is one of the oldest foreign investors in post-cultural revolution China. So when he intimates that doing business there is not substantially harder than it ever was, it may be time to take the complaints of the US and European Union chambers of commerce in Beijing with a pinch of salt.

Mr Wallenberg, chairman of Investor, the Wallenberg family holding company, told the Financial Times at the Shanghai World Expo it was natural that China’s self-esteem (some would say arrogance) had been boosted by its emergence almost unscathed from the global financial crisis and by its growing political influence worldwide.

That means China has become a tough competitor for the west – which has not been used to fighting for its profits in the middle kingdom.

“I hear companies complain about IP [intellectual property] rights and other things, and I am sure there is a foundation for such complaints. But it has to be seen in the overall context,” he says.

That context – though Mr Wallenberg is too polite to say so – is that the west has no choice but to come to China, and little choice but to do so on China’s terms. The financial crisis dealt China a strong hand, and that may take some getting used to.

Joined at the hip
France and Italy are an old and temperamental couple who never cease bickering but can hardly do without each other. They have many cultural traits in common.

President Nicolas Sarkozy is married to a glamorous Italian former star model. Silvio Berlusconi, the Italian prime minister with a penchant for crooning, knows by heart the entire songbook of one of France’s most popular singers, the late Charles Trenet.

But when it comes to business, the Italians often feel that the relationship is all too slanted in favour of the French. With a few notable exceptions – such as the Franco-Italian STMicroelectronics semiconductor group, which the two countries wisely chose to base on neutral ground in Geneva – the French have undoubtedly taken the upper hand.

France’s luxury conglomerates have snapped up some of Italy’s leading brands – PPR with Gucci and LVMH with Fendi. French banks have been expanding in Italy with BNP Paribas acquiring BNL and Crédit Agricole developing an extensive network of its own while owning a stake in Intesa Sanpaolo, Italy’s largest retail lender. French business predator Vincent Bolloré is deputy chairman of Italy’s largest insurer, Generali. The list goes on.

Another characteristic of Franco-Italian business relations is that they are never smooth and always provoke very public rows frothed up by Italy’s media. Not that France has such good relations with its other big European partners, especially Germany. These can be just as tense – even tenser at times, as has been the case over the controversial European bail-out for Greece – but they are never quite as theatrical.

At present, there are two hot issues agitating the Franco-Italian partners. Last week the chief financial officer of Air France-KLM – which acquired a 25 per cent stake last year in Alitalia as part of the latter’s rescue – suggested that his group intended at some stage to increase its stake in the Italian flag-carrier. Although he stressed that there were no concrete plans, his remarks sent the Italians rushing out in spots.

Alitalia, which seems to be recovering in part thanks to its partnership with the Franco-Dutch carrier and the SkyTeam alliance, was certainly not for sale, nor would it be taken over by the French for a “plate of lentils”, declared the airline’s chairman, Roberto Colaninno.

Another row is pitting Italy’s leading defence group, Finmeccanica, against the French state naval group DCNS over their efforts to collaborate in heavyweight torpedoes to equip submarines, including a batch of new ones that the French have sold to the Brazilians.

The Italians want majority control of the joint venture given that they hold the key technology for these so-called Black Shark torpedoes. The French are resisting and infuriating the Italians, who threaten to pull out of the collaboration.

In the end, however, the two sides are likely to kiss and make up. The simple fact is that the two countries are joined at the hip. For France, according to the Bank of International Settlements, holds as much as a third of Italy’s public debt – the equivalent of $510bn out of a total of $1,400bn. This also represents about 20 per cent of French gross domestic product and creates a somewhat profound bond between the two countries. The ultimate question, of course, is who in this case holds the upper hand – the debtor or the creditor?

Copyright The Financial Times Limited 2010

China - missing trademarks of its own...

Beijing tries to push beyond 'Made in China' status to find name-brand innovation
By John Pomfret
Washington Post Staff Writer
Tuesday, May 25, 2010; A01

Quick: Think of a Chinese brand name.

Japan has Sony. Mexico has Corona. Germany has BMW. South Korea? Samsung.

And China has . . . ?

If you're stumped, you're not alone. And for China, that is an enormous problem.

Last year, China overtook Germany to become the world's largest exporter, and this year it could surpass Japan as the world's No. 2 economy. But as China gains international heft, its lack of global brands threatens its dream of becoming a superpower.

No big marquee brands means China is stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits. Much of Apple's iPhone, for example, is made in China. But if a high-end version costs $750, China is lucky to hold on to $25. For a pair of Nikes, it's four pennies on the dollar.

"We've lost a bucketload of money to foreigners because they have brands and we don't," complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. "Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast."

The problem is exacerbated by China's lack of successful innovation and its reliance on stitching and welding together products that are imagined, invented and designed by others. A failure to innovate means China is trapped paying enormous amounts in patent royalties and licensing fees to foreigners who are.

China's government has responded in typically lavish fashion, launching a multibillion-dollar effort to create brands, encourage innovation and protect its market from foreign domination.

Through tax breaks and subsidies, China has embraced what it calls "a going-out strategy," backing firms seeking to buy foreign businesses, snap up natural resources or expand their footprint overseas.

Domestically, it has launched the "indigenous innovation" program to encourage its companies to manufacture high-tech goods by forcing foreign firms to hand over their trade secrets and patents if they want to sell their products there.

Since 2007, thousands of Chinese businessmen have attended government-sponsored seminars on "going out," learning everything from how to do battle with domineering Americans and Britons during conference calls to why a Chinese boss should think twice about publicly humiliating his wayward foreign workers -- as he'd do to his staff at home.

China has also moved to re-brand China itself. Late last year, when memories of China's poisoned pet food and deadly milk were still fresh, the Ministry of Commerce contracted with the global advertising giant DDB for a $300,000 ad showing a series of high-tech products, from top-of-the-line running shoes to an iPod.

As a guitar wails, a voice intones: "When it says 'Made in China,' what it really means is made in China, made with the world."
Remaining insular

In recent months, the Western media have hyperventilated with stories about China's going-out strategy and about Chinese firms buying up the globe -- Oil! Gas! Cars! -- and even investing in the United States. In 2000, China had $28 billion in overseas investments; this year, it could break $200 billion.

But a little perspective: Even if China's total foreign direct investment hits $200 billion, it still pales in comparison to smaller economies, such as Singapore's, Russia's and Brazil's. And China has plunked down only about $17 billion in rich countries, equivalent to the overseas assets of a single medium-ranked Fortune 500 company.

The 34 Chinese companies on the Fortune 500 list basically operate in China only. The world's three biggest banks are Chinese, but none is among the world's top 50, ranked by the extent of their geographical spread.

"Moving forward another 10 years," said Kenneth J. DeWoskin, chairman of Deloitte's China Research and Insight Center, "it's hard to see how viable Chinese companies will be if they just stay in China."

China's attempts to fight what it sees as the stranglehold of foreign patents and intellectual property rights have also had hiccups.

China is estimated to have paid foreign firms more than $100 billion in royalties to use mobile telephone technology developed in the West, according to executives of Western communications companies.

So in the late 1990s, it decided to develop its own. But after more than $30 billion in development costs, its unique technology still has fewer than 20 million users in a market of more than 500 million.

Handset makers have told China's government that they won't produce phones equipped with the new technology unless they are given subsidies. And China has resorted to giving away the technology to Romania and South Korea to encourage broader use.

"China is still stuck," said Joerg Wuttke, former president of the European Union Chamber of Commerce in China and a 25-year veteran of doing business in China. "There is a huge disconnect between the money spent in universities and the lack of products."

China also faces enormous challenges to creating globalized firms. Studies of Chinese executives show that they spend far more time with government officials -- who in China are the key to their profits -- than with customers, who are the key to international success.

"Chinese executives like me need to spend a generation outside China to learn how business is done around the world," said Hua Dongyi, who chairs a massive Chinese mining company in Australia but has also built roads in Algeria and infrastructure in Sudan.

That's definitely true for Hua. In April, he was forced to apologize to his Australian workers after he told Chinese media that the workers were money-grubbing and lacked the "loyalty and sense of responsibility existing in many Chinese enterprises."
Lenovo's lessons

The Chinese computer maker Lenovo, which bought IBM's ThinkPad in 2004, wasn't the first Chinese company to acquire a big foreign brand, but it's still considered the pioneer.

That's probably because China's other forays into buying foreign brands have ended in disaster. An attempt by the Chinese electronics firm TCL to become the world's biggest TV manufacturer in 2003 fizzled when its French subsidiary lost $250 million.

A move by a private Chinese company to take over a once-dominant U.S. lawn mower company, Murray Outdoor Power Equipment, ended in bankruptcy because, among other mistakes, the Chinese firm didn't realize that Americans tend to buy mowers mostly in the spring.

Lenovo purchased IBM's laptop division for $1.25 billion -- a gutsy move considering that IBM's renowned ThinkPad brand lost $1 billion from 2000-2004, twice Lenovo's total profit during that time.

Although Lenovo's move was portrayed by many in the West as a sign of China's rise, Lenovo acted out of desperation, said Yang Yuanqing, who has been a senior executive at Lenovo since it was founded in the 1980s with government funds.

Lenovo was losing market share in China. Its technology was middling. It had no access to foreign markets. With one swoop, Lenovo internationalized, purchased a famous brand and got a warehouse of technology as well.

But from the start, things were tough.

Lenovo's American competitors fanned anti-Chinese flames in Congress, insinuating that Lenovo could insert spyware into the computers it was selling to the U.S. government. The firm also faced enormous challenges bridging cultural divides among U.S. workers at its Raleigh, N.C., headquarters, the Japanese who made ThinkPads and the Chinese who made Lenovos.

William Amelio, the firm's second chief executive who had been lured from a top job at Dell, remembers his first trip to Beijing as the new Lenovo boss in late 2005.

"I was greeted with rose petals and the red carpet treatment and company songs. In Raleigh, everyone's armed were crossed. It was like, 'Who died and left you the boss?' " he said. "You had the respect for power in the East and the disdain for authority in the West."

Meanwhile, Lenovo's competitors were moving. In 2007, Acer, the computer powerhouse from Taiwan, snapped up the European computer maker Gateway, effectively cutting Lenovo off from European customers. Lenovo slipped to fourth place worldwide behind HP, Dell and Acer.

Then the global financial crisis hit, and Lenovo, which sold a large percentage of computers to businesses, was hit hard.

Lenovo responded by following the lead of an increasing number of Chinese firms: returning to its roots. Yuan Yuanqing was reappointed its chief executive and refocused Lenovo on the company's one bright spot: the China market. Sales skyrocketed, despite lackluster performance overseas.

Lenovo, according to Bob O'Donnell, a longtime expert on personal computers at IDC, "became a Chinese company again."

Still, analysts said Lenovo's rocky foreign adventure saved the company.

Lenovo might not have much of a brand overseas, but its association with a foreign firm has helped it in China. Lenovo's computers routinely command twice the price in China that they do in the United States. Lenovo offers its top-of-the-line ThinkPad W700 to the Chinese government at $12,500; in the United States, it runs for $2,500.

Chinese officials pushing the going-out strategy have looked at Lenovo as a model for Chinese firms seeking to become known multinational brands. But for China's companies, going out might be the secret to staying alive at home.

This year, the Chinese car company Geely bought Volvo from Ford. Pundits figured it was to expand China's economic heft -- and its brands -- overseas. But as Geely's founder, Li Shufu, put it, "Volvo will find a new home market in China."

Riscos de uma desaceleracao chinesa - Rodrigo Constantino

Os riscos de uma desaceleração acentuada do crescimento chinês
Rodrigo Constantino

Analisar a economia chinesa é uma tarefa complicada, por sua complexidade e falta de transparência. Mas, devido à sua enorme importância no cenário mundial, alguma estimativa se faz necessária. Economistas começam a identificar sinais de espuma, principalmente no mercado imobiliário chinês. Se o alerta estiver correto, os riscos para países emergentes como o Brasil, muito dependentes da demanda chinesa, não podem ser menos prezados.

A China apresenta mudanças estruturais, experimentando tardiamente sua revolução industrial. Com mão de obra barata e abundante e uma poupança gigantesca, os ganhos de produtividade garantem uma vantagem comparativa no modelo de exportação adotado pelo país. Mas esse modelo apresenta suas falhas, e alguns pilares não são sustentáveis.

O fato de quatro bancos estatais concentrarem o crédito faz com que as decisões de investimento tenham um peso político elevado demais. Além disso, o foco obsessivo no crescimento tem feito com que governos locais adotem incentivos errados, com investimentos pouco rentáveis ou mesmo desnecessários. Cada província precisa apresentar números crescentes e existem casos até de “cidades fantasmas”. Construir casas e pontes onde sequer há demanda, eis um efeito perverso do modelo chinês.

Quase toda bolha especulativa parte de fundamentos sólidos. A trajetória chinesa possui aspectos econômicos interessantes, e seu espetacular crescimento pode criar o ambiente propício ao exagero. Foi assim com as ferrovias no século XIX, o rádio nos anos 1920 e a internet recentemente. Há também, por trás de muitas bolhas, uma fé cega na competência das autoridades.

Muitos acreditam que o governo chinês será capaz de controlar seus excessos. Mesmo com inflação crescente, por conta de uma expansão monetária de dois dígitos, os investidores assumem que as medidas administrativas serão suficientes para conter o avanço dos preços, sem precisar de um forte aumento dos juros.

A taxa de câmbio artificialmente controlada é outro pilar frágil do modelo. Taxas fixas estiveram por trás de crises como a da Argentina e da Ásia. O crédito excessivo, estimulado pela baixa taxa de juros, planta as sementes dos problemas futuros. Novos especuladores são atraídos pelo crescimento da economia, e eles adotam uma postura negligente em relação aos riscos, contando sempre com o resgate do governo em caso de crise.

Há claros sinais de espuma na economia chinesa, sobretudo em infraestrutura e no setor imobiliário. Alguns aeroportos menores, por exemplo, operaram com a metade da capacidade no ano passado. Existem indícios de excesso de capacidade na construção de navios, aço, cimento e ferro. A corrupção parece galopante, o que é esperado quando o governo concentra tanto poder e recurso.

Governos locais criaram veículos fora do balanço para garantir financiamento aos investimentos em suas regiões, o que pode gerar problemas sérios, caso a economia passe por uma desaceleração. O preço das casas sobe em parar, mesmo em relação à renda. Quando se observa os principais centros, como Xangai e Beijing, a situação é ainda mais alarmante, com aumentos de até 60% em apenas um ano. Mais de 20% dos empréstimos bancários foram destinados a esse setor.

Outro indicador importante é o excesso de otimismo nas projeções da maioria dos analistas. Livros são escritos sobre como a China será rapidamente a maior potência mundial, superando os Estados Unidos e a Europa. O “modelo chinês” passa a ser sinônimo de eficiência. O acúmulo de reservas, acima de US$ 2 trilhões, passa uma ideia de invencibilidade. Tudo isso nos remete à euforia com o Japão nos anos 1980.

Caso a economia chinesa realmente esteja passando por uma fase de espuma, os investidores precisam ficar bastante alertas aos riscos que isso representa. Afinal, a participação chinesa no consumo das principais matérias-primas é significativa. Dependendo da commodity, a China já representa de 40% a 50% da demanda mundial. Se o crescimento chinês se mostrar insustentável nesses patamares, a queda abrupta na sua demanda fará com que os preços das principais commodities desabem, prejudicando inúmeros países emergentes, como o próprio Brasil. Eis um risco que não pode ser ignorado pelos investidores.
Time to rethink U.S.-China trade relations
By James McGregor
The Washington Post, Wednesday, May 19, 2010

The U.S. government and the business community need to rethink our China strategy and retool our trade bureaucracy to face the tangled web of emerging Chinese policies. Otherwise, American technology companies could be coerced to plant the seeds of their destruction in the fertile China market.

With nearly half of his Cabinet heading to Beijing for the May 24-25 bilateral "strategic and economic dialogue," President Obama should launch such a strategic economic dialogue among ourselves. The time has come for a White House-led, public-private, comprehensive examination of American competitiveness against a clear-eyed view of China's very smart and comprehensive industrial development policies and plans.

What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation? How do we retool the U.S. government's inadequate and outdated trade bureaucracy to provide thoughtful strategic focus and interagency coordination? How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China's top-down, disciplined and aggressive national economic development planning machine?

At issue is an array of Chinese policies and initiatives aimed at building "national champion" companies through subsidies and preferential policies while using China's market power to appropriate foreign technology, tweak it and create Chinese "indigenous innovations" that will come back at us globally.

China has long been a "pay-to-play" market for foreigners, with mandated joint ventures in key industries, local manufacturing requirements and forced technology transfers as the price of market admission. Its entry into the World Trade Organization in 2001 was supposed to do away with the bulk of those barriers -- and many were eliminated on paper.

But long gone are the days of China acting as a supplicant to gain access to foreign markets or obtain foreign investment. China now funds the U.S. budget deficit. Its rapidly developing domestic markets are expected to lead global growth for decades. The quarterly earnings of the world's biggest multinational companies increasingly depend on their China business.

Chinese leaders -- shrewd students of political and economic leverage -- are shifting their focus from global trade and investment principles to the creation of their own rules and a "China model" of economic development that is difficult to challenge in international courts. Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules. Facing off against this are 30 lawyers in the U.S. trade representative's office of general counsel -- only one of whom can read Chinese. This small cadre handles all WTO cases and supports all our trade negotiations globally. Only a half-dozen people in the office focus on China.

As part of their "China model," that country's leaders have decided that key sectors of the economy will remain "state dominated," including automotive, chemical, construction, electronic information, equipment manufacturing, iron and steel, non-ferrous metals, and science and technology. Others will stay "largely in state hands," including aviation, coal, defense, electric power and grid, oil and petrochemicals, shipping and telecommunications. State-owned companies in these industries are thriving in their protected home market. They have buckets of cash and easy access to state bank loans to carry out government directives to pursue overseas acquisitions and "go global."

Most worrisome is the Chinese government mandate to replace core foreign technology in critical infrastructure -- such as chips, software and communications hardware -- with Chinese technology within a decade. The tools to accomplish this include a foreign-focused anti-monopoly law, mandatory technology transfers, compulsory technology licensing, rigged Chinese standards and testing rules, local content requirements, mandates to reveal encryption codes, excessive disclosure for scientific permits and technology patents, discriminatory government procurement policies, and the continued failure to adequately protect intellectual property rights. The poster child is the evolving "indigenous innovation" policy, which appears aimed at using China's market power to coerce foreign companies to transfer and license their latest technology for "co-innovation" and "re-innovation" by Chinese companies.

American business has to figure out how to balance out today's profits with tomorrow's threat. This dilemma is causing a split between U.S.-based chief executives who sing China's praises based on current growth and profits, and their China-based executives who see the self-destructive results of blindly following the new initiatives.

As the recent Wall Street scandals have made clear, we can't always depend on private industry and profit-driven executives to focus on doing what is best for the country. It is clear, however, that the Chinese government is very focused on doing what it believes is best for China.

James McGregor is a former chairman of the nonprofit American Chamber of Commerce in the People's Republic of China (AmCham-China) and the author of "One Billion Customers: Lessons From the Front Lines of Doing Business in China."

Monday, May 24, 2010

Zona de livre comercio China-Japao-Coreia do Sul

Países asiáticos estudam zona de livre comércio
Da Redação - Jornal do Brasil
24 de maio de 2010

Os ministros de Comércio da Coreia do Sul, China e Japão aceitaram avançar em busca da criação de uma zona de livre comércio que envolva os três países, segundo uma declaração comum publicada ontem após uma reunião em Seul.

Segundo o texto, os três ministros confirmaram que um estudo de viabilidade sobre este bloco comercial estará pronto em dois anos.

– Reafirmamos a importância de um âmbito de investimento trilateral, que servirá para reforçar a cooperação econômica entre nossos três países – acrescenta a declaração.

O presidente sul-coreano, Lee Myung-Bak, já havia convocado a China a trabalhar em busca de um acordo de livre comércio na região. Seul e Tóquio estavam em negociações desde 2004 para realizar esse acordo.

Os ministros sul-coreano Kim Jong-Hoon, chinês Chen Deming e japonês Masayuki Naoshima, reunidos para preparar a cúpula prevista para o próximo final de semana na ilha sul-coreana de Jeju, também trataram de aproximar suas posições antes dos próximos encontros do G20.

Uma primeira cúpula do G20 está prevista para junho em Toronto, Canadá, e outra para novembro, em Seul.

A cúpula de Jeju vai ocorrer nos dias 29 e 30 de maio e reunirá o presidente sul-coreano Lee, o primeiro-ministro japonês Yukio Hatoyama, e o primeiroministro chinês Wen Jiabiao. Deve concentrar-se na na Coreia do Norte e seu programa nuclear, e no naufrágio de um navio militar da Coreia do Sul, que acusa Pyongyang de ser responsável.

Crise financeira O ministro de Finanças da China, Xie Xuren, disse que seu país e os EUA precisam ter como foco a estabilidade e a recuperação da economia, que estão sendo ameaçados pela crise de confiança na dívida soberana de países periféricos da zona do euro. “As exportações da China para os EUA são principalmente de produtos com preços médios e baixos. A vantagem industrial norte-americana reside na produção de itens de grande valor que são amplamente necessários no mercado chinês“, avaliou.

(France Presse)

Japan's Germ Warfare in China, during IIWW

When Germ Warfare Happened
Judith Miller
The City Journal, Vol. 20, n. 2, Spring 2010

Seventy years ago, Japan’s bio-attacks killed hundreds of thousands. The effects linger today.

Jiang Chun Geng, a survivor of Japan's war on China

Jiang Chun Geng’s poisoned right leg, with its suppurating wounds, hangs limply over the gray wooden bench in the medical clinic here in Dachen, a village in China’s province of Zhejiang. Twice the size of his left leg, the limb is too tender to touch during my visit. Instead, Dr. Zhu Jian Jun gently dabs the putrid wounds with an alcohol-drenched swab. Jiang’s heavily lined face tightens as Zhu wraps the fiery stump with a white bandage and unhooks an intravenous antibiotic drip. Another treatment is over.

Jiang, a 70-year-old farmer, can’t remember a time when flesh-eating ulcers didn’t cover his legs. “They never go away,” he tells me. “They just get drier. Sometimes they hurt less.” He doesn’t know for sure how he got them, but his father told him that the wounds first appeared in July 1942, soon after the Japanese army passed through his village. His entire family developed the festering sores. His mother and younger brother died in unbearable pain a decade later as the untreated, mysterious infection crept up their legs.

Jiang is one of 15 elderly Chinese men and women whom Zhu is treating in his simple village clinic for what locals label “rotten leg disease.” A definitive diagnosis is no longer possible so many decades after the initial exposure and secondary infections. But Chinese, American, and other Western physicians who have examined the survivors, documented their histories, and photographed their wounds claim that they are victims of the most gruesome biological warfare attacks in modern history.

These attacks, orchestrated by Japan’s infamous Unit 731 between 1932 and 1945, are the only documented mass use of germ weapons in modern times. Scholars say that we will never know exactly how many were killed. Sheldon H. Harris, the late American historian, estimated in a pioneering work that between 10,000 and 12,000 Chinese prisoners perished in the bloodcurdling experiments that Unit 731 performed in Japanese-occupied Manchuria. Another 300,000 to 500,000 civilians died, he wrote, as a result of Japan’s massive germ assaults on more than 70 Chinese cities and towns. China itself has disclosed no official tally. In fact, for many years, Japan’s use of biological weapons in China was largely forgotten. Only recently has a resurgent China begun to remind Japan—and the world—of the atrocities.

In America, the historical amnesia has a Cold War source, argues Jeanne Guillemin, a political analyst at the Massachusetts Institute of Technology. After World War II ended, the United States and the Soviet Union sought information about Japanese germ experimentation for their own covert bioweapons efforts. In 1947, American officials secretly agreed to grant immunity from war-crimes prosecution to the head of Japan’s program, Major General Shiro Ishii, and to 18 other biowarfare scientists in exchange for intelligence. As Harris recounted, Japanese pathologists gave U.S. officials some 8,000 slides of human tissues and blood samples taken from autopsied victims, as well as knowledge about the warheads and bombs that Japan had designed to spread its killer germs.

While several American military historians and scientists have downplayed the value of the Japanese data, a U.S. military document unearthed by Guillemin called the information “of the highest intelligence value,” though before it underwent full analysis. The Japanese program had to remain secret, another military document concluded (in diplomatic understatement), “to protect the interests of the United States and to guard against embarrassment.” Only after America and the Soviet Union (the Soviets only putatively) ended their offensive germ-weapons programs in the late 1960s and signed a treaty banning pathogens as offensive weapons in 1972 did significant amounts of evidence about the arrangement become public.

A second foreign-policy consideration also helps explain America’s deal and ensuing silence, Guillemin points out. American officials believed that prosecuting Japanese scientists for war crimes that the widely revered emperor himself might have authorized would jeopardize Washington’s effort to rebuild Japan as a stable democracy, “crucial to offsetting the Soviet presence in Asia and the rise of Communist China,” she writes. Indeed, General Douglas MacArthur personally intervened to protect Japanese scientists who had worked on the program from prosecution.

Though President Clinton ordered U.S. government agencies in 2000 to make more than 100,000 pages of official documents on the program available to scholars, key questions remain—for instance, which American official authorized the arrangement with the Japanese biowarriors. The answers are unlikely to be found in Japan, whose own archives on the initiative remain largely closed to public scrutiny.

As for China itself, historically it has vacillated between stoking anti-Japanese nationalism and trying to dampen it, depending on its political needs. For instance, China once estimated that 10 million of its citizens died during Japan’s traumatizing occupation of eastern China and Manchuria—the “Anti-Japanese War of 1931 Through 1945,” as China calls it. Then, after the Tiananmen Square crisis, China raised the estimate to 35 million, seeking to divert attention from domestic discontent. But it’s surely the case, observes Susan L. Shirk, a former State Department official and the author of China, Fragile Superpower, that almost every Chinese family suffered under the onslaught.

Only now that China has emerged as Asia’s leading power has it begun to highlight Japan’s biological crimes against it. The focal point of this effort is the Unit 731 Museum, just south of the city of Harbin in Manchuria. Built on the ruins of a cluster of ten villages known as Ping Fan, the museum occupies what was once the headquarters of Japan’s germ empire. Constructed by Chinese slave laborers in 1936, Unit 731, whose Orwellian cover name was the “Epidemic Prevention and Water Supply Unit,” was a vast laboratory complex of 3.7 square miles with more than 70 buildings—laboratories, officers’ housing, a Buddhist temple, an airfield and railway station, three crematoria to dispose of experimentation victims, a prison, a power plant, and even a brothel to service the 3,000 Japanese scientists and guards who lived and worked there during its peak. Behind the complex’s high, heavily guarded walls, Major General Ishii’s scientists experimented on Chinese, Americans, Koreans, Mongolians, Russians, and others with some of the world’s deadliest germs.

The museum’s main exhibition hall, located in Unit 731’s administration building, describes Ishii’s program and takes visitors through the procedures that his medical team followed in processing doomed inmates. Maruta, or “logs,” as the Japanese scientists dubbed their victims, would be registered, given numbers, and later dragged from their cells through underground tunnels into the testing labs at the compound’s center. Here, Sheldon Harris reported, they would have to eat food laced with one of 31 germs—anthrax-filled chocolate, plague-treated cookies, typhus-infected beer—or be injected directly with deadly pathogens to determine the minimal dose required to sicken or kill them. The “logs” usually lasted only a few weeks. Some were “sacrificed” after unit officials deemed them no longer fit for scientific study. Only a few survived for as long as six months, Unit 731 documents show.

Room Six of the museum contains a display of the high- and low-altitude bombs that the Japanese developed to disseminate their lethal cargo. One bomb included a porcelain cylinder to prevent germs from destruction on impact. Another was called “Mother and Daughters”—the Mother part of the weapon coming with a radio device that would detonate a cluster of germ-loaded Daughter bombs. That weapon proved too expensive for mass production, Harris observed. But other types of anthrax-, plague-, and bacteria-filled bombs were tested on hundreds of prisoners, who were tied to stakes in the ground and died in agony.

Room Nine displays fragmentary evidence of Japan’s “fascistic guilt which cannot be denied,” as the museum puts it: a wooden saw for dismembering human remains and racks for hanging entrails fresh from autopsies, some performed while the victims remained alive to ensure that death didn’t alter the disease’s impact on the organ or bones under study. I recalled interviewing an elderly Japanese soldier several years earlier who told me that he had performed vivisections, without anesthetic, on naked prisoners. Describing in almost a whisper his revulsion the first time he picked up his scalpel when ordered to do so, he said that he eventually grew accustomed to the “procedure.” But his anguish suggested otherwise.

The museum’s holdings are necessarily limited. When the Japanese had to flee Ping Fan in 1945, they attempted to destroy all traces of their crimes against humanity—as the Nuremberg tribunal called similar experiments performed by Nazi doctors in Europe—by killing the last 400 prisoners, setting infected animals free, and blowing up the complex.

Dr. Jin Cheng Ming, the museum’s director, is cautious about death-toll estimates. The museum has been able to identify only 277 of the thousands of prisoners who came here, he said, mostly from the records kept by the Japanese transportation units that delivered them. But his estimates, which draw on provincial records and archives, are comparable with Harris’s. In his Chinese-language book on the program, published in 2008, Jin concluded that so much of the widely dispersed program was secret that the death toll might remain uncertain even if Japan cooperated. “Maybe the Japanese know exact numbers,” he says. “Or maybe your government does, since Japan shared so many records with you.” In 2006, he adds, the U.S. gave China access to about 2,000 more pages of declassified records, but most were from late in the program. He and his staff have made 17 trips to Japan to collect oral evidence from former members of Unit 731. “It’s hard because Japan is not sympathetic,” he says. But part of the museum’s mission is to videotape such testimonies for its collection, which now features over 200 hours of them.

After opening in 1985 with a one-room exhibit and a staff of three, the museum languished for years. Few foreigners or even Chinese came here. Today, though, it bustles with activity and is undergoing a vast expansion. Thirty-one sites are being excavated or renovated in and around the museum, which received more than 6 million visitors last year, about half of them Chinese schoolchildren. The Chinese government has tripled the museum’s budget, and its staff has grown to 40.

The feverish activity is part of Jin’s campaign to have the United Nations Educational, Scientific, and Cultural Organization designate his museum a cultural-heritage monument—joining another infamous death complex, Poland’s Auschwitz. UNESCO sent a team to the museum late last summer to examine the site, and Jin is optimistic that the organization will eventually add his museum to its list. “While we still have many questions, we have so much more evidence than we had before,” he tells me. “People must know and face their history. And the Japanese government should be responsible for its actions.”

As horrifying as the experiments performed at Unit 731’s headquarters were, they pale beside the horrors that Japan inflicted on the Chinese population at large. As we travel by bullet train from Shanghai deep into the province of Zhejiang, activist Wang Xuan tells me that the worst attacks occurred between 1940 and 1943, when the Japanese military struck dozens of Chinese cities and towns with pathogens that triggered recurring plague epidemics and killed hundreds of thousands.

The methods were brutal. Army trucks dumped gallons of deadly germs alongside roads and railway lines linking Chinese towns so that infections would spread from town to town; planes dropped porcelain bombs containing infected fleas on dozens of villages, causing devastating outbreaks of bubonic plague. The Japanese laced more than 1,000 wells in the area of Harbin with typhoid bacilli. They also inserted typhus into bottles of lemonade that children loved to drink in the summer, Harris reported. In Nanking, they distributed anthrax-filled chocolate and cake to hungry children. The Japanese discovered that packing fountain pens and walking sticks with deadly germs was a particularly effective way of secretly disseminating them. In 1940, Major General Ishii sent a train carrying 70 kilograms of typhus bacterium, 50 kilograms of cholera germs, and 5 kilograms of plague-infected fleas to the city of Hangzhou, a holiday resort favored by Shanghai’s wealthy. From there, the germs were dumped into ponds and reservoirs and spread by aerial spraying, contaminating all life in fields of wheat and millet during the harvest.

As our train pulls into the station, Wang Xuan tells me that near here, over the small town of Quzhou, a Japanese plane dropped plague-infected fleas in October 1940. The first victims died a few days later. By 1948, more than 5,000 people had perished. Prior to that outbreak, no case of plague had ever been reported in the town, says Dr. Qiu Ming Xuan, former chief of the Quzhou Center for Disease Control.

That fact proved important in 1997, Wang explains, when she helped organize a lawsuit against Japan for spreading bubonic plague and other fatal diseases across China. Still, the town’s plague-free earlier history—as well as oral histories from elderly residents of Chongshan, a town near Quzhou, and epidemiological data from local and provincial files—might not have been sufficient to persuade the court to side with the Chinese plaintiffs, since biological samples from the 1940 attack were no longer available. But Chongshan’s survivors submitted to the court an original document: the working diary of a senior Japanese military officer, then stationed in Nanjing, responsible for contacts between his forces and Unit 731. The diary mentioned a plague attack on Quzhou on October 4, 1940—a date that coincided perfectly with the plague’s spread from Quzhou to Chongshan.

In 2002, the Japanese court finally ruled that Japan had indeed used biological weapons against China—the first such official acknowledgment. But the court also ruled that the Chinese were not entitled to compensation under international law. Nor did Tokyo itself acknowledge having used germ weapons during the war or apologize to the Chinese victims. Since then, a succession of Japanese governments has remained silent about the crimes.

Sufferers from “rotten leg disease” have no comparable diary entry or official Japanese source that could prove to a court that their suffering was related to Japan’s germ-weapons attacks. Indeed, even some Japanese researchers sympathetic to China challenge the claim that Japan’s biowarfare caused the disease. Keiichi Tsuneishi, a distinguished Japanese historian who helped uncover Japan’s atrocities in China, says that a bacterium native to the region could have been responsible, and he estimates that pathogens killed no more than 1,000 Chinese in the province of Zhejiang.

Wang Xuan responds that Tsuneishi is neither a biologist nor a physician and that he has never visited the affected regions. Refusing to yield to such challengers, she recruited four university students last summer to interview “rotten leg” survivors of the 1942 outbreak and to locate more victims. According to both Qiu and the students, in the villages surrounding the small city of Jinhua in central Zhejiang, 5 percent of the residents born before 1942 described having developed raw, festering wounds on their legs similar to those of the patients I saw.

In Blood-Weeping Accusations, a book in Chinese and English published by the Chinese Communist Party in 2005, some Chinese researchers conclude that anthrax caused the wounds. But at least two American physicians—Martin Furmanski, a pathologist and physician who wrote an essay in the book, and Michael Franzblau, a retired professor of dermatology at the University of California—believe that the culprit is Burkholderia mallei, or glanders. A horrendous skin disease that usually strikes horses, donkeys, and mules, glanders in humans is “exquisitely painful,” Furmanski says. Left untreated, it causes deep wounds that will not heal unless treated with antibiotics. “Pustules come up from below, point, break, and ooze a pussy fluid,” Furmanski explains. “Untreated, they can stay for months or even years. Only rarely do they heal. And when they occasionally do, you get a terrible scar.” Cutaneous anthrax, by contrast, starts as a lesion on the skin that blackens and swells. “You look like the Michelin man,” he says—but when it heals, it doesn’t leave a scar.

Furmanski became convinced that glanders, not anthrax, was the cause of “rotten leg disease” after he and Franzblau toured Quzhou with Wang Xuan in 2002. While taking a sample from a wound 60 years after the initial exposure probably would not reveal the identity of the original infectious agent, it might shed light on the nature of the infection or how best to treat it, he notes. But Furmanski says that he didn’t try to culture a sample and take it back to America because he hadn’t requested China’s permission. Moreover, the shipment of glanders is restricted in America, given its potential use as a biological weapon, he adds. Indeed, glanders remains a research subject at the U.S. Army Medical Research Institute for Infectious Diseases, the military’s premier biodefense lab, at Fort Detrick, Maryland. “Legally, I couldn’t bring it back into the United States,” Furmanski says.

Working closely with Wang, Franzblau has tried for years to introduce a resolution at World Medical Association meetings calling upon doctors to ask Japan to “officially repudiate Unit 731” and to explain “why physicians employed in Unit 731 have never been prosecuted for murder and crimes against humanity.” Each year, his resolution has gone nowhere. “There has never even been a debate,” he complains. The Japanese Medical Association has also remained silent, perhaps because one former president of the JMA was a Unit 731 staff member, as were former officials in many prestigious Japanese organizations.

Wang has raised tens of thousands of dollars to provide survivors the medical care they so desperately need. The Chinese government has done little to care for them, she says. Nor has any money come from Japanese organizations or individuals, unsurprisingly. And she has another fear: “I am worried that when these people die, the memory of what Japan did in China will die with them.”

According to Jan van Aken, a German writer, activist, and now Bundestag member who accompanied Wang on a tour of the region in 2006, “almost the entire microbiology elite of wartime Japan may have been involved in one way or the other in the heinous crimes of Unit 731.” In postwar Germany, by contrast, doctors who participated in similar experiments were exposed and convicted of crimes against humanity. “The time has come for Japan to appoint an independent, international commission, to investigate and publicly document, without restraints, the involvement of former members of their profession,” says van Aken. “This was the most intensive use of biological weapons in modern history. Yet Japan remains silent. And so do most of us.”

Judith Miller is a contributing editor of City Journal, an adjunct fellow at the Manhattan Institute, and a FOX News contributor.

Sunday, May 23, 2010

Only rich people use cars in Shanghai

Car plate prices continue to rise
By Jin Jing
Shanghai Daily, 2010-5-23

CAR plates prices in Shanghai continued to rise this month.

The average price for a car license was 42,262 yuan (US$6,187), up 625 yuan from April, the Shanghai International Commodity Auction Co said. The lowest price was up 900 yuan to 41,900 yuan. Both prices have been rising for eight months and are at their highest since January 2008.

A total of 8,500 car plates were up for auction this month, the same number as last month but more than February's 7,500.

The number of bidders dropped for a fifth month to 16,324, or 989 fewer than April.

Toyota dealer Huang Jia said that although the 40,000 yuan mark was widely considered too expensive and had scared some potential buyers away, demand was still outstripping supply.

"Nearly 50 percent of potential buyers lost their bids last month. It is also getting more difficult to have cars registered in nearby cities, forcing some bidders to join in the battle."

The government has been increasing the quota in a bid to prevent prices rising too rapidly.

But some industry insiders estimate that prices will continue to be high in the short term amid strong auto sales.

Friday, May 21, 2010

The Geography of Chinese Power - Robert D. Kaplan (Foreign Affairs)

The Geography of Chinese Power
Robert D. Kaplan
Foreign Affairs, May/June 2010

How Far Can Beijing Reach on Land and at Sea?

ROBERT D. KAPLAN is a Senior Fellow at the Center for a New American Security and a correspondent for The Atlantic. His book Monsoon: The Indian Ocean and the Future of American Power will be published in the fall.

The English geographer Sir Halford Mackinder ended his famous 1904 article, "The Geographical Pivot of History," with a disturbing reference to China. After explaining why Eurasia was the geostrategic fulcrum of world power, he posited that the Chinese, should they expand their power well beyond their borders, "might constitute the yellow peril to the world's freedom just because they would add an oceanic frontage to the resources of the great continent, an advantage as yet denied to the Russian tenant of the pivot region." Leaving aside the sentiment's racism, which was common for the era, as well as the hysterics sparked by the rise of a non-Western power at any time, Mackinder had a point: whereas Russia, that other Eurasian giant, basically was, and is still, a land power with an oceanic front blocked by ice, China, owing to a 9,000-mile temperate coastline with many good natural harbors, is both a land power and a sea power. (Mackinder actually feared that China might one day conquer Russia.) China's virtual reach extends from Central Asia, with all its mineral and hydrocarbon wealth, to the main shipping lanes of the Pacific Ocean. Later, in Democratic Ideals and Reality, Mackinder predicted that along with the United States and the United Kingdom, China would eventually guide the world by "building for a quarter of humanity a new civilization, neither quite Eastern nor quite Western."

China's blessed geography is so obvious a point that it tends to get overlooked in discussions of the country's economic dynamism and national assertiveness. Yet it is essential: it means that China will stand at the hub of geopolitics even if the country's path toward global power is not necessarily linear. (China has routinely had GDP growth rates of more than ten percent annually over the past 30 years, but they almost certainly cannot last another 30.) China combines an extreme, Western-style modernity with a "hydraulic civilization" (a term coined by the historian Karl Wittfogel to describe societies that exercise centralized control over irrigation) that is reminiscent of the ancient Orient: thanks to central control, the regime can, for example, enlist the labor of millions to build major infrastructure. This makes China relentlessly dynamic in ways that democracies, with all of their temporizing, cannot be. As China's nominally Communist rulers -- the scions of some 25 dynasties going back 4,000 years -- are absorbing Western technology and Western practices, they are integrating them into a disciplined and elaborate cultural system with a unique experience in, among other things, forming tributary relationships with other states. "The Chinese," a Singaporean official told me early this year, "charm you when they want to charm you, and squeeze you when they want to squeeze you, and they do it quite systematically."

China's internal dynamism creates external ambitions. Empires rarely come about by design; they grow organically. As states become stronger, they cultivate new needs and -- this may seem counterintuitive -- apprehensions that force them to expand in various forms. Even under the stewardship of some of the most forgettable presidents -- Rutherford Hayes, James Garfield, Chester Arthur, Benjamin Harrison -- the United States' economy grew steadily and quietly in the late nineteenth century. As the country traded more with the outside world, it developed complex economic and strategic interests in far-flung places. Sometimes, as in South America and the Pacific region, for example, these interests justified military action. The United States was also able to start focusing outward during that period because it had consolidated the interior of the continent; the last major battle of the Indian Wars was fought in 1890.

China today is consolidating its land borders and beginning to turn outward. China's foreign policy ambitions are as aggressive as those of the United States a century ago, but for completely different reasons. China does not take a missionary approach to world affairs, seeking to spread an ideology or a system of government. Moral progress in international affairs is an American goal, not a Chinese one; China's actions abroad are propelled by its need to secure energy, metals, and strategic minerals in order to support the rising living standards of its immense population, which amounts to about one-fifth of the world's total.

To accomplish this task, China has built advantageous power relationships both in contiguous territories and in far-flung locales rich in the resources it requires to fuel its growth. Because what drives China abroad has to do with a core national interest -- economic survival -- China can be defined as an über-realist power. It seeks to develop a sturdy presence throughout the parts of Africa that are well endowed with oil and minerals and wants to secure port access throughout the Indian Ocean and the South China Sea, which connect the hydrocarbon-rich Arab-Persian world to the Chinese seaboard. Having no choice in the matter, Beijing cares little about the type of regime with which it is engaged; it requires stability, not virtue as the West conceives of it. And because some of these regimes -- such as those in Iran, Myanmar (also known as Burma), and Sudan -- are benighted and authoritarian, China's worldwide scouring for resources brings it into conflict with the missionary-oriented United States, as well as with countries such as India and Russia, against whose own spheres of influence China is bumping up.

To be sure, China is not an existential problem for these states. The chance of a war between China and the United States is remote; the Chinese military threat to the United States is only indirect. The challenge China poses is primarily geographic -- notwithstanding critical issues about debt, trade, and global warming. China's emerging area of influence in Eurasia and Africa is growing, not in a nineteenth-century imperialistic sense but in a more subtle manner better suited to the era of globalization. Simply by securing its economic needs, China is shifting the balance of power in the Eastern Hemisphere, and that must mightily concern the United States. On land and at sea, abetted by China's favorable location on the map, Beijing's influence is emanating and expanding from Central Asia to the South China Sea, from the Russian Far East to the Indian Ocean. China is a rising continental power, and, as Napoleon famously said, the policies of such states are inherent in their geography.


Xinjiang and Tibet are the two principal areas within the Chinese state whose inhabitants have resisted the pull of Chinese civilization. This makes them imperial properties of Beijing, in a way. In addition, ethnic nationalist tensions in these areas are complicating Beijing's relationships with adjacent states.

"Xinjiang," the name of China's westernmost province, means "new dominion," and it refers to Chinese Turkestan, an area twice the size of Texas that lies far from China's heartland, across the Gobi Desert. China has been a state in some form for thousands of years, but Xinjiang formally became part of it only in the late nineteenth century. Since then, as the twentieth-century British diplomat Sir Fitzroy Maclean once put it, the history of the province "has been one of sustained turbulence," punctuated by revolts and various periods of independent rule well into the 1940s. In 1949, Mao Zedong's Communists marched into Xinjiang and forcibly integrated the province into the rest of China. But as recently as 1990 and again last year, ethnic Turkic Uighurs -- descendants of the Turks who ruled Mongolia in the seventh and eighth centuries -- rioted against Beijing's rule.

The Uighurs in China number about eight million and make up less than one percent of China's population, but they account for 45 percent of Xinjiang's. China's majority Han population is heavily concentrated in the lowlands in the center of the country and by the Pacific, whereas the drier plateaus in the country's west and southwest are the historical homes of the Uighur and Tibetan minorities. This distribution is a continuing source of tension, because in Beijing's eyes, the modern Chinese state should exert total control over these tablelands. In order to secure these areas -- and the oil, natural gas, copper, and iron ore in their soil -- Beijing has for decades been populating them with Han Chinese from the country's heartland. It has also been aggressively courting the independent ethnic Turkic republics of Central Asia, partly to deprive the Uighurs of Xinjiang of any possible rear base.

Beijing has also been courting Central Asian governments in order to expand its sphere of influence; China already stretches far into Eurasia, but not far enough given its demand for natural resources. Beijing's sway in Central Asia takes the form of two soon-to-be-completed major pipelines to Xinjiang: one to carry oil from the Caspian Sea across Kazakhstan, the other to carry natural gas from Turkmenistan across Uzbekistan and Kazakhstan. China's hunger for natural resources also means that Beijing will take substantial risks to secure them. It is mining for copper south of Kabul, in war-torn Afghanistan, and has its eye on the region's iron, gold, uranium, and precious gems (the region has some of the world's last untapped deposits). Beijing hopes to build roads and energy pipelines through Afghanistan and Pakistan as well, linking up its budding Central Asian dominion to ports on the Indian Ocean. China's strategic geography would be enhanced if the United States stabilized Afghanistan.

Like Xinjiang, Tibet is essential to China's territorial self-conception, and like Xinjiang, it affects China's external relations. The mountainous Tibetan Plateau, rich in copper and iron ore, accounts for much of China's territory. This is why Beijing views with horror the prospect of Tibetan autonomy, let alone independence, and why it is frantically building roads and railroads across the area. Without Tibet, China would be but a rump -- and India would add a northern zone to its subcontinental power base.

With its one-billion-plus population, India already is a blunt geographic wedge in China's zone of influence in Asia. A map of "Greater China" in Zbigniew Brzezinski's 1997 book The Grand Chessboard makes this point vividly. To some degree, China and India are indeed destined by geography to be rivals: neighbors with immense populations, rich and venerable cultures, and competing claims over territory (for example, the Indian state of Arunachal Pradesh). The issue of Tibet only exacerbates these problems. India has been hosting the Dalai Lama's government in exile since 1957, and according to Daniel Twining, a senior fellow at the German Marshall Fund, recent Chinese-Indian border tensions "may be related to worries in Beijing over the Dalai Lama's succession": the next Dalai Lama might come from the Tibetan cultural belt that stretches across northern India, Nepal, and Bhutan, presumably making him even more pro-Indian and anti-Chinese. China and India will play a "great game" not only in those areas but also in Bangladesh and Sri Lanka. Xinjiang and Tibet fall within China's legal borders, but the Chinese government's tense relations with the peoples of both provinces suggest that as Beijing expands its influence beyond its ethnic Han core, it is bound to encounter resistance.


Even where China's borders are secure, the country's very shape makes it appear as though it is dangerously incomplete -- as if parts of an original Greater China had been removed. China's northern border wraps around Mongolia, a giant territory that looks like it was once bitten out of China's back. Mongolia has one of the world's lowest population densities and is now being threatened demographically by an urban Chinese civilization next door. Having once conquered Outer Mongolia to gain access to more cultivable land, Beijing is poised to conquer Mongolia again, after a fashion, in order to satisfy its hunger for the country's oil, coal, uranium, and rich, empty grasslands. Chinese mining companies have been seeking large stakes in Mongolia's underground assets because unchecked industrialization and urbanization have turned China into the world's leading consumer of aluminum, copper, lead, nickel, zinc, tin, and iron ore; China's share of the world's metal consumption has jumped from ten percent to 25 percent since the late 1990s. With Tibet, Macao, and Hong Kong already under Beijing's control, China's dealings with Mongolia will be a model for judging the degree to which China harbors imperialist intentions.

North of Mongolia and of China's three northeastern provinces lies Russia's Far East region, a numbing vastness twice the size of Europe with a meager and shrinking population. The Russian state expanded its reach into this area during the nineteenth century and the early twentieth century, while China was weak. Now, China is strong, and the Russian government's authority is nowhere as feeble as it is in the eastern third of the country. Just across the border from the roughly seven million Russians who live in the Russian Far East -- a figure that could fall as low as 4.5 million by 2015 -- in the three abutting Chinese provinces, live some 100 million Chinese: the population density is 62 times as great on the Chinese side as on the Russian side. Chinese migrants have been filtering into Russia, settling in large numbers in the city of Chita, north of Mongolia, and elsewhere in the region. Resource acquisition is the principal goal of China's foreign policy everywhere, and Russia's sparsely populated Far East has large reserves of natural gas, oil, timber, diamonds, and gold. "Moscow is wary of large numbers of Chinese settlers moving into this region, bringing timber and mining companies in their wake," David Blair, a correspondent for London's Daily Telegraph, wrote last summer.

As with Mongolia, the fear is not that the Chinese army will one day invade or formally annex the Russian Far East. It is that Beijing's creeping demographic and corporate control over the region -- parts of which China held briefly during the Qing dynasty -- is steadily increasing. During the Cold War, border disputes between China and the Soviet Union brought hundreds of thousands of troops to this Siberian back of beyond and sometimes ignited into clashes. In the late 1960s, these tensions led to the Sino-Soviet split. Geography could drive China and Russia apart, since their current alliance is purely tactical. This could benefit the United States. In the 1970s, the Nixon administration was able to take advantage of the rift between Beijing and Moscow to make an opening toward China. In the future, with China the greater power, the United States might conceivably partner with Russia in a strategic alliance to balance against the Middle Kingdom.


China's influence is also spreading southeast. In fact, it is with the relatively weak states of Southeast Asia that the emergence of a Greater China is meeting the least resistance. There are relatively few geographic impediments separating China from Vietnam, Laos, Thailand, and Myanmar. The natural capital of a sphere of influence centering on the Mekong River and linking all the countries of Indochina by road and river would be Kunming, in China's Yunnan Province.

The largest country of mainland Southeast Asia is Myanmar. If Pakistan is the Balkans of Asia, at risk of being dismembered, Myanmar is like early-twentieth-century Belgium, at risk of being overrun by its great neighbors. Like Mongolia, the Russian Far East, and other territories on China's land borders, Myanmar is a feeble state abundant in the natural resources that China desperately needs. China and India are competing to develop the deep-water port of Sittwe, on Myanmar's Indian Ocean seaboard, with both harboring the hope of eventually building gas pipelines running from offshore fields in the Bay of Bengal.

As for the region as a whole, Beijing has in some respects adopted a divide-and-conquer strategy. In the past, it negotiated with each country in ASEAN (the Association of Southeast Asian Nations) separately, not with all of them as a unit. Even its newly inaugurated agreement on a free-trade area with ASEAN demonstrates how China continues to develop profitable relationships with its southern neighbors. It uses ASEAN as a market for selling high-value Chinese manufactured goods while buying from it low-value agricultural produce. This has led to Chinese trade surpluses, even as ASEAN countries are becoming a dumping ground for industrial goods produced by China's cheap urban labor.

This is occurring as the once strong state of Thailand, which has been shaken by domestic political problems lately, plays less and less of a role as a regional anchor and inherent counterweight to China. The Thai royal family, with its ailing king, cannot be as much of a stabilizing force as it once was, and factionalism is roiling the Thai military. (China is developing a bilateral military relationship with Thailand, as well as building such relationships with other Southeast Asian countries, even as the United States is focusing less on military exercises in the region in order to concentrate on its wars in Afghanistan and Iraq.) To Thailand's south, both Malaysia and Singapore are heading into challenging democratic transitions as their nation-building strongmen, Mahathir bin Mohamad and Lee Kuan Yew, respectively, pass from the scene. Malaysia is further coming under the shadow of China economically, even as its ethnic Chinese population feels threatened by the majority Muslim Malays. And the government of Singapore, even though Singapore is a state whose population is mostly ethnic Chinese, fears becoming a vassal of China; for years now, it has nurtured a military training relationship with Taiwan. Lee has publicly urged the United States to stay engaged in the region, militarily and diplomatically. Indonesia, for its part, is caught between needing the United States' naval presence to hedge against China and fearing that if it looks too much like a U.S. ally it will anger the rest of the Islamic world. As the United States' power in Southeast Asia passes its prime and China's rises, states in the region are increasingly cooperating with one another to mitigate Beijing's divide-and-conquer strategy. Indonesia, Malaysia, and Singapore have banded together against piracy, for example. The more self-reliant these states can become, the less threatened they will be by China's rise.


Central Asia, Mongolia, the Russian Far East, and Southeast Asia are natural zones of Chinese influence. But they are also zones whose political borders are unlikely to change. The situation on the Korean Peninsula is different: the map of China is particularly truncated there, and there political borders could well shift.

The hermetic North Korean regime is fundamentally unstable, and its unraveling could affect the whole region. Jutting out from Manchuria, the Korean Peninsula commands all maritime traffic to and from northeastern China. No one really expects China to annex any part of the Korean Peninsula, of course, yet China remains inconvenienced by the sovereignty of other states there, particularly in the north. And although it supports Kim Jong Il's Stalinist regime, it has plans for the peninsula beyond his reign. Beijing would like to eventually send back the thousands of North Korean defectors who now are in China so that they could build a favorable political base for Beijing's gradual economic takeover of the Tumen River region, where China, North Korea, and Russia meet and which has good port facilities across from Japan on the Pacific Ocean.

This is one reason why Beijing would prefer to see a far more modern, authoritarian state develop in North Korea -- such a state would create a buffer between China and the vibrant, middle-class democracy of South Korea. But reunification on the Korean Peninsula would also eventually benefit Beijing. A reunified Korea would be nationalist and harbor some hostility toward China and Japan, both of which have sought to occupy it in the past. But Korea's enmity toward Japan is significantly greater than its enmity toward China. (Japan occupied the peninsula from 1910 to 1945, and Seoul and Tokyo continue to argue over the status of the Tokdo/Takeshima islets.) Economic relations would be stronger with China than with Japan: a unified Korea would be more or less under Seoul's control, and China already is South Korea's biggest trading partner. Finally, a reunified Korea that tilted slightly toward Beijing and away from Japan would have little reason to continue hosting U.S. troops. In other words, it is easy to conceive of a Korean future within a Greater China and a time when the United States' ground presence in Northeast Asia will diminish.

As the example of the Korean Peninsula shows, China's land borders beckon with more opportunities than hazards. As Mackinder suggested, China seems to be developing as a great land and sea power that will at the very least overshadow Russia in Eurasia. The political scientist John Mearsheimer wrote in The Tragedy of Great Power Politics that "the most dangerous states in the international system are continental powers with large armies." This might be reason to fear China's influence as the country becomes more of a continental power. But China only partially fits Mearsheimer's description: its army, 1.6 million strong, is the largest in the world, but it will not have an expeditionary capability for years to come. The People's Liberation Army did respond to the earthquake emergency in Sichuan in 2008, to recent ethnic unrest in Tibet and Xinjiang, and to the security challenge posed by the 2008 Olympics in Beijing. However, according to Abraham Denmark of the Center for a New American Security, this shows only that the PLA can move troops from one end of continental China to another, not that it can yet move supplies and heavy equipment at the rate required for military deployments. Perhaps gaining such a capability does not much matter anyway, since the PLA is unlikely to cross China's borders other than by miscalculation (if there is another war with India) or to fill a void (if the North Korean regime collapses). China can fill power vacuums on its vast frontiers through demographic and corporate means, without needing the backup of an expeditionary ground force.

China's unprecedented strength on land is partly thanks to Chinese diplomats, who in recent years have busily settled many border disputes with Central Asian republics, Russia, and other neighbors (India is the striking exception). The significance of this change cannot be overstated. There no longer is an army bearing down on Manchuria; during the Cold War, that ominous presence had forced Mao to concentrate China's defense budget on its army and neglect its navy. As the Great Wall attests, China had been preoccupied with land invasions of one sort or another since antiquity. No longer.


Thanks to this favorable situation on land, China is now free to work at building a great navy. Whereas coastal city-states and island nations pursue sea power as a matter of course, doing so is a luxury for historically insular continental powers such as China. In China's case, this might be a luxury that is fairly easy to acquire since the country is as blessed by its seaboard as by its continental interior. China dominates the East Asian coastline in the temperate and tropical zones of the Pacific, and its southern border is close enough to the Indian Ocean that it might one day be linked to it by roads and energy pipelines. In the twenty-first century, China will project hard power abroad primarily through its navy.

That said, it faces a far more hostile environment at sea than it does on land. The Chinese navy sees little but trouble in what it calls the "first island chain": the Korean Peninsula, the Kuril Islands, Japan (including the Ryukyu Islands), Taiwan, the Philippines, Indonesia, and Australia. All except for Australia are potential flashpoints. China is already embroiled in various disputes over parts of the energy-rich ocean beds of the East China Sea and the South China Sea: with Japan over the Diaoyu/Senkaku Islands and with the Philippines and Vietnam over the Spratly Islands. Such disputes allow Beijing to stoke nationalism at home, but for Chinese naval strategists, this seascape is mostly grim. This first island chain is, in the words James Holmes and Toshi Yoshihara of the U.S. Naval War College, a kind of "Great Wall in reverse": a well-organized line of U.S. allies that serve as a sort of guard tower to monitor and possibly block China's access to the Pacific Ocean.

China's answer to feeling so boxed in has been aggressive at times. Naval power is usually more benign than land power: navies cannot by themselves occupy vast areas and must do far more than fight -- namely, protect commerce. Thus, one might have expected China to be as benevolent as other maritime nations before it -- Venice, Great Britain, the United States -- and to concern itself primarily, as those powers did, with preserving a peaceful maritime system, including the free movement of trade. But China is not so self-confident. Still an insecure sea power, it thinks about the ocean territorially: the very terms "first island chain" and "second island chain" (the second island chain includes the U.S. territories of Guam and the Northern Mariana Islands) suggest that the Chinese see all these islands as archipelagic extensions of the Chinese landmass. In thinking in such a zero-sum fashion about their country's adjoining seas, China's naval leaders are displaying the aggressive philosophy of the turn-of-the-twentieth-century U.S. naval strategist Alfred Thayer Mahan, who argued for sea control and the decisive battle. But they do not yet have the blue-water force to apply it, and this discrepancy between aspirations and means has led to some awkward incidents over the past few years. In October 2006, a Chinese submarine stalked the USS Kitty Hawk and then surfaced within a torpedo's firing range of it. In November 2007, the Chinese denied the USS Kitty Hawk carrier strike group entry into Victoria Harbor when it was seeking a respite from building seas and deteriorating weather. (The Kitty Hawk did make a visit to Hong Kong in 2010.) In March 2009, a handful of PLA navy ships harassed the U.S. surveillance ship the USNS Impeccable while it was openly conducting operations outside China's 12-mile territorial limit in the South China Sea, blocking its way and pretending to ram it. These are the actions not of a great power but of a still immature one.

China's assertiveness at sea is also demonstrated by its capital purchases. Beijing is developing asymmetric niche capabilities designed to block the U.S. Navy from entering the East China Sea and other Chinese coastal waters. China has modernized its destroyer fleet and has plans to acquire one or two aircraft carriers but is not acquiring warships across the board. Instead, it has focused on building new classes of conventional, nuclear attack, and ballistic missile submarines. According to Seth Cropsey, a former deputy undersecretary of the U.S. Navy, and Ronald O'Rourke of the Congressional Research Service, China could field a submarine force larger than the U.S. Navy's, which has 75 submarines in commission, within 15 years. Moreover, the Chinese navy, says Cropsey, plans to use over-the-horizon radars, satellites, seabed sonar networks, and cyberwarfare in the service of antiship ballistic missiles. This, along with China's burgeoning submarine fleet, is designed to eventually deny the U.S. Navy easy access to significant portions of the western Pacific.

As part of its effort to control its offshore waters in the Taiwan Strait and the East China Sea, China is also improving its mine-warfare capability, buying fourth-generation jet fighters from Russia, and deploying some 1,500 Russian surface-to-air missiles along its coast. Furthermore, even as they are putting fiber-optic systems underground and moving their defense capabilities deep into western China, out of potential enemies' naval missile range, the Chinese are developing an offensive strategy to strike that icon of U.S. power, the aircraft carrier.

China is not going to attack a U.S. carrier anytime soon, of course, and it is still a long way from directly challenging the United States militarily. But its aim is to develop such capabilities along its seaboard to dissuade the U.S. Navy from getting between the first island chain and the Chinese coast whenever and wherever it wants. Since the ability to shape one's adversary's behavior is the essence of power, this is evidence that a Greater China is being realized at sea as on land.


Most important to the advent of a Greater China is the future of Taiwan. The issue of Taiwan is often discussed in moral terms: Beijing talks about the need to consolidate the national patrimony and unify China for the good of all ethnic Chinese; Washington talks about preserving this model democracy. But the real issue is something else. As U.S. General Douglas MacArthur put it, Taiwan is an "unsinkable aircraft carrier" midway up China's seaboard. From there, say the naval strategists Holmes and Yoshihara, an outside power such as the United States can "radiate" power along China's coastal periphery. If Taiwan returned to the bosom of mainland China, the Chinese navy not only would suddenly be in an advantageous strategic position vis-à-vis the first island chain but also would be freed up to project power beyond it to an unprecedented degree. The adjective "multipolar" is thrown around liberally to describe the next world order; only the fusing of Taiwan with the Chinese mainland would mark the real emergence of a multipolar military order in East Asia.

According to a 2009 RAND study, by the year 2020, the United States will no longer be able to defend Taiwan from a Chinese attack. The Chinese, argues the report, will by that time be able to defeat the United States in a war in the Taiwan Strait even if the United States has F-22s, two carrier strike groups, and continued access to the Kadena Air Base, in Okinawa, Japan. The report emphasizes the air battle. The Chinese would still have to land tens of thousands of troops by sea and would be susceptible to U.S. submarines. Yet the report, with all its caveats, does highlight a disturbing trend. China is just 100 miles away from Taiwan, whereas the United States must project military power from half a world away and with more limited access to foreign bases than it had during the Cold War. China's strategy to deny the U.S. Navy entry into certain waters is designed not only to keep U.S. forces away generally but also, specifically, to foster its dominance over Taiwan.

Beijing is preparing to envelop Taiwan not just militarily but economically and socially, too. Some 30 percent of Taiwan's exports go to China. There are 270 commercial flights per week between Taiwan and the mainland. Two-thirds of Taiwanese companies have made investments in China in the last five years. Half a million tourists go from the mainland to the island annually, and 750,000 Taiwanese reside in China for about half of every year. Increasing integration appears likely; how it comes about, however, is uncertain and will be pivotal for the future of great-power politics in the region. If the United States simply abandons Taiwan to Beijing, then Japan, South Korea, the Philippines, Australia, and other U.S. allies in the Pacific Ocean, as well as India and even some African states, will begin to doubt the strength of Washington's commitments. That could encourage those states to move closer to China and thus allow the emergence of a Greater China of truly hemispheric proportions.

This is one reason why Washington and Taipei must consider asymmetric ways to counter China militarily. The aim should be not to defeat China in a war in the Taiwan Strait but to make the prospect of war seem prohibitively costly to Beijing. The United States could then maintain its credibility with its allies by keeping Taiwan functionally independent until China became a more liberal society. The Obama administration's announcement, in early 2010, that it would sell $6.4 billion worth of weapons to Taiwan is thus vital to the United States' position vis-à-vis China, and in Eurasia overall. And the goal of transforming China domestically is not a pipe dream: the millions of Chinese tourists who travel to Taiwan see its spirited political talk shows and the subversive titles in its bookstores. And yet, somewhat counterintuitively, a more democratic China could be an even more dynamic great power than a repressive China would be, in an economic sense and hence in a military sense, too.

In addition to concentrating its forces on Taiwan, the Chinese navy is projecting more power in the South China Sea, China's gateway to the Indian Ocean and to the world's hydrocarbon transport route. The challenges of piracy, radical Islam, and the rise of India's navy reside all along the way, including near the bottlenecks through which a large proportion of China's oil tankers and merchant ships must pass. In terms of overall strategic significance, the South China Sea could become, as some have said, a "second Persian Gulf." Nicholas Spykman, the twentieth-century scholar of geopolitics, noted that throughout history, states have engaged in "circumferential and transmarine expansion" to gain control of adjacent seas. Greece sought control over the Aegean, Rome over the Mediterranean, the United States over the Caribbean -- and now China over the South China Sea. Spykman called the Caribbean "the American Mediterranean" to underscore its importance to the United States. The South China Sea may become "the Asian Mediterranean" and the heart of political geography in coming decades.


There is, however, a contradiction at the heart of China's efforts to project power at sea in the Asian Mediterranean and beyond. On the one hand, China seems intent on denying U.S. vessels easy access to its coastal seas. On the other, it is still incapable of protecting its lines of communication at sea, which would make any attack on a U.S. warship futile, since the U.S. Navy could simply cut off Chinese energy supplies by interdicting Chinese ships in the Pacific and Indian oceans. Why even bother trying to deny access if you never intend to enforce it? According to the defense consultant Jacqueline Newmyer, Beijing aims to create "a disposition of power so favorable" that "it will not actually have to use force to secure its interests." Showcasing new weapons systems, building port facilities and listening posts in the Pacific and Indian oceans, giving military aid to littoral states located between Chinese territory and the Indian Ocean -- none of these moves is secret; all are deliberate displays of power. Rather than fight the United States outright, the Chinese seek to influence U.S. behavior precisely so as to avoid a confrontation.

Nonetheless, there seems to be a hard edge to some of China's naval activities. China is constructing a major naval base on the southern tip of Hainan Island, smack in the heart of the South China Sea, with underground facilities that could accommodate up to 20 nuclear and diesel-electric submarines. This is an exercise of Monroe Doctrine- style sovereignty over nearby international waters. China may have no intention of going to war with the United States today or in the future, but motives can change. It is better to track capabilities instead.

The current security situation at the edges of Eurasia is fundamentally more complicated than it was in the first years after World War II. As American hegemony ebbs and the size of the U.S. Navy declines or plateaus, while China's economy and military grow, multipolarity will increasingly define power relationships in Asia. The United States is providing Taiwan with 114 Patriot air defense missiles and dozens of advanced military communications systems. China is building underground submarine pens on Hainan Island and developing antiship missiles. Japan and South Korea are continuing to modernize their fleets. India is building a great navy. Each of these states is seeking to adjust the balance of power in its favor.

This is why U.S. Secretary of State Hillary Clinton's rejection of balance-of-power politics as a relic of the past is either disingenuous or misguided. There is an arms race going on in Asia, and the United States will have to face this reality when it substantially reduces its forces in Afghanistan and Iraq. Although no Asian state has any incentive to go to war, the risk of miscalculations about the balance of power will increase with time and with the buildup of air and naval forces in the region (if only by China and India). Tensions on land may reinforce tensions at sea: the power vacuums that China is now filling will in due course bring it into uneasy contact with, at a minimum, India and Russia. Once-empty spaces are becoming crowded with people, roads, pipelines, ships -- and missiles. The Yale political scientist Paul Bracken warned in 1999 that Asia was becoming a closed geography and faced a crisis of "room." That process has only continued since.

So can the United States work to preserve stability in Asia, protect its allies there, and limit the emergence of a Greater China while avoiding a conflict with Beijing? Offshore balancing may not be sufficient. As one former high-ranking Indian official told me early this year, major U.S. allies in Asia (such as India, Japan, Singapore, and South Korea) want the U.S. Navy and the U.S. Air Force to act in "concert" with their own forces -- so that the United States will be an integral part of Asia's landscape and seascape, not merely a force lurking over the distant horizon. There is a big difference between haggling with the United States over basing rights, as the Japanese have been doing recently, and wanting a wholesale withdrawal of U.S. forces.

One plan that has been making the rounds in the Pentagon argues that the United States could "counter Chinese strategic power . . . without direct military confrontation" with a U.S. fleet of just 250 ships (down from the 280 it has now) and a 15 percent cut in defense spending. This plan, designed by the retired U.S. Marine colonel Pat Garrett, is significant because it introduces into the Eurasian equation the strategic significance of Oceania. Guam and the Caroline, Marshall, Northern Mariana, and Solomon islands are all U.S. territories, commonwealths with defense agreements with the United States, or independent states that would probably be open to such agreements. Oceania will grow in importance because it is both relatively close to East Asia and outside the zone in which China is eager to deny easy access to U.S. warships. Guam is only a four-hour flight from North Korea and a two-day sail from Taiwan. It would be less provocative for the United States to keep bases in Oceania in the future than it has been for it to keep troops in Japan, South Korea, and the Philippines.

Andersen Air Force Base, on Guam, already is the most commanding platform from which the United States projects hard power anywhere. With 100,000 bombs and missiles and a store of 66 million gallons of jet fuel, it is the U.S. Air Force's biggest strategic "gas-and-go" facility in the world. Long lines of C-17 Globemasters and F/A-18 Hornets fill the base's runways. Guam is also home to a U.S. submarine squadron and is expanding as a naval base. It and the nearby Northern Mariana Islands are both almost equidistant from Japan and the Strait of Malacca. And the southwestern tip of Oceania -- namely, the offshore anchorages of the Australian-owned Ashmore Islands and Cartier Islet and the adjacent seaboard of western Australia itself (from Darwin to Perth) -- looks out from below the Indonesian archipelago toward the Indian Ocean. Thus, under Garrett's plan, the U.S. Navy and the U.S. Air Force could take advantage of Oceania's geography to constitute a "regional presence in being" located "just over the horizon" from the informal borders of a Greater China and the main shipping lanes of Eurasia. (The phrase "regional presence in being" echoes the British naval historian Sir Julian Corbett's "fleet in being" of a hundred years ago, which referred to a dispersed collection of ships that can quickly coalesce into a unified fleet if necessary. "Just over the horizon" reflects a confluence of offshore balancing and participation in a concert of powers.)

Strengthening the U.S. air and sea presence in Oceania would be a compromise approach between resisting a Greater China at all cost and assenting to a future in which the Chinese navy policed the first island chain. This approach would ensure that China paid a steep price for any military aggression against Taiwan. It would also allow the United States to scale back its so-called legacy bases on the first island chain but nonetheless allow U.S. ships and planes to continue to patrol the area.

The Garrett plan also envisions a dramatic expansion of U.S. naval activity in the Indian Ocean. It does not envision enlarging existing U.S. bases, however; it anticipates relying on bare-bones facilities in the Andaman Islands, the Comoros, the Maldives, Mauritius, Réunion, and the Seychelles (some of which are run directly or indirectly by France and India), as well as on defense agreements with Brunei, Malaysia, and Singapore. This would ensure free navigation and unimpeded energy flows throughout Eurasia. And by both de-emphasizing the importance of existing U.S. bases in Japan and South Korea and diversifying the United States' footprint around Oceania, the plan would do away with easy-to-target "master" bases.

The United States' hold on the first island chain is beginning to be pried loose anyway. Local populations have become less agreeable to the presence of foreign troops in their midst. And the rise of China makes Beijing intimidating and appealing at once -- mixed feelings that could complicate the United States' bilateral relations with its Pacific allies. It is about time. The current crisis in U.S.-Japanese relations -- which has arisen because the inexperienced Hatoyama government wants to rewrite the rules of the bilateral relationship in its favor even as it talks of developing deeper ties with China -- should have occurred years ago. The United States' still extraordinarily paramount position in the Pacific Ocean is an outdated legacy of World War II, a function of the devastation that China, Japan, and the Philippines suffered during the conflict. Nor can the United States' presence on the Korean Peninsula, a byproduct of a war that ended over half a century ago, last forever.

A Greater China may be emerging politically, economically, or militarily in Central Asia, on the Indian Ocean, in Southeast Asia, and in the western Pacific. But just beyond this new realm will be a stream of U.S. warships, many perhaps headquartered in Oceania and partnering with naval forces from India, Japan, and other democracies. And in time, as China's confidence grows, its blue-water force could develop a less territorial approach and itself be drawn into a large regional naval alliance.

In the meantime, it is worth noting that, as the political scientist Robert Ross pointed out in 1999, in military terms, the relationship between the United States and China will be more stable than was the one between the United States and the Soviet Union. This is because of the particular geography of East Asia. During the Cold War, U.S. maritime power alone was insufficient to contain the Soviet Union; a significant land force in Europe was also required. But no such land force will ever be required around the edge of Eurasia, because even as the United States' land presence around the borders of a Greater China diminishes, the U.S. Navy will continue to be stronger than the Chinese navy.

Still, the very fact of China's rising economic and military power will exacerbate U.S.-Chinese tensions in the years ahead. To paraphrase Mearsheimer, the United States, the hegemon of the Western Hemisphere, will try to prevent China from becoming the hegemon of much of the Eastern Hemisphere. This could be the signal drama of the age.

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