Job Fair in China

Interesting story here via the NYT on how China (in true fashion) is using the current global financial crisis to its benefit.  China is taking this opportunity to shore up its domestic demand, reduce social unrest by providing job training, rapidly and dramatically increase bank lending, slow inflation, and more.  Leave it to China to quickly pass a stimulus package that dwarfs that of the U.S. (on a per capita GDP basis, and as a share of total GDP) and use the downturn as an opportunity for long run future growth.  This is not to say that everything is perfect here.  Indeed, there are millions of newly unemployed migrant workers in the cities.  Being involved in purchasing, I see firsthand that foreign direct investment in China is way down, but still I think that China will rebound sooner and more dramatically from the current downturn than the “developed” economies.

South China Sea

Well, at least the press would like you to think that. Last night, President Obama dispatched heavily armed destroyers to the South China Sea in response to a group of Chinese ships confronting a USN vessel. President Obama met with Chinese Foreign Minister, Yang Jiechi, who refused to acknowledge any wrong doing by the Chinese.

According to some reports “Only 10 days ago, US defense officials described their dialogue with China as a love-fest.” While many are making a big deal of the current situation, it would be foolish for China to jeopardize the momentum build in recent military dialogues between the countries. But, there is a chance (albeit a rather small one) that this situation could spiral out of control.

In my opinion, the issue comes down to trust. No matter what either sides state in the press, they don’t trust each other. Sure the Impeccable was on a ocean floor surveillance mission, but its true intentions were to monitor Chinese submarines. Would America tolerate Chinese naval vessels off of our coasts? On the other hand, America does not trust China’s military growth. China argues that the rise of its military forces stem from a defensive strategy; US policy makers can see that efforts to build aircraft carriers do not serve a defensive purpose. However, it is important to note that as China grows, the country is going to need to protect its economic interests abroad. So, it appears that the true intention of China’s military growth is to protect their growing economic interests abroad.

It is my hope that the Obama administration will take steps to encourage mutual cooperation between the countries; but, sending destroyers to the region may send the wrong message. Obama is scheduled to meet with Chinese President  Hu Jintao in April following the G20 Summit in London, this will be an important meeting for Obama to stress the importance of military cooperation between the countries. Both countries should regulate military operations in sensitive areas so that they “don’t mess up relations and increase distrust.”

“To be honest, I am definitely a little worried.”  So said Wen Jiabao in a recent press conference, referring to the massive amount of money that China has used to finance US debt in recent years.  China has emerged as one of the most stable nations during the current global financial crisis with their enormous cash reserves, half of which are invested in the US.  Hillary Clinton, on her recent trip to China, reassured Chinese officials of the safety of their investments, but Chinese officials are still worried about the effects a future weakening dollar may have on their holdings.  As it stands now, the US dollar is emerging as one of the world’s strongest currencies due to the fact that in times of crisis the dollar is seen as a safe haven.  However, if the dollar begins to depreciate in the future, Chinese holdings will drop rapidly in value.  While threats can be made that China will sell off their holdings, the likelihood of that is slim since flooding the market with US treasury bonds would seriously deflate their value and in turn the amount of money the CCP would regain.

Intimidation at sea

In January, following the inauguration of President Obama, China published a White Paper (“China’s National Defense in 2008”) on the modernization of the country’s national defense and armed forces. The paper was widely ignored in the western press; however, Japan and Taiwan both took notice. China used the paper to announce its intention of increasing its Navy’s capabilities. An invigorated Chinese Navy would allow the country to exert their growing political power abroad.

China decided to exercise their growing naval power much earlier than expected. Yesterday, the Pentagon announced that the USNS Impeccable was harassed by five Chinese vessels in the South China Sea, roughly 75 miles off of Hainan Island. According to the Pentagon, “On March 8, 2009, five Chinese vessels shadowed and aggressively maneuvered in dangerously close proximity to USNS Impeccable, in an apparent coordinated effort to harass the U.S. ocean surveillance ship while it was conducting routine operations in international waters”

However, it is interesting to note that the USNS Impeccable was followed by a rag-tag armada consisting of:

• A Fishery Patrol Vessel
• An Oceanographic Administration Patrol Vessel
• Two small trawlers
• A Navy Intelligence gathering ship

While the situation is a very serious one, if China were really trying to prove a point, why not use a real navy vessel? Fear of retribution might have forced China to reconsider and send its rag-tag armada, but for a country that recently announced its desire to improve its navy, this seems to be an interesting move.

Chinese ships reportedly closed within 50 feet of the Impeccable and told it to leave the area. In response, the Impeccable sprayed its fire hoses at one of the vessels. The Pentagon reported that, “The Chinese crew members disrobed to their underwear and continued closing to within 25 feet.”

China released a fairly typical response that “The U.S. claims are gravely in contravention of the facts and confuse black and white, and they are totally unacceptable to China.” China claimed that the Impeccable not in international waters, but in China’s special economic zone without permission.

Throughout the week, Chinese ships have increasingly harassed US Navy vessels in the region. History shows that China might be testing the new administration to see how they deal with difficult military situations. China may also be protecting the secrecy of its submarine base in the area (off of Hainnan Island) because the USNS Impeccable’s mission was to monitor undersea warfare. China’s true intentions were probably a combination of both protecting the secrecy of its growing submarine capabilities and its desire to test the new administration.

Republic Congressman Mark Kirk, head of the House of Representative’s US-China Working Group, argued that President Obama should respond forcefully. Representative Kirk is encouraging the new administration to continue the tried and true method of treating China as an enemy. Obama should be careful not to fall into the trap of continuing failed policies toward China; instead, he should recognize that China is testing his administration. China wants to see if the US policy has changed. This is the perfect opportunity to open up a dialogue where China is seen as a partner and not an enemy. We must finally acknowledge that China depends on the US and the vice-a-versa. With the Bush administration China forced an American spy plane to land and refused to return the servicemen for 11 days. Obama faces a much more subdued confrontation; thus, a harsh reaction would be unwarranted.

Greetings,

I’ve decided to take the plunge into the world of blogging. For months, I’ve been contemplating developing a website that analyzes Chinese news and I decided to take the easy way out and create a blog. The goal of this site is to provide a fair and balanced look into the Middle Kingdom; China’s growth is the single most important geopolitical change in today’s world. Anyone interested in international relations should have a thorough understanding of China’s role in today’s world. Unfortunately, most media outlets provide spotty coverage of China. Through this blog I hope that readers will not only learn about China, but also learn from China. The blog will provide a comprehensive overview of China’s rise, particular attention will be given to:

• The Environment
• The Economy
• Security Issues
• Migration
• Nationalism