Connect with us

East Asia

The Asian Square Dance – Part VIII

Published

on

The economy

Economists generally agree that the cumulative economies of China and India will be larger than that of the G7 by 2030. At present, China’s GCP stands at $9.2 trillion, or nearly 5 times that India.

The two countries have taken very different economic paths. China has chosen to become an exporter of labor-intensive products while India still relies on agriculture and services, particularly in IT.

Russia’s GDP at $2 trillion in 2013, and expected to shrink by 3 to 5% in 2015, less than a quarter of China’s. Russia is a raw material powerhouse and a manufacturing dwarf. As such it should be a natural supplier of oil and gas to China – it is a closer supplier than the Middle East. However, the pipeline that will be built across Siberia will deliver its goods to Nakhodka, a port facing Japan. Russia seems to fear that it will become dependent on China for its gas exports and that China will consider Russia as a vassal state and sideline it on the international scene as the disparities between the two countries grow. China has also to date not given a definite reply to the role Russian gas will play in its energy policy. Price is also an issue since China tends to compare the price of gas with that of domestic coal.

While economists forecast that China’s GDP will overtake that of the US, it still has some way to go as US GDP stands at $15 trillion.

By building its extremely large dollar reserves, $4 trillion, the Chinese Central Bank has allowed the US to borrow at very low interest rtes and has created a situation in which banks have searched for higher yields through lending massively to the housing market. The risk on the currency and on the value of US Treasury paper is extremely large. It is estimated that China holds over 6% of the US debt.

China could, if it so wished, put pressure on the US economic system by buying less US debt, or even selling it, thus precipitating a fall in the dollar and an increase in interest rates. Reprisals from the US could come in the form of new barriers to trade for products made in China.

Should there be a major economic recession in the US, with a consequent loss of jobs, the country may well turn to protectionism. The idea that the globalization process has been essentially beneficial to China will be a driver to reduce imports from that country.

China is also worried that US government borrowing to cover its enormous deficit will lead to high inflation and that therefore the bonds held by the Central bank will lose value.

The US has been putting considerable pressure for China to revalue its currency, the RMB, and thus reduce its competitive advantage based on cheap labor. Some economists, however, believe that a revaluation of the currency may well lead to precisely the opposite effect as funds may then float out of the RMB and into other currencies, thus leading to a de facto devaluation.

The fall of the dollar has revaluated the RMB and thus made Chinese exports more expensive, hurting mostly privately-owned SMEs and halting the modernization process of the economy. The US could allow its currency to depreciate further, to the point where its goods would be significantly more competitive than they are today.

China could take advantage of a weaker dollar to acquire assets denominated in dollars, whether in the US or in other countries. It has thus become a major lender and investor in South America – particularly in Ecuador, Nicaragua and Venezuela where it has committed to invest $250 billion over the next 10 years. This might well be the reason for the US to have softened its stance towards Cuba.

China could also use its reserves to acquire major European corporations in the hope that they will out-compete US companies thus creating an economic war between the US and the EU. It could also use its vast financial reserves to hoard oil and uranium forcing prices of these products to reach new highs.

China feels that the US administration under President Obama has not delivered on its pledge of including China, and other emerging countries, into major economic decisions. Thus, the Obama administration has put pressure on its allies in the Asia-Pacific area to stay away from the Asia Infrastructure Investment Bank, one of China’s pet projects.

As of Japan’s GDP at $5 trillion stands also at four times that of South Korea.

Trade and investment

Asia is in a unique tradition with several world powers sitting on a nuclear arsenal and harboring resentments and old, deep rooted hatreds and territorial disputes. Military budgets are on the rise and economic growth has slowed considerably. Competition exists between the countries we have been considering in this series of articles – it exists in the industrial world, in cyberspace and in outer space.

Asia’s history is one of constant conflicts and long-seated hatred and there are too many potential conflicts that threaten to erupt into wars. There is also a seeming disdain of leaders towards their own people, the most flagrant case being North Korea.

There is also a major gender imbalance in favor of men and this situation has led to fears of a rise in militarism. There is contradictory evidence that unmarried men tend to be more violence-prone than married man.

Almost all the countries covered have strong economic interconnections.

India runs a major trade deficit with China which in 2013 was of over $ 30 billion, with India complaining that Chinese goods take advantage of a whole series of measures put in place by the Chinese government while Indian companies have problems entering the market.

Similarly, Indian companies have had problems entering the Japanese market, but due to quality issues.

With the opening of the Indian economy to foreign investments, Japanese corporations, catching up to a late start, are expected to invest $35 billion over the next 5 years in public-private partnerships. Japan is also expected to become a partner in a major public-private infrastructure partnership project, so large many knowledgeable observers of Indian politics doubt it can be realized, estimated at $100 billion, to create a high technology corridor – the Delhi Metro Industrial Corridor – linking Mumbai to New Delhi. Terrorist attacks have so far frightened would-be investors, however.

China has also been an important investor in India. A sustained economic cooperation between the two countries would make them less dependent on exports to the European Union and to the US.

China has regularly complained about the long delays for India to approve investments by Chinese firms and of a total ban in investments in infrastructure. Chinese workers also have difficulties in obtaining working visas.

Bilateral trade between India and Russia is much lower at $12 billion but after President Putin’s visit, ambitious targets have been set for 2030, essentially in infrastructure projects. Thus, Russia will supply four nuclear power plants.

India’s largest market is the US with bilateral trade between the two countries being of the order of $100 billion with plans to reach $500 billion. The US has thus displaced China as India’s largest trading partner in spite of India’s complaint that US subsidies to cotton farmers undermine Indian exports and that steel exports are unjustly submitted to high tariffs. In turn, the US complains at the difficulties companies face in attempting to enter the Indian market and at the limitations imposed on them when investing.

China and Japan are each other’s largest trade partners, China having replaced the US in that role. Japanese tourists are the main visitors to China. Japan is the major foreign investor in China, taking advantage of low labor costs. However, the tense situation between the two countries, and the increased cost of manpower, has led Japanese companies to sharply reduce their investments.

China is also South Korea’s main trading partner with two-way trade of $230 billion and the signing of a bilateral trade agreement that took effect in February of this year. Koreans are also large investors in China.

China and Russia, in spite of the fact that they are both export-oriented economies, are complementary in that the first is a big consumer of raw materials, primarily energy, while Russia is a major exporter of oil and gas. This has led China to increasingly see Russia as a petro-state with little technological capabilities and unable to pose any type of threat.

Hence, while in the years following the Second World War Russia saw itself dwarfed by the Western economies, the country is, today, overtaken economically by both the West and the East, the latter being represented by China, Japan and South Korea.

In the Chinese-Russian partnership, China appears to be the senior partner and it is safe to say that Russia needs China more than China needs Russia.

Russia sees China as a hedge of its European energy markets. This hedge, however, can only be fully operational in the future as building the right infrastructure that would allow Russia to move its energy exports eastwards is a long-term venture, particularly since Russia’s most productive wells are in the European part of the country while the bulk of China’s population is in the eastern part of their own country.

Two-way trade in 2014 was over $100 billion and while China is Russia’s second largest trading partner, trade with the EU is 4 times that amount. The value of trade is very dependent on the price of oil and gas. It is nevertheless expected to reach $200 billion by 2020.

On completion of the Eastern Siberian Pacific Ocean Oil Pipeline (ESPO), Russia could supply 20% of China’s imports and 33% of Japan’s on condition these two countries choose this dependency.

The two countries have launched the world’s largest joint gas project – the Sila Sibiri pipeline – which will deliver gas to the Russian Far East and to China. There are other joint projects, including in the Arctic, which have received President Putin’s blessing.

Since 2014 commercial contracts between the two countries intensified as Russia was looking for credit and investors in the face of the sanctions imposed by the EU and the US as well as the serious dip in the price of oil. The oil and gas contracts signed between the two countries are, respectively, of $270 and $400 billion over a thirty-year period with Gazprom deliveries due to start in 2019.

Chinese investments in Russia are of the order of $10 billion and new investments have been earmarked for a large variety of projects. The largest investment is a partnership with Rosneft, valued at several billion dollars meant essentially for the Sakhalin-3 block. Rosneft has also secured a $35 billion loan from China in exchange for oil supplies. This envelope is to be used to purchase several smaller oil producers.

China will also invest in a high-speed train between Kazan and Moscow – a $25 billion investment, and other major infrastructure projects are being discussed.

Russia has, in turn, agreed to supply China with the know-how to produce uranium-enrichment facilities and to supply enriched uranium.

Economic ties between China and the US are also important and the interdependence between them appears to be growing rather than slowing in spite of constant mutual accusations of retreating from free trade. The US ran in 2013 a deficit of $318 billion for merchandise trade, one third of the total trade deficit. China is the US’ biggest supplier.

Imports by the US of cheap Chinese products – essentially manufactured goods, machinery, chemicals and transport products – has been of great assistance in controlling inflation and the US has thus transferred to China increasingly large amounts of dollars. Since China is a major supplier of goods to other Asian countries, in particular in South-East Asia, that assemble products for export to the US, the US’ importance to the Chinese economy is even greater than what the above figures show. The US has started a large number of cases against China at the WTO claiming the country is practicing illegally high import tariffs on US goods while simultaneously subsidizing exports. By limiting or banning exports of raw materials, such as bauxite, and allowing prices to climb, China has been accused of developing one more strategy of subsidizing its industry.

Chinese investments in the US are of the order of $50 billion but are dwarfed by the over $400 billion invested by US corporations in China, even though the investment flow has slowed. Statistics in this respect are not meaningful, as often these investments are not reported in US statistics as the flow of funds is channeled through favorable tax havens.

A large number of American firms have established manufacturing facilities in China, and this allowed the US economy to grow with minimal inflation. There is a generally shared belief that China has entered a period of uncertainty, that local competition is adopting a more aggressive stance that in some areas there is over-capacity, that intellectual property is not respected and that the country is increasingly adopting a protectionist stance. Nevertheless, an increasing number of US corporations are dependent on the Chinese economy for their profits and sometimes on products, such as tobacco, whose sales are dwindling in traditional markets.

Also, the US is attempting to sell, in China, alternative energy sources such as solar or wind power technology. This is a major market considering that the Chinese government has announced its intention of investing $200 billion in renewable energies by 2020. US companies, however, are loath to export their latest technology in a country known for closing an eye to the trespassing of intellectual property.

Chinese investments in the US could be even bigger if they were not met by obstacles – the most glaring example being that of Huawei, the telecommunications company, which was blocked from entering the US market.

The Chinese have also become very large buyers of real estate in the US, amassing a portfolio of $22 billion.

The relationship between Japan and Russia is more complex since the two countries have never signed a final peace agreement and Japan still lays claim on the Kurile Islands. Russia is ill at ease with Japan’s future involvement in a missile defense system and has proposed to join the initiative which is led by the US.

Bilateral trade is of the order of $33 billion with oil and LNG taken an important part of this volume, in particular from the Sakhalin deposits. After the Fukushima incident Japan has felt the need to diversity its sources of energy and Russia is a natural supplier. In Russia’s eyes, supplying Japan would counterbalance the increasing dependence on China. Several cooperation agreements to develop new gas and oil fields have also been signed between the two countries.

Total Japanese investments are small, with car makers have plants in Russia, but the most likely investments will target Russia’s Far East, particularly for infrastructures. Several joint ventures have been started in agriculture, energy and infrastructure.

Japan and South Korea are each other’s fourth largest trading partners. Russia has proposed building a railway that would link North and South Korea to the European markets via Russian territory – i.e. connecting to the Trans-Siberian Railway. Such an undertaking would allow South Korea to increase trade with Europe and reduce its dependency on the American and Asian markets.

Bilateral trade between South Korea and the US amounted to $115 billion in 2014 and represented a US deficit of $25 billion. In June 2007, the two countries signed a trade agreement that phases out all tariffs, on consumer and industrial products over a period of three years. Total investments from South Korea to the US is estimated to be $25 billion while US investments in South Korea are of $35 billion.

Bilateral trade between the US and Russia was, in 2014, of $34 billion with a US deficit of $13 billion. Russians are big investors in New York – particularly Manhattan – real estate particularly since the sanctions and the decrease in the price of oil led to a collapse of the ruble. US investments in Russia stand at around $15 billion and are rather diminishing, again in view of the sanctions.

Economic growth has not eradicated poverty in East Asia and estimates of the extremely poor are of the order of 250 million persons. Although continuing economic growth should lead to a reduction in poverty, this should still touch 15 to 17% of the population. The imbalance stems in part by the fact that there is an imbalance between skilled and unskilled labor as well as regional imbalances due to the rapid industrialization of certain areas.

Demography

East Asia is today’s the world’s fastest aging. Projections show 20% of the population over 60 by 2050, or two-thirds of the world’s seniors. Already by 2040, the number of people over 60 will be higher than the people under 15.

Just as China is the world’s most populated country, India is the world’s largest democracy. They are the only two countries with a population larger than 1 billion. It is forecast that sometime between 2015 and 2025, India’s population will have overtaken China’s as the former’s population is growing at twice the rate of China’s population. Furthermore, India’s population has a low average age while China’s is aging. Therefore while India may be considered to have an infinite supply of cheap labor, this will not be the case of China in the mid-term future. Thus, while India’s dependency ratio will improve, China’s will worsen.

China’s population is aging rapidly, partly because of a vastly improved health system. This expanding health care system will require substantial additional funding. So will the pension system even though traditionally, children support their elderly parents.

Both China and India suffer from a growing ratio of males to females. The devotion of the children to their parents, when these age, will be difficult to maintain if single men, due to absence of the brides, migrate in search of employment of opportunities.

As the economies of both countries expand at a similar rate, they will need trained engineers and scientists. China graduates 600 000 engineers per year and India 350 000. However, China has a qualitative advantage due to a better educational system.

Japan’s economy is to a large extent driven by demographic change. Birthrates have collapsed with a total fertility rate dangerously approaching 1. With a life expectancy of 88 years, it has today the world’s oldest population, with the largest number of centenarians, but may well cede this place to China by 2050. By 2025 its population over 80 years of age will be equal to that under 15. Thus, two persons of working age will have to support one retiree. On the other hand, they will be a reduction in supporting children.

Older persons invest very conservatively, and therefore the economy might lack the dynamic financial markets required to fuel growth and entrepreneurship.

To a large extent, the same analysis applies to South Korea. North Korea is faring slightly better with a total fertility rate of nearly 2.

Russia has a population of 142 million for a country representing 19% of immerged land. There has been a small rebound in birth rates, but it may not be sustainable. The percentage of the population over 60 is low compared to China, Japan and South Korea, and is of only 20%. The imbalance between women and men – 1 160 women for 1 000 men – and the fact that women in rural areas are unable to find husbands who are not addicted to alcohol, contribute to a low level of marriages, and consequently low fertility. With life expectancy expected to rise in the coming years, while fertility is expected to remain at its present level, the old-age dependency ratio is expected to double by 2050. This would mean that spending on allowances and pensions would rise from the present figure of 9% to 12% by 2030 and 16% by 2050.

The situation in the US, while not as bad, is worrying. Its population of 316 million is growing at the rate of 0.7% and is expected to reach 400 million by 2050. 22% of the population will be over 65. The life expectancy is slightly higher than 78 years but the total fertility rate at 1.9% is below replacement. The reduction in birth rate applies also to immigrants, usually an important component in US demographics.

India’s demographics are quite different. Its population is only slightly below that of China, at nearly 1.3 billion, and it has the world’s largest number of young people since two thirds of its population is under 35, and the average age of the population is 27. But in India too the population is aging and is expected to reach 37 by 2050. At that time 300 million people with be over 60. The total fertility rate is 2.5. It should therefore still enjoy a demographic dividend compared to the ageing societies we have reviewed.

The Diasporas

There is a large Tibetan diaspora in India where the Dalai Lama has established his headquarters and this has been an irritant to the Chinese government while achieving little for the Tibetans. The Dalai Lama relinquished his political responsibilities in March 2014 and has been replaced by a Harvard scholar who has never visited Tibet

The presence of a Chinese diaspora in Russia is a more complex issue as there is an important labor movement, of legal and illegal immigrants, along the border and is becoming an important issue in the relations between the two countries. Migrant labor is essentially employed in agriculture and construction. The total number of Chinese in Russia is estimated to be 400 000 including nearly 20 000 Chinese students in Russian universities. The vast majority of the migrants come to make money and have no plans to settle permanently.

The Chinese diaspora in the United States is much larger with 1.6 million immigrants and just as many US citizens of Chinese origin, heavily concentrated in the states of California and New York. Several incidents have questioned the loyalty of some of the immigrants to the host country.

There is a small but concentrated Korean diaspora in China numbering approximately 600000.

There has been a considerable flow of highly qualified and entrepreneurial migrants from India to the US and the Indian diaspora amounts to 2.5 million people and this number is expected to double in the next ten years. Indians are thus the most important group of Asian immigrants in the US. The 75 000 Indian students in the US are the largest foreign group registered in colleges and universities. Indian immigrants have been, on the whole, an extremely educated and successful group with total assets estimated to total $76 billion.

There are in the US over 3 million Americans of Russian descent.

Water

There is a contentious issue between China and India regarding the latter’s water diversion plan which will shift 50 billion cubic meters of water from the Yarlung-Tsangpo, an affluent of the Brahmaputra originating on the Tibetan plateau, to the Yellow River so as to harness hydroelectric energy. This would severely restrict the flow of water to India.

Energy

As mentioned in the first part of this article, China and India, but also China and Japan, are competing to secure energy sources.

While the competition between China and India lies in securing energy sources in other countries, that with Japan is not only centred around Russian supplies, but also on the presumed hydrocarbon deposits around two rocky uninhabited islands in the East China Sea that the Japanese government purchased from a private owner and which China claims as its own.

China is uncomfortable with the long shipping route oil takes from the Middle East to its ports. The area is populated by pirates and other revolutionary or semi-revolutionary movements that could be allowed, if not encouraged, to target Chinese vessels. Ensuring the safety of the shipping routes is the official reason for China’s investments in naval power.

Central Asia

Russia fears the political influence that China may exert on the Central Asian republics, in particular through the SCO – the Shanghai Cooperation Organization – set up by China but pf which Russia is also a member. India is, incidentally, an observer, and Russia would like to invite the country to full membership status. Intriguingly, however, while Russia sees to remain the determining factor in influencing policy in Central Asia, China’s position is that these states are free to develop relations with countries not members of the SCO and that the organization is not, and should not, become an anti-Western club.

Russia opposes China’s wish of extending the SCO agreement to cover trade in the form of a free trade agreement, as Russian corporations would be unable to compete on price. It would also open the area to Chinese investments, including in energy projects. China is successful in the region due to the aid it brings, diplomatic pressure and large investments. Russia’s policy has been to prevent Central Asian countries to supply European markets by bypassing the Russian pipeline system and ensuring it has a monopsony. However, in view of the decreased quantities purchased by Russia affected by the reduced demand in Europe, these countries have looked for alternative markets, and China is the obvious one.

Russia would like to see a coordination of pricing policy on energy exports between the member countries that are energy exporters.

Another Chinese advantage is that it is perceived by Central Asian governments as a trading partner and a door to Europe and the Middle East, and not as a competitor as Russia is for gas supplies to Europe. Russia’s role as a supplier of finished goods disappeared with the downfall of communism.

China sees the pipelines for hydrocarbons from Central Asia as a hedge against possible disruptions of shipping lanes from the Middle East. However, just as it is beefing up its Navy to protect those lanes, and to rely less on US maritime power, it will have to beef up its security along the pipelines to protect them from possible attacks.

Russia sees China as a good partner in its policy of containing the US in Central Asia and elsewhere. In fact one can say that Russia sees China as a partner only when its relations with the West are less than perfect – which is the situation at present.

China has been able, so far, to restrain any influence the US could have on Central Asia thus enabling China to secure energy resources for itself and to prevent the infiltration of democratic ideas.

The US has key interests in the region: to support its military adventure in Afghanistan, to have access to energy – without relying on the Russian logistical infrastructure – and to wield political influence in the entire Central Asian area. The US also sees an opportunity to lessen Russia’s position as a gas supplier – should the Central Asian republics find alternative routes for their gas shipments, Gazprom will no longer be in a position to export as domestic demand is rising from an already important base.

Weapons

China’s strategy has been, and will continue to be in the foreseeable future, to encircle India both through its own forces and through those of its allies who neighbour India, Pakistan in in particular. China, nevertheless, contrary to the US, is not part of any defence organization and thus does not have the burden of having to defend the territories of other nations.

China’s military budget for 2015 has been increased by 10%, reaching $145 billion, a rather steep figure in regard to the slowing of the country’s economy. China has installed missile systems pointing to India’s major cities while China’s industrial heartland is very far removed from their common border.

China’s nuclear strategy is to use their missiles only for a second strike and not to use them for a first strike on any state. It may, however, rapidly change this policy if it so decided.

India is also worried with the building of a port, by China, on the coast of Myanmar, that would give China direct access to the Bay of Bengal. It is also worried by the increasing presence of Chinese submarines in the Indian Ocean. The submarines use Colombo as a refuelling port, leading India to fear that China was building alliances with countries surrounding India – the so-called ‘string of pearls.’ China has called this project the 21st Century Maritime Silk Road, a project financed by China to the tune of $40 billion.

Indian military hardware purchases, the world’s largest with a budget of $250 billion over 10 years, are an important source of cash for the ailing Russian military manufacturers.

The two countries will be jointly developing a fighter plane of the fifth generation. India has also served Russia as a basis to enter the South East Asian markets for military hardware by servicing and training users of Russian equipment sold to those countries.

Russia has been very supportive of India in its conflict with Pakistan over Kashmir, among other things committing not to supply weapons to Pakistan, an embargo it lifted in 2014.

The US has also been a major provider of mostly defensive weapons to the Indian army and this may lead to a licensing agreement for India to manufacture American weapons.

India and Japan have reached an agreement regarding military cooperation. Japan is about to review its constitution to enable it to expand its military which is already considered as one of the world’s best and China would have problems measuring themselves to Japanese firing power in case of a conflict. It is also backed up by the US military that have bases in Japan.

The main discussions between the two countries centred on the supply of nuclear technology and fuel to India by the US. This is an important step considering the fear of nuclear proliferation pervasive in the world today and particularly considering the fact that India will be adding to an already existing nuclear capability while it has never signed the Nuclear Non Proliferation Treaty (NPT). This allows the US to put pressure on New Delhi to reduce its energy purchases from Tehran. Further, India’s rivalry with Pakistan might lead the latter to accelerate its own weapons programs should India proceed with its own purchases.

For India this is an important development as its supplies of uranium are drying out. The treaty also allows it to remain a nuclear player without signing the NPT, although the country has entered negotiations with the International Atomic Energy Agency to negotiate an agreement that would have clauses specific to its situation.

The US has insisted on certain clauses in the treaty such as India accepting not to undertake further nuclear testing, not reprocessing the spent fuel and accepting that the President of the United States certifies, annually, that the country is respecting these clauses.

For the US this is a major step in containing China and relations between China and India took a turn for the worse, with China supplying nuclear power plants to Pakistan, after this agreement was signed.

Another main motivation of the US has been to prevent India making up for its energy shortcomings by purchasing Iranian gas that would be routed through an Indian-Pakistani pipeline. Financial motives are not left too hard behind, considering the deal would generate close to $100 billion in sales for US corporations to which must be added large sales of defence equipment which presently India purchases from France and Russia.

India is also the country with which the US has conducted the largest number of military exercises in recent years.

Following President Obama’s visit to India in 2015, a Joint Strategic Vision for the region was agreed upon. Its objective is to support sustainable development and address poverty. However, the main objective is to ensure India’s Navy plays a dominant role in the Indian Ocean.

Japan is now allowing its military to have an activity outside the country’s territory.

China’s increased militarization worries Japan, particularly the installation of missile launching ramps, China’s declaration of an exclusive maritime and air space, and the highly vocal Chinese media constantly threatening of war with Japan.

China, in turn, fears a reunified Korea with nuclear weapons.

Russia continues to be China’s main weapons supplier as it wants the money from these exports which are of the order of $2 billion per year. Since 2006, the two countries have conducted joint manoeuvres, and intensified their military cooperation.

China, however, no longer represents an overwhelming share of Russia’s weapons exports – a mere 20% today from a high of 70% ten years ago, while the value of total exports has risen considerably, thus decreasing even more the importance of Chinese purchases. Further, with the new cold war, Russia itself is becoming its own major customer.

Russia is eager to maintain this monopoly on Chinese weapons purchases, and the EU and US embargo assist them in achieving this objective. However, inevitably, China will want to be involved in weapons development and testing rather than simply acquiring technology entirely developed in Russia. It has already indicated it does not want to buy finished weapons or assembly kits but want to build the planes in China.

On a longer term basis, it is obvious that China will develop its own military platforms and it is already successfully copying several weapons systems thus severely reducing its imports from Russia. This worries Russia as on a conventional army basis, China would have the upper hand in case of conflict, and Russia would have to rely on tactical nuclear weapons where it has the upper hand. While the INF treaty constrains Russia’s capability of deploying intermediate range nuclear missiles, Russia would probably opt out of the treaty should it feel threatened by China.

North Korea is actively developing its nuclear program and at least one estimate is that it may possess 100 nuclear heads by 2020.

On the other side of the demilitarized zone, there are US forces on the ground. The US keeps 40 000 troops in South Korea.

Border issues

China and India have fought several border wars and in November 2006 China declared one of the Indian provinces, Arunachal Pradesh, to be part of China, calling it South Tibet. India also claims China is occupying illegally an Indian province in the Himalaya.

In fact, China and India are in a constant military confrontation along their mountainous border.

China is also in a confrontation with several countries regarding their maritime borders, and particularly Japan.

The Diaoyu / Senkaku (Chinese and Japanese names, respectively) islands have been a bone of contention for 120 years but China has lately become assertive on their claims particularly as it is believed that the waters surrounding them are rich in hydrocarbons and fishing grounds.

China’s attitude is also fed by the fact that it is using Japan as a useful scapegoat that helps it maintain strong nationalist feelings of its population, an important cement in a country in which social pressures between different groups, such as rural and urban, are increasing and threatening the country’s stability. China also believes that Japan is on a long-term decline and will not be able to adequately respond to China’ bullying presence.

China’s claim that the entire South China Sea belongs to it has opened the door for the US to pose as the protector of the South East Asian countries.

The South China Sea is an important point of convergence between the interests of the two countries as well as the countries of Southeast Asia. The rise of Chinese naval power – which could become larger than that of the US in the next 5 years – could threaten the US’ dominance in the area.

The South China Sea sees the flow of half of the world’s trade and the conflictual situation could disturb the globalization process which explains why China is becoming interested in continental routes and goods are shipped by train through a new train link which is the worlds longest and reaches all the way to Madrid.

The interest in the area, however, does not stop there. China believes that it contains massive quantities of oil – approximately the same as those in the Arab Gulf.

China’s development and purchase of high-powered microwave weapons, 1500 missiles, submarines and amphibious ships seem targeted at resisting, or keeping at bay, the US Navy in case of a conflict with Taiwan. As a response, the US moved 20 vessels from the Atlantic to the Pacific fleet in 2007 and more such moves are forecasted. The South China Sea is considered by the US as a natural border China should not cross. It is a strategic passage point between the Indian Ocean and Japan and Korea.

China also has a border issue with Russia. The two countries share a 4300 km border and an important historical confrontational past.

Inside those two borders the major issues about the autonomy of certain regions and peoples – Taiwan, Tibet and Xinjiang for China and a considerably large number of areas in Russia and the adjoining countries in Central Asia that were once part of the Soviet Union. If China has a clear position on this issue – i.e. a total aversion to any such move including with the use of force and population movements – Russia has a more opportunistic stance. It has fought an internal war to prevent the Chechen aspirations to an independent state but intervened military outside its borders in Georgia and is the only country to recognize Abkhazia and South Ossetia as independent states.

Russia fears that its under-populated and vast expanse of territory rich in natural resources, Siberia and the Far East, yields in the face of China’s demography while Russia is in a state of demographic collapse. These two areas have large deposits of hydrocarbons, diamonds, gold and other metals as well as large tracts of forests that provide raw materials to the Chinese paper industry.

Some of the lands forming the region of the Russian Pacific were Chinese until the eighteenth century, and while China has not made any recent claims for their return, Russians fear they may do so.

Russia and China are intent in developing their relations but simultaneously competing for domination of Central Asia and attracting Japanese and South Korean capital to develop the Far East so as not to be exclusively bound to China.

Simultaneously, Russia will redevelop China’s and North Korea’s moribund industry in the adjoining North Eastern parts of the country so as to economically integrate these areas.

Russia also has a contentious issue with Japan that has prevented the signing of a peace agreement between the two countries since the end of the Second World War. It concerns what the Russians call the Southern Kuril Islands, and the Japanese the Northern Territories.

Russia carried out military drills on the islands and announced it would spend over $1 billion between 2016 and 2025 to develop these islands. Japan would like to invest in these islands, particularly in energy projects.

While for many years neither country appeared to think, in spite of speeches to the contrary, that dealing with the other was a priority, Primer Minister Abe’s visit to Moscow in August 2013 seems to have started a different process. One thing Japan needs to avoid at all costs is a coalition between China and Russia.

A dialogue process was started between the defence and foreign ministers of the two countries to discuss measures to combat piracy and terrorism.

Russia’s strengthening of its military presence in the Arctic should also be considered as part of its Asian play, the Arctic being a possible base for ventures in Europe, the American continent and Asia.

Japan also has a territorial issue with South Korea centred around the Takeshima or Tokdo islands, as called respectively by the Japanese and Koreans, that each country claims to be a part of their territory.

These are very small volcanic islands. They are, however, of interest economically as their waters are good fishing grounds and the surrounding waters are believed to contain gas, although none has so far been found. Further, if an international arbiter would rule in favour of Korea, Japan’s case for the Kurile Islands and the Senkaku Islands would be severely affected as the country’s claims in all three cases stems from the San Francisco Peace Treaty that remained vague on this issue.

East Asia

Summit for Democracy Attempts to Turn Multicolor Modern World into Black and White Divisions

Published

on

One of the most important takeaways from the recent sixth plenary session of 19th CPC Central Committee is that Beijing flatly rejects Westernization as the path to modernize the Chinese society and the national economy. Instead, as it was underscored in the plenary Communiqué, the country will continue to stick to “socialism with Chinese characteristics in the new era.” The leadership will preserve and further develop the system that served the people so well over last more than 70 years.

This statement did not come as a surprise to numerous China watchers all over the world. In fact, the critical choice between socialism and Western-type liberalism was not made in November of 2021, but decades ago.

One can argue that the outcomes of the sixth plenary session are yet another manifestation of a more general global trend: The world has been and will continue to be very diverse in terms of political systems, social models and economic patterns of individual nation states. Moreover, the odds are that this diversity will increase further literally in front of our eyes. Instead of the “end of history,” we will observe more intense multifaceted competition between different types of social development.

One way to react to this emerging reality is to accept it as a positive trend that enhances the overall stability of the global social system. The more diverse and complex the system is, the more resistant it is to various shocks and disturbances. To make a rough analogy with biology, a natural forest, which is a very diverse and complex ecosystem, is much more resistant to whims of the weather and natural disasters than a man-cultivated monocultural field. Accepting the trend, we should focus on how to manage competition within the increasingly diverse and complex world so that this competition will ultimately benefit all of us.

The other way to deal with this reality would be to start fighting against social, political and economic diversity by trying to advance one single model over all others. This is exactly what the Joe Biden administration is committed to doing by launching an ideological crusade against China, Russia and other nations that dare to deviate from the fundamentals of the Western development model. To make its case, the White House has announced a virtual Summit for Democracy to be hosted by the US on December 9–10 with the goal “to renew democracy at home and confront autocracies abroad.”

This vision reduces the multi-color palette of the modern world to a minimalist black and white graphics of a global fight between “democracies” and “autocracies.” It divides the international system into “us” and “them,” into “good” and “bad,” into “legitimate” and “illegitimate.” Such a reductionist system, if constructed, cannot be stable and shock-resistant by definition: Any major international crisis or a regional conflict could spark high risks of implosion.

It goes without saying that the nations of the world should firmly oppose corruption, abuses of power by state authorities and gross violations of human rights. If the goal of the Summit for Democracy were to confront these evils on a global scale, there would be no need to make the event exclusive by inviting mostly US friends and allies. If the goal is to advertise the US political, social and economic model, Washington should probably delay the summit and put its house in order first. If the goal is to isolate Beijing and Moscow in the world of politics, this is not likely to work well for the US.

Nations of the world have a right and even a duty to experiment with their political and social development paths. This experimenting contributes to the overall social experience of the humankind. Only history is in a position to judge what models turn out to be efficient, productive and fair and what models will find their place at the dump of human delusions. And history has a lot of means at its disposal to punish leaders, who believe that they possess a “one size fits all” model, which could successfully replace the existing diversity with an imposed universalism.

From our partner RIAC

Continue Reading

East Asia

The Chinese diplomatic force in the IAEA to confront Western leadership

Published

on

At the level of international relations, through China’s presence in all the relevant international organizations, and its membership in all of the United Nations organizations, specifically in the International Atomic Energy Agency “IAEA”, China aims to play the role of the (international balancer),  in light of its quest to maintain a certain level of competition with the United States of America politically and economically, this is in line with its desires to constantly play the role of the pole calling for (multipolarity and multilateral international pluralism through the Chinese political speeches of Chinese President “Xi Jinping”), in order to oppose American hegemony over the world and Washington’s policies to maintain its position as a single pole in the international community. China’s increase in its foreign investments, in order to enhance its economic hegemony over the world through its political and diplomatic tools with countries that have equal economic power with it in a number of (trade, scientific and technological issues, in addition to military and intelligence tools, as a reference for China’s new foreign political center).

  We note that the patterns of Chinese foreign policy is (the pattern of dependence, which is based on the high level of foreign participation in all current global issues), to restrict the attempts of the United States of America to pass its decisions internationally, and therefore China is trying to enter the membership of all international organizations so that China’s foreign policies remain more comprehensive, broader and more effective in the global change, and to change all directions of these issues and control them in the United States, and this is one of its new political tools that serve its global expansion through the (Chinese Belt and Road Initiative).

   In the same context, China focuses its external and competitive strength on its presence in effective international organizations, and rapprochement with the European Union, especially (France, Germany), despite not denying their relations with Washington, because of their strong influence in the global economy.  In addition to China’s reliance on the plan of foreign and foreign investments in countries that influence American influence through the Belt and Road projects, as well as China’s resort to the import policy of many resources necessary to develop its economic capabilities from certain European countries to open influential relations with them, leading to (the Chinese strategy to obtain  political support through the policies of alliances, consulates, representations, and its membership of international organizations), with the aim of influencing countries’ policies economically to pass important international decisions regarding the US challenge to China, such as: (the Iranian nuclear file, North Korea, Myanmar, Afghanistan, Syria, Venezuela, etc.), to increase with this  The level of external penetration of China economically and politically).

    China is mainly aiming to increase its membership in international organizations and the International Atomic Energy Agency, to (create a new balance of power and get rid of unipolarity restrictions through the medium powers and small states that the international system prevails with real pluralism, instead of the current state of American unipolarity).

   In my personal opinion, the countries of the Middle East may find in the rise of China and Russia, and perhaps other international powers to re-compete the United States,  as a (real opportunity to advance the effects of the pluralism of the international system at the regional level, and this would create more space for movement and opposition or bargaining and flexibility of movement for all to confront the policies of American hegemony, according to Chinese planning with Russia), and this also works to alleviate those restrictions and American dictates, and perhaps the sanctions and pressures it imposes on opponents of its approach internationally.

  The strategy of competition between China and the United States has become China’s long-term strategy, which is based on (the necessity of a heavy Chinese presence in all international organizations and forums, which allows China to communicate with various global powers and balance its relations with them compared to Washington), as well as diversifying the People’s Republic of China for its relations and distribution of its power among the competing countries, which allows China to show wide options on all important issues, and the most dangerous is that this Chinese presence, which (allows Beijing to prejudice the foundations of its relationship with the United States of America and the other various powers around the world).

  China and Russia also aim to form an alliance into all international and regional organizations to change the current provocative approach of the American policies in their confrontation, especially those related to mobilization policies and American alliances against them around the world. The Chinese alliance with Russia was so clear with the (Russian Foreign Minister “Sergey Lavrov’s visit” to Saudi Arabia, the UAE and Qatar, while on the other hand, both Kuwait and Qatar have received a member of the Political Bureau of the CPC Central Committee and Director of the Office of the Foreign Affairs Committee of the CPC Central Committee “Yang Jiechi”).

    On the other hand, China is among the Security Council countries that have the largest number of (Chinese peacekeeping forces around the world), and China is at the forefront of the (most contributing countries to the international peacekeeping budget, in addition to sending naval fleets to carry out maritime guard missions according to according to the UN Security Council resolutions), and therefore China may play an important role in establishing security in many countries in the world, and this is perhaps what China plans to ensure its use, in the event of a decline in American interest in the security of many regions in the world, within the framework of (the strategy of pressure of the American expenditures, retreat and withdrawal from many places around the world and devote its concern to the American interior issues and its worsening economic crises).

  The point is worthy to be considered here, is the report issued in July 2021 by the (International Atomic Energy Agency), entitled “Nuclear reactors around the world”, in which he analyzed China’s plan to (establish the dream of nuclear sovereignty around the world by starting to build and establish about 11 reactors). There are other Chinese nuclear reactors under construction, as well as the (new Chinese planning to build other 29 nuclear reactors), while the International Atomic Energy Agency’s work report on the other hand indicated that the known total number of reactors that are actually in service, other than those planned for construction, and other reactors under construction, is up to  About 50 Chinese nuclear reactors, a step that confirms that “China is clearly shifting towards nuclear energy in the production of electricity, and depends on it directly in its industrial renaissance during the coming period, especially as it is the number one country in the world that is expanding in the establishment of nuclear plants, followed by Russia, which plans to build other 20 new nuclear reactors, while it has 38 nuclear reactors in active service”. Some leaks indicate the presence of Chinese nuclear reactors, exercises and tests in the “Doklam Desert” region on the borders of “Xinjiang” province in northwest China.

   It also notes that, from the reality of the report issued by the International Atomic Energy Agency “IAEA”, its confirmation regarding (Chinese planning to become the first country in the world in the production of nuclear energy during the next ten years, in return for the decline in the share of the United States of America in nuclear reactors, which continues to the continuous decrease with the exit of new American numbers of reactors annually), as the future plan of the United States of America does not include the establishment of new reactors, which indicates that (the expansion of this type of energy tends towards China and Russia during the coming period, and these countries will have accumulated experiences, enabling them to dominate and control this new nuclear industry in various countries of the world, and this is what is actually common happening in the region).  Knowing that its uses will be mainly peaceful and to serve the interests of peoples and countries, so we may witness the coming period intensifying the role of the International Atomic Energy Agency in many files around the world to study them, inspect different regions and various other areas to ensure (their peaceful uses of nuclear energy in many development projects around the world).

   Hence, we almost understand (the importance of the Chinese presence and presence and its membership in the International Atomic Energy Agency in the first place), given that it actually owns 50 nuclear reactors in service, and its contribution to the production of electricity and providing energy to one and a half billion citizens, and China also has new nuclear reactors under construction, so (China seeks to be near the International Atomic Energy Agency, to embarrass, restrict and limit the American influence on the one hand against Beijing’s allies, led by Iran and then North Korea. Therefore, China has developed a strategic plan in the coming years, which is based on the intensity of the Chinese international presence and passing its foreign policies and decisions with the help of its Russian ally internationally).

Continue Reading

East Asia

How AUKUS changed China’s diplomatic position towards the IAEA

Published

on

Image source: Wikipedia

The American challenge to China in its places of influence in the “Indo-Pacific” region, and its interference in the Taiwan issue, was a decisive factor in increasing China’s influence and presence in all international forums, especially (the official Chinese objection to the International Atomic Energy Agency (IAEA) to the Australian nuclear submarine deal and an attempt to mobilize the international community against this deal under the auspices of the United States of America). Hence, China, through its membership in the International Atomic Energy Agency, seeks to present its issues fairly internationally, as in the case of (the AUKUS Defense Agreement and the Australian nuclear submarine deal). This was confirmed by Chinese President “Xi Jinping” in his political speeches, that “China opposes American hegemony and its quest to stifle China in its Asian areas of influence”.

  Therefore, all the Chinese political speeches by President “Xi Jinping” came before all international organizations and forums, stressing (establishing a multipolar and multilateral international world with active actors in it to defend the rights of poor and marginalized peoples, and support development initiatives in developing countries), outlining the declared goals for “China’s global strategy in the new century”, which aspires to be one of its main and distinguished poles.

    The American challenge to China by signing the new AUKUS defense agreement and the intensity of American influence in the “Indo-Pacific” region, especially the (South China Sea, Taiwan’s Formosa Strait and the Pacific Ocean regions), that has given Washington the excuse to increase its presence in the Asian region surrounding China, despite the relative success. The Chinese side isolate Taiwan from communicating with the world for a long time, according to the principle of “one unified China”, according to what has been approved upon Taiwan internationally. However, a number of indicators have created a kind of concern at Beijing about the reality of the changing US position towards Taiwan to interfere in its internal affairs, most notably:

 The current US administration, which is led by the President “Joe Biden” called to “grant Taiwan a permanent seat in the United Nations”, after Washington signed the new AUKUS defense and security agreement with Australia and Britain, under the pretext of allowing Taiwan to present its issues with US support, which strongly provoked Beijing.

In addition to the fact that the “New AUKUS Defense Agreement” has provided the opportunity for the United States of America to interfere in (Taiwan’s internal affairs) to restrict China’s influence by inviting Taiwanese officials to visit the United States of America and visiting members of the US Congress to Taiwan, and announcing an increase in the volume of US military sales to Taiwan, and the (constant presence of the American troops, destroyers and warships in the Taiwan Strait to counter Chinese influence), which is inconsistent with all international conventions that (consider Taiwan an integral part of China), the USA has also provoked Beijing by giving an “entry visa” to the Taiwanese officials, and helping out with the “re-election of Taiwan’s opponent president to Beijing with 54% in the face of China”, in addition to Washington easing restrictions on dealing with Taiwanese officials, which continues so far with the current president of Taiwan, “Tsai Ing-wen”, and increasing the volume of American military sales to Taiwan.

The “Aukus Agreement” gave the United States of America the justification for sending American military ships in the Pacific Ocean and Taiwan’s Formosa Strait, under the pretext of protecting the “Indo-Pacific” region and defending the Taiwan Strait in the face of Chinese interference, as well as increasing the sale of American warplanes to  Taiwan, and the indefinite existence of the US forces in the “South China Sea and Taiwan Strait” under the pretext of protecting international maritime traffic, especially after the United States of America signed the “New AUKUS Defense Agreement” with (Australia, UK) and the “Quad Agreement” with (Japan, India, and Australia).

In ​​an earlier period, the US government deliberately changed the name of the organization in which it handles Taiwan affairs to (Taipei Economic and Cultural Representation Office in the United States of America).

   Hence, we understand the intensity of Chinese international calls after the American signing of the Aukus Defense Agreement, to (confront the policy of American alliances and calling for international polarity). Since China and the United States of America are two large countries that belong to the membership of the nuclear club, in addition to the actual influence of each of them internationally, so any action of either China or the United States of America affects the whole world, so “China submitted an objection to the International Atomic Energy Agency against  The United States of America for violating the terms and conditions of its membership in the International Atomic Energy Agency by sponsoring the Aukus nuclear agreement”.

    The signing by the United States of the new AUKUS defense agreement in the face of China, which is “allowed the Chinese side to put pressures on the Iranian nuclear file at the International Atomic Energy Agency and to put actual pressure on Washington”, which came from China’s call for the IAEA’s cooperation with the Iranian nuclear issue in a balanced and objective way to avoid the complex American calculations and China’s resolute response to the withdrawal of the United States of America from the “Iran nuclear agreement” in 2018 during the presidency of “Trump”. This is what China strongly opposes before the International Atomic Energy Agency “IAEA”, especially to embarrass the USA internationally as well, after the American signing of the AUKUS nuclear defense agreement in its confrontation.

  This is what was supported by statements of Chinese officials, calling for the International Atomic Energy Agency “IAEA” to play a constructive role in strengthening diplomatic efforts in favor of Iran in confronting the United States of America,  as a part of the proposed Chinese solutions towards this nuclear issue between Iran and the USA, which China have publicly directed diplomatic and international blame for (Washington’s violation of its international agreements and its negative behaviours of all its international conventions, foremost of which is its unilateral withdrawal from the nuclear agreement with Iran).

  Therefore, the Chinese strategy came after the signing of the AUKUS Defense Agreement led by Washington, by calling on China to the IAEA to strengthen dialogue and cooperation with Iran in the face of American violations in the first place, in order to restore the confidence of the international community regarding (the peaceful nature of the Iranian nuclear program), which is what China is trying to prove  And call him in the face of Washington.  China is also keen to hold and conduct international talks with the European Union and officials of the International Atomic Energy Agency on this Iranian nuclear issue, claiming that “the United States of America has made the world and the Middle East live in a critical stage, due to its violations of all its recognized international covenants”, and the Chinese government’s declaration that dialogue and cooperation with Iran, regarding its nuclear program is the only correct way to resolve this issue in the face of the current provocative American policies.

   The most remaining dangerous and important analysis for me is that China will respond firmly internationally against the United States of America, because of its sponsorship of the Aukus Defense Agreement in its confrontation, especially with the increase in those American and European invitations in the first place, pending the outcome of the new talks with Iran under the auspices and supervision of the officials and supervisors of the International Atomic Energy Agency, and the final decision to be taken on (consideration of referring Iran’s file to the UN Security Council to take a position or impose sanctions against Iran). Of course, there will be an opportunity here for China and its ally Russia to teach the United States of America and its traditional European allies a harsh lesson by using (veto or objection right) to block any decisions affecting the Iranian nuclear file, which will be the summit of Chinese provocation to Washington internationally after its infringement of its rights by signing the “Aukus Defense Agreement”.

   Here, we find that the role of China will seek at the present time to (extension of the agreement to monitor the Iranian nuclear program by the International Atomic Energy Agency), but in the event of the failure of these talks with Iran due to those American pressures on the International Atomic Energy Agency “IAEA”, and in the event of (the success of the American planning to issue a new resolution by the Board of Governors of the International Atomic Energy Agency against Iran and referral of the issue to the Security Council), both Russia and China will respond and will definitely refuse to support the issuance of any international or US resolutions against Iran. This represents a real Chinese and Russian challenge to US power after it signed the AUKUS defense agreement with Australia in the “Indo-Pacific” region to curb Chinese influence.

  It remains the most prominent and important here, that (the growing Russian and Chinese support for Iran had a negative impact on the efforts of the United States of America and the European Union to bring Tehran to the negotiating table during the last period due to the Iranian conditions supported by Russia and China), and here we analyze that the current situation which (allows Iran to include more demands and conditions in its list for obtaining more concessions from Washington and its European allies in the nuclear negotiations), and this will therefore be the (harsh and resolute Chinese internationally response to confront US policies, after signing the AUKUS Defense Agreement to restrict and contain China’s influence in the “Indo-Pacific” region).  China will respond forcefully before the International Atomic Energy Agency and the international community against US policies, due to (the American support of the nuclear proliferation and competition by adopting the Aukus nuclear deal in favor of Australia).

    Therefore, monitoring the relationship between the United States of America and China and identifying points of conflict and convergence between the two countries, and the impact of these relations on the international system and the policies of the work of international bodies and organizations, in addition to the Chinese rise and its impact on American hegemony and the adoption of the United States of America (containment strategy) to control this Chinese emergence, all of this, enables us later to understand and analyze the nature of the next stage and all its international ties, especially with regard to the Iranian nuclear file, and China’s accusation of the United States of America violating to the international covenants, especially by signing the AUKUS Agreement, which will lead to (international nuclear conflict and competition that undermines international security stability).

Continue Reading

Publications

Latest

Economy1 hour ago

A Good Transport System Supercharges the Economic Engine

The infrastructure bill in the U.S. has been signed into law.  At the American Society of Civil Engineers (ASCE), they...

Science & Technology3 hours ago

Digital Child’s Play: protecting children from the impacts of AI

Artificial intelligence has been used in products targeting children for several years, but legislation protecting them from the potential impacts...

Middle East5 hours ago

Testing the waters: Russia explores reconfiguring Gulf security

Russia hopes to blow new life into a proposal for a multilateral security architecture in the Gulf, with the tacit...

Reports7 hours ago

People are increasingly worried about inequalities but divided on how to address them

For a recovery from the COVID-19 crisis that is strong, sustainable but also fair, it will be key to tackle...

business-technology business-technology
Tech News9 hours ago

Industrial innovation to accelerate transitions towards greener and digital economies

In the context of the 8th European Conference on Corporate R&D and Innovation (CONCORDI), 2021 – Industrial innovation for competitive sustainability,...

Reports11 hours ago

Data show how the COVID-19 pandemic has hit all aspects of people’s well-being

The COVID-19 pandemic has not only had devastating effects on physical health and mortality but has touched every aspect of...

Reports14 hours ago

Inflation Concerns Push Up Emerging East Asia Bond Yields

Emerging East Asia’s bond market grew 3.4% in the third quarter to $21.7 trillion, although rising global inflation and a...

Trending