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The Asian Square Dance, Part IX: Mini Scenarios

Michael Akerib

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“I predict that it is in Asia where the fate of the future will be decided.”-Tsar Alexander III

Needless to say, forecasts are extremely difficult to make in international relations, and all the more so when so many factors are in play. The author does not have any special information that he could use to forecast the future. The different miniscenarios are very wide and therefore any of these could reasonably, or unreasonably, be expected to occur.

Mini-Scenario I: Integration or growing together in a Sino-centric world

“… economic integration is the path to riches and peace.” E Prescott

China uses its massive wealth to invest in other countries generating wealth and peaceful sustainable development in a Sino-centric world. This will be done through the One Belt, One Road initiative that groups two projects, the Silk Road Economic Belt and the 21st Century Maritime Silk Road which aims at integration, on a number of levels, a large number of countries from Asia to Europe. These projects replace the International Socialization initiative of President Hu.

Central Asia will be the first beneficiary of the first project and could easily be integrated as a supplier of energy and food.

Europe has largely welcomed China’s financial presence – it now rates as the fifth biggest investor with 2014 FDIs of $18 billion. China has signed an Agriculture Cooperation Plan with the European Union. China is also interested in the Ukraine as a food supplier. Russia would welcome investments in the Pacific where China could produce food and timber to fill its large requirements.

The Silk Road initiative is backed by a $40 billion fund and the creation of the Asian Infrastructure Investment Bank (AIIB) of which even the UK has become a founding member, soon followed by France, Germany and Italy. This could alleviate the negative perceptions the US has of the bank.

These two initiatives are very wide and encompass financial cooperation, increased people-to-people contacts, infrastructure building, investment facilitation, opening of economic corridors and trade facilitation.

China’s actions go as far as Latin America where investments in Ecuador and Venezuela cover the entire energy production process. Africa has also been a priority zone for Chinese investments with a priority for infrastructure. The possibility of transferring labor intensive industries to the black continent has also been suggested.

Nevertheless, the US remains the first destination of China’s overseas investments. Chinese companies are buying majority shareholdings in US companies cheaply as the American economy has been underperforming significantly. This has also led the US to considerably reduce its defense spending.

For the project to be fully successful, however, China abandons its bullying tactics in the South China Sea, its aggressive stance towards Japan, the expansion of its naval power in the Indian Ocean and its rhetoric about reconquering Taiwan. Territorial disputes with India are settled. Historical issues leading to tensions with Japan and the negotiation of an agreement regarding the disputed islands should also come about.

It changes its historical narrative to reduce anti-Japanese feelings and above all to increase the GDP per capita of its population.

It is also more cooperative with its ethnic minorities to avoid confrontation and gradually slides towards a fully democratic system.

It should reduce its military spending that make it appear as an aggressive regional power looking to become a hegemon and invest time and money to project a friendlier image to the surrounding countries.

A satisfactory model is the relations between China and South Korea. This has been achieved through frequent meetings and discussions at various governmental levels.

China and Japan reach an agreement on the Senkaku Islands, followed by wider agreements covering trade and investments, and Japan becomes one of China’s closest allies. A number of events related to the US personnel on the military bases in Japan, leads to a downgrading of the relationship between Japan and the US and the latter is asked to reduce the number of military personnel in the country. Effectively the US presence in the China Sea becomes irrelevant. Taiwan can no longer be effectively protected and a referendum approves the return of Taiwan in the fold of the People’s Republic of China.

Another important step in increasing China’s contribution to a peaceful development is the rise of the remimbi – which today is the fifth most used currency and the second most used in trade finance – as a global currency. It first needs to become convertible and then become a reserve currency and part of the IMF’s SDR basket.

MiniScenario 2: Chaos ahead: The collapse of the Chinese economy

The ageing population and the impact of decades of the one-child policy led to a major impact on labor availability. The country stops being considered as low labor-cost. The government may open the country to immigration from the neighboring countries, creating social tensions.

The anti-corruption drive amplifies and touches a large number of well-established senior members of the party that decide to band together. The president is overthrown. Revolts start in several rural areas where income inequality with city dwellers is large. Farmers and workers are reluctant to see corruption gain the upper hand. Social stability is threatened.

Large tracts of land are polluted and the rural labor force ages, agricultural production declines steeply leading to food shortages. Imports of foodstuffs lead to increased prices and a disruption of the grain market, exacerbated by a US-imposed reduction on exports to China. China decides it will no longer support North Korea and a flood of refugees arrives in the poor eastern provinces.

Water scarcity, already a problem, grows worse due to the present agricultural plans. A disaster is only a climatic-wrought drought away.

Pollution is affecting agricultural production and creating major health problems. Air pollution is major cities already led to episodes of civil unrest.

A bank collapse is a clear possibility as the amount of outstanding bad loans is considerable. This could lead the central bank to sell massive amounts of dollars, putting enormous pressure on the American currency.

The Uigur minority revolts in an attempt to secure independence.

Maoists entice the population to revolt and lead them into a civil war. This grinds globalization to a halt and creates a surge in inflation.

MiniScenario 3: The collapse of North Korea

North Korea’s dictator, Kim Jong-un is assassinated and rival army factions launch a civil war. Chaos ensues and large numbers cross into China. The Chinese army tries to secure the border, but facing total lack of success, invades North Korea. The South Korean army also receives marching orders to secure part of the North Korean territories and in particular the Weapons of Mass Destruction. The two armies clash. US ground forces and air support back the South Korean army.

Certain army units that had remained loyal to the Kim clan, led by Kim Jong-Un’s sister, detonate in front of Pohang, South Korea, a nuclear engine loaded on a ship. There follows a large number of deaths. Simultaneously a similar deflagration is carried out in a Japanese port with catastrophic mortality. The average Japanese is reminded of Hiroshima and Nagasaki. North Korean artillery bombs Seoul, including with chemical weapons. Sleeping North Korean operatives in South Korea proceed with assassinations of key figures.

South Korea, having previously obtained nuclear weapons, reciprocates with the use of these weapons destroying major North Korean infrastructure.

Japans’ Primer Minister orders Japanese troops to land on the western beaches of North Korea.      

The NATO allies of the US are expecting to be requested to provide support but no such request is forthcoming. The US wants to avoid having China drawn into the conflict. However, as the US, South Korean and Japanese troops make deep inroads into North Korea and the troops of that country put a stiff resistance, China calls urgent meetings of the Security Council which is simply emitting toothless resolutions. The Chinese military overtake North Korea and explode a nuclear bomb over Seoul.      

MiniScenario 4: Reviving old enmities

China lands a group of group of marines on the Senkaku islands. Japan may not back down on its own claim on the islands and answers to the Chinese provocation by an important landing of Japanese troops and what starts as small skirmishes rapidly escalate as both sides provide air cover to their troops. With obvious Chinese superiority due to proximity and numbers, Japan asks for military assistance from the US.

China disables a several important US satellites, causing disarray in communications among US troops. Chinese ballistic missiles rain on the US bases in Japan as a preemptive move and North Korea bombs Seoul with classic artillery and missiles.

Russian troops seize the opportunity of occupying several northern islands and Hokkaido.

Essentially, the Japanese economy is destroyed and the country suffers millions of dead civilians.

MiniScenario 5: Gas as mediator

For the US, Russia can be a potential player in the containment for China. Russia, while refusing this role, is reluctant to let China’s influence increase even more or to join China in limiting US’ role in Asia.

While tensions rise between China and Japan over the Senkaku islands, and several incidents take place with planes colliding, Russia’s increased penetration in the Ukraine have led to severe sanctions by the European Union and the US. An ever larger part of Russian gas is exported to China, Japan and Korea. A conflict would seriously impair Russia’s exports. Russia therefore successfully acts as a mediator and President Putin’s prestige is enhanced both domestically and internationally.

MiniScenario 6: China choking … or is it?

Several vessels carrying oil for China are hijacked by pirates in the Malacca Straits. In spite of denials by the US and Indian governments, China claims this is a plot against it. A vessel also destined to China explodes a few hundred miles outside the Hormuz Straits and claims are made by an as-yet-unknown Uighur liberation movement. A US frigate was sailing very close to the vessel at the time of the explosion. An oil tanker bound for China is intercepted by a US vessel, thoroughly searched and then allowed to proceed to its destination.

Central Asian and Russian supplies are able to replace the Middle East shortfall in exchange for further Chinese investments and an even greater economic integration.    

MiniScenario 7: Restless islands

The US closely monitors the synthetic islands built by China in the South China Sea and which are claimed to be Chinese territory. Small incidents degenerate and lead to China attempting to close air and naval space to the US military. The US sinks a Chinese naval unit and China reciprocates. Escalation leads to a major conflict. Escalation includes cyber warfare, space warfare and China is able to keep the US outside the South China Sea. Both powers refrain from using nuclear weapons and China is free to continue its regional domination.

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East Asia

Freedom, Sovereign Debt, Generational Accounting and other Myths

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“How to draw the line between the recent and still unsettled EU/EURO crisis and Asia’s success story? Well, it might be easier than it seems: Neither Europe nor Asia has any alternative. The difference is that Europe well knows there is no alternative – and therefore is multilateral. Asia thinks it has an alternative – and therefore is strikingly bilateral, while stubbornly residing enveloped in economic egoisms. No wonder that Europe is/will be able to manage its decline, while Asia is (still) unable to capitalize its successes. Asia clearly does not accept any more the lead of the post-industrial and post-Christian Europe, but is not ready for the post-West world.” – professor Anis H. Bajrektarevic diagnosed in his well-read ‘No Asian century’ policy paper. Sino-Indian rift is not new. It only takes new forms in Asia, which – in absence of a true multilateralism – is entrenched in confrontational competition and amplifying antagonisms.  The following lines are referencing one such a rift.

At the end of 2017, Brahma Chellaney, a professor with the New Delhi-based Center for Policy Research, wrote an article titled “China’s Creditor Imperialism” in which he accused China of creating a “debt trap” from Argentina, to Namibia and Laos, mentioning its acquisition of, or investment in the construction of several port hubs, including Hambantota in Sri Lanka, Piraeus in Greece, Djibouti, and Mombasa in Kenya in recent years.

These countries are forced to avoid default by painfully choosing to let China control their resources and thus have forfeited their sovereignty, he wrote. The article described China as a “new imperial giant” with a velvet glove hiding iron fists with which it was pressing small countries. The Belt and Road Initiative, he concluded, is essentially an ambitious plan to realize “Chinese imperialism”. The article was later widely quoted by newspapers, websites and think tanks around the world.

When then United States Secretary of State Rex Tillerson visited Africa in March, he also said that although Chinese investment may help improve Africa’s infrastructure, it would lead to increased debt on the continent, without creating many jobs.

It is no accident that this idea of China’s creditor imperialism theory originates from India. New Delhi has openly opposed China’s Belt and Road Initiative, especially the China-Pakistan Economic Corridor as it runs through Pakistan-administered Kashmir, which India regards as an integral part of its territory. India is also worried that the construction of China’s Maritime Silk Road will challenge its dominance in South Asia and the Indian Ocean. Based on such a judgment, the Indian government has worked out its own regional cooperation initiatives, and taken moves, such as the declaration of cooperation with Vietnam in oil exploration in the South China Sea and its investment in the renovation of Chabahar port in Iran, as countermeasures against the Chinese initiative.

Since January, India, the United States, Japan and Australia have actively built a “quasi-alliance system” for a “free and open Indo-Pacific order” as an alternative to the Belt and Road Initiative. In April, a senior Indian official attending the fifth China-India Strategic Economic Dialogue reiterated the Indian government’s refusal to participate in the initiative.

The “creditor imperialism” fallacy is in essence a deliberate attempt by India and Western countries to denigrate the Belt and Road Initiative, which exhibits their envy of the initial fruits the initiative has produced. Such an argument stems from their own experiences of colonialism and imperialism. It is exactly the US-led Western countries that attached their political and strategic interests to the debt relationship with debtor countries and forced them to sign unequal treaties. China’s Belt and Road Initiative is proposed and implemented in the context of national equality, globalization and deepening international interdependence, and based on voluntary participation from relevant countries, which is totally different from the mandatory debt relationship of the West’s colonialism.

It is an important “Chinese experience” to use foreign debts to solve its transportation and energy bottlenecks that restrict its economic and social development at the time of its accelerated industrialization and urbanization. By making use of borrowed foreign debts, China once built thousands of large and medium-sized projects, greatly easing the transportation and energy “bottlenecks” that long restrained its social and economic development. Such an experience is of reference significance for other developing countries in their initial stage of industrialization and urbanization along the Belt and Road routes.

In the early stage of China’s reform and opening-up, US dollar-denominated foreign debt accounted for nearly 50 percent of China’s total foreign debts, and Japanese yen close to 30 percent. Why didn’t Western countries think the US and Japan were pushing their “creditor imperialism” on China?

Some foreign media have repeatedly mentioned that Sri Lanka is trapped in a “debt trap” due to its excessive money borrowing from China. But the fact is that there are multiple reasons for Sri Lanka’s heavy foreign debt and its debt predicament should not be attributed to China. For most of the years since 1985, foreign debt has remained above 70 percent of its GDP due to its continuous fiscal deficits caused by low tax revenues and massive welfare spending. As of 2017, Sri Lanka owed China $2.87 billion, accounting for only 10 percent of its total foreign debt, compared with $3.44 billion it owed to Japan, 12 percent of its total foreign debt. Japan has been Sri Lanka’s largest creditor since 2006, but why does no foreign media disseminate the idea of “Japan’s creditor imperialism”?

In response to the accusation that China is pursuing creditor imperialism made by India and some Western countries, even former Sri Lankan president Mahinda Rajapaksa wrote an article in July using data to refute it.

Most of the time, the overseas large-scale infrastructure construction projects related to the Belt and Road Initiative are the ones operated by the Chinese government and Chinese enterprises under the request of the governments of involved countries along the Belt and Road routes or the ones undertaken by Chinese enterprises through bidding.

It is expected that with the construction of large-scale infrastructure projects and industrial parks under the Chinese initiative, which will cause the host country’s self-development and debt repayment ability to constantly increase, the China’s creditor imperialism nonsense will collapse.

An early version of this text appeared in China Daily

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Arrogance of force and hostages in US-China trade war

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Even before the ink on the comments made by those who (just like the author of these lines) saw the recent meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in Buenos Aires as a sign of a temporary truce in the trade war between the two countries had time to dry, something like a hostage-taking and the opening of a second front happened. The recent arrest in Canada under US pressure of Meng Wanzhou, the chief financial officer of China’s telecommunications giant Huawei, is unfolding into a full-blown international scandal with far-reaching consequences.

Meng Wanzhou faces extradition to the United States where she is suspected of violating US sanctions against Iran, namely by making payments to Tehran via the UK branch of the US bank HSBC. The question is, however, how come someone is trying to indict a Chinese citizen according to the norms of American law, and not even on US territory to boot?

China’s reaction was extremely tough with Deputy Foreign Minister Le Yucheng summoning the Canadian and US ambassadors in Beijing and demanding the immediate release of the detainee, calling her detention “an extremely bad act.” First of all, because this is yet another arrogant attempt at extraterritorial use of American laws.

Other countries, above all Russia, have already experienced this arrogance more than once; suffice it to mention the cases of Viktor Bout and Konstantin Yaroshenko, or of the alleged “Russian hackers,” who, by hook or crook, were taken out to the United States to face US “justice”.

Enough is enough, as they say. Russia’s Foreign Minister Sergei Lavrov, who is usually careful in his choice of words, said that while Russia is not involved in the US-China trade war, it still regards Meng’s arrest as “another manifestation of the line that inspires a rejection among the overwhelming majority of normal countries, normal people, the line of extraterritorial application of their [US] national laws.”

“This is a very arrogant great-power policy that no one accepts, it already causes rejection even among the closest allies of the US,” Lavrov said. “It is necessary to put an end to it,” he added.

One couldn’t agree with this more. But first, I would like to know who really is behind this provocation, even though China’s reaction would have been much anticipated. The arrest of Meng Wanzhou sent US markets into a tailspin and scared investors, who now expect an escalation of the trade war between the United States and China.

The point here, of course, is Washington’s displeasure about Huawei’s activities, with The Wall Street Journal reporting that the US Justice Department has long been conducting a probe into the Chinese company’s alleged violation of US sanctions against Iran.

There is more to this whole story than just sanctions though. The US accuses Huawei (as it earlier did the Chinese ZTE) of the potential threats the company’s attempts to use tracking devices could pose to the security of America’s telecommunications networks. The United States has demanded that its closest allies (primarily Canada, the UK, Australia and New Zealand, with whom it has set up a system for jointly collecting and using Five Eyes intelligence) exclude 5G Huawei products from their state procurement tenders.

I still believe, however, that the true reason for this is not so much security concerns as it is a desire to beat a competitor. Huawei has become a world-renowned leader in the development and application of 5G communications technology, which looks to the future (“Internet of Things”, “Smart Cities”, unmanned vehicles and much more.)

Since technology and equipment are supplied along with standards for their use, there is a behind-the-scenes struggle going on to phase out the 5G standard developed by Huawei from global markets.

As for the need “to put an end to this,” the big question is how. Formally, detainees are extradited to the United States in line with national legislation, but at Washington’s request (which often comes with boorish and humiliating pressure from the US authorities and is usually never mentioned in public).

Add to this the US Congress’ longstanding practice of changing, unilaterally and at its own discretion, already signed international treaties and agreements as they are being ratified – another example of “arrogance of power” as mentioned before.

The question could well be raised at the UN Security Council, but its discussion is most likely to be blocked by the US representative. However, there is also a moral side to the assessment of any political practice the work on international legal norms usually starts with.

If China and Russia, as well as other countries equally fed up with the “arrogance of power” submit a draft resolution “On the inadmissibility of attempts at extraterritorial use of national legislation by UN member states” to the UN General Assembly, it would most likely enjoy the overwhelming support by most of the countries of the UNGA, maybe save for just a dozen or so of the most diehard advocates of Washington’s policy…

First published in our partner International Affairs

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Will China Save the Planet? Book Review

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Barbara Finamore has been involved in environmental policy in China for decades.  Her new book, Will China Save the Planet?,is a succinct report (120 pg.) on the short, yet promising history of China’s actions to address climate change and pollution.

Chapter 1 is about the recent global leadership role that China has taken in the fight against climate change.  At first, the PRC was hesitant to commit to specific pollution-reduction benchmarks.  After experiencing increasingly devastating bouts of industrial smog in the 1990s however, China began to take its environmental commitments more seriously.  It has set out to become the de facto leader in combatting climate change through ambitious domestic action and sponsoring international conferences.  The Trump Administration’s withdrawal from the Paris Climate Agreement has only furthered China’s dominance.

Chapters 2-4 give in-depth analysis on China’s efforts to wean itself off of coal, develop its renewable energy capacity and become a global leader in electric vehicle production.  China has long used coal to fuel its unprecedented rate of industrialization.  In recent years, it has pledged to wean itself off of coal dependency by enforcing coal plant efficiency standards, enacting a cap-and-trade program, managing grid output, promoting local politicians based on their success in implementing green policies and supporting green energy developments.  China is now home to many of the world’s top manufacturers of solar panels, wind turbines and commercial & private electric vehicles.

There is much to applaud China for in its efforts.  Finamore writes that, “After growing by an average of 10% annually from 2002-2012, China’s coal consumption leveled off in 2013 & decreased in each of the following three years… Largely because of the dip in China’s coal consumption, global CO2 emissions growth was basically flat between 2014-2016.”  By moving away from coal, China has been able to, “Every hour… erects a new wind turbine & installs enough solar panels to cover a soccer field.” As of last year, “Chinese solar manufacturers accounted for about 68% of global solar cell production & more than 70% of the world’s production of solar panels.”

Chapter 5 focuses on China’s mission to export its green initiatives around the world, particularly through its Belt and Road Initiative (BRI).  The BRI is shaping up to be the largest international infrastructure plan in history, investing trillions of dollars in 65 countries in Asia, Europe, Africa and the Middle East.  China thus has a golden chance to help much of the developing world to adopt clean energy goals and foster economic growth.  The Chinese government is encouraging its citizens to invest in renewable energy initiatives in the BRI countries by implementing a “green finance” system.  Through its pivotal role in the G20, China can also help to lead the developed world by spearheading reports and policies among the 20 member nations.

Barbara Finamore has written a highly readable and informative overview of China’s role in the global climate change battle.  She lists the Chinese government policies that have led the world’s largest nation to meet and exceed many of the green benchmarks that it set for itself.  It would have been helpful if Finamore had written more about China’s water instability and how that ties to the Tibetan occupation, as access to drinking water is one of the top environmental issues in the world today.  As a whole, Will China Save the Planet?is a good primer for environmental policy analysts and anyone else interested in studying feasible solutions to climate change, humanity’s greatest threat.

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