October 4, 2007: U.S. intelligence agencies believe China's annual military spending is at least $100 billion, and will stay above that level for at least the next decade. Most of that money will go to modernizing a 2.2 million troop force that is still largely equipped with decades old weapons and equipment. To get anywhere near U.S. levels will require far more money than the Chinese are currently spending.

Iraq stunned the United States by ordering $100 million worth of police weapons and equipment from China. Iraq said the U.S. was taking too long to fill orders like this. Left unsaid was the known Chinese willingness to expedite and conceal the bribes and kickbacks that often accompany deals like this.

Senior Chinese officials are split over how to deal with the increasing Cyber War activity with America. Some officials want to go public with how successful American hackers have been at penetrating government and military networks, and carrying away secrets. The better publicized Chinese attacks on American military networks are believed, by many Chinese to simply be a response to the U.S. aggression. But the majority of government officials want all this Cyber Warfare stuff to be kept secret, lest embarrassing details of official incompetence come out.

International calls for China to lean on the military dictatorship in Myanmar brought forth, very little. China announced that it had said some diplomatically appropriate, but essentially harmless, things to the generals running Myanmar (Burma). Actually, the Myanmar dictatorship, and the Chinese one, have gotten along well for decades. First, in a joint campaign to shut down the heroin production along their common border. The main reason Afghanistan is now producing most of the world's heroin, is because Burma and China worked together to eradicate it in their mutual back yard. More recently, there are the Chinese companies that are developing Burma's natural gas deposits, with energy starved China being the main customer.

Chinese leader's main worries have nothing to do with a military build up or Taiwan, but with ecological and demographic trends that are going to drastically limit China's growth potential. The growing wealth of the Chinese people is causing enormous pollution problems, and water shortages. The solution is to import more food, and cut way back on the agricultural use of water. That means the economic growth has to be encouraged even more, to absorb another hundred million or so unemployed farmers. Pollution can be handled by using less polluting, but more expensive production methods. That makes Chinese good less competitive, but that will simply result in less wage growth for Chinese workers. But there's another problem for Chinese workers, there will not be enough of them. The "one child" policy has been in place for three decades, and has resulted in sharply limiting population growth. But the downside of that is a rapidly aging population. Currently, the fertility rate in China is 1.7 (average births per woman, which is below the replacement rate, and less than the U.S. rate of 2.2). So the next few generations are going to be preoccupied with caring for their more numerous elders. All this will be a bigger distraction than foreign military adventures.