China: The Fearsome Four Million


June 28, 2015: China has largely completed its seven island building projects in the South China Sea and is now proceeding with construction of air strips and other military facilities on these new islands. China has ignored all protests about this from the United States and nations bordering the South China Sea. China is apparently putting its aggressive territorial claims against India on hold, the better to concentrate on the South China Sea. This has led to Japan and the Philippines discussing the terms for the Japanese navy and air force to use Filipino military bases. India is in touch with the nervous nations that border the South China Sea and wants to cooperate. In response China has offered to resume negotiations with the Philippines over the South China Sea disputes. China said it was willing to allow the Philippines to share the new facilities (on newly created islands) China has built. This makes it clear that any peace talks begin with the understanding that China owns the South China Sea. That makes any further talks difficult to justify.

The U.S. Navy continues its patrols of disputed areas in the South China Sea, very visibly ignoring the growing Chinese demands that the American warships and aircraft obey instructions from Chinese officials in the area. It was recently revealed that China tried to jam communications of a Global Hawk UAV patrolling the area and sent numerous radio messages to a manned (P-8) maritime patrol aircraft to leave. The P-8 continued its patrol and ignored the Chinese. This is in response to the Philippines, Japan and Vietnam encouraging the United States to follow through with plans to have American aircraft and warships regularly challenge parts of the South China Sea and challenge Chinese claims. Japan is also flying military aircraft through this disputed air space.

None of China’s neighbors believe legal action will make China halt its continuing moves in the South China Sea. China is now attempting to regulate how other countries can use it (for fishing, oil exploration, or even transit via sea or air). Only American military power can provide an obstacle the Chinese cannot just brush aside, at least not without risk of escalation and violent encounters. It has long been American policy to actively oppose the sort of claims China is making. In addition to building small islands (from sand dredged from reefs and sand bars) China now plans to build light houses and other “navigation and control” facilities which will be run by Chinese government staff. The Philippines is surrounded by shallow waters that are full of reefs and shoals that are just below the surface. This includes over a third of the South China Sea. Larger ships must move carefully through these waters and groundings are common. A Chinese warship recently went aground in 2013. So far American opposition to China has been very restrained and not persuaded the Chinese to slow down.

Thailand has decided to buy three diesel-electric submarines from China. German and South Korean subs were also considered but the Chinese price ($335 million each) and offers of technology transfer was considered the best deal. The Thai Navy has not operated subs since 1951. Thailand would be getting the 2,000 ton Type 41. These Song Class subs look a lot like the Russian Kilo class and that was apparently no accident. China began ordering Russian Kilo class subs, then one of the latest diesel-electric designs available, in the late 1990s and within a decade began building boats that were similar to the different models of the Kilo. Pakistan also ordered six Type 41s in early 2015. Thailand will not receive these subs until the early 2020s, assuming a new (elected) government does not cancel the deal. Aside from prestige, most Thais see no value in having subs. Pakistan has a different attitude and encourages naval cooperation with China. For example, in late May a Chinese Song class sub visited Pakistan and stayed a week at Karachi to resupply and let the crew get some shore leave. These subs have also been visiting Sri Lanka, the small island nation off the southern tip of India. The appearance of Chinese subs off the coast of India has the Indians very uneasy.

June 26, 2015: The Chinese stock market fell another 7.4 percent today. That’s a 20 percent decline since June 12, when many investors began to panic over the direction (slowing down) the economy was going and fears that the government could not handle this. Such a sharp fall in the stock market has not been seen since the 1996 recession. Analysts have long been warning that the Chinese market was unreasonably optimistic and prices inflated. That’s because the economy has been slowing down and, in some areas, contracting, for several years but the big problem is government supported (and often corrupt and counterproductive) investments. Many investors believed government propaganda that the economy was under control, despite foreign analysts pointing out that portions of the Chinese market were inflated (a bubble, especially real estate and the stock market) with share prices at over 80 times earnings. In the last few weeks more and more Chinese investors realized the foreigners were right and began selling. The government still hopes to avoid a major stock market slump, because that would make a lot of Chinese unhappy with the government. Particularly worrisome are the four million or so Chinese that have become millionaires and control most of the economy by owning or running new companies made possible by over three decades of economic freedom (the U.S. has seven million millionaires and Japan one million). While China is still a communist police state the unelected rulers know that their new class of wealthy business owners and managers has to be kept content and confident in the ability of the government to manage the economy. That will be difficult if the stock markets experiences more shrinkage as that will cost the four million millionaires a lot of money (most of these fortunes come from years of rapid price growth in the stock market).  Aside from all that the Chinese economy is doing well. The problems, like building too much housing (leaving over 100,000 homes and apartments unsold) and bad investments by local communist (and often very corrupt and incompetent) bureaucrats are not the fault of the newly wealthy entrepreneur and manager class. Worse, most Chinese agree that the government is the biggest threat to the economy, not the new millionaires.

The first Chinese patient of MERS (Middle East respiratory syndrome, a viral disease similar to influenza) was released in the south and returned home to South Korea. The man entered south China via Hong Kong in late May after catching MERS in South Korea. He fell sick in China and was quickly diagnosed and treated before he could spread the disease. South Korea has not been as lucky or efficient and has so far put nearly 7,000 people under medical quarantine in an effort to contain an outbreak of MERS. South Korea becomes the first country outside Saudi Arabia to have an outbreak and so far 162 cases have been confirmed with a death rate of 12 percent. MERS was first discovered in 2012 among Saudi camels (and came to be called “camel flu”). As with most diseases like this MERS somehow got into humans (like the original flu thousands of years ago) and since 2012 nearly 700 Saudis have got it. Among Saudis the death rate was 40 percent. MERS cases have been detected in China, Sudan, United States and the Philippines so far but only in South Korea was it able to spread. In South Korea the government is getting a lot of criticism for not stopping the spread of MERS as was the case in other countries. MERS was first confirmed in South Korea in May. The Saudis have also suffered a lot of local and international criticism on how they have handled the matter. In response both Saudi Arabia and South Korea eventually responded more effectively. MERS spreads like the common flu, but not as quickly. It can be detected early and contained, as several nations have demonstrated. Since the only known source is Saudi Arabia (and possibly South Korea). Both countries are quarantining people who might have it and testing all people with the symptoms (similar to a bad case of flu). South Korea fears that North Korea may still be working on weaponizing diseases like MERS so that they spread faster and have a higher death rate.

June 25, 2015: The U.S. openly named China as the chief suspect in an April hacker attack that made off with government databases containing  personal information on nearly twenty million government employees (active and retired.) This included data collected for people applying for security clearances. It will take several weeks or months before the Chinese connection can be confirmed (or not). Meanwhile China has officially denied any involvement. Hackers can use this information for various types of online larceny, or espionage or both. What is particularly worrisome (and making China more likely the culprit) is the fact that none of that data has shown up on the Internet black market. Aside from Internet based fraud, the other major use of that data is espionage.

June 22, 2015: In the northwest (Xinjiang) there was another Uighur terror attack. This one, using knives and bombs, left 28 dead, including six attackers and three police. The rest of the dead were civilians killed in the cross fire. Locals blamed police reinforcements for most of the civilian casualties because when additional police arrived at the scene of the attack they were apparently under orders to take no chances and fired on bystanders. Police said it all began when fifteen Uighur men attacked a police station. This attack came at the start of the Moslem holy month of Ramadan, during which Moslems are supposed to fast in daytime and that means many restaurants with largely Moslem clientele close for much of the day during Ramadan. As they did last year, China encouraged (or ordered, where they could) Xinjiang Moslems to not fast and for Moslem owned food shops to remain open. This was the first major attack in Xinjiang since November 2014, which left fifteen dead. Before that (September) an against a market place, two police stations and a store left over 40 dead, most of them attackers or civilians, along with four policemen. Most of the dead were Uighur but over a dozen appear to have been ethnic (Han) Chinese. Before that there was an attack on July 28th which left over a hundred dead. After that one the government prosecuted and punished 17 local politicians and police commanders for not preventing the attack and not handling it well when it did occur. That has encouraged local officials to do better and the prompt response to the most recent attacks is the result. Locals say the police now shoot first after attacks and are apparently under orders to act that way without fear of punishment. The most embarrassing aspect of the late 2014 attacks was that earlier officials had announced that in the previous six months anti-terrorist efforts in the northwest had destroyed terrorist cells or organizations and arrested 334 people. It wasn’t enough and many locals believe all this made more Uighurs willing to commit terrorist acts. Most of this terrorist violence is taking place in Xinjiang. China accuses Islamic terror groups among the ethnic Turks (Uighurs) of Xinjiang for all these problems. The government is greatly embarrassed at its inability to halt the violence. Unhappy Uighurs are increasingly aggressive in attacking the growing Chinese presence among them. In Xinjiang province the local Uighurs are not responding well to growing pressure from Han Chinese soldiers and intrusive Han government officials. Because of that many Uighurs continue to support anti-Han activity and this makes it possible for Islamic terrorists to survive and operate. Most Uighurs are found in Xinjiang province. There the nine million Uighurs are now less than half the population and most of the rest are Han Chinese. The government has been publicly urging soldiers and police to be more aggressive against uncooperative Uighurs. The government accuses Uighur activists of endangering state security and tries to keep the unrest out of the news. The same thing is happening in Tibet, where the government is using the same tools to keep everyone under control. Since 2011 several hundred have died in Xinjiang because of Uighur violence against Han rule. Thousands of Uighurs have been arrested and hundreds sentenced to prison, or death. While Islamic terrorism is seen as a major threat in the West the Chinese regard that threat in China as largely confined to Xinjiang. Despite the occasional attack, the Chinese believe they have it under control.

At the UN China vetoed an Indian proposal that Pakistan be sanctioned for refusing to arrest and prosecute Islamic terrorists involved in the 2011 Mumbai terrorist attack. India has plenty of evidence but Pakistan continues to protect Islamic terror groups that only attack other nations (mainly India and Afghanistan). Now Pakistan owes China big time because of this use of their veto to block a justified sanctions request.

June 20, 2015: After years of trying Pakistan found its first export orders for its JF-17 jet fighter (which is largely Chinese). The customer is Sri Lanka and the order is supposed to be for at least 18 aircraft and at a very attractive price. Previous efforts to export the JF-17 failed because the aircraft was not considered competitive by potential customers. Earlier this year Pakistan ordered another fifty JF-17 jet fighters, to be delivered by 2018. The first Pakistani JF-17 squadron became operational in 2010. Pakistan has already received sixty JF-17s as part of a project that began in 1992 and while it was a joint Pakistan-China development project China supplied most of the money and did most of the work. China, however, does not use the JF-17, only Pakistan. That’s largely because the JF-17 is assembled in Pakistan, although over 40 percent of the components come from China or Russia. The project has gone through several name changes (FC-1, Super 7).  The 13 ton warplane is meant to be a low cost ($20-30 million) alternative to the American F-16. The JF-17 is considered the equal to earlier versions of the F-16, but only half as effective as more recent F-16 models. The JF-17 uses the same Russian engine, the RD-93 that is used in the MiG-29. The JF-17 design is based on a cancelled Russian project, the MiG-33. Most of the JF-17 electronics are Western. The JF-17 can carry 3.6 tons of weapons and use radar guided and heat seeking missiles. It has max speed of Mach 1.6, an operating range of 1,300 kilometers and a max altitude of 17,000 meters (55,000 feet).

June 13, 2015: Russia announced that it will increase military forces in Central Asia. This is seen as a counter to growing Chinese influence there. Russia has long dominated Central Asia economically and militarily. For over a century (until 1991) most of Central Asia was part of the Russian empire. But with the collapse of the Soviet Union five independent Central Asian nations appeared and these new states gradually developed strong ties to the booming Chinese economy. This makes Russia nervous. The Russians are also unhappy with the Chinese competition in the arms export business. Most of the Chinese offerings are copies of Russian designs but are offered at lower prices and, as the Chinese often point out, as more reliable alternatives to the Russian originals. There is some truth to this as China has more eagerly adopted Western (and Japanese) attitudes towards industrial quality control than the Russians. A growing number of Chinese weapons are more reliable than equivalent (and very similar) Russian models. Chinese tank manufacturers recently derided the new Russian T-14 tank as being overpriced and much less reliable that Chinese offerings.  

June 8, 2015: Off the coast of Vietnam warships responded to Chinese efforts to force Vietnamese fishing boats out of long used fishing areas because of recent Chinese claims to most of the South China Sea. In this case the Chinese eventually withdrew.

In Congo the government recently announced that it has brought in several outside experts to determine why recent long-term contracts it signed with China have Congo paying about $3 billion less than they are worth. Outside observers (experts in such matters) note that Congolese officials appear to have been bribed by the Chinese mining companies so that Congolese minerals are obtained for much less and sold worldwide at market prices. The worst terms seem to involve Sicomines. China owns 68 percent of Sicomines, the Congolese government the other 32 percent.  The Sicomines deal, however, is only one of many similar projects where the Chinese supply expertise, material and construction workers. The Chinese build the required infrastructure in exchange for long-term access to the particular resource. China points out that it will build around 3,000 kilometers of new (or highly-improved) transportation infrastructure (both railroad and road). The deals have critics, however, lots of critics. One group claims the roads that have been built are of poor quality (quick work, shoddy materials). Such corrupt deals are increasingly illegal for Western firms, but the Chinese will play by local rules not matter how corrupt they are as long as it boosts profits. But most of the foreign aid comes from Western nations that insist that the Congolese government suppress corruption or see aid withheld. Many Congolese want the corruption curbed and it has gotten to the point where the government has to do something. The question will they do something effective or just for show.

June 5, 2015: The Chinese Navy announced that it will begin carrying out training exercises in the waters (Bashi Channel) between Taiwan and Philippines. This would bring Chinese warships close to Taiwanese coastal waters. The U.S. reported that China recently moved self-propelled artillery vehicles to one of the new artificial islands it has built. In this case the two artillery vehicles were within range of areas claimed by Vietnam. The two vehicles were later removed and this was apparently part of a training exercise. China is increasingly sending its amphibious ships (including the ones that can transport and land heavy vehicles) into the South China Sea for training.





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