China officially expects GDP to grow nearly seven percent this year, but there is reason to doubt the accuracy of that number. For example Producer Prices (what manufacturers sell their goods for) have been falling for 40 months in a row. This is caused by low demand and in response companies have been reducing employees for 21 months in a row. Part of the slowdown is deliberate. China had made it more difficult to borrow in an effort to deal with the real estate bubble and corruption (bad loans) in the banking system. But now the government is loosening credit to make it easier for companies to grow. The problem is that the economy is no longer growing like it did since the 1980s, at over 10 percent a year. On top of that there is the old problem of corruption within the government when it comes to accurate economic statistics.
One area of corruption has been getting a lot of coverage in the state-controlled media. Since the 1990s China has been trying to suppress corruption in their armed forces. This has involved over 100,000 separate audits and the prosecution of thousands of officers, troops and civilians. Early in 2015 the government admitted that 4,024 senior officers (including 82 generals) were currently being investigated for corruption. Later in the year the government allowed some retired generals to write articles pointing out that most of China’s past military defeats had been because of corrupt officers. All this has been recognized since the 1990s, but the problem persists. New laws have been passed, and some were energetically enforced, for a while at least. The biggest problem for many senior officials was not the corruption but the inability to keep it quiet. Thanks to the spread of cell phone and Internet use since the 1990s there was growing opportunity for Chinese, in or out of the military, to get more incidences of corruption recorded and exposed. Eventually most senior government officials realized that all their ambitious plans for regaining lost (over the last two centuries) territory meant little if the military was crippled by corruption and everyone knew it. Now many more Chinese and foreigners were reconsidering actual Chinese military capabilities. This made it clear that the critics (Chinese and foreign) and historians (the Chinese believe in the lessons of history) were right and that the traditional corruption in the Chinese military was very much alive, very difficult to control and not likely to be eliminated without extraordinary efforts. Recent investigations, including many “speak freely without fear of prosecution” interviews with old soldiers discovered that the corruption didn’t even disappear, as many were led to believe, in the early years (late 1940s to 1960s) of communist rule in China. This was particularly demoralizing, as it was thought that there was some kind of “Mao Magic” in the 1950s when the leading founder of communist China, Mao Tse Dung seemed capable of doing anything. That included, it was later revealed, crippling the Chinese economy in a major way and causing a massive famine that killed over ten million Chinese. For the current corruption problem passing laws doesn’t seem to help much. For example in 2010 China enacted new laws that put additional pressure on the military to maintain quality standards in the construction and use of military equipment. At the time many were alarmed at why something like this was thought necessary. It's all because many Chinese assumed that if you got a government job, you had a license to steal. In the military, this meant weapons were built in substandard ways and equipment was not properly maintained. Military corruption is an ancient Chinese custom and accounts for most of the poor military performance in the past.
One popular and persistent source of corruption is buying Russian weapons. The Russians understand corruption and have no problem with it. Dealing with Western suppliers is not nearly as profitable for Chinese procurement officials. The sanctions on Russia because of their invasion of Ukraine has made the Russians willing to export high-tech systems they had formerly kept from China. Thus in 2014 Russia exported nearly $15 billion worth of weapons. Nearly 70 percent of those sales were to three countries; India (25 percent), China (22 percent) and Iraq (22 percent). China had been buying less Russian stuff since 2005 when Russia cracked down on Chinese technology theft and that has now changed because Russia has no choice. Corruption is recognized as a world problem and is particularly bad in East Asia. For example South Korea ranks 43 out of 175 nations in an international corruption survey. North Korea does far worse, ranking 174 out of 175. China ranks 100 and Japan 15. Most of the least corrupt nations are in North America and Western Europe while the worst are in Africa and the Islamic world.
Speaking of North Korea China continues having a hard time convincing the North Korean leadership that ignoring serious economic and corruption problems is not acceptable. Many Chinese, especially those living near the North Korean border, find little in North Korea that makes sense. For example China completed a new bridge across the Yalu River in late 2014, providing another route for trade between China and North Korea. But the bridge is not open yet because North Korea has not completed the roadwork on their side of the river. No reason is given by North Korea, it’s just the way things are there. Many Koreans (north and south) believe China is fed up with the incompetence and intransigence of the North Korean leadership and is now willing to wait for the North Korean government to collapse and then go in and rearrange the situation to its satisfaction. At the same time many North Korean leaders blame their problems on China. That is made worse by China demanding that North Korea halt its nuclear weapons program and follow Chinese advice (free the economy) to deal with the growing economic crisis. Turning up the heat on its unstable and increasingly troublesome neighbor has not worked as well as China hoped. In late 2014 China told North Korea that it could no longer depend on automatic Chinese support if North Korea got involved in a war. China cut off various forms of aid but that did not change North Korean refusal to reform its economy and get rid of its nukes. Not only did North Korea refuse but increased its public defiance of China. What makes this really painful for China is that they are simply asking North Korea to improve their economy using what worked for China while still remaining a police state. The death of Kim Jong Il in 2011 made Chinese style economic reforms more acceptable, but not in a big enough way. China continues to pressure the north to implement reforms and this fails because the North Korean government has split into reform and conservative factions, making change difficult to agree on. Despite all this China has made it clear to the world that North Korea is a Chinese responsibility and if the North Korean government collapses China, not South Korea, will pick up the pieces. South Korea does not agree with that, and this could be a big problem in the future. In the last few weeks North Korea had made some friendly gestures towards China, but not indicated they are going to do what China wants.
Meanwhile China finds that being more tolerant of corruption and chaos outside the country continues to have its advantages. China has become a major investor in Africa, especially in countries run by corrupt government. Even Libya, torn apart since 2011 by civil war, is seen as an opportunity by China. Thus the inability of the two Libyan “governments” to agree to a UN plan to form a coalition government is closely followed by the Chinese As a result of this intransigence many Libyans blame the UN for the continued presence (and growth) of ISIL (Islamic State in Iraq and the Levant). China and Russia are also being blamed for supporting this intransigence by blocking peacekeeping efforts in the UN. It is believed that because the chaos in Libya causes more problems for the Western nations, especially the flood of illegal migrants, Russia and China try to make something out of it. This is right out of the Russian Cold War playbook and is discussed freely and proudly on the streets of Moscow. That Chinese also recognize the usefulness of this tactic but don’t discuss it as openly as the Russians.
Closer to home the government announced that over a hundred ships, plus supporting aircraft, are currently holding training exercises in the South China Sea. This involves firing shells and missiles and that requires public warning given to foreign ships who might be moving through the area.
August 6, 2015: India went public with its support for Vietnam and other nations in the area opposing China claiming most of the South China Sea as Chinese waters. The Chinese claims are in violation of several international treaties. India has long criticized the Chinese position but is now being more public about it.
July 26, 2015: In Mogadishu Somalia a terrorist suicide car bomber attacked the Jazeera Palace Hotel killing 17 and wounding ten. This hotel is also the home of the Chinese embassy in Somalia. The bomber was later identified as a 30 year old Somali man who had been living in Germany as a refugee. There he was convinced by al Shabaab recruiters to return to Somalia to defend Islam and Somalia from non-Moslems. The hotel was heavily damaged and was attacked in part because it was a favorite with foreigners, especially diplomats. None of the hotel guests were hurt but one member of the security staff died and several were wounded. The bomb went off before it could get closer to the hotel, because of the tight security. China reopened its Somali embassy in late 2014, but now may shift the embassy to neighboring Djibouti until the security situation is improved in Mogadishu.
July 25, 2015: China launched two more of its Beidou GPS navigation satellites. That makes three so far in 2015 and 19 altogether. In 2012 China opened Beidou to civilian use and expects to grab a major share of the satellite navigation market from the U.S GPS system by the end of the decade (when Beidou will cover the world). In 2013 Pakistan agreed to adopt Beidou and give it equal status with the American GPS. China will build ground facilities in Pakistan to enhance Beidou so that it can be used for precision applications (like landing aircraft in bad weather). Pakistan is the fifth country to adopt Beidou. Currently Beidou only covers Asia and the Pacific but by 2020 there will be sufficient satellites in service to cover the world.
Filipino fishermen found some Chinese buoys near Scarborough Shoal and towed them back home and turned them over to police. China leaves buoys to warn non-Chinese fishing boats away from disputed areas. Chinese coast guard ships visit these areas regularly and will try to force foreign fishing boats they encounter away from the area. Earlier this year Filipino fishermen accused Chinese Coast Guard crews of robbing Filipino fishing boats that the Chinese accused of being “illegally” in Chinese waters near disputed areas like Scarborough Shoal. This shoal is 220 kilometers from one of the main Filipino islands (Palawan) and 650 kilometers from Chinese territory (Hainan Island). The Chinese coast guard has a reputation for theft and other illegal activity. The Chinese government has cracked down on the worst examples of that (like assisting in the hijacking of ships or aiding smugglers) but it is known that the thefts still occur, especially when they involve non-Chinese boats. It is believed that China encourages its coast guard to do whatever they can get away with to drive foreign fishermen from their traditional fishing grounds that are now claimed by China in the South China Sea.
July 24, 2015: Bowing to growing popular pressure the government has completely eliminated a 15 year old ban on video game consoles. A partial lifting of the ban was announced in 2014 and almost immediately the American XBox console showed up in some Chinese stores. The 2014 ruling only allowed foreign game console sales in the few parts of the country, as a test. That was successful and now the ban is gone nationwide. Nearly 500 million Chinese regularly play video games on their PCs, usually via the Internet. Game consoles have been smuggled in for years and this made it difficult for government censors to control what Chinese played on those illegal (but increasingly common) consoles. Meanwhile the government has had more success in controlling what kind of online games are available. For example back in 2009 the government banned video games that promoted the "gangster lifestyle," drug use, bad language, gambling, rape, vandalism and theft. The government believed that playing these games (like the Grand Theft Auto series) led to bad (especially anti-government) behavior. China also censored some of the violent elements (turning piles of bones into sandbags in World of Warcraft) out of games that were allowed to continue. These bans did more political damage than the games, for research in many countries has shown that there is little impact on player behavior because of these games. Worse, the games are very popular and addictive and cutting players off from them made people angry.
Pakistan finalized the agreement to buy eight Chinese diesel-electric submarines for $625 million each. For over a year China and Pakistan have been negotiating prices and terms for the sale. The high price indicates the sale is for Type 041s although there has been no official announcement yet about the details of this sale. Currently the Pakistani Navy has five submarines. The Type 041s have the most modern equipment including an AIP propulsion system that enables these boats to stay under water for more than a week at a time. This contract is the largest arms purchase Pakistan has ever made from China. Despite this sale many Pakistani admirals believe their combat capabilities are declining because there is not enough money to maintain the fleet and pay for training (which means lots of time at sea).
July 23, 2015: China protested the recent court case in Burma that sent 153 Chinese citizens to jail for life because they were convicted of illegal logging. As a practical matter this means 20 years in prison. Most of those going to prison were arrested earlier in 2015. Another three Chinese were given shorter sentences. The Chinese protests included some implied threats that had the desired effect. At the end of July Burma announced that the Chinese loggers were being set free as part of a larger (nearly 7,000 prisoners) amnesty program in honor of Buddha. This prosecution was very popular with most Burmese but upset a lot of long-standing (and illegal) operations in the north. Many of the gangsters are foreigners and most of those are Chinese. Some of these gangs have political allies back in China where the prosecution of Chinese loggers is seen as a sign of disrespect. For thousands of years China has been the “big brother” in East Asia and all other states are “little brothers” who must behave accordingly and not do anything to make big brother look bad. Prosecuting Chinese gangsters on a large scale makes big brother unhappy.
There's a lot of illegal logging going on along the border up north and until recently arrests for this were rare and usually because someone did not pay bribes to the right people. The loggers operate openly and on a scale that can easily be seen from aerial (or satellite) photographs. This involves the use of bulldozers (for creating roads) and heavy trucks (to carry out the logs), as well as heavy duty saws and the disappearance of a lot of trees. Much, if not most, of the illegal logging is run by Chinese. This resulted in growing Burmese anger at Chinese business practices. Many ordinary Burmese resent illegal Chinese logging in the heavily forested north. This logging is part of decades of Chinese efforts to take control, legally or otherwise, of natural resources in northern Burma. To further this effort China has been quietly interfering in internal Burmese disputes and backing several of the rebellious tribes up there. When the government jailed all those Chinese loggers most Burmese considered it a very good thing. But now the Chinese have leaned on the government and the government rolled over, much to the disappointment of Burmese in general.
July 22, 2015: China and Japan are disputing whether China has the legal right to drill for oil and gas in parts of the East China Sea claimed by both nations. At the moment China appears to be staying on its side of the Japanese line but Japan warns China not to tap into oil or gas fields that extend into Japanese waters.