China: A Land Of Danger and Opportunity


August 28, 2017: While the government has been successful at buying diplomatic and economic cooperation in most parts of the world it doesn’t always work. Yet it does work enough to make it the preferred Chinese tactic. Often all it takes is being allowed to export goods or investment cash to a country to make the recipient more receptive to siding with China when asked. The more obvious examples (Africa in general, Iran, Venezuela, Burma, the Philippines) are featured in the news regularly. But other examples are nations that have been under economic attack for so long that it is no longer considered news. Taiwan is one of the best examples. China wants to regain control of Taiwan but not at the risk of a major war. So China does it the Chinese way. That means more patience, discretion and cash than bluster, threats and military demonstrations. Case in point is the movement of Taiwanese investment cash and company operations to China simply because it’s much more profitable than the alternatives (other East Asian nations). Taiwan shares culture, ethnicity and language with China and as the Chinese market has grown China became an attractive place for ambitious Taiwanese university graduates. This is great for Taiwanese job seekers and investors but not so good for Taiwanese independence. Then again, it’s another example of “an offer you can’t refuse.” For the Taiwanese university grades jobs in China paid much more and the opportunities were more abundant and exciting. For these Taiwanese China has become the Wild West, a land of danger and opportunity.

A similar situation occurred more recently in Europe, where Greece was limping along after an economic disaster brought on by decades of local corruption and overspending. Greece was always a difficult place for foreign investors but China came along offering massive investments (with tough conditions to make them viable business deals and not outright bribes) and the Greeks were receptive. Like the Ukrainians to the east, the Greeks have a culture of corruption going back a long time and difficult to clean up. Ukraine demonstrated to the Greeks that you could do business with China, all they wanted was a reasonable chance of making a profit and, more importantly, a more “China friendly” (or less “China hostile”) foreign policy. Greek found this acceptable and China seeks to do more such business in Europe.

The economic influence approach does not always work. The most vivid example of this is North Korea. Chinese individuals and firms doing business in North Korea complain that the North Koreans have become even more unreliable when it comes to handling foreign investments from China. In the past China could impose some degree of discipline on North Korea for abuse of Chinese investors and investments. The North Koreans are increasingly ignoring this sort of pressure and as a result Chinese investors are backing away from current and planned investments. North Korea used to be a dependable place, at least for Chinese with the right connections in the Chinese government. While corruption in China has declined in the past few years it appears to have gotten worse in North Korea, to the point where long-term deals are avoided and transactions are made carefully, usually with payment before delivery. The smugglers and various other criminal gangs in China that do business with their North Korean counterparts have been forced to operate this way as well and for the same reasons. South Korea and Japan have already learned how unreliable North Korea can be when it comes to business deals and Russia has already adopted the wary approach to economic deals with North Korea.

China has visibly increased enforcement of economic sanctions on North Korea but this has not made North Korea any more willing to negotiate. The growing number of police and secret police night patrols in areas where North Korean smugglers long operated is hard to miss, as is the fact that when North Korean smugglers are encountered they get arrested and taken away. Even higher bribes (over $3,000 to make an arrest not happen) no longer work because the Chinese cops will still demand that amount of cash before they will turn the smugglers over to North Korean officials. China never came down so hard on North Korean smuggling before.

China is also cracking down on North Korean drug production and smuggling. This is a matter of self-defense for China and is effective because North Korea make the highest profits from methamphetamine (“meth”). But this drug requires a key ingredient (phenylacetic acid, in the form of white crystals) to be smuggled in from China. Now the Chinese are cracking down on that as well as the meth coming into China. North Korea is seeking another, probably more expensive, supplier in Russia.

While Russia is still doing business with North Korea China and Russia are also cooperating with the new rules banning North Korean workers they long employed legally. This exported labor was outlawed by the latest round of sanctions. North Korea responded by quietly ordering overseas workers to stay where they are and work illegally (in deals arranged by their government minders). Yet in many instances the export ban on slave labor is being enforced by Russia and especially China and that is hurting North Korea economically.

The North Koreans see this as yet another challenge that can be worked around. While it is true that there are still a lot of corrupt Chinese and Russians willing to do business with North Korea if the bribe is large enough, that is not working as well as it used to in China. This is because North Korea is very unpopular with Chinese in general and a growing number of senior Chinese officials in particular. Russians are less upset with North Korea and, while having fewer economic resources than China, are more receptive to shady deals. The problem is that North Korea has become very dependent on the much larger and still expanding Chinese economy. Russia simply cannot supply a lot of what North Korea needs. It is possible to still buy the forbidden goods in China and have them shipped to a fictitious customer Russia who will quietly send it to North Korea. That does not always work and when it does it costs a lot more than getting the goods directly from China. North Korea has less cash for the extra expenses. The Chinese know this and are quite willing to slowly squeeze until North Korean leaders are all dead or more receptive to Chinese needs (no nukes next door and fewer desperate illegal migrants). Yet there is the growing risk that North Korea will get (or thinks it has) reliable nukes and keep threatening China. That is not the desired outcome but the Chinese have quietly reminded leaders of both Koreas (and their foreign allies) that in the past China has occupied much of Korea when the Koreans become troublesome.

Xinjiang Will Be Assimilated

China continues to have problems with minorities. The most difficult group (Turkic Uighurs) can now be found in the northwest (Xinjiang province) where the government has introduced more financial rewards for non-Han minorities who behave. The latest such incentive is a large (up to $13,000) discount on maintaining (utility bills) for a house or apartment if they move from an area where Uighurs are the majority to an area where Han (over 90 percent of all Chinese) are the majority. With this policy the government are encouraging economically successful Uighurs to move out of neighborhoods where such families form the local leadership and get then into Han majority areas where these Uighurs can live among and get to know their new Han overlords better. Similar incentives are given to Han families who move to these new integrated neighborhoods. The money is paid out over ten years and monitored in an effort to avoid cheating. Many of the Han families taking advantage of programs like this are recent arrivals. The national government has been advertising nationwide for qualified (politically and in terms of needed skills) for Han Chinese individuals willing to move, with their families if necessary, to Xinjiang.

There are many Turks (Uighurs and other Central Asian minorities) in Xinjiang and most of them are Moslem and the source of most of the few Islamic terrorism recruits China has produced. The main cause of unrest in Xinjiang is ethnic and economic but China justifies (at least to the outside world) the growing list of restrictions in Xinjiang with the need to eliminate Islamic terrorism. Nationwide most of the violent unrest is because of corruption and government failures but that sort of thing is not given as much media coverage as Islamic terrorism and other foreign threats (like American warships passing through the South China Sea). For the last few years the government has come up with a growing number increased security measures to deal with the ethnic fraction. This has included restricting or blocking foreign journalists who attempt to enter the province. Foreigners who do get in find Xinjiang is different than the rest of China in some very special ways. They would see that Han Chinese hold most of the police and key government posts. That has not been enough. In early 2017 the government ordered mandatory spyware installation on all smart phones used by residents of Xinjiang so that the government can monitor smart phone use in much more detail and constantly report back to the government censors. Normally most of the several million people working for the national Internet censorship bureaucracy look for anti-government activity online. The use of the new spyware is actually part of an earlier effort to introduce similar spyware nationwide. That generated more trouble (and backlash) than it was worth and was halted. But work on that spyware continued. The Xinjiang effort seems to be another test of the idea. Police in Xinjiang are checking locals (who must produce their ID cards at the many checkpoints established in the past few years) and those whose smart phones do not have the spyware are punished. Naturally the spyware is not popular but the government publicized some recent arrests (for incorrect thought online) to the spyware. It is also believed that the spyware is responsible for growing number of local officials (Han and non-Han) being arrested and prosecuted for corruption.

South China Sea Peacemaking

China and the Philippines have agreed to settle the latest South China Sea incident peaceably. This one occurred on August 12th when Chinese warships chased Filipino fishing boats away from a sandbar within Filipino territorial waters. Many Filipinos saw this as an act of war but others pointed out that the Philippines could not win a war with China over a sandbar, or anything else. China cooperated by saying it was a misunderstanding and that China had no intention of building an artificial island out of the sandbar (followed by a military base) as it had done elsewhere in the South China Sea. This did not satisfy a lot of Filipinos, or those from other nations dealing with Chinese territorial claims in the area.

This sandbar clash was a clear violation of international law as it occurred within Filipino coastal waters (that extend 22 kilometers from land). But the island (Pagasa) in question, despite being closer to the Philippines than China and occupied by Filipino civilians is now being claimed by China. Pagasa (also called Thitu Island) is the second-largest (37.2 hectares/93 acres) of the Spratly Islands and is inhabited by 250 Filipinos civilians and a few military personnel. China has been increasingly belligerent about its claims to Pagasa and threatens to “take it back” by force. Chinese military and civilian ships are showing up near Pagasa with increasing frequency and sometimes the Chinese vessels try (by getting in the way) to prevent non-Chinese vessels from getting too close to the island. The Philippines often has a coast guard patrol boat off the island (which is 480 kilometers from the nearest Filipino territory China does not claim) and that provides the possibility of a violent military encounter. China is also concerned with the increasingly frequent visits of American warships to the Philippines (for leave and maintenance) and the South China Seas (to challenge Chinese claims.) So far China has not been violent but with more and more Chinese warships, warplanes and troops showing up in the South China Sea there appears to be increased risk of someone opening fire. There are a growing number of “offenders” for the Chinese to shoot at. In addition to ships from the nearest countries (mainly Philippines, Vietnam and Taiwan) there are the more powerful allies of these countries (mainly Japan and the United States).

President Duterte of the Philippines pointed out earlier in 2017 that China threatened war if the Philippines went ahead with plans to drill for oil in offshore areas that international law recognizes as Filipino but that China claims actually belongs to them. Duterte admits that the Philippines cannot protect such oil projects from foreign aggression and openly criticizes other nations for not confronting China. All the South China Sea nations facing territorial losses because of Chinese claims have backed down. He points out that even the United States is unwilling to go up against China. Meanwhile the Chinese are openly moving more weapons to bases in the South China Sea as well as their main naval base in southern China (Hainan Island). When pressed a few Chinese officials would admit that in talks between Duterte and Chinese leaders it was mentioned that war was a possibility if other nations sought to take possession of Chinese territory. In other words (that non-Chinese can understand); back off or die.

Peace In Our Time With India

Today China and India agreed to pull back their military forces on the Doklam plateau, near the Tibet border. Details to follow later. This confrontation has been going on since June when, for the first time since 2008, another ancient and unresolved border dispute between China and India escalated. The two nations blamed each other for this confrontation in a very inhospitable part of the world. The Doklam plateau is where the Tibet border meets India’s Sikkim State and is near Bhutan and Nepal. Sikkim is small (7,100 square kilometers) and has a population of less than 700,000. East of Bhutan is the Indian state of Arunachal Pradesh, which China claims most of. China claims smaller bits of Bhutan and Sikkim. The problem with Sikkim is that it was an independent monarchy until 1975 when the king allowed a referendum on joining India, which won. China protested Sikkim becoming part of India because of the border disputes China long had with independent Sikkim. The current incident began when China began building a road into Bhutan that was seen as part of a Chinese effort to threaten the Siliguri Corridor (a 22 kilometer wide strip of land between China and Bangladesh that connects northeast India to the rest of India). India had agreed to help Bhutan oppose Chinese efforts to just grab the disputed area (which is 3,000 meters up on the Doklam plateau and has no real value to anyone). China and India had signed an agreement in 2012 to respect the existing Bhutan border. But like most Chinese territorial claims revived recently incidents like this serve to make the Chinese government look like it is “serving the (Chinese) people” and are carried out at little cost in lives or money. So thousands of Chinese and Indian troops have been moved to this inhospitable part of the world because the Chinese government wants some good publicity inside China. There has not been much violence aside from some fistfights and rock throwing.

Meanwhile China is very obviously carrying out military training exercises nearby. These exercises in Tibet have become a regular event and get larger each year as more Chinese troops learn how to cope with the problems of high altitude operations. Most of Tibet is a high (over 3,000 meters/10,000 feet) plateau and that causes unique problems for people and equipment not prepared for it. Altitude sickness afflicts over 90 percent of lowland Chinese, but hardly any native born Tibetans. Equipment also has problems, as many mechanical and hydraulic items operate differently at the higher altitudes of Tibet. The pilots and maintenance personnel gain valuable experience each time they spend a week or two in Tibet for training. If the border dispute with nearby India ever got hot, China would have to rapidly fly in additional warplanes and operate them from Tibet.

China has, since 2011, very openly (lots of TV coverage) brought more lowland military personnel to the Tibet highlands to train and remain for extended periods. While India has lowlands close by on its side of the border China has no such advantage and on their side of the border must be capable to operating on a sustained basis at high altitude. China has turned a disadvantage into an advantage.

August 26, 2017: China criticized Japan for the new sanctions Japan just imposed on Chinese and Namibian companies illegally doing business with the North Korean military. Japan is following the lead of the United States and using their large network of international business and financial relationships to uncover and suppress North Korean smuggling (of tech and equipment) for its nuclear and missile program. Japan believes that China is expressing its displeasure by sending more of its electronic intelligence aircraft to the vicinity of Japanese territory and close enough to trigger Japanese fighters taking off to confront the intruder. These aerial intrusions now (for the first time) include long range bombers and maritime surveillance aircraft getting close of Okinawa. To the dismay of the Chinese these intimidation moves backfire. Japan sees these escalating threats from North Korea, Russia and China as justification to shed over half a century of pacifism and expand their military power. That could include developing nukes, which the Chinese know Japan could do quickly and quietly.

August 25, 2017: The government has banned North Korea from establishing any new businesses in China or expanding existing ones. Russia has done the same, but the Chinese are a much larger market and apparently intent on following through.

August 22, 2017: The United States imposed more sanctions on sixteen Chinese and Russian firms or individuals American investigators have linked to North Korean efforts at obtaining components and technology for its nuclear and missile programs. In addition to the smuggling some of the sanctions are directed at the illegal (in both the U.S. and China) financial transactions. The sanctions freeze assets, if possible and make it more difficult for the firms or individuals trying to use the international banking system. The Chinese reaction was quick and negative, indicating the sanctions had publicized some more corrupt practices that the government anti-corruption had not mentioned yet. That often indicates the illegal operation is still “protected” by a senior official who is also immune to prosecution, at least as long as none of his corrupt activities are publicized. China added that in response to this it would be less cooperative in dealing with North Korea. That is another way of admitting that North Korea isn’t paying any attention to Chinese demands either.

August 21, 2017: For the second time in two months an American destroyer collided with a merchant ship in the Western Pacific. This time ten American sailors died. The Chinese navy and state controlled media made much of two incidents and implied that this some sort of divine payback for the problems the U.S. Navy had been causing China. As part of this propaganda campaign Chinese naval experts implied that American warships are fragile and not as sturdy and dangerous as they seem to be.

August 20, 2017: China admitted that there had been a brawl between Chinese and Indian troops on the Tibet border on the 15th. At first China denied the incident took place but as it became obvious that the video of incident on the Internet was authentic, China changed its mind and not only admitted some of its soldiers were involved but that some were injured and the Indians started it. The commentary on Chinese state controlled mass media played up the Chinese popular attitude that most non-Chinese (especially “westerners”, which includes India) are vulgar, ignorant barbarians who often cause trouble and must occasionally be punished. This was a subtle reference to the 1962 skirmish on the Tibet border with Indian forces, a series of short but decisive battles that India very obviously and quickly lost. The new stories run on Chinese TV also featured video of air and army training exercises being held elsewhere in Tibet (but near the Indian border).

August 18, 2017: American and Japanese military leaders met in Japan and the U.S. agreed to provide whatever Japan wanted to improve its missile defenses. This would include the land-based (Aegis Ashore) version of the Aegis anti-missile system already installed on some Japanese warships. The U.S. pledged to work closely with Japan as it develops new anti-missile technologies.

August 16, 2017: China has halted the legal importing of North Korean seafood. Dozens of North Korean trucks were stopped at the border and some of the drivers got out and loudly protested the fact that their refrigerated cargoes were going to be lost either from spoilage or because the seafood would have to sold for much less in North Korea.

August 15, 2017: North Korea backed down on its threat to fire four ballistic missiles at Guam. The threat was described as a demonstration as four IRBMs would be fired at Guam but aimed to fall at least 30 kilometers from the island. This would be a demonstration of North Korean capabilities and the threat was supposed to persuade the U.S. to back off on planned joint military exercises with South Korea. In addition North Korea wants the U.S. to take action to lift sanctions on North Korea. In the past, as least since the 1990s, such threats have persuaded the U.S. to provide enormous amounts of economic aid in return for disarmament pledges the North Korea did not make good on. The U.S. would not withdraw its remaining forces from South Korea nor cancel the treaties it has with South Korea to defend it against North Korean attack. North Korea has always insisted that it is the victim and that the U.S. is out to destroy North Korea. Since the end of the Korean War in 1953 that was never the case but China and Russia always supported the North Korean propaganda until, after the Cold War ended in 1991, such support weakened. China in particular was tired of North Korean behavior and in 2017 told the North Koreans that Chinese support would not be provided if North Korea attacked the U.S. or South Korea. Meanwhile the U.S. refused to back down to the North Korea threat and made it clear there would be a violent and immediate response if North Korea even appeared ready to fire missiles towards Guam. This put North Korea in a bad position because the IRBMs aimed at Guam require a day or more of preparations that can be seen by satellite surveillance. So North Korea announced today it would pause its preparations to see what the United States would do.

In the southwest (Tibet) on the border with India (Sikkim State) about fifty Indian and Chinese troops clashed alongside a lake on the Doklam plateau. Punches and rocks were thrown during the brawl, which was caught on video and officially denied by both sides (but unofficially confirmed by troops familiar with the area).

August 14, 2017: India, Pakistan and Bangladesh recently celebrated the 70th anniversary of British India (and centuries of British rule) being replaced with independent India and Pakistan (which, after 25 years, split into Bangladesh and what is now Pakistan). Today these three nations have a population equal to China but have fared differently when it comes to economic growth. After 70 years India has seen its GDP per capita increase 5.5 times, Pakistan 3.9 times and Bangladesh 2.4 times, Neighbor China saw an increase of 17.9 times. Back in 1947 the GDP per capita in India was 38 percent higher than China while in what is now Pakistan it was 50 percent higher and in Bangladesh 21 percent higher. In 1947 China has just ended four decades of rebellion, civil war, invasion and one more civil war that put the communists in power. During that time British India was much more peaceful and undergoing the industrial revolution and the attendant changes. The Chinese economy didn’t grow much more quickly than that of India until the 1980s when the Chinese government decided to give economic (but not political) freedom a chance. India always had political freedom but the economy was crippled by corruption and state control. In the 1990s India introduced more economic freedom but still, like Pakistan and Bangladesh, suffered more from corruption than neighboring China. There were also cultural differences between the four nations but it is interesting to see how the four did after 70 years of independence. China makes much of this in the state controlled media while India seeks ways to catch up.

August 12, 2017: Down in the South China Sea (Spratly Islands) a Chinese naval force (three warships, a large coast guard ship) and ten fishing boats showed up five kilometers from Pagasa Island and chased away Filipino fishermen working near Sandy Cay (three sandbars featuring good fishing).

August 11, 2017: Russia announced that its new (and still not ready) stealth fighter had an official designation; Su-57. Russia now says the Su-57 will enter service in 2019, or at least that’s the current plan. The American F-22 entered service in 2006 and the F-35 ten years later. One of the Chinese stealth fighter designs (the J-20) entered service in early 2016 but it hasn’t been seen much. About a dozen J-20s have been built. The Su-57 looks a lot like the F-22. The 37 ton Su-57 about the same weight as the F-22, and has a similar shape but lacks reliable engines and competitive electronics. The J-20 is also similar to the F-22.

August 10, 2017: Japan, in part to counter Chinese military aid, has offered the Philippines a stock of 40,000 spare parts Japan put in storage after it began retiring the last of its 150 locally built (under license) UH-1H helicopters in 2012. The Philippines is still a heavy user of the UH-1. These spares are extremely valuable to the Philippines, which has been using the UH-1 for decades and often arms them. Mostly the Philippines uses UH-1s as transports. The Philippines has received over 160 UH-1s since 1969 and many have been lost to accidents and hostile fire or have just worn out. About 45 are still in service. Often as many as half of these are not operational because spare parts are not available. The Filipinos have been pleased with the performance of these aircraft and it’s the spare parts, and the skill of Filipino maintainers that keeps so many of the elderly UH-1s going. The Japanese parts collection thus looms very large for the Philippines as it makes more money available to buy other needed equipment.

August 3, 2017: In North Korea Kim Kwang Won, the head of the fisheries department was released from custody after being arrested in China sometime in mid-June and charged with smuggling antiques. The Chinese were surprised to find a senior North Korea official personally supervising a smuggling effort but it turned out that Kim Kwang Won was no ordinary government official or smuggler. His real occupation was leader of a large smuggling operation which had bribed so many North Korea officials that it had gained control of a small port town near the coast on the Yalu River. From here he ran a smuggling operation that survived by making sure that the North Korean government was paid well. Given the growing demand for foreign currency by the government Kim Kwang Won was tolerated. But the master smuggler got caught up in the growing Chinese anti-corruption drive as well as stricter Chinese enforcement of sanctions on North Korea. Kim Kwang Won misjudged the danger and while in a Chinese port to help organize a new smuggling operation (dealing in North Korean antiques) he was arrested along with two associates. Undaunted Kim Kwang Won pulled strings and paid whatever it took (in bribes and “gifts”) to get quietly expelled back to North Korea and then, after explaining himself and paying more “fines” was quietly released to go back to his lucrative (for the government) work. At the same time Kim Kwang Won has to discreetly discover if he has enemies among his “friends” in the Chinese and North Korean security services.




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