January 5, 2018: In late 2017 someone with access to top secret Chinese documents leaked a four page outline of a particularly damaging September 15 ^th Chinese proposal to North Korea. This was actually an attractive (for North Korea) secret ultimatum. China demanded that North Korea stop developing and testing nuclear weapons. North Korea would be allowed to keep those nukes it already had (believed to be as many as twenty) and in return China would secretly supply North Korea with new missile technology and other military assistance as well as help in defying economic sanctions and whatever it takes to improve the sorry state of the North Korean military and living standards in general. If North Korea did not accept then China would first go after senior North Korean leaders and their families and strictly enforce all the sanctions and continue in that direction until North Korea behaved. In the document China said it did not believe the Americans would really attack, but that was more of a possibility now than in the past. It is unclear what deadline was associated with this proposal or if North Korea had actually received it. There was a high level meeting between Chinese and North Korean officials in North Korea on November 17 ^th but nothing public came from that. North Korea definitely knows about the September 15 document now and now North Korea wants to talk peace with South Korea. .

Non-government experts agree the document looks authentic (format, typeface, phrasing of the text) and the Chinese government will not comment, nor will the CIA or any other major intelligence agency. With what China knows about current affairs across the border it is easier to understand how the Chinese see the “threat” differently. The North Korean threat to China is rather absurdist; push us North Koreans too far and we will bleed all over you (with millions of refugees coming from badlands that will be expensive to fix). This is not as spectacular as a nuclear threat, but more likely. The Chinese know (as do most senior North Korean officials) that actual use of nukes by North Korea (whether successful or not) means the end of the North Korean government and possibly much of the population as well. The traditional (and still quite popular) Chinese strategy is to try and make deals with enough members of the senior North Korean leadership to carry out a coup. Even if that does not succeed the growing paranoia among the senior leadership leads to weakening of the North Korean government as more key people flee or become ineffective lest they do something that is deemed treasonous. The secret ultimatum specifically gives the North Korean ruling class protection, if the rulers agree.

The secret ultimatum is based on the belief that China is more exposed to damage from a North Korean collapse than South Korea or Japan. In other words, the North Korean ICBM is more of a political prop than a military threat. In the meantime there are more indications that the North Korea underground nuclear test site, which is close to the Chinese border, is leaking radioactivity and that this is causing alarm in northeast China. This is but a small taste of what China would have to deal with if there was a collapse of the North Korean government and a flood of refugees heading for the largely unfortified Chinese border. This is a very real threat and not something the Chinese want to deal with, especially if a lot of those refugees suffer from radiation poisoning and many diseases that are rarely encountered in China these days. China cannot admit that it is actually hoping for a military coup that would preserve public order in North Korea and justify sending large volumes of aid and getting the nuclear weapons and ballistic missile programs dismantled. A disorderly collapse of the North Korean government would make the current Chinese leadership weak, not something that head of communist police state can afford. With all this in mind the secret ultimatum makes sense. It also appears that not everyone on the Chinese side of this agrees with ultimatum terms. Or maybe it was believed that those terms would never really work.

Venezuela

China has a major opportunity to establish itself economically and militarily in South America. It is all about how you handle bad debts. China has been a major lender to Venezuela and has provided over $50 billion since 2007. Most of these loans are repaid with Venezuelan oil. The amount of oil owed China increases as the oil price declines, which means Venezuela has less oil to sell or use for domestic needs. To make matters still worse Venezuela became officially bankrupt at the end of 2017 and that is causing potential losses for China, which was not unexpected. The bankruptcy process will take months to get rolling and years to resolve. This is where China has an opportunity. China feared that they might not see a lot of their loans repaid and demanded more oil instead. These losses mean little to China and are seen as a cost of establishing themselves in South America and providing even larger, and riskier, opportunities. .

Venezuela is not the only nation in South America where China is increasingly active as a trading partner, banker and investor. Now Venezuela appears to be an opportunity China is willing to take some risks for. China would like to obtain long-term control of Venezuelan oil and other industries and do so legally. This can be seen in China allowing one of its state owned trading companies to sue Venezuela in a U.S. court over failure to pay for $43 million worth of steel products already delivered to the state oil company. The U.S. courts are involved because Venezuela has assets that could be seized if the Chinese can prove their case, which also involves accusations of deceit and fraud and thus the Chinese could be awarded even more money if the criminal activity can be proved.

This is how China deals with nations they have treated well (billions in loans and other forms of assistance) and yet allow state owned firms to deceive Chinese suppliers. Venezuela is responding to this by going through the motions of trying to blame all the bad behavior in the state oil company on officials the socialist government appointed but then went rogue. China sees through that (senior politicians always got a cut) but might be willing to show mercy if the Venezuelan government puts on a good show of contrition and gratitude towards China. This may turn out to be another deal Venezuelans will regret making. But if the current Maduro government wants to survive it may well be persuaded that whatever China proposes will work both financially and politically, at least in the short term. Iran, Russia and Cuba are also offering to help, but none have the depth of financial and industrial resources China possesses. Those three countries may well be allowed to participate as junior partners in an enterprise that has to avoid triggering an aggressive response from the United States or too many other Western Hemisphere nations.

South Asia

China has another potentially advantageous (to China) disaster in Burma. China stands to gain influence in Burma if the Rohingya crises continues. Despite blocking UN resolution against Burma China is trying to make the best of a bad situation. This is about economics and politics. Burmese leader Aung San Suu Kyi, who won international praise for her decades of efforts to get Burmese democracy restored in 2011, now agrees with the Chinese pragmatism. She also believes China is the best alternative (for investment and essential imports) if international economic sanctions are again imposed on Burma, as they were until the generals gave up some of their power and allowed the 2011 elections. Suu Kyi has visited China three times to discuss economic matters. Meanwhile the Islamic world is demanding UN action against Burma. That is not going to happen as long as China backs Burma and China has recently made it clear that the support is still there. One obvious example was the 2017 agreement where China invests over seven billion dollars in upgrading Kyauk Pyu port in Rakhine State and the Burmese government agreed to let China control (via 70 percent ownership of the new port facilities) the upgraded port. China had wanted 85 percent but backed down because most Burmese wanted China to have much less control. China has used similar tactics in neighboring Thailand, reducing their initial demands to get an agreement and then offering more help against sanctions (Thailand currently has a military government).

Meanwhile the more the rest of the world pressures Burma on the Rohingya the more power the Burmese military gets back and the easier it is for China to make corrupt deals (which helped weaken the military before 2011) and restore ones that had been halted. It has become easier for China to establish itself as the primary source of weapons and military equipment in Burma and the return of economic sanctions makes China even more indispensable to Burma. The military interest in the tribal areas is now largely economic as the generals got rich off all sorts of scams in the north, especially after China began investing.

January 2, 2018: China is determined to tame the Internet, which continues to provide too many Chinese to speak freely with each other and billions of other Internet users outside China. One of the more common tools for evading censors has been the VPN (Virtual Private Networks). Since 2014 China has been cracking down on VPN use with more and more effective methods. By late 2017 it became clear that the latest anti-VPN measures had backfired. A growing number of foreign firms, whose VPN use is supposed to be unrestricted, are finding their VPNs rendered useless by Chinese censors. Worse, the Chinese government is slow to fix these problems and it is no secret that many Chinese leaders would like to drive most foreign companies out of China without admitting that sort of thing is Chinese policy. The VPN situation got much worse in 2015 when China made a major effort to block Chinese from free access to the international Internet. This involved new censorship software to detect and block the use of VPNs that have been used to access forbidden web sites outside China. In 2015 it was estimated that as many as ten percent of Chinese Internet users get past the “Great Firewall Of China” using VPNs and other technical tools. The government also rolled out powerful new data mining and screening software checks for anti-government posts in real time. The problem with blocking all this is that many of these wall piercers are just curious or, more importantly, business users who need this international access to remain competitive. While the government will grant international access for business and academic users these permits are difficult to get and still involve some censoring. As expected the Great Firewall crossers are finding other ways to access the outside world and the struggle continues. Despite all this censorship Chinese continue to discuss forbidden subjects (mainly about corruption at the top and Chinese who openly protest the corruption and bad government). Chinese censors are not really going after individual offenders as much as they are seeking to prevent mass unrest from being ignited. Thus sometimes even the arrest and punishment of Internet offenders is not publicized, lest this get a mass protest movement going. China has a growing problem with large groups of people hitting the streets to protest in the flesh. With the large amount of government corruption and inefficiency, there's a lot to protest. The Internet is seen as essential economically, but also the chief means of local protests turning into major ones. That is not to be allowed, at all costs.

January 1, 2018: The North Korean leader, during his New Year speech, offered to restore the hotline with South Korea and conduct peace talks with his South Korean counterpart. South Korea, after some brief discussions with the United States, agreed and arrangements were made for the leaders from the two Koreas to meet at the DMZ truce village (Panmunjeom) on the 9^th. North Korea indicated it was willing to participate in the Winter Olympics, which take place in South Korea this year. These events (including the Paralympics) run from February 5^th to March 18^th. Both Koreas and the United States have agreed to suspend large scale military training exercises during the Winter Olympics. Before the 1^st North Korea had insisted it would only negotiate with the United States directly and not with South Korea or anyone else. The U.S. refused since this is seen by the Americans as a Korean matter thus talks between the two Koreas is preferable. It is unclear if this is another publicity stunt by North Korea or if all the stories coming out of North Korea about popular discontent and the ramshackle armed forces unprepared for war are true and the North Korean leader is seeking to avoid economic and government collapse in the north.

December 30, 2017: The Chinese military has announced a new web site ( www.PLA110.cn ) for tips on corruption, espionage or anything else illegal in the Chinese military. Tips can be made anonymously, but rewards for useful tips can only be paid to those who identify themselves. The new site went live on January 1^st.

December 28, 2017: In the south (Tibet) on the Indian border (Arunachal Pradesh), Indian troops seized two Chinese construction vehicles (excavators) that Chinese civilian workers were using on a road one kilometer into Indian territory. Normally such Chinese intrusions are accompanied by troops, but this one wasn’t. Chinese and Indian officers later met to discuss how to resolve the situation. India says it will not return the construction equipment unless China agrees to stay on their side of the border. The official Chinese position is that Arunachal Pradesh is theirs and any border India claims is illegal. West of Arunachal Pradesh India notes that China still has an above average number of troops in Chumbi Valley, from which China launched a June incursion into Indian territory on the Doklam plateau. This confrontation was settled in late August. 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. China is also building new roads to this part of the Tibet/India border.

China announced today that starting in 2018 the key elements of the national police (PAP or People's Armed Police) will report directly to the CCP (Chinese Communist Party) and senior national leadership (the Central Military Commission), which already has direct control of the military. The PAP has about 1.5 million personnel and most of them do ordinary police work all over the country. What the CCP is interested in is the 700,000 PAP personnel in specialized units (border patrol, special operations, counter-terrorism, fire-fighting and riot control). In China, the line between the armed forces and the police is sometimes blurred, especially when it comes to paramilitary outfits like the PAP. The specialized PAP personnel exist to take care of emergencies and they tend to be kept busy with the thousands of demonstrations and “labor actions” that occur each year. Many of these are without a permit and involve a lot of angry Chinese. Technically, the PAP is an armed force that undertakes public security duties as well as the enforcement of law and order within the country. In practice it's not that simple. While there are about 1.4 million local police, for emergencies (a frequent event in Tibet and Xinjiang) you call the PAP. This paramilitary force will quickly smother the unrest but it won't solve the underlying problems.

The history of the PAP is a confusing one. The PAPs ancestor was the Peoples Public Security Force, established in 1949 after the creation of the communist government in China. However, it was disbanded during the Cultural Revolution (1960s) and its duties transferred to the PLA (People's Liberation Army or "the army"). After the Cultural Revolution the government decided that the PLAs primary duties should be the defense of the country against foreign threats. So frontier police units were moved to the Ministry of Public Security, the same ministry that oversees the civilian Chinese police. The People's Armed Police were created in 1982. A lot of demobilized PLA troops have been incorporated into the PAP since its creation.

The PAP is rigidly organized, like most of Communist China's military and police organizations, with a national headquarters in Beijing and local headquarters in every province of the country. Another confusing aspect of the PAP is that it was long under the authority of two different bodies; the Central Military Commission and the Ministry of Public Security, which also manages the regular police forces. Within the PAP, a number of different types of units exist each with their own distinct missions, some of them military oriented and some law enforcement-oriented. These units are internal defense units, frontier defense units, fire brigade units, mobilized divisions, commandos, and forest police units. The PAP tries to be ready for anything they might encounter and now that includes whatever the CCP believes is a threat to the CCP. .

December 27, 2017: China agreed with Iran and backed more direct land-link between Gwadar and Chabahar. While the two ports are only 72 kilometers apart the only land link currently is a 362 kilometer long highway that requires a six hour trip. China is willing to finance the new Gwadar-Chabahar link alone if India does not want to participate. Iran earlier expressed interest in linking with the new Chinese Obor (One Belt, One Road) link from China to the Pakistani coast. China likes this because their expensive Pakistani link to the Indian Ocean is more at risk from Islamic terrorist violence than the one in Iran. As with the ancient Silk Road, Iran and China are willing to do business. At the end of 2017 t he new Iranian port of Chabahar in southeastern Iran on the Indian Ocean and its road link to Afghanistan was officially open. This project also includes new railroad and highway connections from Chabahar to Afghanistan and Central Asian railroads. Projects like this help keep the peace because they provide Afghanistan with an alternative to the existing Pakistani road links to Pakistan ports. This usually meant Karachi but now also includes the Chinese Obor project which has a similar (to Chabahar) link to the Pakistani port of Gwadar (72 kilometers down the coast from Chabahar) that links up with Chinese roads and railroads.

December 24, 2017: At the UN China and Russia blocked efforts to punish Burma because of the mistreatment of the Burmese Rohingya Moslems. There are reasons for the Chinese support. Three days earlier, in northern Burma (Shan State) about fifty tribal rebels attacked an area through which the Chinese oil and natural gas pipelines passed and were repulsed by the army before any damage could be done to the pipelines.

December 22, 2017: The UN imposed more economic sanctions on North Korea, with the most important ones being the sharp reductions in oil (refined and unrefined) that can be sent to North Korea. China has long been the major source of these fuels the cuts in refined products (especially aviation fuel) is particularly damaging to North Korean military efforts. By the end of December China was under pressure to crack down on Chinese companies caught smuggling. In particular Chinese tankers are going to sea and meeting North Korea tankers and transferring fuel. The U.S. released satellite photos showing dozens of such transfers since the September fuel sanctions went into effect. By the end of 2017 South Korea had seized two of these Chinese smuggler tankers. North Korea pays a very high price for this fuel, but that’s how it has always been with smugglers, especially in China. If you are willing to pay there are Chinese smugglers willing to provide what you want. The major complaint here is that China is refusing to punish some of the Chinese firms caught smuggling. It is unclear if this is because of government corruption, national pride or a belief that the punishments (blacklisting Chinese ships caught smuggling) would be ineffective and counterproductive.

December 21, 2017: Taiwan announced that it will no longer report all Chinese military aircraft or ships that come close to Taiwan (often in disputed areas). It is also common for Chinese warplanes to enter the Taiwan air defense identification zone and refuse to identify themselves. Taiwan will no longer report most of these incidents because China appears to be doing this sort of thing more frequently and deliberately as a form of psychological warfare.

December 18, 2017: Pakistani and Chinese officers and technical experts met in Pakistan and worked out an agreement for China to build a naval base on the 24 kilometer long Jiwani peninsula 34 kilometers east of the Iranian border and west of the newly expanded Gwadar docks. Jiwani already has a small port and a small airfield. Both will be expanded and all civilians will be relocated to somewhere else in Baluchistan (southeast Pakistan, where both ports are). Construction is to begin in July. Jiwani will be the second Chinese naval base outside China. The first one is under construction in northeast Africa (Djibouti).

December 16, 2017: China completed six days of joint anti-missile defense drills with Russia. The joint drill uses computer simulations and took place in China (which now leads the world in the number of supercomputers in service). The drill is to coordinate a response against a ballistic missile attack against either country from any direction.

December 12, 2017: China put an Algerian communications satellite (built in China) into orbit. Called Alcomsat-1 it should last 15 years. This comes a month after Morocco put its first surveillance satellite into orbit. The 1.1 ton Mohammed VIA is based on a similar French earth observation satellite; Pléiades-HR. Another Moroccan satellite will be launched in 2018. This is part of a secret $590 million deal made with France in 2013. The new photo-satellites orbit 694 kilometers from the earth and will last at least five years. Algeria made the Alcomsat-1 deal with China in 2013.

December 11, 2017: In Pakistan China has taken note of the Pakistani military assuming more control over the government and is making sure that more of the contracts for work on obor/CPEC (China-Pakistan Economic Corridor) projects go to construction firms owned by the military. This shift of contracts is being carried out as part of an anti-corruption effort that has halted work by several Pakistani firms that China believes are using corrupt practices and wasting money. China can do this and the new contractors are expected to be ones that the military controls. CPEC is a complex piece of work that began in 2013 when China agreed to spend $18 billion to build a road from the Pakistani port of Gwadar to northwest Pakistan and China. This will require drilling long tunnels through the Himalayan Mountains on the border (in Pakistani controlled Kashmir.) The road and a natural gas pipeline are part of the $46 billion CPEC project. This will make it much easier and cheaper to move people, data (via fiber optic cables) and goods between China and Pakistan. China also gets a 40 year lease on much of the port facilities at Gwadar, which India fears will serve as a base for Chinese warships. It will, but in addition to the main Chinese naval base at Jiwani.

December 8, 2017: In central Mali five men installing fiber optic cable for a Chinese telecom company were kidnapped and later murdered. Four of the dead were from Mali while the other was from Togo. China has no problem recruiting Chinese for these dangerous jobs. The pay is higher than usual and those that survive (most do) are seen as intrepid and capable of handling difficult situations.

December 7, 2017: Taiwanese and Filipino officials signed a new trade and financial investment agreement. This was not unusual as the two neighbors have long traded and worked out differences with negotiations. The next day China reminded the Philippines that anyone receiving aid from China was expected to consult China in certain key matters, like economic relationships with Taiwan (which China considers a renegade province, not an independent nation). In 1975 the Philippines went along with this, as did a lot of countries (including the U.S.) and established diplomatic relations with China while shutting down its embassy in Taiwan. But like many other nations the Philippines was going through the motions and still doing business as usual with Taiwan. But now that the Philippines is buying Chinese weapons (often at a big discount) and accepting gifts (cash, weapons and whatever) from China so the Chinese expect more compliance with the “one China” policy. This is going to cause problems for all concerned because Taiwan has always been considered a friendly neighbor and China more of a threat. For example in 2015 Taiwan and the Philippines established a joint patrol system, especially in some disputed areas and for greater cooperation during emergencies at sea. What really triggered that agreement was a mid-2015 announcement by the Chinese Navy that it would now be carrying out training exercises in the waters (Bashi Channel) between Taiwan and Philippines. This brought Chinese warships close to Taiwanese coastal waters on a regular basis, something that makes many Taiwanese and Filipinos uneasy.

China believed it had succeeded in buying cooperation (or blind obedience in an emergency) from the Philippines but there are still some disagreements over how that will work. The Filipino government is willing to accept all the legal gifts (aid, investments, loans) China offers in return for the Philippines not resisting Chinese claims in the South China Sea. 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). Chinese officials admit that they are determined to get their way in the South China Sea but it is also the case that China prefers to buy what it wants rather than start a war over it. That is an ancient Chinese tradition that is currently giving a lot of popular and official support inside China. The Chinese are finding that bought support is often only rented and the expiration date of that lease is vague.

December 6, 2017: South Korea approved a seven percent increase in annual defense spending (to $39.3 billion). There were big increases in what is being spent on missile defense and Special Forces (especially units expected to go north in wartime or a severe crises). Pay for conscripts will be doubled and career soldiers are getting large pay raises. Japan is also spending more on defense and especially missile defense. Japan is also buying long-range cruise missiles that its fighter-bombers can fire at targets anywhere in North Korea.