China: Debts Coming Due

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August 8, 2019: In Hong Kong, anti-government demonstrations that began on June 4th not only continue but have grown. Locals have been massing in the streets to protest government efforts to further erode the “special system” that has governed Hong Kong since 1997 when the British agreed to leave (per the lease they had with the old imperial government). The departure was complete by 1999 and Hong Kong became a “special autonomous zone” within China. This agreement was popular with most Hong Kong residents but the Chinese government saw the special treatment as something to be discarded as soon as possible. While Hong Kong was an enormous economic asset, the Chinese government saw the pro-democracy attitudes to the Hong Kong residents as a threat. Since 2014 the government received more and more reminders of how important freedom is to those who see it threatened. The major protests began in 2014 when China imposed restrictions on who could get elected to the Hong Kong government. China was seen as trying to ensure than only pro-China people were running Hong Kong and that was not popular with the locals.

The government is currently waiting out the protestors and refusing to meet any of their demands. Even the extradition law is still waiting to be revived, rather than completely withdrawn as protestors demanded. The current cycle of protests began on June 4th when Hong Kong was the only place in China were large groups could gather to commemorate the 30th anniversary of the Tiananmen Square massacre. Hong Kong is the only place in China where you can do a lot of things. Tiananmen was a spontaneous 1989 demonstration that scared Chinese officials a great deal as they saw it as potentially the start of a Chinese version of the early 1989 collapse of communist rule in East Europe. Every year at this time Chinese Internet censors are noticeably more active in a continuing effort to keep any news of the 1989 uprising from the Chinese public. Any discussion of the savage crackdown has been banned since 1989 and the government has been successful at keeping most Chinese from knowing the details or caring much about it. However many Chinese are aware that something happened.

There are many nasty aspects of Chinese history that the Chinese are dimly aware of but not particularly curious about. In China, there is a lot to forget and good reasons for doing so. The 30th anniversary was notable in that Chinese censors apparently noted that forbidden Tiananmen related chatter in Chinese Internet and cell phone networks (both of them monitored, and actively censored) had increased. This prompted senior officials to break their usual silence about Tiananmen and insist that the crackdown made it possible for the Chinese economy to continue growing. The censors noted that these announcements did not have the desired effect. Memory wipes are an ancient Chinese practice and often remarkably effective. But during the last few generations researchers have been uncovering more details about some of the ancient sages, philosophers and such who were thought effectively wiped from the historical record. Modern technology (lots more records and copies of them, better tools to search and find data) has made the old school memory wipes much less effective. The memory of Tiananmen persists and seems to be getting stronger because the truth is available in so many places the Chinese censors cannot reach.

The “Remember Tiananmen Square” demonstration prompted many to remember that in 2006 over 20,000 Hong Kong residents demonstrated in favor of full democracy for the former British colony. China tolerates this activity in Hong Kong, but not elsewhere in China. That's because pro-democracy demonstrations of up to half a million people have taken place in Hong Kong, but no violent attempts to overthrow Chinese control have occurred. To professional paranoids in the Chinese security services, Hong Kong is seen as an explosion waiting to happen and a threat to Communist Party rule.

Since the late 1990s, residents of Hong Kong have been pressuring China to live up to its promises to allow democracy in the city. China continues to select city leaders, rather than allowing the promised elections. Many in Taiwan, who favor union with China because of promises that Taiwan could keep its democratic system, are dismayed at what's going on in Hong Kong. The Chinese leadership apparently does not care and is rather pleased with the intimidating effect of using military force in Hong Kong. Actually, China has not used military force yet because, although the military garrison in Hong Kong is all Chinese, the Hong Kong police are locals and so far are obeying orders to confront the demonstrators.

China could crackdown on Hong Kong any time it chose to. There would be chaos and large economic costs but Hong Kong would take a few years to become part of the South China economic zone that has become the location for many new industries, valuable foreign banking connections that sustain a booming economy in Hong Kong and throughout China, especially the southern areas adjacent to Hong Kong.

While the Hong Kong GDP is only 2.6 percent of the total China GDP, Hong Kong only has .5 percent of China’s total population. Hong Kong has about the same GDP as Singapore, the other major financial center in Southeast Asia. Singapore has less population (5.5 million) but as an independent city-state has to pay for national defense and other expenses a sovereign state has. As a sovereign state with a majority Chinese population, Singapore has always been admired by Hong Kongers who, like Singapore Chinese, identify first as citizens of their city and only secondly as ethnic Chinese. Same deal in Taiwan. China openly covets Taiwan but also sees Singapore as part of China because according to Chinese tradition, once a Chinese always a Chinese, no matter where you live or what your passport says. China knows that Taiwan will be harder to acquire if the “special system” in Hong Kong fails. Singapore and every other nation bordering China will notice as well.

Hong Kong has been allowed to retain most of its freedoms because that was seen as useful in persuading Taiwan residents that agreeing to become part of China could be beneficial provided the Hong Kong arrangements remain largely intact. During the two decades after the British left in 1997, Taiwan residents watched how Hong Kong handled its absorption into China and noted that it was not a disaster. Thus the growing number of Taiwanese who were not violently opposed to becoming part of China. This accounts for the lack of enthusiasm for spending billions to upgrade military defenses. Many Taiwanese fall back on the attitude that the United States will save them if China attacks, ignoring the fact that China is building up sufficient forces to grab all, or most, of the island before the Americans can get there. At the same time, there is the fact that China has increasingly violated the 1997 agreement, usually in small ways but seeking to reach the point where Hong Kong was treated like the rest of China and living compliantly under full police state control.

Hong Kongers know that and while half a million of them emigrated in the decade before the 1997 merger with China, even more are now making plans to leave. This attitude is common among newly affluent people throughout China. If a government crackdown did trigger the exodos, much of Hong Kong’s economic value to China would evaporate. This economic angle is more important to China now than ever before. That’s because of the current economic disputes China is having with the Americans in particular and the West in general.

Until recently China thought it had time on its side in Hong Kong but the nationwide economic problems, plus the trade war with the U.S., make Hong Kong unrest particularly unwelcome just now.

The confrontation has been rapidly approaching. In 2014 Hong Kong conducted a referendum on greater democracy for Hong Kong. Some 22 percent of registered voters cast electronic ballots (using their government ID) in the non-binding poll. Most people voted for more democracy. China controls who can be allowed to run for office in Hong Kong and directly appoints many officials. Government controlled media condemned the vote, but Hong Kong does have enough autonomy to get away with this sort of protest, and many others besides. As long as there is no violence the government tolerates it. Over the past five years, there were more demonstrations, involving more and more people and there was more violence.

China does not want the domestic and international backlash that would accompany a severe (sending large numbers of activists to jail and some “disappearances”) crackdown on the pro-democracy movement. For one thing, it would be bad for business. But more democracy would be bad for the communist government, which would lose power in a democracy. Most people in Hong Kong and a growing number in the rest of China believe that democracy should be given a chance. These Chinese have noted how so many Western ideas have benefitted China, often after some modifications to suit local needs. Why not democracy as well? After all, it works in Taiwan and Singapore. To the Chinese government, this is very dangerous thinking. Since 2014 China has tried to slowly and quietly eliminate the many freedoms granted to Hong Kong in 1997 and that effort has now backfired in s spectacular way with larger and larger demonstrations in Hong Kong making it clear what the locals thought about their freedoms.

At the same time, China was constantly reminded of how lucrative those freedoms were to China. For example in 2014 the Global Competitiveness Report ranked China 28 out of 148 countries. Each nation was scored on how well it did in areas like education, government effectiveness, technology, market efficiency, infrastructure and acceptance of innovation. Corruption, more than anything else, is what harms global competitiveness. Some nearby nations did much better in these worldwide rankings. Singapore was number 2, Japan 6, Hong Kong 7, Taiwan 14, Malaysia 20, Thailand 31 and India 71. In five years those ratings have not changed much at all. Most of the top twenty are Western nations. The U.S. is 1, Israel is 20 and most of those in between are nations with democratic governments and less corruption than China suffers from. The Chinese government wants China to become more like Hong Kong in some ways (like competitiveness) but does not want to loosen the police state control the CCP (Chinese Communist Party) exercises over China, but not so much over Hong Kong. China has a choice to make and does not like the options.

In 2014 there were escalating demonstrations for more democracy but by the end of the year the government efforts to suppress the demonstrations prevailed. That did not eliminate the local enthusiasm for democracy but did persuade the pro-democracy groups to develop new tactics. Meanwhile, the government proceeded with plans to make Hong Kong more like China, especially a new law that made it possible to extradite Hong Kong residents to China for prosecution and punishment. This was a big deal and it brought out more demonstrators than ever before and, for the moment, halted implementation of the new extradition law.  

Serious Matters

While Hong Kong is a visually attractive media magnet, Chinese leaders have more serious matters to tend to. The trade war with the Americans is more of an immediate threat that Hong Kong unrest. The Chinese economy is a mess and getting worse, a situation that has been around for over a decade. At the core of it is a growing banking crisis. Years of tolerating corruption and ignoring the growth of bad loans (that were at the basis of much corruption) mean that just borrowing more money to give the economy a boost will not work. A sharper decline in Chinese economic activity would have a worldwide impact because China is a major trading nation and a major customer for raw materials, semi-finished goods and some high tech items. Fewer orders from Chinese firms will have major impacts on national economies worldwide. That’s why global financial markets have been in turmoil since 2018 and prospects of a turnaround are not good. The Americans demanding an end to Chinese bad behavior comes at an inconvenient time for China.

While 2018 was a bad year for the economy, 2019 is not much of an improvement. China hoped to maintain GDP growth of at least six percent while at the same time continuing to safely reduce (“deleverage) the huge number of bad loans local governments and corrupt banks have taken on over the last decade. The economic decline in 2018 could be measured in many aspects of economic activity (production, orders for raw materials, finished goods or construction and so on) and sentiments (of people running the economy and consumers). Chinese stock markets were down over 30 percent by the end of 2018 and for the first time in three years, profits of industrial firms took a dive. At the same time there were similar shocks to the American economy, but much more limited. Chinese and American leaders have not been able to agree on how to resolve trade and intellectual property disputes. China so far resists making any trade concessions. There is also supposed to be a halt in Chinese theft of American IP (Intellectual property) and commercial espionage in general. Until now the Chinese would often flagrantly cheat and then deny that they had done any such thing. This has been going on for decades and the recent American trade war is meant to deal with this long festering issue. China is apparently hoping to be patient and take advantage of the current political turmoil in the United States. This has made most of the American media and many American politicians reluctant to criticize China mainly because American mass media is obsessed with overthrowing the current U.S. government. China sees an opportunity here and is taking it. Meanwhile, China can concentrate on growing nationwide unrest about the decline of the Chinese economy. Business loans for legitimate needs are harder to get and there is a worsening credit crisis. A labor shortage is forcing companies to move production outside China, which also helps evade higher American tariffs. The trade war has forced China to let their currency, the yuan trade freely and it promptly lost value and it cost more in yuan to buy dollars. For over five years wealthy Chinese have been seeking to buy foreign currencies rather than hold large sums of cash using the yuan. If the Chinese banks do get in very visible trouble the value of the yuan will plummet sharply. Such devaluation of the yuan impacts all Chinese because that means it takes more yuan to buy a dollar, the main currency for international trade. That means it costs Chinese more (over ten percent more so far) to pay for imports. The Chinese government does not have enough cash to strop this devaluation, despite all the government pronouncements that everything is fine. For three years China has been trying to keep the yuan stable but that has now been abandoned. Since 2015 a growing number of Chinese didn’t believe their government could handle this mess and that results in hundreds of billion dollars’ worth of Chinese currency trying to get converted to more trusted foreign currencies (like the dollar, euro and yen).

In China, there are too many people trying to convert their yuan into foreign currency. The government has limited ability to stop this process. This means the yuan will lose a lot of its value versus foreign currencies. Since the late 1990s this was seen as an inevitable problem and in 2010 China agreed to allow the yuan to be freely (within limits) bought and sold. This meant that the international value of the yuan would more accurately reflect the state of the Chinese economy. By letting the yuan "float", the cost of Chinese exports went up (reducing demand somewhat), while Chinese were able to buy foreign goods for less. Unfortunately the government efforts to control how far the value of the yuan would fall failed and by 2015 it was obvious (because of the stock market collapse that began earlier in the year) that more extreme measures were needed. Those measures have been abandoned, using the American trade war as the reason. That is not accurate, and Chinese who buy and sell dollars and yuan for a living know it. People who run Chinese banks and foreigners who do business with those banks know it as well. As prices rise for Chinese consumers most Chinese will be reminded of their own banking crises and the risks of holding onto yuan or assets denominated in yuan.

China calls this an American effort to thwart the Chinese rise to superpower status. The Americans consider it punishing decades of bad behavior and bad faith negotiations. What is impeding Chinese achieving superpower status is economic stability and a network of powerful and reliable allies. Chinese tradition prevents both of these because China traditionally recognizes only enemies and subordinate foreigners. China does not do allies. China also has problems accepting the need for a fair and reliable legal system and a trustworthy banking and financial system. It has that in Hong Kong and is reminded that those benefits come with demands for government reforms the current Chinese Communist Party police state is unwilling to provide.

Korea

China has turned against North Korea because the mess the Northern leaders have made of their country and how that threatens to overflow into northeast China. South Korea is much less at risk because of the heavily guarded DMZ. North Koreans seeking to reach South Korea know that the quickest route is north, via China. The DMZ is a deathtrap for “defectors.”

Time is also the enemy. North Korea has been able to stall another round of mass starvation but not eliminate the possibility. That would require the leadership to admit they have a problem and submit to verifiable monitoring of aid distribution and denuclearization. North Korea has insisted it would never do this. But time is not on their side and internal unrest has grown as has the general breakdown in order and “discipline.” That means options for North Korean leaders are shrinking. North Korea’s nuclear weapons are not yet capable of scaring anyone into submission. The North Korean military, in general, is run down and suffering from two decades of neglect because of economic mismanagement and higher priority nuclear and ballistic missile programs.

China has witnessed all of this in more detail than any other country and that is why China is pressuring North Korea to be less of nuisance and that request is more of a demand if North Korea wants to maintain any economic access with China at all. So the North Koreans go along with this, although in most cases what China is asking for North Korea is eager to provide. For example, as economic conditions worsen in North Korea more North Koreans, who are allowed to visit kin in China, often overstay their visas and, in effect, “defect.” China does not want illegal migrants from North Korea and insists that North Korea send secret police teams to China to hunt down, arrest and take back to North Korea illegals that China has identified. The North Korea police make some extra cash by taking back a suitcase or two full of Chinese consumer goods that will fetch a big profit in North Korea.

Southern Charms

In Thailand, the military is seeking to maintain its relationships with its long-time military allies, like the United States, while also developing similar relationships with China. Most Thais prefer the Americans to the Chinese but the military needs an alternative source of equipment and military cooperation in case its plans for long-term military-dominated rule in Thailand lead to an anti-military revolution. Moreover, many Thai generals don’t trust the Chinese as much as they do the Americans. Another factor is the economic problems China is currently suffering from. China insists its economy is doing well but there are signs in Thailand that this is not the case. Chinese tourists are not visiting as much as they used to while tourist traffic from India is increasing. Another sign is countries moving their manufacturing operations to other countries (especially Thailand, Malaysia and Vietnam) in the region. That is because of the current trade war between the U.S. and China. This was long overdue and popular with other nations in the region. As the Chinese economy grew over the last four decades China became something of an economic bully. Even the Thai generals quietly welcome China taking an economic hit.

August 6, 2019: The U.S. Navy conducted another FONOP (freedom of navigation operation) in the South China Sea. This one consisted of an American aircraft carrier task force (a nuclear-powered carrier and its escorts). Filipino military and political officials were flown to the carrier to witness air operations conducted while the carrier moved through waters China now claims as Chinese territory. This means moving within the claimed territorial (closer than 22 kilometers) of some of the islands China now claims. China issues warnings and accuses the Americans of troublemaking because of these FONOPS. There were five South China Sea FONOPs in 2018 and even more than that so far in 2019. Since 2015, when Chinese South China Sea claims became a major issue, the Americans have carried out more FONOPS in the South China Sea each year. By early 2019 China had moved more radars and EW (Electronic Warfare) equipment and guided missiles to the Paracel islands. China also declared once more that the Paracels were part of China and China would control its territorial waters. That last 2018 FONOP was near several of the Chinese occupied islands in the Paracels. These islands had long belonged to (and been occupied) by Vietnamese. China took the Paracels by force in the 1970s. In 2012 one of the Paracel islands (Woody Island) was declared the center of Sansha, a new Chinese municipality (city). Sansha is actually Woody Island and dozens of smaller bits of land (some of them shoals that are underwater all the time) in the Paracels and the Spratly Islands to the south. In fact, the new "city" lays claim to two million square kilometers of open sea (57 percent of the South China Sea). China continued its policy of not interfering with FONOPS but does send warships to follow the foreign ships. There are two ways China can enforce its sovereignty exert control over its territorial waters. The traditional response is to attack intruders with gunfire or missiles. Then there is the preferred Chinese method of swarming around the intruder with commercial, coast guard and even navy warships and combat aircraft. This has included causing collisions (often just “bumping”). China does not want a war with the United States, mainly because of the economic risks which could lead to more unrest inside China. Interference with seaborne trade and trading relationships in general would disrupt the Chinese economy and threaten CCP control. What China has demonstrated is a willingness to do everything short of war, especially if they can remain able to claim victim status.

Playing the victim is hard to do when the Americans are the only naval power the Chinese are really intimidated by. When it comes to nations with legal claims on South China Sea waters China is more aggressive. Case in point is the recent standoff near Vietnam as a Chinese oil survey vessel sought to gather data on underwater natural gas deposits. China has forcibly prevented Vietnam from extracting gas in these waters and now Vietnamese warships are opposing the Chinese survey vessel. Vietnam complained that China was violating a 2011 agreement over how to handle these conflicting claims. That is a pattern for the Chinese; make agreements to settle disputes and then violate those agreements.

August 5, 2019: In Hong Kong the largest demonstration ever seen in the city, the “8/5 Strike” took place. First proposed in late July, it was not a popular idea at first but in the last week that changed. Technically the event is not a strike because Hong Kong trade union law prohibits a “strike” but allows for “political protests.” The 8/5 organizers advised strike participants to avoid offending employers by taking a vacation or sick day or, if possible, say you are working from home that day. Many employers unofficially endorsed that approach. Hong Kong companies are more vulnerable to government pressure because many also have operations inside China. The mass protest worked and the city was shut down for a day. The stock market still opened and trading confirmed the uncertainty about Hong Kong’s future as well as that of the Chinese economy as a whole.

August 3, 2019: In Hong Kong, twenty protestors were arrested during the third day of increasingly disruptive protests. Today the police tried to halt groups of protestors blocking traffic and surrounding a police station.

August 2, 2019: Today the U.S. withdrew from the 1987 INF (Intermediate-Range Nuclear Forces) treaty. With this deal the U.S. and Russia (Soviet Union) agreed to ban the production and use of land-based missiles, especially ones with nuclear warheads, with a range of 500-5,500 kilometers. By 1991 2,700 missiles had been withdrawn from service and the agreed upon ten years verification continued into the 1990s even though the Soviet Union dissolved in 1991. The American withdrawal decision was earlier announced and described as in reaction to Russian violations of the treaty. The Americans pointed out that some versions of the new Iskander and RS-26 ballistic missiles violated the range restrictions. The Americans were also angry about Russian violations of other important nuclear disarmament deals. In particular, there was the 1994 treaty one that got Ukraine to surrender its nukes in return for a Russian guarantee that it would never seek to annex all or part of the Ukraine.

China is not bound by the INF and producing weapons that violate it. Russia sees the Americans leaving INF as a major setback because until now Russia has been able to violate several Cold War era arms reductions treaties with impunity as Russia sought to rebuild its empire using the excuse that NATO was conspiring to conquer or contain, Russia. On a more practical level, the poor condition of the Russian economy plus the sanctions imposed for the annexation of Ukrainian territory has reduced Russian military capabilities. This is particularly true when it comes to producing new weapons systems. Russia has become like Iran, announcing new weapons that are little more than a press release and some unworkable prototypes.

The Russians also know this American decision is really aimed at China. The Americans can now produce and station a wider array of weapons around China, The U.S. also realizes, and the Russians refuse to admit, that China has, for the first time in centuries, a more powerful military than Russia. The Chinese lead is growing and unlike the United States or NATO, has very real, and recently (1970s) fought over, claims on Russian territory in the Far East and parts of eastern Siberia. China has very deliberately never renounced these claims, not even after the communists took over China in 1949 and not since. Now Russia is increasingly economically dependent on China, a condition that is getting worse and appears headed for China getting its disputed territories back via economic not military conquest. For the moment Russia plays down the Chinese threat and makes much of the imaginary one posed by NATO. While China also has good relations with Saudi Arabia (a major supplier of oil), Iran is seen as traditional local superpower and acts accordingly.

August 1, 2019: Chinese and Kenyan authorities agree that electronic equipment China donated to the Kenyan government (for parliament use) had disappeared in transit, apparently after the shipping container it was in arrived in Kenya. China is accustomed to the corruption so common in Africa but this case stands out because the goods involved were part of a diplomatic effort to improve relations with Kenya. Thus the Kenyans are embarrassed.

July 31, 2019: In the Taiwan Strait a Chinese Type 071 amphibious ship collided with a Taiwanese bulk carrier just outside Taiwanese territorial waters. This happened at night 35 kilometers from a Taiwanese port. The damage appeared to indicate a glancing blow and it was noted that the other ship appeared to be military. The Taiwanese ship called for Taiwanese coast guard assistance and a patrol boat soon arrived to examine the damage. Another patrol boat went after the Chinese ship which had not communicated with the bulk carrier it collided with but knew that it had hit something. The Chinese amphibious ship did communicate with the Taiwanese patrol boat that soon caught up with it. While the Taiwanese took photos of the damage to the 26,000 ton warship the Chinese refused to halt and allow closer inspection and then ended communication with the Taiwanese. The Chinese still refuse to comment but it appears that the Chinese warship approached the bulk carried from the rear on what turned out to be a collision course and veered away to avoid a more serious (for both ships) collision.

July 30, 2019: The EU (European Union) has persisted in trying to get their INSTEX (Instrument in Support of Trade Exchanges) financial system, designed to get around American economic sanctions and allow payment in hard currency to Iran for oil, working. China would like this to succeed. The EU believes they have succeeded, sort of. Recently a test transaction was successfully completed. The Americans have been able to block such schemes and the Europeans, unlike the Chinese, were willing to persist and take on the United States despite the Americans have been remarkably effective at blocking such systems. The EU, mainly Germany, Britain and France, persisted and is now seeking to put a real transaction through. The Europeans are responding to Iranian threats to resume nuclear weapons development unless the Europeans either find a way around the resumed (by the U.S.) sanctions. EU efforts to get the Americans to back down on at least some of the sanctions have failed and INSTEX is their Plan B. Many European leaders are trying but a growing number of European voters are turning against these pro-Iran policies. The EU financial experts have been working on INSTEX since January 2019. If INSTEX does work for Germany, Britain and France, China has said it would be willing to join the INSTEX system.

July 29, 2019: China has decided to side with Iran in the Iranian effort to evade the renewed American sanctions. China made this public in Austria during an emergency meeting of the JCPOA (Joint Comprehensive Plan of Action). This is the group of six nations (China, France, Russia, Britain, the U.S. and Germany) that negotiated and signed the 2015 treaty with Iran to lift economic sanctions in return for Iran halting its nuclear weapons program (which Iran insisted it did not have). Inside Iran, this treaty was considered a great victory that would cost Iran nothing and provide much benefit. The nuclear program would be halted for a while but not dismantled. This angle was documented in early 2018 when an Israeli intelligence operation in Iran got away with tons of documents from an Iranian storage facility. This was a major embarrassment for Iran, which declared all the evidence fakes. Western intel agencies, especially American and Israeli ones, already knew what Iran was doing with its nuclear weapons program but did not have such explicit documentary evidence. The Americans leaving the 2015 treaty in 2017, citing the clause that allowed for this is Iran was in violation, did not persuade any other JCPOA members to do the same. The Americans were seen as a special case as they were the only JCPOA member that Iran has openly been at war with since the 1980s. Iran still holds anti-American demonstrations several times a year in which everyone one repeatedly shouts “death to America.” Iran perpetuates that attitude mainly because of the support the U.S. has long provided to Israel (which Iran also wants to destroy). The other JCPOA members believe they can avoid any trouble from Iran by supporting Iranian efforts to evade the American sanctions. As part of that effort, China has joined Russia in recently (June) holding joint naval exercises with Iran. China now expects Iran to leave Chinese oil shipments from the Persian Gulf alone. China also calls for JCPOA member Britain to negotiate a compromise with Iran over the Iranian attacks on British tankers. This is all about the UN sanctions on Syria, which Britain enforced by seizing an Iranian tanker caught smuggling oil to Syria. China also sides with Russia and Iran when it comes to evading sanctions in Syria.

July 28, 2019: North Korean exports to China fell to the lowest level ($13 million) in a year. North Korea received more refined products in June but not enough to cope with the widespread fuel shortages throughout the country.

July 26, 2019: China has offered all possible cooperation to Bangladesh to assist in the return of Rohingya (Burmese Moslems) in Bangladesh refugee camps to their homes in Burma. China did not mention any specific forms of aid. For a long time, China has been an ally of Burma and the Chinese veto (and considerable clout in the UN) has blocked any UN action against Burma. The UN has similar problems with China in the UN, where it is considered prudent to not criticize China directly. China will ignore such criticism and then come up with ways to retaliate diplomatically or economically against the critics. China will also express gratitude to their supporters in the UN. No one is willing to make any real threats against Burma as long as China shields Burma and that shield shows no signs of being lowered. This has led to a lot of posturing for the media without any danger of actually having to do something to get the Rohingya safely back to their Burma homes. Burma says it is ready to accept Rohingya refugees but that is an empty promise because there is nothing to return to.

July 25, 2019: A Chinese oil company has halted work in western Uganda due to the Ebola virus threat. Uganda’s major oil fields are near Lake Albert, which borders Congo. The Chinese operate Ugandan fields along with European partners, Total and Tullow Oil.

July 24, 2019: The Philippines is trying to be more realistic on the Chinese effort to take possession of the South China Sea. The Philippines and Vietnam have the most to lose but all other Western Pacific countries feel threatened by growing Chinese naval power and aggressiveness. These nations are coming together in an anti-China coalition that may (if the Americans take an active role) persuade China to back down and play by the international rules it agreed to in the past. So far China is building bases and, according to one Filipino official, only “controls” seven percent of the South China Sea. China is not yet trying to enforce its claims although it is increasingly vocal about other nations for “violating Chinese territorial waters.” This includes non-military force to prevent non-Chinese (especially Filipino) fishing boats from operating in traditional (and legally Filipino) fishing grounds. President Duterte sought to negotiate a deal with China that would compensate the Philippines for lost access to their fishing areas. That was blocked by Filipinos invoking the constitution and its prohibitions against officials negotiating away those rights without assent of the people (the national legislature).

Chinese claims have no standing when it comes to international law and agreements. Yet China is slowly seeking control over the entire South China Sea and is willing to spend as much time as it requires to achieve recognition as the undisputed owner of the South China Sea. This is the ancient “death of a thousand cuts” strategy China has used for centuries and is being blatantly applied, for the first time, on vast maritime areas. The fishing resources alone are enormously valuable and, based on past Chinese performance, likely to be exploited to the point where there are not many fish left to catch. There are also offshore oil and gas and much else on the bottom of the shallow waters of the South China Sea. Initially, the Philippines tried to accommodate China but the feeling, both popular and among the leadership, is that the Chinese threat will not be tempered by accommodation. China wants it all and the only question now is will China risk war over their territorial claims.

The Philippines has contracted a commercial space satellite firm to provide the Philippines with 24/7 coverage of the South China Sea areas disputed the Philippines and China. The surveillance would begin in September. This is intended to document Chinese bad behavior in these disputed areas.

In Singapore, police seized another Chinese liquid natural gas tanker, the second such seizure in three days. A German bank ordered the seizure because the Chinese owner of the tankers was in violation of the loan agreement (the tankers were collateral) because the tankers were being used to smuggle Iranian natural gas.

July 21, 2019: In Hong Kong, the weekly demonstrations turned violent for the first time as white-clad triad (criminal gang) members attacked protestors outside a railroad station. This violence was blamed on the government because the Chinese police typically exercise a degree of control over the triads. In return, the gangsters do “favors” for the government, usually for the secret police. Hong Kong police denied that they had requested the triad attack on protestors. That may be true, because Chinese secret police and military intelligence agents have long operated in Hong Kong, even before the British left in 1997. Protestors are now targeting the police and more frequently demonstrating outside police stations.

July 18, 2019: An American admiral confirmed that China appeared to test-fired six of its DF-21D ballistic missile from mainland bases into the South China Sea and nearby ocean areas. These missiles are designed to hit American aircraft carriers. Since 2006 there have been stories (in the West) about how China was working on targeting systems for its ballistic missiles that would enable them to seek out and hit aircraft carriers. Such sensors would use infrared (heat-seeking) technology. This sort of thing had been discussed for decades, but China appeared to be putting together tactics and missile systems that could make this work. The key was having multiple sensor systems that could find the general location of the carrier, before launching the ballistic missile (like a DF-21, with a range of 2,100 kilometers). By 2010 the carrier killer missile was identified as the DF-21D. Since then this weapon hasn't been tested, much less seen or officially announced. The Americans did not release any data they might have had about how successful these late June tests were.

 

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