The trade war with the Americans has prompted China to accelerate its plan to eliminate dependence on American technology. This includes abandoning the U.S. dominated SWIFT bank transfer system, computer operating systems and the Internet. China is also hustling to replace all the American computer hardware (mainly key components) and software. This won’t happen quickly and may cost the economy more than expected.
China has already created its own version of SWIFT, called CIPS (Cross-Border Interbank Payment System) and is planning to link with the Russian counterpart, SPFS (System for Transfer of Financial Message.). Currently SWIFT has about 10,000 member organizations (banks and other financial institutions). Created in 1974 as a restricted and secure messaging (email) system, it is used mainly to arrange money transfers between members. Chinese and Russian competitors have fewer than 500 members. India is considering joining the China/Russia combined network. China is creating or expanding technologies in all these areas and seeking to become the dominant source of those technologies in the world market. Despite announcements of agreements, the trade war continues.
Ignoring the official optimism of the Chinese government, a growing number of Chinese government and business leaders believe China is headed for the same fate as Japan in the 1990s, when a real estate bubble triggered a violent and continuing halt in economic growth. The Japanese had allowed a huge real estate bubble to develop and, when economic growth stalled for a bit, a lot of the real estate loans became bad debt and that created an economic crisis Japan is still dealing with. Japanese were angry and being a democracy they elected new politicians. China is not a democracy and a banking crisis like the Japanese went through in the 1990s will create a lot of angry Chinese who cannot, as the saying goes, “vote the rascals out (of office)”. In China that degree of public anger means revolution, or at least a lot more disorder. China also has a huge real estate bubble, very inefficient (compared to most Western nations) government spending policies and rapidly escalating labor shortages plus deficits in social spending (like taking care of the impoverished elderly). Chinese problems, in addition to being similar to those of Japan, are also considerably worse because of greater corruption, pollution and political oppression. Japan is a democracy while China is still a communist police state and that means the crises in China will not be handled peacefully as it was in Japan.
The unrest continues, as does the damage to Hong Kong and the Chinese economy. Property values are plunging in Hong Kong and that appears to be having an impact on southern China where there is growing economic panic. Banks and companies in south China were already in trouble because of heavy debt loads, most of it unlikely to be repaid. By comparison Hong Kong was economically healthy. But now a lot of money and people that maintained Hong Kong prosperity are fleeing and with them the hopes of economic recovery in south China. Prosperity in south China always relied on proximity to Hong Kong and for decades south China has seen its economy grow.
The Hong Kong protests have the national government still hoping to succeed by being steadfast and patient. The November elections showed that the protestors had the support of over 80 percent of the voters. Hong Kong is very much an endurance contest, despite the growing unemployment, disruption to education and an uncertain future for most city residents. More of them are either emigrating or making plans to do so. This could go on for another six months. The national government hopes that is not the case but at this point, no one is absolutely sure of anything.
December 16, 2019: China and Russia are asking the UN to lift key sanctions on North Korea. These include North Korean exports of minerals, especially coal, as well as cheap labor for China and Russia. China and Russia have already allowed North Korean smuggling of coal and other raw materials to flourish and have unofficially allowed North Koreans to resume working in China and Russia. This comes after North Korea recently told the United States that it would never give up its nuclear weapons. This has always been the attitude inside North Korea, and the U.S. has been told it has to come up with some sort of compromise by the end of 2019 or the negotiations are over. Actually, these negotiations were over months ago when news came out of North Korea that the state-controlled media was confirming that North Korea would never give up its nukes. That was when North Korea began “testing’ missiles again. First it was older, short-range ones but by now the ICBM type missiles are being tested, but only as satellite launchers. All ICBMs can double as satellite launchers and some obsolete ones do so rather than be scrapped. North Korea has launched 13 ballistic missiles since May, a violation of promises North Korea made to the U.S. as part of the negotiations to end the sanctions.
China and Russia say their request was made for humanitarian reasons. The people of North Korea are suffering and by lifting the sanctions the suffering will be reduced a bit. Russia and China are less concerned about North Korea obtaining workable nukes because the United States and Japan are the designated targets and that is fine with China and Russia. If North Korea should threaten China or Russia with its nukes, these two nations would either stage a coup or just launch their own ballistic missiles first, invade and replace the Kim dynasty. The United States does not have this “Balance of Terror” with North Korea although that may change.
The UN is unlikely to go along with China and Russia and lift sanctions because the major UN members have come to understand that North Korea is an outlaw state and with nukes, North Korea is a major threat to everyone. In the past, reducing economic problems in North Korea tended to see more cash going to the military than the suffering population.
December 13, 2019: In the United States the government is preparing to impose sanctions on companies and individual Chinese officials involved with the imprisonment of over a million Moslems in western China (Xinjiang province). This might also include Hong Kong officials if the situation gets violent there. These sanctions could be implemented within a month and are an aftereffect of the secret Chinese documents about the Xinjiang crackdown that was leaked a month ago. China has not denied that the detention camps exist but insists that all the “students” have graduated. That does not appear to be the case as satellite photos show the dozens of camps still occupied and under guard. China is angry that details of the Xinjiang are being publicized because the government always denied the reality of the situation in Xinjiang. Hong Kong is also embarrassing as is the continued defiance foreigner as exhibiting towards Chinese claims in the South China Sea.
December 8, 2019: China is not pleased with its ranking in the Human Development Index. The UN has compiled and published this ranking for 29 years. The index ranks all the world nations in terms of how well they do in terms of life expectancy, education and income. In 2019 China was 89th out of 189 nations while Pakistan was 152, India 129 and Bangladesh 135. North Korea is not ranked because not enough reliable data is available on the population or economy while South Korea was 22.
The top ten nations are Norway, Switzerland, Ireland, Germany, Hong Kong, Australia, Iceland, Sweden, Singapore and Netherlands. It was particularly embarrassing for Hong Kong, and equally Chinese but independent Singapore to rank so much higher than China. The bottom ten are Mozambique at 180th place (there are a lot of ties) followed by Sierra Leone, Burkina Faso, Eritrea, Mali, Burundi, South Sudan, Chad, Central African Republic and in last place, Niger. Other notable nations are the United States at 15 (tied with Britain), Russia at 49, Israel 22 (tied with South Korea), Saudi Arabia 36, Iran 65, Afghanistan 170, Venezuela 96, Colombia 79 and Mexico 76. Taiwan is not ranked because China insists it is not independent and forced the UN to leave Taiwan out starting in 2017. Before that Taiwan consistently ranked 21 or 22.
December 6, 2019: China has ordered government office operations to begin replacing all foreign computer equipment and software with Chinese equivalents.
December 4, 2019: India revealed that in September it had forced the Chinese oceanographic research ships Shiyan-1 to leave portions of the Andaman Islands controlled by India. The Chinese were accused of spying for the Chinese Navy and while the Chinese denied that they moved the Shiyan-1 away from the Andamans without making a fuss.
In Pakistan, there is another scandal involving government-backed corruption employed to avoid offending China. The government has taken extreme measures to suppress news of a major Chinese operation to lure Pakistan women to China where they are forcibly married to Chinese men. The Chinese bachelors pay up to $60,000 to gangs that recruit women in Pakistan for jobs in China. There are no jobs because when the women get to China they are forced to marry Chinese men. Those who refuse are sold off as prostitutes or to organ brokers who murder the women for salable organs for transplants. In some cases, the gangs can purchase teenage daughters of poor parents who see one or two thousand dollars received as worth it. The Pakistani investigators and journalists who did the research collected the names of 629 victims, had trouble getting the story published in Pakistan so passed it on to Western media where it recently appeared. This caused outrage in Pakistan, which came in the aftermath of 31 Chinese men being acquitted of charges they were running such a “marriage bureau.” All the witnesses in the case suddenly refused to testify or had disappeared. This all began in May when Pakistani police arrested 31 Chinese men and accused them of enticing or kidnaping Pakistani women to China and sell them to Chinese men to be wives. There a growing shortage of Chinese women in China that has created a market for young foreign women. China's "one child" policy of the last few decades, and the ability to determine the sex of the child before birth, led to more (20 percent more) boys than girls being born in China. The lack of potential brides means desperate Chinese men are willing to buy a kidnapped girl from Pakistan (or anywhere else). This crime has become common in most nations neighboring China.
December 2, 2019: Provincial officials in the northwest (Xinjiang province) insist that all Uighur Moslems have “graduated” from the prison camps established over the last few years to reeducate Uighurs unhappy about the government efforts to turn Xinjiang into a Han (ethnic Chinese) majority region. Until recently Xinjiang was a Uighur majority province.
December 1, 2019: Commercial satellite photos show that China has begun using tethered aerostats equipped with vidcams and other sensors to monitor what happens near island basses China has built, often illegally, in the South China Sea. Aerostat systems use a 32-85 meter (100-250 foot) long, helium-filled, unmanned blimp equipped with radar and other sensors. The larger of these blimps are more than twice the size of the more familiar advertising blimps. An aerostat is designed to always turn into the wind and stay in the same place. An aerostat is unpowered and secured by a cable that can keep the aerostat in position at its maximum altitude of 5,000 meters. The cable also supplies electricity and most aerostats can remain aloft for up to 30 days at a time. Aerostat systems cost varies from $5 million to over $100 million each, depending on the size of the aerostat and the capabilities of the radar and other sensors. Aerostats work. Kuwait had one in 1990, and the ground radar spotted the Iraqis as soon as they crossed the border. The U.S. uses dozens of aerostat systems in Iraq and Afghanistan, to guard bases. While aerostats stay in one place, they are up there, and in the way of aircraft that move. Some of the onboard sensors are used to alert moving aircraft that the aerostat is there, and to maneuver accordingly.
November 25, 2019: The results of the November 24 Hong Kong District elections were a shock to the Chinese government. Pro-democracy candidates won 84 percent of the 452 seats. Normally these elections are a minor event because the district council members are all about local issues and administration of city services. But this time they became a referendum on the protests and the protestors won big. This gave the protestors, who have been at it for six months, an unexpected boost. Because of protest-related disruption the local economy has gone into recession for the first time in over a decade. The city GPD is down a few percent so far this year and unemployment is up. There will probably be long term economic damage. Despite all that most of the protestors are willing to keep it up.
Carrie Lam, pro-China Hong Kong “mayor” (chief executive) was summoned to the national capital in mid-December and after hours of discussions with national leaders, Lam was portrayed as still having the support of the national leadership. The national leaders made it clear that the most important goal was to restore order in Hong Kong and halt the economic decline there.
November 21, 2019: The U.S. Navy conducted two FONOP (freedom of navigation operation) in the South China Sea during the last two days. Both of these FONOPS consisted of a single American warship passing close (with 20 kilometers) of a Chinese base in the Spratly Islands. The last South China Sea FONOP was in September when two destroyed took part. In August an American aircraft carrier task force (a nuclear-powered carrier and its escorts) passed through. 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 seven so far in 2019. Since 2015, when the Chinese South China Sea claims became a major issue, the Americans have carried out more FONOPS in the South China Sea each year. China 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.
November 20, 2019: In the last few days North Korea has announced it is no longer interested in negotiating with the United States over denuclearization and sanctions. At least not until there is first some reduction in the economic sanctions. The Americans refuse to consider that because in the past the North Koreans have used such threats to get some relief and then refused to do anything about reducing their military threats to South Korea, the U.S. and Japan and allowing that to be verified.
The current economic sanctions are the most damaging North Korea has ever endured. Even China is enforcing most of these sanctions. There is little support in South Korea for easing up. North Korea continues to demand a halt to joint U.S.-South Korea military training, considering this an aggressive act. In reality, these exercises are largely about neutralizing North Korean efforts to attack South Korea and at least heavily damage the capital, which is within artillery range of the DMZ.
North Korea realizes the American-South Korean forces are superior and joint training just increases that advantage. For the same reasons, North Korea criticizes Japanese missile interception training. While North Korea is the main threat Japan also has to worry about Russian or Chinese missiles. North Korea believes the missile defenses are mainly there to make North Korea weaker. The official American reaction to the North Korean threats is, “we remain open to talks and meetings between the leaders of North Korea and the U.S.” These meetings are big media events for both leaders but when the North Korean leader keeps returning home with no reducing in sanctions he is seen as a failure and weak. Meanwhile, the sanctions do their work, making the already bad conditions (from growing corruption and decades of mismanagement) worse.
November 17, 2019: Secret documents about security operations in western China (Xinjiang province) were recently leaked and published in Western media. The information in these documents had more impact in countries neighboring China because the documents had an impact on foreign relations, both diplomatic and economic. The leaked documents consisted of two batches of Chinese government reports on the progress of the Chinese crackdown on separatism or support among Turkic Uighurs in Xinjiang. The re-education camps are no secret and many have been spotted by Westerners scouring commercial satellite photos of Xinjiang. That shows camps holding over half a million Uighurs, who are, according to the leaked documents, held for up to a year until they are deemed “reeducated” and terrified enough to avoid any involvement in separatist or anti-Han (ethnic Chinese) activities. The leaked documents contained details of how the camps were run and how thousands of Chinese government officials in Xinjiang were accused of not supporting the reeducation program energetically enough. Many of these officials were jailed and reeducated.
Since 2017 the West, but not Moslem countries, have been increasingly critical of Chinese efforts to deal with Islamic extremism and anti-Han attitudes by sending over a million Chinese Moslems to prison camps where can undergo “re-education”. China considers Islamic conservatism or radicalism a mental disease that can be cured by re-education. The Moslem world was silent on this until these documents appeared. That was largely because it was a known fact that China will ignore any such criticism and seek to punish (economically or diplomatically) any Moslem country that would criticize China. Many Moslem majority nations depend on China for economic, diplomatic and military support. That is important but not as much as the fact that China simply ignores any criticism about how it treats its own Moslems. China responded to the criticism from the West by insisting the camps were for imparting useful language (how to speak Chinese) and job-related skills to improve the lives of the Moslem Turks who were once the majority in Xinjiang. This “occupational training” excuse was flimsy since the government budgets for Xinjiang show no such increase in job-related training and reports from those released from the camps make it clear the “training” is all about acquiring a more cooperative relationship with the Chinese government. All this, and more, was confirmed by the leaked documents.
The documents pushed many Moslem nations to reconsider their fear of China. This was especially true of Turkic nations farther west. These are the five “Stans” that, until 1991, were five components of the Soviet Union. Since the 1990s the Stans have become more economically dependent on China than Russia, which has declined economically since 1991 while China continued to prosper. Even before the campaign against the Xinjiang Turks the Stans were having second thoughts about increasing economic involvement with China. The leaked documents reminded the citizens of the Stans, most of them Turkic, that China has a far larger population and economy than the Stans and that Xinjiang was once sort of a sixth Stan (Uighurstan or “East Turkestan”) and is now being absorbed by Chinese money and non-Turkic Han Chinese.
November 15, 2019: In the south (Burma’s Rakhine state), fighting between soldiers and tribal rebels is again causing problems for China. These clashes
are related to the ongoing peace
negotiations between the government and the
NA (Northern Alliance) tribal rebels. These talks have negotiated some initial agreements, including a ceasefire and prisoner exchange. Those last two items have not worked out. No long-term peace deal yet but this is more progress with the NA than ever before. Some NA members are still engaged in combat with the army. The NA exists because its members refused to sign the 2015 Burmese Nationwide Ceasefire Agreement (NCA). Those who did sign the NCA have made progress in working out differences with the Burmese government and military. The army, which tends to do as it likes in the tribal areas of the north, is the primary cause for violence. China is also involved because Northern Alliance members survive via their access to China. The access is tolerated as long as these Burmese rebels do not let the fighting spread into China or interfere with Chinese commercial operations in Burma. This includes the BRI project, which NA members do object to.
November 14, 2019: After a three day meeting in Thailand, officials from Thailand, Laos, Burma, Vietnam, Cambodia and China agreed to create the “1511 operation” to coordinate their efforts to curb the illegal drug trade. This is mainly about methamphetamine or “yaba” in pill form coming out of Burma. This is currently the most active part of the Golden Triangle area. This is where the borders of Thailand, Laos and Burma meet near where the Ruak and Mekong rivers meet. For centuries this area was the source of opium, the original “illegal drug”. Sixty years ago heroin (refined opium) became a major export and more recently meth and a growing number of other synthetic drugs. China is the largest market for the meth but all the 1511 nations are harmed by the illegal drug trade.