US and PRC relationship & India

ramana · Post by **ramana** » 03 Mar 2011 09:52

Abh, Its related to Gates re-emphasis on not fighting land wars in Asia. Shopkeepers cant be empire sustainers.

RajeshA · Post by **RajeshA** » 03 Mar 2011 14:39

ramana wrote:Chris and RajeshA, The current totalitarian setup with uncle is not conducive to Indian interests. Granted they will be hostile to India due to proxmity and perceived clash of interests, the current setup leds itself to manipulation and direction. So in my view a change could be better.
Just my thoughts.

ramana garu,
as the projections state, in a few decades the Chinese economy would be more than twice as big as that of America. I don't think the manipulation and direction would last that long.

Regardless of what kind of political system comes up in China, the fundamentals of the country with respect to its interests would remain the same. Any new system would have to rely on nationalism to keep the country together. Also the state machinery would remain as it is, as even a democratic system would practically inherit the bureaucracy.

A communist system managed by the CCP and PLA allows India to counter China by targeting our rhetoric at the CCP and PLA, and being totalitarian, it makes the demonization of the enemy much more easier. We can do this without finding fault with the Chinese people themselves. What India does not need is an Asia where Indians and Chinese become mortal enemies. PLA and CPC allows India a suitable deflector, in our tussle for co-existence and domination over the Asian landmass.

Any tussle over Tibet and East Turkestan, over Myanmar and Pakistan, over Central Asia and South-East Asia, over Pacific and Indian Oceans can be better managed if the adversary is vulnerable at home, and democratic forces arraigned up against totalitarian determination can be quite unsettling.

India's development causes a stabilization of social forces in India - the separatism in our Northeast, the Naxalites, the Muslims, all these would learn to join the mainstream in the next 3-4 decades. In China, economic liberalization also means that China has empowered civil society, and CCP can keep on this mandate of heaven, if it can keep the race between economic prosperity ahead of political aspirations. Any dip, any stumble, in economic growth can cause political aspirations to overtake economics, and with an empowered society, it would become very difficult for the CPC and PLA to keep control of the situation.

This potential for instability gives India in any confrontation over China (not necessarily military) a definitive edge.

We should keep that card, but that card is safe only as long as China is totalitarian. Any peace right now between a democratic India and a democratic China would freeze our relative power levels at the current level which is to China's advantage. We do not wish it to freeze when Tibet and East Turkestan is still in China's control.

Once USA is dethroned from its primacy in the world, say in the next 2-3 decades, a totalitarian China would cause a lot more paranoia in the West, and push them into India's corner, tilting the equation in our balance.

Just my thoughts.

ramana · Post by **ramana** » 03 Mar 2011 23:38

Paul Johnson the British pop hisotrian had written an article where he claims that the new China has an old habit: drugs consumption. He claims that PRC youth are self destructing with new age hafeem.

Prem · Post by **Prem** » 04 Mar 2011 00:31

Ramana,
Did you watch documentary oh History Channel about
Is Bruce Bueno De Mesquita The New Nostradamus
http://chemical-network.com/end-times/2 ... stradamus/

He dont think much of China and predict their failure in achieving any kind of grandeur.

ramana · Post by **ramana** » 04 Mar 2011 00:37

You know about him anyway!

RamaY · Post by **RamaY** » 04 Mar 2011 02:55

RajeshA wrote: ramana garu,
as the projections state, in a few decades the Chinese economy would be more than twice as big as that of America. I don't think the manipulation and direction would last that long.

RajeshA garu, the projections cannot be extended for long periods of time as we started seeing in PRC's case (Hu is saying they hold their GDP growth rate at 8% in 2011). Per these projections PRC's GDP in 2050 should reach $135Trillions

(2010 world GDP is $62T) That is double (or triple) the per capita income of current USA.

Can you imagine the amount of natural resources required to support such an economy?

I would put the sweet spot of PRC GDP at $13-$15T. They will stop at that.

devesh · Post by **devesh** » 04 Mar 2011 20:07

even the $13-15 Trillion is too high. if the Atlanticists have their way, they will arrange for a crash in China in this decade. ultimately, China owes its prosperity to the West. if Americans lose their patience with globalist dreams, imvho, the dragon will go down one of those dirty, sticky, and nauseous chimneys in some ding-dong province.

Johann · Post by **Johann** » 04 Mar 2011 21:06

RamaY,

A lot depends on whether China implements social reforms or not.....

China is dependent on exports rather than internal consumption because of the cost of healthcare and education means that people must keep a high rate of savings. There just isn't the same network of charitable help or credit facilities to defray costs for most.

China is also coming up on a demographic shift that will significantly reduce its work force, and change the supply-demand dynamics of the labour market and increase the household welfare burden.

My guess is that China will gradually build up the social security net to (a) defuse political grievances and (b) increase domestic consumption.

In order to keep labour costs down and production humming we may actually see the Chinese importing labour from poorer countries around it.

Lalmohan · Post by **Lalmohan** » 04 Mar 2011 21:12

consensus is building amongst economists and commentators that the chinese economy is skating on very thin ice... need to be careful that the implosion is slow and does not export shocks around the world

Johann · Post by **Johann** » 04 Mar 2011 22:05

If China does not transition its current socio-economic model it risks being caught in the same trap as Mexico and Russia....and we've seen where that model leads.

An increasingly depopulated countryside, and cities with public administration that is powerless against mafia like armed local economic elites despite one-party rule. In fact the demographic trends mean that China has even more in common with Russia than Mexico.

The bottom line is that the Chinese system has to care more for its ordinary citizens if it doesn't want to be hollowed out from the inside.

However, I think the CPC with its hypersensitivity to protest is likely to improve social support in order to minimise dissent even as it cracks down.

ramana · Post by **ramana** » 04 Mar 2011 22:55

Then it wont be PRC!

SureshP · Post by **SureshP** » 05 Mar 2011 01:53

ramana · Post by **ramana** » 05 Mar 2011 07:13

Ram N:

China Syndrome

FINANCIAL TIMES

The China Syndrome

By By FT Reporters(James Kynge, Richard McGregor, Daniel Dombey, Martin Arnold, Helen Warrell and Cynthia O’Murchu).

Published: March 3 2011 22:18 | Last updated: March 3 2011 22:18

"Let’s just talk, you know, straight realpolitik. We are in a competition with China. Take Papua New Guinea: huge energy find . . . ExxonMobil is producing it. China is in there every day in every way, trying to figure out how it’s going to come in behind us, come under us."

Hillary Clinton’s words this week were blunt. Not only was the US head-to-head against China in a battle for international influence but Washington was losing the “information war” to emerging powers.

The comments made by the secretary of state to a congressional hearing bring bang up to date the anxieties laid bare in confidential US government cables over the surge in Chinese global influence in recent years.

Emanating from American embassies across the developing world, these characterise Beijing variously as having fewer scruples than Washington, “playing dirty” in commerce and ignoring human rights in its dealings with other countries.

“I might also mention China has about a $600m development programme for these Pacific island nations. And what do we have in a response? Zero,” Mrs Clinton added. She went on to observe that China’s establishment of a multi-language international television network, Russia’s launch of an English-language network and the continued success of al-Jazeera had come at a time of cuts in US networks and at the BBC.

“We are in an information war and we are losing that war,” she said.

Such remarks open a crack of daylight into what is revealed by the WikiLeaks cables as a long-standing tournament of shadows – the diplomatic feints and dodges that animate often undeclared US-China rivalries – in places as varied as Africa, the Indian subcontinent, central and south-east Asia and Latin America.

The vignettes on this page, which are taken from cables written over several years until last year, demonstrate not only the number of areas in which US and Chinese interests clash, but also the varying intensity of the competition that results.

In a number of African countries, the sense of rivalry is unambiguous. Alleging that “Chinese companies play dirty”, a cable from the US embassy in Nairobi said: “We wonder if [Beijing] simply turns a blind eye to the dirty work of Chinese firms, or if it actively contributes to the problem.” In Nigeria, US officials see a benefit to China from having fewer scruples than Washington. “In pursuing its economic interest here, China is free to ignore human rights, democracy, and other issues which complicate the US relationship,” the cable from Nigeria-based US officials said.

Cables from Algiers show a similar vein in complaints. “Competition between US and Chinese firms will continue to dominate the US-China relationship toward Algeria,” said one, noting that “more than 40,000 Chinese nationals reside in Algeria”. In Ethiopia, US companies told officials their contracts with the country’s telecommunications operator were terminated after they allegedly exposed “inadequacies and falsification of data” by a Chinese rival.

In contrast to the anxiety manifest and unsubstantiated claims made in cables from embassies in Africa, those from Asia convey a milder disappointment, such as over Sri Lanka’s apparent disinclination towards western investment in favour of China’s “no-strings generosity”. This may be “convincing President Mahinda Rajapaksa that he can have both his war and his infrastructure, instead of having to choose between the two”.

US experts endorse the sentiments. “There’s definitely a new game taking place in many parts of the world. The extent to which it has advanced has taken a lot of people by surprise, not least the Chinese themselves,” says Charles Freeman, previously America’s top trade negotiator with China and now at the Centre for Strategic and International Studies. But he also notes a sense among some countries that China has come on too strong: “People are pleading with us to stay around and stay engaged.”

A sense of this dynamic is evident in the cables. In one, a warning comes from executives at Vale, the Brazilian mining giant. At a May 2007 meeting with the US ambassador to Brazil, they said America “would need to pay greater attention to where its raw materials would come from as China hoped to lock up both South America and Africa as its suppliers”.

Washington has tried to translate Brasilia’s annoyance over unfair Chinese competition into a joint position pushing for the faster appreciation of the renminbi. So far, however, Brasilia has maintained an even hand.

China is aware of countries’ concerns. Yang Jiechi, foreign minister, wrote last month of a need for “public diplomacy” because the world “still has biases, misunderstandings and worries about China”.

KEY

Brazil:

The uneven relationship that has emerged from dependence on China as an export market has proved tricky for Brazil to navigate.

Some, such as Roger Agnelli, chief executive of Brazilian miner Vale, note their concern that Beijing plans to control not only Latin America’s mineral deposits but also its infrastructure networks.

In a cable seen by the Financial Times, Mr Agnelli is reported as urging America in a 2007 meeting with the US ambassador to Brazil “to think seriously . . . as to what would happen if the Chinese won the struggle for access to commodities”. This would “create imbalances in the international market as the remaining customers in the US and Europe would have to pay high prices as key stocks would effectively be off the market”.

Despite these concerns, according to the cable’s author, the miner itself is deeply involved with China. “As [Vale] derives much of its record profit from sales of iron ore to China,” says the cable’s author, “in many ways it is a willing partner.”

In an earlier cable Renato Amorim, Vale’s director of foreign affairs, is reported as calling China “too clumsy in Latin America”, concluding that it is “not living up to . . . the bluster and heightened expectations created from Chinese President Hu Jintao’s 2004 visit”.

Vale executives declined to comment

Sudan

China starts to anticipate a southerly shift in ownership of the oil resources of Sudan, its sixth biggest supplier, as early as 2009. Watched closely by US officials, Beijing moves its focus from President Omar al-Bashir in Khartoum towards the leaders of the south, engaged at the time in a battle for independence. After a May 2009 meeting with China’s special representative on Darfur, US diplomats say he “suggested that the opening of China’s new consulate general in Juba [proposed capital of an oil-rich breakaway state] reflected China’s increasing attention to the south”.

Chinese officials are reported nonetheless to be opposed to independence, telling US counterparts in 2010 – a year before the south voted overwhelmingly to secede – that it would result in “a domino effect”.

Beijing appears uneasy defending its close ties to the Bashir regime while improving links to Juba. US diplomats say Chinese officials have told them the country must “keep one foot in each boat” and maintain “friendly” relations with all sides. The Chinese also stress their policy of non-interference in domestic politics. This shifting stance may explain why Luis Moreno-Ocampo, chief prosecutor of the International Criminal Court, is quoted as telling US officials in 2008 China “would not oppose” Mr Bashir’s arrest for war crimes and crimes against humanity as long its oil interests were protected.

Ethiopia and Kenya

A US diplomat reports a warning from an official at US development agency USAid in 2009 that the building of Africa’s biggest dam would pose “grave risks” to local people. Ethiopia subsequently struggles to find overseas financing and turns, eventually, to Beijing. In 2010, the Industrial and Commercial Bank of China agrees a $500m loan for the €1.5bn Gilgel Gibe III project, and the Export-Import Bank of China also offers backing.

Western concern about the dam dates back to 2009, when US embassy officials in neighbouring Kenya report the USAid official as saying the dam – being built by Italy’s Salini Costruttori and China’s Dongfang Electric Machinery Corporation – is a threat to Kenya’s indigenous Turkana people and others living near the Omo River. In his opinion, according to a cable of June 2009, “Lake Turkana is bound to be at risk, especially in low rainfall years.”

Gibe III “could [also] pose ‘grave risks for indigenous communities in south-western Ethiopia’.”

However, a Kenyan official tells US diplomats that the dam has his country’s full support and there is “no cause for alarm” about its impact on water flowing into Lake Turkana, Kenya’s northernmost Rift Valley “desert lake”. But it faces opposition from non-government organisations, which submitted a petition and staged a peaceful protest outside the Chinese embassy in Nairobi last month.

Kazakhstan

US diplomats recognise that in Kazakhstan, history dictates that Russian and Chinese interests trump theirs. But they still report anxiety that US companies are “often at a disadvantage” when bidding against the Chinese, who make “impossible commitments on time and cost that they admit in private they will not be able to meet”.

A June 2009 cable quotes a European sales manager complaining that: “Chinese workers entering Kazakhstan always wait at the end of the [immigration] line and carry plenty of cash . . . because most of them enter the country illegally, without required work permits, and must pay bribes in order to pass through immigration, labour and customs controls.” The allegation is later supported by a Chinese diplomat who apparently tells the US energy attaché that as extreme deadlines give China’s companies no time to train local labour, they “often bring expatriate employees into Kazakhstan without visas and work permits” – though the embassy requires compliance with local law.

The sales manager claims fines have had “no effect”. Kazakh officials are also “frank in their criticism”. When a minister tells the US deputy chief of mission of statutory amendments that could allow abrogation of contracts on national security grounds, he assures the diplomat: “Don’t worry. The law is not aimed at you. It is for the Chinese.”

Sri Lanka

“Sri Lanka’s new friends cannot compete with her old ones in the United States and EU,” write US diplomats, claiming that the success of Chinese companies is undermined by concerns about quality and business methods.

In December 2009, diplomats reprise a meeting with Sri Lankan mobile providers and their claims that Chinese diplomats may have been involved in contracts won by Huawei Telecommunications: “Some have speculated that Huawei has been assisted by the Chinese embassy, but we could not confirm whether these suspicions are well founded.” The diplomats quote the local providers’ allegations that Chinese-owned Huawei’s equipment is “sometimes suspect and the quality of their work is often questionable” but concludes that this is “not hindering their business model”. (Huawei would not comment on these allegations.) US companies do not have the financial resources to compete with Chinese state-owned groups, enterprises or consortiums “that are supported by the Chinese government”, according to a cable from July 2009. The real invective is reserved for Beijing’s aid following the 2004 tsunami. “High on optics, thin on substance” is the curt title of an April 2005 cable on a visit by Wen Jiabao, China’s premier. It notes gifts of “modest tsunami aid and debt relief” plus “a new bust of [China’s first premier] Chou Enlai for a Chinese-built conference centre”.

Thailand

America cannot complain it lacked fair warning that its waning interest was clearing the way for an ever closer Sino-Thai relationship.

When Democratic Senator Jim Webb visits Bangkok in January 2009, King Bhumibol’s deputy private secretary is reported in a cable sent soon after the meeting apologising for “having to play the China card” but pointing out that “as US focus on south-east Asia has diminished over the last decade, China has increasingly become a more important partner for Thailand”. The region is seen as at the “tail end” of US priorities. The senator promises to carry this message back to Washington.

When China displaces the US as Thailand’s leading export market within the year, US diplomats write in a cable dated December 2009: “Our ability to manage a counterstrategy to China’s charm offensive is complicated by the fact that, unlike the Chinese, most of the US-Thai trade and investment relationship is based on decisions made by private US firms and not by the US government.”

According to a dispatch of February 2010, Chinese diplomacy seems to focus on the royal family, which is wooed with “lavish VIP trips to China”. Princess Sirindhorn, “the second most beloved Thai royal, has made a reported 28 trips to China since 1981 – including three in 2009 – in an effort to foster closer social and educational ties between the two nations”, it reads.

ramana · Post by **ramana** » 05 Mar 2011 07:18

a snapshot of US economy;

GDP= Consumption+Govt spending+Servcies+Exports-Imports

Consumption in doldrums due to economy
Govt Spending maxed out and huge deficits

Services not much there as who can afford US services. Mostly outsourced with fee collection
Exports are only thing

1% of 2.8 % last quarter growth in GDP was from exports.

Of this 1% ~60% came from small and medium bussinesses.

They need govt trade reps to lobby for them. And more Exim Bank credits.

Christopher Sidor · Post by **Christopher Sidor** » 05 Mar 2011 15:06

ramana wrote:Ram N:

China Syndrome

....
....
In a number of African countries, the sense of rivalry is unambiguous. Alleging that “Chinese companies play dirty”, a cable from the US embassy in Nairobi said: “We wonder if [Beijing] simply turns a blind eye to the dirty work of Chinese firms, or if it actively contributes to the problem.” In Nigeria, US officials see a benefit to China from having fewer scruples than Washington. “In pursuing its economic interest here, China is free to ignore human rights, democracy, and other issues which complicate the US relationship,” the cable from Nigeria-based US officials said.
....
....

The Pot calling the kettle black ?

krisna · Post by **krisna** » 06 Mar 2011 06:17

One thing which will always keep chinese CCP on the backfoot will be its own mango abduls. However strong the chinese economy is.
Birds of the same feather flock together- look at the economic deals china has made with countries- majority are totalitarian states with scant regard to their own citizens. closest buddies are TSP and NoKo.
Mango chinese are in 1000s in these many countries doing the constructions business for chinese companies. Interestingly it is in countries which have no democrazy with dictators(or similar to that) ruling the roost. Net effect is the mango chinese in these countries might feel mother china is similar or better off than these countries like the those central asia/middle east/africa and others.

Mango chinese in EU and Uncle are of diffferent type who are exposed to the full effects of democrazy. They have a different take on the political freedom in mainland china.

Between these 2 types and the majority of mango chinese at home,there exists the potential for a small spark that can light an inferno which will consume the CCP/PLA power structure.Hence it will always be a nervous soper duper power but never a confident one.This is itself a big minus one for china compared to India.

Both India and uncle need not worry on this score because of democrazy. Non performers will be booted out in election cycle every few years despite some deficiencies in the system.

India has to be wary of both. It should be based on pragmatic strategic realities and not on some moral high grounds. National interests should dictate the policies. It should not blindly support uncle nor give into flattery by gotus.

abhishek_sharma · Post by **abhishek_sharma** » 08 Mar 2011 09:38

Production, not innovation, will win the future

http://prestowitz.foreignpolicy.com/pos ... the_future

In his State of the Union speech, President Barack Obama called on Americans to "win the future" and to do so by dint of innovation and doubling exports.

Because it played to Americans' assumption of an innate entrepreneurial superiority that effortlessly produces game changing silver bullet solutions, this part of the speech was roundly applauded by virtually all of the president's audience as well as the broader public.

...

There was one dissenting group -- most of America's academic economists. Speaking for them, former Council of Economic Advisers chairman and current Harvard economics professor Greg Mankiw chastised the president in a New York Times op-ed reciting the orthodox catechism that because globalization is always a win-win proposition, there is no way the United States can be in economic competition with China or any other country.

Nevertheless in comments picked up last week by the Financial Times, Secretary of State Hillary Clinton was clearly feeling the competition. "Let's just talk, you know, straight realpolitik," she said. "We are in a competition with China. Take Papua New Guinea: huge energy find. Exxon Mobil is producing it. China is in there every day in every way, trying to figure out how it's going to come in behind us, come in under us."

She continued: "I might also mention China has about a $600 million development program for these Pacific Island nations, and what do we have? Zero." She followed that by saying: "We are in an information war and we are losing that war."

...

The tone of all that suggests there is, in fact, a lot of economic competition between the United States, China, and other countries. And even where the competition is not directly economic, as in the case of the "information war," it is indirectly economic both in the sense that the U.S. can't match what China is spending on it and in the sense that the ultimate objective of the "war" is often access to limited raw material sources and markets.

Not only is the United States losing the competition that Clinton finds so frustrating, but it is also losing on a much broader scale. Take exports and Obama's goal of doubling them in the next five years. At first blush, things look good. U.S. exports are up about twenty percent so far in 2011, well on the way to the doubling target and an important part of an apparent economic recovery that has just brought under nine percent for the first time in three years. The only problem is that the exports are being drowned in a renewed flood of imports. As a result, the U.S. trade deficit is rising back toward the four percent of GDP level that is generally accepted to be unsustainable, and the present U.S. recovery is being bought at the cost of higher debt and lower economic growth potential for our children.

The truth is that the president's export-doubling target is silly and meaningless. But no more so than the notion that America's future will be rescued by innovation razzle dazzle that Americans are uniquely capable of achieving.

Just read this past weekend's interview by Wall Street Journal editor Alan Murray with United Technologies CEO Louis Chenevert, Applied Materials Executive Vice President Mark Pinto, and Suntech Power CEO Zhengrong Shi. These business leaders are unanimous in the view that China is taking innovative leadership in the very green technologies the White House is targeting.

...

And it is precisely here that the United States seems to be suffering from gene deficiencies. In an important new study, Manufacturers Alliance adviser Ernest Preeg points out that U.S. manufactured exports as a share of global exports fell in the decade of 2000-2010 from 19 to 13 percent while China's rose from 7 to 20 percent.

...

The reason for this and for Clinton's frustration at not being able to compete for influence and access to global commodity sources and markets is not that America lacks innovation. No country has been more innovative in the past thirty years than the United States. The reason America is increasingly losing out and lagging behind is that it lacks production. And that lack of production capability is now also leading to a decline in innovative capability.

From this, two conclusions follow. Greg Mankiw really needs to update his textbook, and if Obama wants to win the future for America he'll need to reverse his priorities -- focus less on innovation and exports and more on domestic production that can competitively substitute for imports.

ramana · Post by **ramana** » 08 Mar 2011 09:47

In the last quarter GDP grew by 2.8%. Of this 1% came from exports. 70% are from manufacturing. 7% came from services. American worker productivity is the highest in the world. True US exports 13% only while PRC exports form 40 % and FRG exports 43%.
Those countries dont have domestic markets and need to export.

Clyde Prestowitz should look around the data and share the optimism and not spread doom and gloom.

devesh · Post by **devesh** » 08 Mar 2011 11:40

what optimism ramana? in the jargon of BRF, 'Khanate' is doomed. the vaporization of manufacuring/industry in America has led to disastrous consequences. ultimately, the US will slowly become a poodle country enslaved to China, if it doesn't move away from the path it is on. i personally have started losing all hope on US, especially when considering the fact that the economic depression and societal martialization are both happening simultaneously.

Christopher Sidor · Post by **Christopher Sidor** » 08 Mar 2011 13:12

abhishek_sharma wrote:Production, not innovation, will win the future

http://prestowitz.foreignpolicy.com/pos ... the_future

As america is the world largest economy and market the chances of something new and radical succeeding are higher due to economy of scales. For example consider the iPod or google maps. In India or China if a company had created iPod the market for the same would have been minuscule to say the least. Of if a company in China had invented Google maps and given it out, then its consumers in China and/or India would be tiny. But in case of America these new products get to succeed because of economies of scale.

The key to breaking American hegemony in high-tech or innovation is not to have supportive policies but to have a market which can make a success of these new innovations. Supportive policies for innovation, like patents, copy-rights, research-institutions support, etc are enablers but they are not the key.

Christopher Sidor · Post by **Christopher Sidor** » 08 Mar 2011 16:32

A bit dated article, published in Jan-2011 from Asia Times, but still relevant
Hu confronts ghost of Stalin

Basically the point that this article is trying to make is that China-US are natural partners. And their estrangement can be broken via a North Korea-Taiwan swap. China gives up North-Korea and in return US gives up Taiwan. The advantage, according to the author, is that US solves the Korean problem, while China gets unhindered access to Pacific ocean and reunification of the mother land. The author lays the blame of sino-us estrangement on Stalin.

Also the author hopes that this reunification will allow hu to carry out

major institutional reforms he(i.e. Hu) may deem necessary for the future

Also after unification China and US would cooperate to resolve issues

work together (US and China) on a number of other international issues dear to the US, such as Central Asia, the Middle East and Africa.

This is a line of thinking which has been advocated by many people, particularly the Chinese and now we see it being championed by a European.

A Loss of north-korea would mean the presence of American/Korean/Japanese soldiers very near to the chinese capital. Away from the economic and industrial might of China, but very close to the political capital of China. A loss of Taiwan to US would mean that China would no longer be restricted by the first island chain. It would have free access to the entire pacific ocean, where its ships and power would eventually clash with US.

Status quo serves both the countries. US has no direct way of carrying out a land invasion of China other than a tie up with Russia and Mongolia. China has no way to challenge the bed-rock of US armed power, its navy and air force. US at the end of the day is a maritime power. China is a continental, land based power. Also this bargain would entail a loss on both the sides. Will the net gain for each participant concerned, i.e. US and China, be worth it?

But let us for sake of argument assume that this swap does occur. What then. We can then safely assume that US would be very very cool towards containing China. In fact it might be a repeat of 1970s, when US quietly handed over to Indian government a note which said, Boss if you fight with China you are on your own. Then we had the soviets to fall back on, and the soviets right through out the 1970s-80s gave us valuable and crucial support. We could hold back the Chinese threat in 1983 and 89 on the back of soviet weaponry. Today there is no soviet union. We would be all on our own. Off course US would pay lip service to the China threat so as to be in India's good books but face it, when push comes to shove it will be a silent spectator. And since it has happened in the past, a precedence already exists.
As far as India is concerned this Bargian would be a great shock to new-delhi and would shake people out of their complacency. Whether it would finally dawn on Indians the perfidy of americans is debatable. It would drastically increase the Chinese pressure on Arunachal, Leh and the middle sector of LAC.

devesh · Post by **devesh** » 08 Mar 2011 20:05

problem is that Russia is in a pretty weak position too. its population is declining, while China floods its borderlands with Han Chinese, and Russia looks on helplessly as the Far East is literally a stone's throw away from the much larger population of Han Chinese. it is debatable if Russia can contain/manage its demographic decline, let alone reverse it. and this is cause for great concern.

Atlanticists view Russian decline positively, but they also realize that a drastic reduction of Russian power is basically an open invitation for PRC to dominate the Far East and thereby the make a play for the Pacific.

another view is how far can PRC really extend before it is overstretched. as such, Inner Mongolia, Tibet, and Xinjiang are borderlands which have only recently been colonized, and the Han population is reaching the upper limit of its extent. if PRC makes a play for the Russian Far East in the coming decades, can it really colonize this region and extend its rule without creating a huge burden for itself? and how will US react? and ultimately, how will this effect India?

ramana · Post by **ramana** » 08 Mar 2011 21:12

Its easy to get into a group think and become part of doom and gloom brigade led by Prestowitz and Fareed Zakaria. They do not understand the real America due to jaundice or green colored glasses. Prestowitz was G.W. Bush Admin US Trade Representative who shilled for PRC!
FZ wrote a Time cover article on "Decline of America" this week. He just made himself irrelevant to US opinion makers.

Another thing its not proper to relieve in the pool one is swimming in.

Meanwhile Nightwatch:

Nightwatch 3/7/2011

China: The Communist Party-run Beijing Daily criticized anti-government protest movements in the Middle East and dismissed the possibility of similar happenings in China, the Associated Press reported 5 March.

Such movements bring nothing but chaos and misery to their countries' citizens and are engineered by a small number of people using the Internet to organize illegal meetings, a front-page editorial stated, adding that the minority becomes a "self-delusional ruckus." Chinese people support their nation's political stability, economic development and favorable government policies, but there are always those with ulterior motives who may attempt to incite unrest, according to the editorial.

Comment: Students of revolutions know that one of the most "conservative" political phenomena is a successful revolution. The current Chinese leadership fears the very kind of movement that created the Peoples Republic. The leadership has replaced revolutionary zeal with balance sheets backed by a degree of general prosperity inconceivable throughout millennia of Chinese history.

The Communists never seemed to grasp, however, that personal well being and education, especially, are inherently antithetical to communism because they imply individual dignity and worth. This is one of several great contradictions that Mao struggled mightily with, but never found an answer.

ONly a few states, all democracies, have the internal power and openness to rejuvenate themselves, i.e., to update their revolutions. All centrally-controlled political systems lack the mechanisms and the fire. That lack accounts for Qadhafi's troubles, for one example.

Quite relevant to what future avails the PRC unless it changes. I wouldn't be surprised is the PLA decides to le the Falun Gong into polticial power to stem the rot.
The CPC is killing the imagination of the Chinese people and needs to go. Its role on the China's stage is over.

devesh · Post by **devesh** » 08 Mar 2011 21:18

Zakaria is a typical Atlanticist stooge. and i have no idea who this Prestowitz is. i was broadly speaking about US essentially becoming a financial and economic basket case. it is amazing to me that a country with such huge geographic isolation, huge land area, large population, and enormous agricultural resources could ever be in this situation. all routes of foreign invasion and neighborhood domination by other countries have been sealed shut by US long ago. America has basically done itself in. though the role of systematic social engineering over the past 100 years by Anglophile and British imperialists has been crucial in bringing US to its present situation.

ramana · Post by **ramana** » 08 Mar 2011 21:31

They might have pulled the trigger to get rid of their problems just as FSU became CIS and got rid of all their problem areas (all the Stans) and retained the core. We are seeing a big reset and are in the well and can't see the world outside. Despite the rhetoric the centerists are together and managing the change via Obama.

devesh · Post by **devesh** » 08 Mar 2011 21:59

^^^ we shall see. i am presently very skeptical of any political grouping in US having even an iota of wisdom. i don't think a lot of people realize that most of the developments in US economic/financial realm are now beyond control. these things can't be controlled now. i fear a critical mass has appeared in monetary realm which the FED is helpless against. i also fear the US political system has become so dysfunctional that the vast imbalances can't be corrected unless forcefully imposed by reality.

svinayak · Post by **svinayak** » 09 Mar 2011 00:03

Paul B. Farrell
The 2008 crash isn’t over, only covered up

Last Update: 12:01 AM ET Mar 8, 2011
Phase 2 of the 2008 meltdown is already in full swing as the Reaganomics Brain aggressively races to complete unfinished business, which will implode Wall Street banks and the Fed, ending the reign of the dollar as the world’s reserve currency.
http://www.marketwatch.com/story/the-20 ... =nwhfriend

ramana · Post by **ramana** » 09 Mar 2011 01:03

Time mag article by Zakaria

LINK

ramana · Post by **ramana** » 09 Mar 2011 07:07

Joseph Nye feels compelled to reply!!!

Cheer-up Fareed!

FZ really hit below.

abhishek_sharma · Post by **abhishek_sharma** » 09 Mar 2011 09:31

Why isn't the iPhone made in America?

http://prestowitz.foreignpolicy.com/pos ... in_america

John McCain provided some good laughs and made himself look stupid on a recent ABC news interview by telling Diane Sawyer that the iPhone and iPad are great examples of products that are made in America.

They're not. And given the amount of high technology production in his state, McCain should certainly have known better. The fact that he didn't does make you wonder about what, if anything, they know in the U.S. Senate. But quick, let me ask you where these iconic Apple products really are made.

If you said China (and I know most of you did), you were wrong, and thereby hang a number of tales.

...

But that begs the bigger question of the U.S. iPhone trade deficit. With the bulk of the parts in the iPhone being made elsewhere in Asia and being shipped from China to the U.S. market, the United States still has a big trade deficit on iPhones. It just happens to be with all of Asia instead of just with China. (Yes, there are also parts from the U.S. and Europe, but the bulk of them are from Asia.) So, in a way, the U.S. deficit with China is a proxy for what is really a deficit with Asia.

That raises more interesting questions. The other Asian countries -- particularly Japan, but also Korea and Taiwan -- do not have low labor costs. Indeed, Japan and Korea are members of the Organization for Economic Development (OECD), the long time rich nations club. Furthermore, the parts they supply for the iPhone -- semiconductor chips, displays, lenses, etc. are not labor intensive. They are capital and, above all, technology intensive. Exactly the kind of products in which the United States is supposed to be the leader. So if America actually did produce the stuff it says it is good at producing, it wouldn't have a trade deficit with Asia for which China is the proxy at all. It would have a trade surplus and 20-40,000 more jobs than it has.

Why then, doesn't America make the stuff it says it ought to be good at making? For the answer stay tuned.

ramana · Post by **ramana** » 09 Mar 2011 10:16

Usually mfg costs are 10% of most hitech products.

svinayak · Post by **svinayak** » 09 Mar 2011 10:19

Our company works with the supplier of iphone. It costs around $100 for each piece. They sell it at $400-$600 retail/channel

ramana · Post by **ramana** » 09 Mar 2011 22:22

RajeshA, In the early 50s Paul Samuelson the Nobel Laureate for Economic wrote that by the 70s the FSU would overtake the US. In the early 90s the expert consensus was that US might have won the COld War but Germany and Japan would reap the benefits and economically dwarf US. As the poet in Pyaasa says where are they now?

Same thing with all these projections of US decline and demise. The biggest thing going as Joseph Nye says is that US can tap the wopld for its resources while all these insular economies will not.

India needs to empower all its citizens and drive with all cylinders firing and not against it.

devesh · Post by **devesh** » 09 Mar 2011 22:28

^^^agree that US has intrinsic strengths that most other economies don't (even India doesn't have some of the advantages that US does). but i believe that US cannot return to former economic glory without making drastic and major changes to its economic structure. and these changes will not be brought on by the politicians. there is simply too much to be done. under these circumstances, change will come, but it will come forcefully. it will be imposed simply by reality. no nation, even America, can have an economy that is so grotesquely imbalanced and so thoroughly infected with the disease of debt. it is impossible. US has to change on its terms or it will be forced to change at some time that is not of its choosing.

svinayak · Post by **svinayak** » 10 Mar 2011 02:10

devesh wrote: US cannot return to former economic glory without making drastic and major changes to its economic structure. and these changes will not be brought on by the politicians.

Lot of the former glory is due to the cold war and cooperation it received due to common threat. From now it is real economy and there is resource to make that economy.

Theo_Fidel · Post by **Theo_Fidel** » 10 Mar 2011 02:55

The US is really starting to focus on exports as a means of domestic growth. Even local governments are pushing it relentlessly. The long wage deflation means the productivity of the American worker makes him/her competitive with the world for the first time in a long while. The US will use Pandaland's mercantilist tactics against it.

China's only real advantage is wage arbitrage. It has not made even the smallest steps to move away from this model. This particular model hits its inflexion point when per capita income hits $8,000 or so. China is not SK or JP. By now those countries had already come up with world leading business models and management reform to squeeze out waste and increase productivity. Panda is a resource intensive model with no regard to efficient use.

abhishek_sharma · Post by **abhishek_sharma** » 10 Mar 2011 03:14

It's not just the iPhone that America doesn't make

http://prestowitz.foreignpolicy.com/pos ... oesnt_make

The first is economies of scale. Take two economies, say the United States and the E.U. Take a product, say airplanes and especially commercial airliners. During World War II, the Germans, Japanese, British, and Americans all made very good airplanes. Europe was competitive with the United States in its ability to make airplanes. After the war, both the Europeans and the Americans had all the technology, resources, and skills requisite for aircraft production. And, indeed, it was Britain that actually produced the first commercial jetliner. Yet, it was the American companies -- Boeing, Lockheed, and Douglas -- that emerged in the post war period as the globally dominant aircraft makers, especially of commercial jetliners. This was because, as part of the post-war occupation policies, Germany and Japan were forbidden to produce aircraft. While the French and British faced no such prohibition, their national markets for jetliners were relatively small compared to the U.S. market. Aircraft production is an industry with enormous economies of scale.

If you build only one plane, the cost for that one plane is prohibitive. But if you build a thousand of the same model, the cost per plane falls dramatically because high fixed costs can be amortized over a large number of planes produced.

...

Of course, the E.U. governments decided to engage in what economists call "picking winners and losers" by heavily subsidizing Airbus to make it a viable competitor with the U.S. producers. Their policy eventually paid off and today, Airbus is the world's leading commercial aircraft maker. But it took great policy determination over a long time and hundreds of billions of dollars of subsidies to achieve.

The second answer is U.S. geopolitical and international economic policy doctrine. Since the end of World War II, America's highest priorities have been to assure access to military bases around the globe, to conclude and maintain alliances, and to engage in military intervention to assure a global balance of power deemed favorable to U.S. interests. To this end, Washington has continually been prepared to make economic concessions in order to obtain geo-political objectives. Thus, for example, Washington effectively responded to the Airbus subsidies for fear that doing so might upset NATO arrangements.

This geopolitical priority has long been rationalized and justified by an international economic policy that held free trade to be always and everywhere a win-win proposition. Indeed, it was believed that unilateral free trade (keeping one's markets open, even in the face of protectionism by one's trading partners) was a winning proposition. Thus, there was no need to be concerned about things like subsidization of key foreign industries or loss of capability in these fields, and hence no need for trade measures that might upset delicate geopolitical relationships.

...

The third answer is that the rise to dominance of the theory of Shareholder Value (the sole duty of the CEO is to increase relatively short-term returns to shareholders) in U.S. business schools. Beginning in the 1970s, business leaders promoted the off-shoring of production by American CEOs who aimed to increase returns by arbitraging labor costs between Asia and America.

In the 1960s and early 1970s, the U.S. consumer electronics industry was the world leader in virtually every dimension. But first Japan, and then the Asian Tigers, and then China were determined to catch up. Far from believing that governments should not "pick winners" by subsidizing and protecting them, they saw that most of the major industries like steel, shipbuilding, aircraft, and electronics were characterized by economies of scale and that they had no chance of being in these industries except by dint of subsidies and protection. Governments, they believed, had an absolute duty to achieve rapid economic growth precisely by picking these kinds of industries to be winners.

Thus, Japan kept its yen undervalued (just as China is today keeping its yuan undervalued), provided preferential financing to consumer electronics producers, subsidized their exports, encouraged them to dump (sell abroad at prices below cost and/or below the prices at home) fiercely protected its domestic markets, and forced foreign producers to transfer technology to Japan as a condition of obtaining market access. The objective was to achieve high rates of production in order to obtain the economies of scale necessary to match the costs of American producers.

At the same time, the U.S. government, not wishing to upset the U.S.-Japan alliance with nasty trade issues and seeing no need to do so because it believed that trade is always win-win, took no action to counter the dumping, currency undervaluation, intellectual property theft, and subsidization of "winner" industries by Japan.

...

In the past 25 years, the governments of Korea, Taiwan, Singapore, and other Asian countries have sought to wrest dominance in these and other key industries away from Japan by imitating its mercantilist, strategic export led growth strategies and its "picking of winners."

...

All of these players managed to achieve large scale production such that, even if a U.S. company like Apple had the requisite technology and resources, it could not hope to compete economically with the giant industry leaders. To do so would require that the U.S. government heavily subsidize and protect U.S. based production, a step that would require a revolution in American policy thinking and that may well no longer be affordable even if it were feasible.

That's why America doesn't produce iPhones or much of the other stuff it keeps saying it's good at.

...

abhishek_sharma · Post by **abhishek_sharma** » 11 Mar 2011 14:36

Strategic Asia by the Numbers 2010-11

This appendix consists of fourteen tables covering politics, economies, trade and investment, energy and the environment, security challenges, and nuclear arms and proliferation. The data sets presented here summarize the critical trends in the region and changes underway in the balance of power in Asia.

From here, PDF here

ramana · Post by **ramana** » 12 Mar 2011 00:01

yahoo article on the recent trade figures:

Looks like Prestowitz and Zakaria are not correct:

What to make of the Jan trade figures?

Daniel Gross, On Thursday March 10, 2011, 12:44 pm EST

What can we learn from Thursday's Commerce Department report on January's $46 billion trade deficit — other than that the U.S. brings in a lot more stuff from overseas than it sends to people in other countries?

Four things.

Declining Decline. Pessimists have hammered home three persistent themes during the current expansion: global growth is a zero-sum game; the U.S. doesn't make or produce anything the world wants; and the U.S. doesn't matter as much economically as it used to.

But look at that data. Since bottoming in April 2009, exports have risen virtually every month. In January, U.S. exports were a record $167.7 billion, up 2.7 percent from December 2010, up 15.9 percent from January 2010 and up 35 percent from the monthly low of $124.1 billion in April 2009. (Thank you, foreigners!) It turns out the U.S. produces plenty of goods, services and experiences that the world wants. And continuing global growth means more people around the world can afford them. Oh, and as much as we like to write off the power of the chastened, debt-laden American consumer, our shoppers won't be denied. By importing $214 billion of stuff, we're keeping a lot of factories around the world humming.

Trade is the new plastics. (If you don't get the obvious reference to The Graduate, click here.) Imports and exports combined in January were $381.7 billion, up 18 percent from $323 billion in January 2010, and up 38 percent from $276.7 billion in April 2009. The implication: Trade and trade-sensitive businesses are good ones to be in. Exporting, importing, agriculture, commodities, shipping, delivery, logistics, railroads, hotels, translation, custom brokerage. The companies that facilitate the movement of people and goods around the world have bounced back rapidly and are experiencing high levels of demand. Which means they may be hiring.

Oil Filter. If the U.S. didn't use so much oil, the U.S. trade deficit would look a lot better. (Duh!) Check out Exhibit 9 on Page 11 of the report. In January, the U.S. imported $26 billion more of petroleum products than it exported. Even if oil consumption remains flat, as it generally has in recent years, more-expensive oil contributes to a higher trade deficit. Rather than complain about it, the U.S. can do something about it. Policy (drill, baby drill!), behavior (carpool, baby, carpool!) and consumer choices (hybrid, baby, hybrid!) could combine to put a dent in this component of the trade deficit.

It's little noticed and much dismissed, but the slow shift in the U.S. car fleet toward greater efficiency is helping keep oil demand down. Now if we could only do something about the diversity of transportation fuel supplies — i.e., if more cars could run on natural gas, or electricity, or fast-food grease — then the trade deficit would shrink dramatically.

The China trade. As per usual, China accounted as well for a big chunk of the trade deficit in January (about $23 billion, or half the total). That's up from $18.2 billion in January 2010. Here's a chart of America's trade balance with China.

China is definitely buying more goods from the U.S. — last year exports to China rose 32 percent from 2009. But they're starting from a low base. And U.S. imports from China, which are starting at a very high base, rose 23 percent in 2010. Of course, this trend may be poised to reverse. If you believe official Chinese numbers (a reasonably big 'if') China had a trade deficit in February, as exports barely budged from the year before while imports rose nearly 20 percent from February 2010. The Chinese government has made noises about wanting to encourage more domestic consumption. And what the Chinese government wants, it tends to get. Throw in the marginal appreciation in China's currency against the dollar, which will make the country's exports more expensive, and it's possible that this component of the trade deficit could start to shrink. It'll be interesting to see if the U.S. data for February, which will be released next month, confirm this report.

All of which leaves one final question: Why does China know its trade data for February when the U.S. is just now reporting its January trade data? Trains apparently aren't the only thing that move more quickly in China vs. in America. or

RamaY · Post by **RamaY** » 12 Mar 2011 00:16

what the Chinese government wants, it tends to get

It can grow, stop, reverse GDP as a rate it deemed fit within a month