Bharat Rakshak

Suppiah wrote:Re. article posted by Durgesh, is it the author's own imagination or has some credible basis...time will tell...I doubt Obama has suddenly grown the dangling stuff needed to confront the commies in China.

Reuters has reported:

BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

Oh really?

Our President can, with the wave of a pen, reduce our outstanding Federal Debt by a trillion dollars. He can issue an executive order that declares that every bond the Chinese Government holds is worthless.

What are you going to do about it?

The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.

Gerard wrote:China’s hawks demand cold war on the US

Then came Copenhagen, where Obama virtually had to force his way with his bodyguards into a conference room where the urbane Chinese premier, Wen Jiabao, was trying to strike a deal behind his back.

The Americans were also livid at what they saw as deliberate Chinese attempts to humiliate the president by sending lower-level officials to deal with him.

“They thought Obama was weak and they were testing him,” said a European diplomat based in China.

In Beijing, some diplomats even claim to detect a condescending attitude towards Obama, noting that Yang Jiechi, the foreign minister, prides himself on knowing the Bush dynasty and others among America’s traditional white, Anglo-Saxon, Protestant elite.

Beyond a scintilla of doubt, there can be no definitive solution without give-and-take of territories on either side. The formula that has the best chance of success is accepting the status quo in the western and northern sectors, and ceding Tawang to China, with the McMahon Line being taken as the basis for delineating the boundary on the east without prejudice to its legitimacy or otherwise.

This also broadly corresponds to the ‘Heixiazi’ formula (used to settle the Sino-Russian border) advocated by Professor Zhou Shixin of the Shanghai International Studies University.

prad wrote:1. US Govt will buy back those 2.5T themselves.

Neshant wrote: What could be the motive for trying to antagonize China?
Does he want China to drop its dollar peg which is hurting America?
Could be anything but I detect the US is trying to push all of China's buttons.

Steve Clemons of the New America Foundation has posted an interesting assessment of the Defense Department's 2010 Quadrennial Defense Review, on his blog. The essay, by Liu Shuisheng of the Chinese Academy of Military Sciences, deserves to be read in full. It portrays the 2010 QDR as a sign of "strategic contraction" by the United States. In the author's analysis, the United States's focus on the Middle East will "further chip away at the United States' strength, aggravate its strategic adversity, and increasingly narrow the room for maneuvers on other issues."

Who’s scared of China?

Premen Addy

In a contemporary setting, Churchill’s ‘riddle’, ‘mystery’ and ‘enigma’ better suit China, whose statecraft appears bereft of logic and imagination, whose communications with the serious world beyond its frontiers, and its separate incantations, betray an awful autism

Contemplating Russia’s next move in October 1939, a month or more after the outbreak of World War II, Winston Churchill famously described it as a “riddle wrapped in a mystery, inside an enigma”. Moscow had outsmarted Britain and France as it dissembled and procrastinated in talks to construct a united front against Nazi Germany’s unfolding aggression in Europe; it had calculated, no doubt, that Adolf Hitler would turn his forces against the USSR, so ending its predicament about an unsavoury dalliance. Its bluff was called when Hitler made secret overtures to Stalin, which led to the Soviet-German Non-aggression Pact of August 1939. Moscow had bought valuable time against the German onslaught to come in June 1941. Also, in April that year, the Soviet-Japanese treaty of neutrality saved the USSR from a two-front war when Hitler’s legions finally crossed into Soviet territory.

{PS: This is what Edaward Luttwak was saying about the Byzantine Empire which had diplomacy, force and intelligence as three tools for their relations with other states unlike the Imperial Romans who had only force as they could afford that. I guess it applies to all successors of Imperial Roman traditions.}


Churchill had witnessed the first part of this drama as a politician outside Government. It provided the context to his remark. But the ‘riddle’ to which he alluded was a complex game of chess played by the grandmaster of all the Russians. Churchill was adept at cards, chess was foreign territory, hence the ‘mystery’. Mulling over his observation in a contemporary setting, the great man’s ‘riddle, ‘mystery’ and ‘enigma’ better suits China, whose statecraft appears bereft of logic and imagination, whose communications with the serious world beyond its frontiers, and its separate incantations at home and abroad, betray an autism of self-regard and rage, manifestations of conceit that challenge the rational mind. Beijing’s formal acceptance of the norms that guide international diplomacy is subsumed, it would appear, by the primordial urges of the tributary system which imposed upon designated ‘barbarian’ communities the obligatory kowtow before the Son of Heaven.

The Dalai Lama, poor soul, induces incontinent explosions of ill temper, stemming from perceived loss of face, since his very existence, and that too in a neighbouring country, becomes an affront to the self-image of an all-powerful hegemon before whose authority lesser breeds are expected to “tremble and obey” — as the Emperor Chien Lung enjoined upon the British monarch George III in a letter, when his envoy Lord Macartney came calling at the imperial court in Beijing in 1793 in a bid to open commercial relations between the two nations. Whether Chien Lung’s ceremonial reply to King George — “O Barbarian King” was its address — played any part in his subsequent insanity is a mystery best left to cultural anthropologists to solve. Meanwhile, Han irredenta has woven a seamless robe of the ‘Motherland,’ where non-Han Tibetans and myriad minority nationalities have been chastened into a common shape under the beguiling banner of unity.

Broadsides directed at India come and go with the seasons. Beijing made known its displeasure at the Dalai Lama’s visit to Arunachal Pradesh. Hymn-sheets in the Chinese capital and elsewhere denounced India: A caste-ridden, superstitious society, they said, on the verge of disintegration. The rhetoric was redolent of Islamist Pakistan, the one state which the Middle Kingdom can rightly call a true friend; China’s other partners being diverse expressions of public convenience. Anger has cooled, if only temporarily, and the Sino-Indian relationship, said a Foreign Ministry spokesman in Beijing recently, was waxing, not waning.

It is now the turn of the United States to experience China’s ire. The Obama Administration’s decision to supply Taiwan with military equipment worth $ 6.4 billion — a deal drawn up by the previous George Bush regime — has been damned in no uncertain terms by China’s great and good. The Sunday Times correspondent Michael Sheridan reproduced the litany of abuse directed at Washington. “More than half of Chinese people questioned in a poll (conducted for Global Times, a state-run newspaper) believe China and America are headed for a new Cold War.

Sheridan again: “An independent survey of Chinese-language media for The Sunday Times has found Army and Navy officers predicting a military showdown and political leaders calling China to sell more arms to America’s foes.”

Liu Menxiong, a member of the Chinese people’s political consultative conference: “We should retaliate with an eye for an eye and sell arms to Iran, North Korea. Syria, Cuba and Venezuela. We have nothing to be afraid of.”

Major-General Yang Yi, a naval officer: “This time China must punish the US. We must hurt them hard.”

But the cautionary voice of retired diplomat Wang Yusheng in the China Daily broke into this cacophony of militant nationalism. He warned that such an approach would be “hazardous”, as China was neither as rich nor as powerful as the US and Japan. He clearly recalled the folly of pre-War fascist Japan and had no desire to participate in an assisted suicide.

However, US President Barack Obama’s visit to Beijing and his limp performance there reflected poorly on the advice given him by his China advisers. The treadmills of America’s China policy obey a beat that is also ‘riddle’, ‘mystery’ and an ‘enigma’ to most China-watchers near and far. Talking a good line, as the US President usually does, is no substitute for statesmanship. Operating in an intellectual void has its dangers. He gained nothing in his cavalier treatment of the Dalai Lama except, ironically, the silent scorn of the Chinese leadership who saw him as weak and ineffectual.

{I wish some one asks BS Raghavan to read this op-ed!}

And so to Britain. A year ago the British Foreign Office declared that Article 3 of the 1914 Simla Convention on Tibet was, in its eyes, no longer valid. The Article included the following words: “Recognising the special interest of Great Britain, in virtue of the geographical position of Tibet, in the existence of an effective Government of Tibet and in the maintenance of peace and order in the neighbourhood of the frontier of India and the adjoining States, the Government of China ...engages not to send into Outer Tibet, nor to station civil or military officers, nor to establish Chinese colonies in the country...”.

Beijing was naturally delighted by London’s abdication. It was another barrier removed, however inconsequential its relevance on the ground, to the full and unrestrained application of China’s totalitarian power and authority over a conquered people. It had the scent of Munich 1939 and the betrayal of Czechoslovakia to Hitler’s Nazi hordes.

Wedded to Islamist Pakistan, Britain and China intended clearly to serve notice on India, but the Dalai Lama spoilt the party by chipping in to say that the Government of Tibet was a signatory to the Simla Convention and McMahon Line; and that it had given its sovereign consent to this frontier in a binding accord with the Government of India. Bless you, Your Holiness. The poxy mandarins in Whitehall have been trumped.

Hari Seldon wrote:A true-blue red-blooded yankee jingo lets loose on PRC in this one (heh, heh, highly entertaining read only)
China Flaps Its Jaws (Again)

Oh really?

Our President can, with the wave of a pen, reduce our outstanding Federal Debt by a trillion dollars. He can issue an executive order that declares that every bond the Chinese Government holds is worthless.

What are you going to do about it?

OMG read it all, people. Have a hearty laugh and move on.

But last week a Nepalese government delegation visited Beijing on a trip that underscored, once again, how China’s newfound weight in the world is altering old geopolitical equations.

As Nepal’s home minister, Bhim Rawal, met with China’s top security officials, Chinese state media reported that the two countries had agreed to cooperate on border security, while Nepal restated its commitment to preventing any “anti-China” events on its side of the border.

Details of the meetings were not yet known, but the two countries were expected to finalize a program under which China would provide money, training and logistical support to help Nepal expand police checkpoints in isolated regions of its northern border.

The reason for the deal is simple: Tibet.

V. R. Raghavan, a retired general in the Indian Army, said that China for years had tacitly allowed Tibetans to cross into Nepal, many of whom were making pilgrimages or attending universities in India. But the March protests made China realize that it had a “southern window” that needed to be closed, he said.

“Every movement of important personages and priests and others from Tibet has taken place through Nepal,” said General Raghavan, now director of the Delhi Policy Group, a research institute.

Chinese officials tightened security on their side of the border in the name of preventing pro-Tibet agitators from slipping into, or out of, the country. They also pushed Nepal to become more vigilant.

Last fall, Mr. Rawal announced that Nepal, for the first time, would station armed police officers in isolated regions like Mustang and Manang on the border with Tibet.

Meanwhile, Tibetan advocates say the tightening border security has already sharply slowed movement. Until 2008, roughly 2,500 to 3,000 Tibetans annually slipped across the border, according to the office of the Dalai Lama. By last year, the number dropped to about 600, a change that Tibetan advocates attribute to closer ties between China and Nepal.

“As they get closer,” said Tenzin Taklha, secretary for the Dalai Lama, “it is becoming more difficult for Tibetans.”

And the path to a more constructive overall relationship may lie in both sides dropping any pretense at friendship and acknowledging they are competitors as much as partners, said Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing.

“If China and the U.S. identified each other as rivals I don’t think they would be disappointed with each other,” Yan said. “Both sides pretend to be friends. Actually, they are not.”

President Obama met with the Dalai Lama on Thursday, welcoming the exiled Tibetan spiritual leader to the White House for a low-profile meeting that nonetheless raised the hackles of China. The two men spoke about democracy, human rights and the need to preserve Tibet’s religious identity and culture — all issues that, predictably, irritated Beijing.

In a written statement, the White House said Mr. Obama had expressed support for the preservation of Tibet’s “unique religious, cultural and linguistic identity and the protection of human rights for Tibetans in the People’s Republic of China.”

The meeting on Thursday between Mr. Obama and Tenzin Gyatso, the 14th Dalai Lama, did not please Chinese officials, either. China, which regards the Dalai Lama as an advocate of Tibetan independence, said that it was “strongly dissatisfied” and that it expected the United States to try to make amends.

The spokesman for the Chinese Foreign Ministry, Ma Zhaoxu, said in a statement that the meeting “violated the U.S. government’s repeated acceptance that Tibet is a part of China and it does not support Tibetan independence,” the official Xinhua news agency reported.

While the White House took pains to avoid the appearance that this was a meeting between heads of state — it took place in the White House Map Room, not in the Oval Office — the Dalai Lama also met with Secretary of State Hillary Rodham Clinton at the State Department.

The White House went out of its way to keep the meeting low-key. White House officials did not allow reporters or photographers to see Mr. Obama and the Dalai Lama together, and they released a single official photograph after the meeting.

The Dalai Lama did meet with reporters at the White House afterward, and said he was happy with the visit. He also tossed some snow at reporters.

In deference to China, American presidents usually do not meet publicly with the Dalai Lama. President George W. Bush broke with that tradition in 2007 when he attended a ceremony in the Capitol Rotunda in which Congress gave the Dalai Lama its highest civilian honor, the Congressional Gold Medal.

Analysts of China said the country’s president, Hu Jintao, might retaliate for Mr. Obama’s meeting with the Dalai Lama by canceling Mr. Hu’s planned visit to Washington in April.

ramana wrote:Shayam Saran, with whose speech we started this thread quits GOI as of March 14, 2010.
Wish him a great life.

When President Obama met with the Dalai Lama in the White House on Thursday, he was following a tradition that all recent American presidents had dutifully honored.

Yet, to some Chinese Mr. Obama’s support of the Dalai Lama represents something more troubling and disrespectful. The meeting, while low-profile, and the routine announcement last month of American arms sales to Taiwan, were taken as the latest signs that despite China’s rapid ascent, the American government still refused to compromise on issues that China considered sacrosanct: matters of sovereignty and territorial integrity.

On Friday, the Chinese Foreign Ministry called in Jon M. Huntsman Jr., the American ambassador here, to lecture him on the Dalai Lama, the exiled spiritual leader of the Tibetans, whom China considers a separatist.

They say that China emphasizes sovereignty issues while refusing to give any weight to the Obama administration’s two top priorities in the relationship: containing Iran’s nuclear ambitions and rebalancing currencies and trade. The Americans have also highlighted issues of Internet censorship and security.

“There’s not a lot of overlap in the Venn diagram,” an American official involved in China policy said on the condition of anonymity, following diplomatic protocol. “What’s really the most worrisome is the degree to which we have that disconnect.”

On the American side, a struggling economy is forcing the Obama administration to make currency valuation and market liberalization top priorities. With an unemployment rate of nearly 10 percent and midterm elections coming up, American officials are aware that pushing China to raise the value of its currency, the renminbi, and allowing American companies greater access to some Chinese markets could be important political victories for Mr. Obama and his party.

Economists say the renminbi is undervalued by 25 to 40 percent, a wider gap than at any other time since 2005, when, under pressure from the Bush administration, China decided to allow the renminbi to float in a narrow band against the dollar and other currencies. The renminbi appreciated 21 percent, but has not moved at all since July 2008. This month, Ma Zhaoxu, a Foreign Ministry spokesman, rejected an unusually public call by Mr. Obama for China to revalue its currency, saying that “the value of the renminbi is getting to a reasonable and balanced level.”

Economists say the Obama administration and European allies can press China to revalue the renminbi by threatening to impose more tariffs on manufactured goods. Last fall, the American government imposed tariffs on Chinese tires and steel pipes. European officials have privately said that China’s increasingly unyielding stance on issues like human rights has made it politically easy for European governments to toughen up on tariffs.

“China just doesn’t see Iran as part of its core national interest, except for that fact that Iran collects a lot of natural resources for them,” the American official involved in China policy said.

...

Despite China’s newfound confidence, the American official said, China still does not want to be seen as a lone spoiler on major global issues.

“Eventually,” he said, “the Chinese will cave once they’ve gone as far as they can go without looking like they’re the ones blocking all this.”

I think something radical was proposed to D lama during the meeting. Lama was visibly shaken and lost of words when he came out of meeting.

The Dalai Lama did meet with reporters at the White House afterward, and said he was happy with the visit. He also tossed some snow at reporters.

Sanku wrote:

ramana wrote:Shayam Saran, with whose speech we started this thread quits GOI as of March 14, 2010.
Wish him a great life.

OT > but a point which needs discussion.

His leaving his probably going to be a political bombshell, already being linked to choice of policies and NSA and direction of GoI.

Once again we see revolt from within GoI ranks, and this time at the highest levels.

This seems to have become a penchant for UPA govt.

I think that MMS's days are numbered.

His insistence on carrying on a dangerous foreign policy and flying in the face of his own party's, aam janthas' and bureaucratic opposition will piss off too many people.

With this quantum of high level unhappiness, his own lack of political support, lack of a mass base and political experience in the international arena will require that he declare "health reasons" and ride off into the sunset.

Analysts say that China is closely monitoring US-India missile defense cooperation since any integration of India into the US global missile defense system, would profoundly affect China's security.

Relations between China and India have thawed since the beginning of this century, and there has been a lot of talk about common interests, especially on the Indian side. Holslag analyzes the forces that are drawing the two nations closer, such as growing trade and investment ties, "road diplomacy" (tacit cooperation on opening up transportation routes in places such as Myanmar and Nepal), and shared concerns over the unstable buffer states of Myanmar, Nepal, and Pakistan. But he also points out that the relationship remains dominated by long-standing conflicts of interest over borders, Tibet, naval power in the Indian Ocean, influence in Southeast Asia, and the nuclear balance. The public's image in each country of the other is negative, making strategic cooperation harder. Even if a much-discussed bilateral free-trade agreement were signed and the border issues settled, the two powers, Holslag argues, would continue to be opponents-a rivalry that could work to the United States' advantage in the region.

So you see while its PRC and India a bilateral matter there is the third party who is friendly to both while they squabble.

chetak wrote:
I think that MMS's days are numbered.

His insistence on carrying on a dangerous foreign policy and flying in the face of his own party's, aam janthas' and bureaucratic opposition will piss off too many people.

With this quantum of high level unhappiness, his own lack of political support, lack of a mass base and political experience in the international arena will require that he declare "health reasons" and ride off into the sunset.

A gentleman capable of sharm el sheik is not to be left unescorted in any discussions because after all he is the head of the Govt and the paki insistence on dealing only with him, and that too one on one, will cause this region deep grief.

All further discussions with the US and purelanders should be held pragmatically and by a multidisciplinary team including reps from IA and IB.

The other side have openly included their army and isi reps.

Hari Seldon wrote:India Prepares for a Two-Front War

Uh-oh. Can't be good if Yindia's warmongering general sahibs can not only steamroll pak without having to get off the couch (a.k.a. cold start), seems they can also apparently effectively stymie cheeni interventionism, land-grab and rampant ransom-ism onlee.

The sub-heading is even more alarmist:

This isn't just a change in military doctrine—it's a reflection of America's declining power in Asia.

Seems even unkil may be powerless sooner rather than later to restrain Yindia's storm-breaking vengeance onlee.

There is one country responding to China's military build-up and aggressiveness with some muscle of its own. No, it is not the United States, the superpower ostensibly responsible for maintaining peace and security in Asia. Rather, it is India, whose military is currently refining a "two-front war" doctrine to fend off Pakistan and China simultaneously.

Simultaneously? Really? uh-oh for TSP.

But as China has grown more aggressive, Delhi has begun planning to fight a "two-front war" in case China and Pakistan ally against India. Army Chief of Staff General Deepak Kapoor recently outlined the strategy: Both "fronts"—the northeastern one with China and northwestern one with Pakistan—would receive equal attention. If attacked by Pakistan and China, India will use its new integrated battle groups to deal quick decisive blows against both simultaneously.

The two-front strategy's ambitions go even further: In the long term China is the real focus for Indian strategists. According to local newspapers, Gen. Kapoor told a defense seminar late last year that India's forces will "have to substantially enhance their strategic reach and out-of-area capabilities to protect India's geopolitical interests stretching from the [Persian] Gulf to Malacca Strait" and "to protect our island territories" and assist "the littoral states in the Indian Ocean Region."

Wow. No wonder paki pants went all warm and moist when Gen Kapoor spoke, routinely, about Cold start.

Of course the existence of a new doctrine does not make it an operational reality. But a cursory glance at India's acquisition patterns and strategic moves gives every indication that India is well on its way to implementation. Delhi is buying and deploying sophisticated command, control, communications, computers, intelligence, surveillance and reconnaissance networks; supersonic cruise missiles; lightweight towed artillery pieces; and new fighter aircraft with supporting electronic warfare and refueling platforms. India has already bought C-130J aircraft from the U.S. for rapid force deployment. The navy is planning to expand its submarine fleet, to acquire three aircraft carriers, and to deploy them with modernized carrier-based fighter aircraft. In addition India plans to deploy fighters and unmanned aerial vehicles at upgraded bases on the Andaman and Nicobar islands in the eastern Indian Ocean.

India is not looking for a fight with China: It simply understands it is prudent to develop a military that can deter Beijing.

Yup. An understanding borne of blood, sweat and tears in 1962. Legend has it that uber WKK-icon JLN himself was shamed into accepting reality.

President Obama's accommodating stance toward China and his apparent lack of interest in cementing partnership with Delhi have focused Indian minds, as have his failure to invest in resources his Pacific commanders need.

While America has a strong interest in sharing the burdens of checking China's expansionism, it should be concerned when its friends react in part to a perception of American weakness and Chinese strength. Ultimately, the U.S. is the only country with the power and resources to reassure its allies they need not engage in costly arms races with China. But first the U.S. must identify Chinese military power for what Asian allies know it to be: a threat to peace in Asia.

Right. So in the end, the article ends up as another exercise in asking for more US military presence in Asia. More arming of traditional rivals like India and Pak, I guess. And also for continuation of sanctions against India as well. Not.

Could China use its U.S. debt holdings to squeeze us on foreign policy?

That's unlikely, at least in the short term, according to most of the witnesses who testified before the U.S.-China Economic and Security Review Commission last week. Beijing's role as our banker does give it significant influence in Washington. But what's often lost is the fact that China relies just as much on the U.S. as a destination for its investments.

...

Currently, the New York Fed puts China's holdings of U.S. Treasury Securities at $755 billion, making it our second largest foreign investor, just behind Japan. But the real figure could be closer to $1 trillion when you add in Hong Kong's $153 billion and possible offshore investments through third parties. As for foreign currency reserves, Beijing holds around $2.4 trillion, according to the People's Bank of China.

Fears that China might dump much of that debt -- and trigger an international sell-off -- are unfounded. For one, Beijing would suffer considerable losses on its U.S. holdings (although Cornell Professor and Brookings Senior Fellow Eswar Prasad argued, Beijing would lose less than most analysts believe).

....

On the flip side, we do rely heavily on Chinese investment to finance everything from stimulus spending to the wars in Iraq and Afghanistan. If Beijing were to try to use its creditor status to pressure Washington, we could push back with trade sanctions and potentially find other lenders. Neither is an attractive prospect, however, as China would no doubt match our sanctions with those of its own, and our growing deficit could make the search for alternative sources of financing difficult. For the short term, at least, it seems we're coming to state of mutually assured economic destruction; both countries need each other and neither is likely to risk any serious damage to the relationship.

...

China's influence is much stronger in many of the developing countries where it's heavily invested.

...

Indeed, the greatest threat China poses to the U.S. is over the long term. If another reserve currency were to emerge that could absorb Chinese investment, the U.S. would no longer be China's only option. Beijing has recently shown interest in either internationalizing the renminbi or in using IMF-issued Special Drawing Rights, although a Chinese economist reportedly dismissed the latter as "the Esperanto of international reserve currencies."

...

Prasad explained that much of the bluster we see from China is in response to instability within the country where nationalism is seen as a safe channel for political expression. If nationalism grows too strong or loses its effectiveness as a safety valve, all bets are off.

To try to rein in China's economic and foreign policy reach, most of the witnesses suggested the U.S. take advantage of the fact that we're not the only country frustrated with Beijing's trade and currency policies. ASEAN countries, the EU, and various developing nations are all suffering from Chinese economic controls, and working with these partners to pressure China on trade and its exchange rate would be a useful step. India, in particular, as a powerful country not closely bound to China, might prove a key ally.

...

The administration worked hard to minimize the impact of those two events, and sees the Chinese response as about what was expected, two officials told The Cable. Some military-to-military relations were canceled while others, like the visit of the USS Nimitz to Hong Kong, were allowed to go on as planned. The Steinberg trip itself was supposed to happen in early February but was postponed as a sort of protest -- and now China is welcoming Steinberg only weeks later.

One senior administration Asia official said that Chinese behavior in the wake of the two diplomatic spats showed a mounting struggle between hard-liners with increased confidence and more friendly but weakened actors within the Chinese Communist Party.

For example, the Chinese had threatened to sanction U.S. companies due to the Taiwan arms sale, but there hasn't been any follow-up thus far. "Was that just rhetoric or is there another shoe yet to drop?" the official asked. "We still haven't seen how this fully plays out yet."

China hasn't stepped up to its responsibilities regarding climate change, currency fairness, cyber security, and human rights, Auslin said. Meanwhile, he argues the Obama administration's China policy has lacked a clear, overarching message that could be used to press the Chinese to move farther and faster in maturing as a world power.

"They're so invested in reading the tea leaves, they don't realize there's not a lot of tea in the cup," Auslin said.

There is a growing drumbeat to do something about China's undervalued currency. In November, Paul Krugman urged the Obama Administration to take the situation seriously. As the financial crisis abates, he wrote, trade imbalances would blossom again.

"So picture this: month after month of headlines juxtaposing soaring U.S. trade deficits and Chinese trade surpluses with the suffering of unemployed American workers. If I were the Chinese government, I'd be really worried about that prospect."

In the Financial Times in December, a retired University of Chicago economics professor called for a 10 percent tariff on all U.S. imports from China.

...

So what is to be done? There is a very strong case that China's currency is undervalued. The most telling indicator is that China's foreign exchange reserves have hit $2.4 trillion and are growing at a rate of roughly $400 billion per year.

...

The question, then, is what policy options are on the table. A menu:

1. Quiet, patient diplomacy. ...

2. Naming China a currency manipulator. T

...

3. Sticks and stones. If name-calling doesn't move the Chinese, what about threats of tariff retaliation?

...

4. A WTO challenge. Using the World Trade Organization as the fulcrum to lever Chinese action is more likely to break the WTO than it is to move the Chinese.

...

5. A multilateral framework. What if the major nations of the world got together to condemn China's approach to exchange rates? There are a few problems with this.

...

The fundamental problem is that the Chinese are more scared of the potential pain of currency appreciation than they are of anything the West might realistically throw at them. China recently conducted a "stress test" to look at the possible effects of a currency appreciation. Reuters reports:

According to the initial results of the tests, which focussed on textile, garment, shoe and toy exporters, every percentage point of yuan appreciation would erode one percentage point of their profit margin. This would be a serious blow to profitability since their net profit margin is often only 3 to 5 percent, the newspaper said.

...