Chinese Military,Political and Social Superthread

[TCBF]

Indeed, and plenty of other stuff, too, including much needed resources and lebensraum.

The return of the "Greater East Asia Co-prosperity Sphere."

 

[CougarKing]

The return of the "Greater East Asia Co-prosperity Sphere."

All the more reason to pay attention to the "Shanghai Six"/Shanghai Cooperative Organization/SCO alliance led by China and Russia.



I think that the scenario Tom Clancy details in his novel The Bear and the Dragon might not be too much of a stretch when it comes to reasons why you might find the PLA rolling through the Siberian plains in a future war. However, I really doubt the factors/catalysts for China making that desperate invasion will all happen as simultaneously as it did in the novel. Futhermore, I don't think Clancy did enough research, since he mentions the US still having an official embassy in Beijing (not a quasi-embassy or trade office like the AIT in Taiwan) even if the govt. of "Pres. Jack Ryan" switched their "One-China recognition" from the PRC to Taiwan as what happened in the novel.  :

 

[Kirkhill]

Right now China and Russia can both agree on the need to co-operate to "catch-up" to "The West".  When/if that day occurs is there anything in their mutual track-records to suggest that they can come an amicable distribution of assets? 

I don't see a Russia-China based Asian Union as a viable option.  Should I?

 

[tomahawk6]

What mystifies me about China-Russia is that the Chinese are migrating into Siberia and the Russians dont seem to be doing anything about it. Unchecked the Chinese could absorb alot of territory. If the Russians try to move them out there could be trouble.

 

[Edward Campbell]

Russians are streaming out of Siberia while the Chinese are streaming in.

I just read, within the past few days, that the Russian population of Siberia has declined by something like 16% while the Chinese recorded population has increased by an order of magnitude! (Or some such numbers.)

Tom Clancy aside, Siberia is very, very attractive as a resource base. The Chinese, I think would rather buy those resources from a friendly neighbour but they must have some of them - one way or another.

 

[CougarKing]

Right now China and Russia can both agree on the need to co-operate to "catch-up" to "The West".  When/if that day occurs is there anything in their mutual track-records to suggest that they can come an amicable distribution of assets? 

I don't see a Russia-China based Asian Union as a viable option.  Should I?

So you doubt the SCO security alliance will expand on anything more than "terrorism" and other internal security threats common to all its members, which the Chinese media often describes as the targets for those annual SCO military exercises? You doubt it will become another Warsaw Pact?

Russians are streaming out of Siberia while the Chinese are streaming in.

Some of those Russians, unfortunately, end up in China's sex trade, as a number of Russian women end up as prostitutes for high-paying Chinese businessmen even in places as far in Western China as Urumqi, in Xinjiang province.

 

[Edward Campbell]

I don't think the SCO is meant to tie Russia in.

It is, I believe, a way to extend Chinese influence into Central Asia. Russia is "in" only because, to paraphrase Lyndon Johnson, China wants then "in the tent pissin' out" rather "outside pissin' in." I suspect, also, that China is doing a little not so subtle "nose rubbing" - letting the Russians see that after only a very few years Central Asia is now in China's sphere of influence.

The Chinese are deeply suspicious of Islam and of the "stability" of their Islamic neighbours. The separatists in Xinjiang are perceived to be a real, significant threat to China and, therefore, China needs to "control"the neighbourhood.

 

[CougarKing]

I don't think the SCO is meant to tie Russia in.

It is, I believe, a way to extend Chinese influence into Central Asia. Russia is "in" only because, to paraphrase Lyndon Johnson, China wants then "in the tent pissin' out" rather "outside pissin' in." I suspect, also, that China is doing a little not so subtle "nose rubbing" - letting the Russians see that after only a very few years Central Asia is now in China's sphere of influence.

The Chinese are deeply suspicious of Islam and of the "stability" of their Islamic neighbours. The separatists in Xinjiang are perceived to be a real, significant threat to China and, therefore, China needs to "control"the neighbourhood.

Campbell,

Since you pointed out that the PRC intends to expand its "sphere of influence", do you think that the PRC intends to possibly make all the neighboring former Soviet satellite republics, such as Kazakhstan, into its own satellites or protectorates? While the Soviet Red Army technically "liberated" from the Nazis/occupied much of what later became the now-defunct East Bloc of Eastern Europe, the Chinese may use economic factors instead of force at first to expand their influence in Central Asia.

An example of this westward expansion of the Chinese sphere of influence would be the Tibet precedent. The Qing dynasty certainly had an influence on Tibet under both Emperors Kangxi and Qianlong; the latter emperor sent an expedition which occupied the country and made it a de facto protectorate with the Dalai Lama, as Tibet's spiritual head, if I can recall correctly while the Chinese maintained a sort of resident commissioners called "Ambans" as Peking/Beijing's representative to Lhasa. The ROC also had a similar arrangement with Lhasa, and the ROC govt. in Taiwan has never given up its claim to Tibet up to today, though Tibet has been fully integrated as a province of the PRC.

It's a shame though that the only instance in Western/Hollywood popular media where the influence between China and Tibet is depicted is the movie Seven Years of Tibet, in a small scene where the Chinese representative to Lhasa in the local ROC embassy/consulate has to leave Tibet, not long after the new PRC govt. makes a claim on Tibet as yet another Chinese province. You see the Chinese "Amban", played by Victor Wong, and his embassy delegation as well as the embassy detachment of Guo Min Jun soldiers leaving Lhasa together in one scene. 

Perhaps closer ties to India and Pakistan will help the US/Canada/Europe would serve as a counterweight to any westward Chinese expansion into Central Asia? Maybe your idea that you mentioned before about turning the Commonwealth into a security alliance would work as a framework to not only entice India to join (I doubt Pakistan will be reinstated into the Commonwealth with the current mess that it is in), but would serve as another incentive for Western powers to ensure that the two new nuclear powers will not go to war against each other, even if India does have its own interests.

 

[Edward Campbell]

I don't think we should consider that the Stans could be anything like as useful to China (in the role of satellites) as Czechoslovakia, East Germany, Hungary and Poland were to the now defunct USSR. For that reason and bearing in mind China's mistrust (at least the mistrust I perceive) of Islam, I doubt China wants them too close.

The British always preferred to rule indirectly; a good sound policy which I'm guessing the Chinese would like to emulate.  Sphere of influence? Yes. Satellite? No, not on the Warsaw Pact model, at any rate.

 

[a_majoor]

In terms of resource development, China is facing a similar problem that Imperial Japan faced in the 1930's.

The Imperial Army faction wanted to expand from Manchuria into Siberia in order to secure the resources known and suspected to be there. The two down sides to the project were the vast expense of actually developing the resources from scratch out of the hostile Russian wilderness, and the Red Army. The Japanese defeats in a series of battles between the Imperial Army and the Red Army in 1938 in Northern Manchuria and outer Mongolia ended that particular line of thought.

The Imperial Navy supported aggression against European colonies in SE Asia, with the rational that most resources were already developed and therefore accessible, European Empires would be unable to resist Japanese incursions and the local peoples could be co-opted to act as a ready labour force. As it turned out, the Navy faction was right up to that point, but had totally miscalculated the response of the United States.

The Chinese might establish a defacto colony in Siberia through "squatter's rights", but I suspect they may have difficulty in mobilizing the manpower and resources to develop the resources in a timely manner (note; they can accomplish this with either a patient approach, or alternatively rape Siberia of whatever there is to grab and leave). On the other hand, looking south provides a source of well developed resources and markets, and the Chinese may well be content to act as notional overlords of a trading hub without establishing an actual presence. In the 1400's, the Chinese sent tribute fleets throughout the Indian ocean basin to proclaim their power and accept notional acceptance of their supreme place in the order of things by other regional powers, but never established colonies, cities, markets or any of the other signs of presence that we as Westerners would take for granted.

The Stans provide an interesting case, they are regarded as part of the Russian "near abroad", watched by the Chinese as hotbeds of radical Islam and a threat to the Chinese "west" and potential "wedge" states being courted by the United States (who now operate bases and promote investment into the region). The Americans are being far more subtle in this region as reported by Robert Kaplan in "Imperial Grunts"; the thrust is "building relationships rather than bases". Perhaps the presence of large scale US forces in SW Asia is more of a red flag to distract the world from actions in the rest of the "Arc of Decision"

 

[CougarKing]

In terms of resource development, China is facing a similar problem that Imperial Japan faced in the 1930's.

The Imperial Army faction wanted to expand from Manchuria into Siberia in order to secure the resources known and suspected to be there. The two down sides to the project were the vast expense of actually developing the resources from scratch out of the hostile Russian wilderness, and the Red Army. The Japanese defeats in a series of battles between the Imperial Army and the Red Army in 1938 in Northern Manchuria and outer Mongolia ended that particular line of thought.

The Imperial Navy supported aggression against European colonies in SE Asia, with the rational that most resources were already developed and therefore accessible, European Empires would be unable to resist Japanese incursions and the local peoples could be co-opted to act as a ready labour force. As it turned out, the Navy faction was right up to that point, but had totally miscalculated the response of the United States.

According to the book Kaigun:Strategy, Tactics, and Technology in the Imperial Japanese Navy, 1887-1941, by David Evans and Mark Peattie, the idea of northwards expansion was called the "Hoku Shin" strategy by IJA planners, while the expansion in Southeast Asia- especially the oil-rich the Dutch East Indies- was called "Nan Shin" by IJN planners.

The Chinese might establish a defacto colony in Siberia through "squatter's rights", but I suspect they may have difficulty in mobilizing the manpower and resources to develop the resources in a timely manner (note; they can accomplish this with either a patient approach, or alternatively rape Siberia of whatever there is to grab and leave). On the other hand, looking south provides a source of well developed resources and markets, and the Chinese may well be content to act as notional overlords of a trading hub without establishing an actual presence. In the 1400's, the Chinese sent tribute fleets throughout the Indian ocean basin to proclaim their power and accept notional acceptance of their supreme place in the order of things by other regional powers, but never established colonies, cities, markets or any of the other signs of presence that we as Westerners would take for granted.

Thucydides,
The slow process by which Texas Republic came to seperate from Mexico by the 1840s and its later annexation by the United States by the Mexican-American War comes to mind as a parallel of gradual colonization of another nation's territory. The ethnic conflicts in the former Yugoslavia in the early 1990s, which saw the creation of so-called "Republic of Serbian Krajina" within what is now Croatia and another sister Serb Republic called the "Republika Srpska" within what is now Bosnia, both of which Belgrade supported until the Dayton Accords were signed, could be another similar example, even if their fates were unfavorable to the Serbs in both countries.

As for those tribute fleets that set out across the Indian Ocean under the Ming Dynasty, they were mostly commanded by Admiral Zheng He, who is Hui Ren or from a Han Chinese ethnic group which follows Islam. Part of the reason why there is a large Han Chinese community in Singapore today (who speak mostly Cantonese and Fukienese dialects) is because Singapore was one of the first Ming trade outposts Zheng He's fleet established on his way to the Indian Ocean; this goes contrary to your saying that the Chinese left no "colonies" behind when they sent their tribute fleets outward, since not only Singapore, but all those Hua Qiao/Overseas Chinese minority groups in the many nations of Southeast Asia today are the enduring legacy of Admiral Zheng He's fleets.

Campbell,

Now that we have Admiral Zheng He in mind, perhaps one should reconsider whether the Beijing govt. really distrusts Muslims in general, since both the Uighurs and the Hui Ren are two ethnic minorities within China that practice Islam. While the distrust you meant obviously refers to the foreign Muslims in the Central Asian "stans", the Muslim minorities within China are another story altogether.

Like China's 50 or so Zu or ethnic groups within China, aside from the Han Zu these Muslim ethnic groups would have been given special attention by the PRC govt. not long after establishment with their efforts to better integrate them into mainstream Chinese society. Admiral Zheng He was and is probably still used by PRC schools as a symbol by which to inspire people in Muslim minority groups to better integrate with mainstream Chinese culture. Ethnic minorities which had smaller populations such as the Uighurs were allowed to have more than one child at the onset of the "One-Child Policy". Also, the greater exposure to Han/mainstream Chinese culture brought by the waves of Han Chinese settlers moving to western provinces like Xinjiang. IIRC, one interpretation of the PRC flag's symbolism holds that the five yellow stars symbolize the five largest zu/ethnic groups within China, with the Han obviously symbolized by the largest star; the Hui Ren/Muslim groups are supposedly symbolized by one of the smaller stars. My point is that in spite of recent Uighur nationalism, for the most part, Chinese Muslims are seen by Beijing as just another ethnic minority that it can trust no more or no less than other ethnic minorities; the Hakka minority have proven especially trouble to the Qing Dynasty during the Taiping Rebellion of the 1800s, to illustrate an example. For now, the PRC govt. is more concerned with keeping the Han Zu united, or at least hopes to be perceived as doing so, in order not to lose face or be perceived not only by the people, but by subversive elements as being too weak to maintain control and national unity; the recent handovers of Hong Kong and Macao back to mainland China, as well as the conciliatory gestures and diplomatic initiatives by both sides of the Taiwan Strait which demonstrate this.

 

 

[Bruce Monkhouse]

I won't post this as a Mod, as it is not in the guidelines but, listen up CougarDaddy, ........Edward Campbell, has on many different fronts, earned the right to be either addressed as Sir, or at least having  Mr.or Edward, placed in front of his last name.

 

[Edward Campbell]

No worries, Bruce Monkhouse or CougarDaddy. Had I been offended by anything CougarDaddy said I would have told him so.

It is not an issue, for me. In many languages it is customary to address people by "titles" - when no "titles" (like "uncle" or "elder brother" or "comrade" or "master") are evident one falls back on to a single word name. I know two people who speak and write absolutely unaccented English; one would have no idea of their Chinese ethnicity until you hear them address one another or refer to one another - not as "Eric" and "Vanessa" but rather as "Bother" and "Sister," as in "Sister, have you seen my such 'n' such?" That is the form they inherited as part of their milk tongue - the language they learned at their mother's breast.

Serious students of a second language often pick up some of the linguistic habits of that language.

I don't know CougarDaddy's first language or his status re: other languages, but being addressed as "Campbell" does not jar and I do not take it as anything other than yet another linguistic peculiarity - I've gotten used to several over the decades.

He does not offend; I only wish I had his facility with languages; I only wish I was young again; it's a good thing I'm so devilishly handsome, eh?

Maybe a Mod could delete both these messages so as not to clutter up the thread with extraneous details ...

 

[TangoTwoBravo]

While Taiwan, Siberia and perhaps places inside China are all indeed potential hotspots or fault lines for conflict, I sometimes wonder about a potential conflict involving Chinese interests in Africa.  Africa offers resources with a reduced threat of direct confrontation with peer powers such as Russia, the US, Japan and others.  Nevertheless, the expansion of power in an area can lead to either direct or indirect conflict with competing powers (perhaps India at some point in the future).

Anyhoo 

 

[CougarKing]

No worries, Bruce Monkhouse or CougarDaddy. Had I been offended by anything CougarDaddy said I would have told him so.

It is not an issue, for me. In many languages it is customary to address people by "titles" - when no "titles" (like "uncle" or "elder brother" or "comrade" or "master") are evident one falls back on to a single word name. I know two people who speak and write absolutely unaccented English; one would have no idea of their Chinese ethnicity until you hear them address one another or refer to one another - not as "Eric" and "Vanessa" but rather as "Bother" and "Sister," as in "Sister, have you seen my such 'n' such?" That is the form they inherited as part of their milk tongue - the language they learned at their mother's breast.

Serious students of a second language often pick up some of the linguistic habits of that language.

I don't know CougarDaddy's first language or his status re: other languages, but being addressed as "Campbell" does not jar and I do not take it as anything other than yet another linguistic peculiarity - I've gotten used to several over the decades.

He does not offend; I only wish I had his facility with languages; I only wish I was young again; it's a good thing I'm so devilishly handsome, eh?

Maybe a Mod could delete both these messages so as not to clutter up the thread with extraneous details ...

Mr. Campbell,

I do apologize for my not addressing you as Monkhouse said, for I do highly respect your opinion which is why I continually seek it. I also await your response to my last post, but am thankful for your insights so far. The same goes for Mr. Kirkhill and a few others on this thread as well.

Aside from my last post, I am also curious about what any of you would think about my comments  that discuss the Tibet precedents for Chinese protectorates predating the PRC occupation of Tibet, which I mentioned in the latter half of an earlier post in this page; my purpose is just to point out that there are precedents for China expanding westward through Central Asia and making such protectorates.

CD

 

[Kirkhill]

The feeling's mutual CougarDaddy.  And in my case Kirkhill is strictly a net name.  Chris is my actual name.

But to get back on topic - you mentioned a few posts back about how southerners with 5 and 6 tone languages/dialects would often switch to their local tongue "when trying to be deceiving or want to relate something to each other in confidence, when a foreigner (lao wai) or even a Chinese outsider from another province is in hearing distance."  Presumably Beijing is "another province" as far as the southerners are concerned.

If you will allow me to stipulate that culture is essentially organic and originates from the nuclear family via the tribe to the city and then and only then to the nation/state/country and finally the empire then I would suggest that there is an inherent, institutionalized distrust of "the other" within the PRC (and the Republic of China for that matter).  This would find echoes in Britain in terms of children's rhymes like "Taffy was a Welshman. Taffy was a thief.  Taffy came to our house and stole a pound of beef."  which was recited by Scots and English kids.  400-500 years after the Welsh Tudors incorporated the Welsh into England the rhyme still indicated that the Welsh were "other" than English and today they have their own parliament and are re-creating a Welsh language community.

Your observation to Edward that because Zheng He was muslim and Chinese, and that there are other Chinese muslims, and therefore muslims will find a welcoming in China as a trusted member of the community seems to me to be a bit weak.  In fact, IIRC, didn't the Emperor of the Day (Ming?) reject Zheng He's advice?

From what I understand Chinese suzerainty outside of the river lands, especially up into the Tarim, only goes back to the Tang's (roughly the days of the Viking raids on Lindisfarne and Charlemagne).  Prior to that there was lots of water coming down river so no need to move upstream and as well there was a desert in the Huang He loop through Mongolia preventing easy passage.  This seems to track with the high concentrations of Chinese speaking the northern dialects of the Han.  It also is contiguous with the highly urbanized areas (including high density farming communities).

When we talk about "Chinese" moving into Siberia, are we talking about Beijing civil servants and Shaanxi farmers moving out to establish new communities on, essentially, virgin ground?  Or are we talking about Uighurs and Mongols moving north to continue their traditional lives amongst distant relatives that are living the same lives?  It seems to me that one is a threat to Beijing's hegemony and the other extends it.

Would the son of a farmer on the Han in Shaanxi move downriver to seek opportunity in Shanghai or would they consider moving upcountry to set up as a pioneer outside or Irkutsk?

Given my assumption on the institutionalized nature of culture I could see some moving north to continue as farmers but more moving downriver to continue in an urban setting.  Meanwhile the Uighurs and the Mongols will more and more ignore an increasingly porous border putting distance between themselves and Beijing and Beijing's hold/claim on them becoming more and more tenuous.

You mentioned Texas.  You might recall that Davy Crockett et al were late arrivals in America.  Their parents arrived in Virginia in the 1700s from the Border of Scotland and England via Northern Ireland.  They weren't welcome at home because of their independent, violent streak.  They weren't welcome in Ireland. Equally they weren't welcome in coastal Virginia which was settled by moneyed Englishmen with attachments to London.  They were sent off to the hills to act as a buffer between the slightly more "savage" Indians and the "civilized" slave owners in the Tidal Lands.  Texas was established as an independent Republic that only applied for help from the US after it got into trouble with the Mexicans and that happened when it became an irritant to the Mexican government.  I don't believe that the Texas expansion was centrally driven from Washington.

So there's the other question: Is Beijing in control of its northern populations? 

And finally, does that play into Beijing's fear of the chaos that might/will ensue when North Korea falls?

 

[CougarKing]

Your observation to Edward that because Zheng He was muslim and Chinese, and that there are other Chinese muslims, and therefore muslims will find a welcoming in China as a trusted member of the community seems to me to be a bit weak.  In fact, IIRC, didn't the Emperor of the Day (Ming?) reject Zheng He's advice?

My points about Zheng He were mainly aimed at Thucydides and were meant to disprove the notion that Ming tribute fleets did not leave anything of consequence in the Southeast Asian nations they passed by, such as colonies, when in fact the tribute fleets of Admiral Zheng He as well as successive waves of Chinese traders and immigrants in the following centuries laid the seeds for the large Hua Qiao communities/Chinese diaspora who continue to live in those Southeast Asian nations today. In fact, the Hua Qiao communities in Malaysia, Singapore, the Philippines and Indonesia own a considerable portion of the wealth of those countries and exert considerable economic and political influence on the govt.s of those nations; the wealth of these Chinese communities is resented by many among the local populations of Malays and other ethnicities that members of some of these prominent local Chinese have been kidnapped and ransomed. Examples include the families of tycoons such as Lucio Tan, Henry Sy and the Gokongwei clan of the Philippines, as well as the Widajaja clan of Indonesia, if I can recall correctly. 

Regarding your other point about how much the PRC govt. "trusts" any of the Muslim groups, I did not say they trusted them at all, only that the PRC regarded them with the same level of distrust they would give any ethnic minority. BTW, just because CCTV News/Xinhua/PRC schools has told members of any Muslim minority/Hui Ren to emulate Zheng He does not necessarily mean those minority members will necessarily believe that; neither will Han children taught verbatim to memorize the names of all the heroes throughout Chinese history up to the heroes of the Revolution will necessarily believe in the legendary exploits of Lei Feng or Cai Yongxiang. However, regardless of whether they are historically accurate or not, such historical figures are still emphasized in PRC schools and PRC propaganda- though not as much as before- in order to inspire a sense of nationalism and even a sense of belonging to a nation even bigger than one's ethnic group; still, such blind hero worship has obviously waned in importance in the two-three decades since Deng Xiaoping to the West, with more practical skills such as mathematics, science and foreign languages being emphasized.

When we talk about "Chinese" moving into Siberia, are we talking about Beijing civil servants and Shaanxi farmers moving out to establish new communities on, essentially, virgin ground?  Or are we talking about Uighurs and Mongols moving north to continue their traditional lives amongst distant relatives that are living the same lives?  It seems to me that one is a threat to Beijing's hegemony and the other extends it.

Are we discussing the present day when you mention those Chinese civil servants and Shaanxi farmers? I really doubt any scholar-official from the Qing or Ming periods would want to move to a place they would consider a wilderness. When T6 mentions the Chinese moving into Siberia, he probably just means the usual migrant workers- some skilled and some unskilled- who would go to Siberia mainly to find jobs or possibly even to set up businesses; a not-so similar comparison would be the flow of a lot of cheap, unskilled and illegal labor into the Southern United States from Mexico.

Would the son of a farmer on the Han in Shaanxi move downriver to seek opportunity in Shanghai or would they consider moving upcountry to set up as a pioneer outside or Irkutsk?

If you were just a poor farmer's son, do you think you would seriously have the money to travel all the way to Irkutsk??? Shanghai seems more probable. I take it this question was a rhetorical one?

So there's the other question: Is Beijing in control of its northern populations? 

I don't see any current problem with any minorities in the Northeast- Heilongjiang province, Jilin province, etc.- although the North Korean refugees streaming into those provinces adjacent to the Yalu may be a problem.

And finally, does that play into Beijing's fear of the chaos that might/will ensue when North Korea falls?

Does Beijing care much at all for their former proteges- the DPRK govt.- as much as in the past? I don't think so. The PRC acts in own self-interest and does not seem to see any "communist camraderie" anymore among neighboring Maoist/Marxist states such as Vietnam and the DPRK; in fact the PRC invaded Vietnam in 1979 although their relations are much better now and Vietnam has opened its markets to capitalism and full trade with the West in the same manner as the PRC.

However, the PRC does care if Kim Jong Il starts his usual saber-rattling and has been helpful by participating in Six-Party talks with the US, Russia, Japan, the ROK/South Korea and the DPRK. Also, if I can recall correctly, the PRC cut off the electricity/gas pipeline supply that goes into the DPRK temporarily during one those times the DPRK tested its missiles or when there was a diplomatic crisis, in order to signal to Kim Jong Il of just how Beijing would tolerate; furthermore, the PLA has moved more troops to its border with the DPRK in one of those past diplomatic rows that involved Pyongyang.

 

[a_majoor]

WRT the treasure fleets, I was perhaps glossing it over a bit too quickly, but considering the size and numbers of ships in the "Treasure Fleet", the actual Chinese presence in the Indian ocean basin was insignifigent, especially when compared to the results of much smaller and less organized incursions of the same area by the various European Empires shortly thereafter.

I was also under the impression that the large scale presence of Chinese people throughout SW Asia was the result of musch later disporias, including the recruitment of Chinese workers (voluntary or otherwise) to serve in the various European colonies. Regardless, they are there now....

Kirkhill raises an interesting point. There is a huge internal migration from the rural areas to the southern coastal industrial cities, and the bulk of these people are very likely from the Han Chinese ethnic community, while the shadowy illegal immigration into Siberia is very likely the groups identified by Kirkhill, and going for the reasons he suggested (getting away from the central government, as opposed to the central government encouraging or controlling this in any way). I suppose the interesting long term question will be who ends up with Siberia? The Russians? The Chinese? The Uighurs and Mongols rejoining their relatives? Will the Russians use force to assert their sovereinty over the area? Will Beijing send in the PLA and police to control their wayward citizens and bring them back under Chinese control?

 

[a_majoor]

Moving to a different topic: China's ForEx reserves

http://blogs.telegraph.co.uk/foreign/richardspencer/jan08/economicriseofchina.htm

China's trillion dollars
Posted by Richard Spencer on 07 Jan 2008  at 21:48
Tags: China, Taiwan, South Korea, Japan, US, dollars

Last week I wrote a piece for the paper's comment pages putting forward the view that a trillion dollars wasn't a lot of money. It was another of my attempts, possibly self-serving, to play down the hype over the economic rise of China that has started to take hold of some areas of public life in the UK and beyond.

US Dollars
What does the Chinese government use to buy those dollars?

Self-serving? Because it's my job to hype China stories, and no-one else's, of course.

So you can say I'm biased, but in any case, re-reading the piece after publication I decided I ought to go on a bit more. I omitted for a general audience some of the economic niceties, so here for the suffering loyal reader they are, as I see them.

It's basically true that a trillion and a half dollars divided between a billion and a half people (that's the Chinese people, as in the People's Republic, which owns a trillion and a half dollars in foreign exchange reserves). However, that sounds a bit amateurish, and since I did check out some aspects of my theory with the professionals I thought I should flesh it out.

The attitude I was attacking is that attitude that states that by itself, China's admittedly huge forex reserves, as of last year the largest in the world, were an enormous sign of wealth which, as the government set it into action overseas, would see the idea that China was taking over the world become reality.

If you have a trillion and a half dollars, you can buy up swathes of western companies, hold indebted countries who have borrowed the cash (like the United States) in your thrall, and generally play at economic neo-colonialism.

There's one, to me, very dramatic counter-argument: if huge forex reserves make you a giant, what about other big forex holders. Let's not talk about such mighty titans as Qatar, or Taiwan, or South Korea. Let us instead talk of Japan, the only other country with (nearly) a trillion in reserves - and let's face it, no-one's been talking about Japan as a giant throwing its weight around in the last few years.

If a trillion in spare cash makes you a strong nation, what happened there?

There's a good answer, for which I am indebted in part to Michael Pettis, the hedge fund director/professor of finance at Beijing University whose blog follows this issue closely. (As with everyone I quote, wisdom is his, mistakes are mine.)

He points out that forex reserves seem like cash and sometimes are cash, but are also sometimes just an accounting issue.

While Qatar has made money by selling a dollar-denominated asset (oil), China has got those reserves like this: it sells lots and lots of stuff, nearly all in its own currency. It sells far more than it buys.

While that seems like a good thing, and is, you would expect its currency to rise, making its stuff more expensive and less buyable.

But China wants to stay competitive (and to keep its currency stable, which has other advantages) so it keeps the renminbi artificially low by buying up the dollars of the companies that have sold the "stuff" at an artificially high price. It also has to buy dollars off foreign companies investing in China. End result: it has lots of dollars, but overpriced ones.

Well, better to have overpriced dollars than none at all, it's true: the dollar is still the main reserve currency, and having them is a good hedge against the sort of currency crisis that afflicted much of Asia a decade ago. But still, you have bought an asset at too high a price - and, as we now see, that asset's value is decreasing all the time.

Still, better to have the asset - but just how valuable is it? Now here's the thing: what does the Chinese government use to buy those dollars? Of course, being the government, it can just print money.

But that's inflationary - no governments should just print money. It could pay it out of its budget - but what government has the hundreds of billions of spare dollar-equivalents necessary to build up those reserves?

In fact, it is largely issuing bills - ie, it is borrowing money off banks to buy the dollars. Michael Pettis tells me that no-one knows the exact details - it's that opaque thing, the party state, at work again - but a guess might be two-thirds of the forex reserves are matched by government bills. In other words, its net wealth is much, much smaller than a trillion and a half dollars.

There's an interesting way of looking at this (this is purely my own doing, and I welcome people telling me it's nonsense). Why are the banks lending money to the government on this scale to buy dollars? Remember that these are ultimately state-owned banks, which operate according to a mixture of commercial and political imperatives. Is this a good investment of their savers'/depositors/investors' money, or are they doing what they are told?

Well, there's the rub. Banks are difficult places for depositors: as we know, ordinary savings accounts attract very little interest, which is one reason people are flocking to the stock market and the property market.

Individuals are banned from investing abroad (say, in dollars) and it is also difficult for domestic financial institutions. Yet modern investment advice suggests that one should diversify one's holdings - I bet if you look at your pension/investment fund, if you have one, you will find that while most is in your home currency, some has been diversified to other currencies and their equities and other markets as a hedge. So this represents a sensible diversification by the banks.

Except the actual decisions on where to invest are not being taken by the banks,  but by the state. The already nationalised assets of the banks have been renationalised once turned into dollars. And liberal economists would suspect that as with all state-run business decisions, the investments are not necessarily wise: as in, perhaps, putting your trillions in a fast-declining currency backed by an economy which appears to be in trouble.

Creating a sovereign wealth fund with some of the money (200 billion) looks like a sensible move, as that puts the investment fund at arms-length from the government. But how long is an arm?

We are waiting for that 200 billion to start buying up western companies, and some of it no doubt will - 3 billion has gone to the private equity firm Blackstone, and 5 billion to the troubled US investment bank Morgan Stanley.

But the biggest sums - 65 billion, more or less - has so far been ear-marked to bail out troubled Chinese banks. It's not being used to take over world-beating western companies yet!

In fact, it doesn't strike me at all as far-fetched to describe the forex reserves a nationalised pension fund. After all, their existence is part and parcel of a non-liberalised financial system which discourages long-term private pension fund building.

As we know from the Shanghai pension fund scandal, such pension funds as there are in China aren't necessarily the safest bets for your future, and they are, in total, rather small.

Last time I looked, the government's own pension funds were in the low tens of billions of dollars: compare that to the Japanese government pension fund which is the largest single pension fund in the world (guess what - it's around a trillion dollars).

So in a best-case scenario - where the government doesn't have to use the reserves to rescue itself from a currency crisis, or to bring them back home to pay off the debts it's taken out to buy them - the reserves represent a long-term, rather poorly invested savings fund.

In fact, they the government's major savings fund for all its many future dependent pensioners.

Which is why, with a number of elderly that will grow fast in the next couple of decades, a trillion dollars is not a large sum of money.

As I say, I'm not saying it's better not to have reserves than have them: but excessive reserves are a sign of something that's not quite right.

As with everything else (including the American sub-prime crisis) if growth continues, and reform happens, you could grow out of the underlying problem - the weakness of the financial system and lack of confidence in the industrial sector that causes the government to undervalue its currency.

Then you will be left with a healthy-looking, but not particularly enormous, starting point for future investment.

All well and good, though as I pointed out once before, a sum not unlike other country's (Japan's) pension funds, and not unlike the international holdings of big western wealth management firms. But nothing, in the overall view, so very spectacular.

At the moment, China's growth is heading in the right way, and the financial system is getting better. That's the best-case scenario, then. Let's just hope it continues.
Posted by Richard Spencer on 07 Jan 2008 at 21:48

 

[CougarKing]

WRT the treasure fleets, I was perhaps glossing it over a bit too quickly, but considering the size and numbers of ships in the "Treasure Fleet", the actual Chinese presence in the Indian ocean basin was insignifigent, especially when compared to the results of much smaller and less organized incursions of the same area by the various European Empires shortly thereafter.

I was also under the impression that the large scale presence of Chinese people throughout SW Asia was the result of musch later disporias, including the recruitment of Chinese workers (voluntary or otherwise) to serve in the various European colonies. Regardless, they are there now....

I was only referring to the Chinese diaspora/Hua Qiao communities in Southeast Asia, not SW Asia or the Indian Ocean basin as you stated, unless you had Malaysia, Indonesia and Singapore in mind as well when you mentioned the "Indian Ocean basin", since the Strait of Malacca leads to the Indian Ocean.