View Full Version : The Rise and Rise of China

Sunday, November 14th, 2004, 04:25 PM
The Daily Reckoning
Weekend Edition
November 13-14, 2004
Baltimore, Maryland
By Addison Wiggin and Tom Dyson


Jim Rogers wrapped up the conference yesterday, as always, with a
brilliantly entertaining presentation, including slides and a video
of his 3-year global odyssey.

"And when we got back to New York in 2001, we were pretty darn
tired," recalled the Adventure Capitalist, "so we decided to stay at
home and relax a while. And that's where we received the final
surprise...and the best surprise of the whole trip, in fact. We found
out my wife, Paige, was pregnant. And now, here she is...my baby

And with that, a picture of Rogers, all smiles, cuddling his
daughter, is projected on three giant screens at the front of the

"Ahhhh" went the crowd...

When Rogers had finished presenting the slides from his world
record-breaking trip, he elaborated on some of his investments, and
some of the major themes he's paying attention to in today's

"Well, I can tell you, the Chinese are some of the most capitalist
people on earth. And it's a different capitalism to what you might
have thought. In China, they save almost 20% of their incomes,
compared to 2% here in the U.S. and in China, they don't worry about
how many vacation days they might get, no, they worry about how many
days they are allowed to work."

The 19th century belonged to the U.K., once the richest and most
powerful nation on earth. The 20th century belonged to the U.S., but
the 21st century, predicts Rogers, will belong to China. "I recommend
you all start to learn mandarin, and tell your children and
grandchildren to do the same...I'm not just saying it either...my
baby girl has a Chinese nanny, who only speaks mandarin. And already,
my baby girl is starting to pick up some of the words."

Despite his confidence in China's emergence, Rogers expects a hard
landing for China at some point in the next 12 months...

Rogers' next topic for discussion was the U.S. dollar. "It's probably
overdue for a rally. They've been hitting it pretty hard recently. I
wouldn't even be surprised to see a large bounce...but don't listen
to me, my market timing is horrible..."

"What's much more important, is that Americans owe $8 trillion to the
rest of the world," he offers, "and it's only gonna git worse. The
dollar is a fundamentally flawed currency, and still has a long way
to fall."

"My baby girl don't own any dollars. You know what she's got...a
Swiss bank account. That's right. All her money's in Swiss francs."

The dollar closed Friday at $1.2972 versus the euro, having made a
new intraday high at $1.3004 earlier in the day. The euro has never
before traded as high.

For his own account, Rogers owns a basket of 16 international
currencies and some Chinese equities. "But if you wanna know where I
think the rally big money is, and the best way to play China, it's
natural resources and commodities."

Your editors, here at the Daily Reckoning, wholeheartedly agree.
China needs lead. It needs nickel. It needs tin...and rubber and
copper and cotton. There's nothing that can change the basic demand
for these commodities over the medium to long term. Nothing. And what
this means for you, says the former trading partner of George Soros,
well, it will simply be the easiest way to make a lot of money in the
coming decade. And when asked by a member of the audience to list his
favorite commodities, Rogers named sugar, cotton and orange juice, in
that order.

"My baby girl won't be selling her portfolio of commodities until oil
hits $150 a barrel and they're drilling on the front lawn of the
White House. Or until cotton hits $4 and they're growing it in
Central Park."

Oil fell over 5% last week, closing at $47.32, providing a boon for
the stock market. The Dow is now in positive territory for the year,
having gained 151 points last week. The Industrials Index closed at
10,539. The S&P and the Nasdaq were also higher. The Nasdaq gained 46
to 2,085 while the S&P closed up 18 to 1,184.

"What about gold?" asked another member of the audience, as gold was
hitting a fresh 16-year high, gaining $4.50 on the week to close at

"My baby girl owns gold too..." came the reply.


Tom Dyson,
The Daily Reckoning

Sunday, November 14th, 2004, 10:23 PM
interesting, china may lead the world in numbers and economic growth, but the west and japan will still always lead in technology

Thursday, November 18th, 2004, 02:58 AM
interesting, china may lead the world in numbers and economic growth, but the west and japan will still always lead in technology
There was a newspaper article in the Toronto-based Globe and Mail, part of a special series on China, which pointed out that China's educational system is so rigidly focused on rote-learning and examinations that even the Chinese themselves recognize that it is not producing people with a capacity for creative thinking and innovation. In effect, the Chinese are basing their economic growth on making products for our consumpton based on technology that they have copied (or in some cases stolen) from us, and which they largely lack the capacity to have developed themselves. If western countries weren't set on taking advantage of low Chinese labour costs to keep the wholesale prices of consumer goods relatively low, then China would very likely still be a relatively technologically backward country.

Thursday, November 18th, 2004, 03:59 AM
there is also the problem of brain drain; the intelligent, creative, well-educated people china does produce often move away to other, more affluent nations.

Friday, November 19th, 2004, 02:32 AM
there is also the problem of brain drain; the intelligent, creative, well-educated people china does produce often move away to other, more affluent nations.Yes, the research facilities of universities and corporations is stocked with graduate students from China. I should know since half of my family's friends work in those places. And the American engineering students are basically a pot of various Asian ethnics. And we haven't even discussed the computer field.

So, even American technology is increasingly becoming "Chinese".

Friday, November 19th, 2004, 05:40 AM
It is too bad that the United States can not lead the 21st century due to it's out sourcing jobs , and political/war fiasco.

Not mention our spending and our deficit.:|

Friday, November 19th, 2004, 06:37 AM
I don't see how naturalized citizens or Asian Americans can be considered in the out-sourcing category, since they are creating wealth and spending it here. It's proportional. The more people, the more jobs there are.
Do you mean they are taking jobs away from Whites?

Friday, November 19th, 2004, 01:00 PM
I don't see how naturalized citizens or Asian Americans can be considered in the out-sourcing category, since they are creating wealth and spending it here. It's proportional. The more people, the more jobs there are.
Do you mean they are taking jobs away from Whites?

The problem in this case is that corporations in the US are bringing people into the country at a much lower wage, so that they can layoff native Americans who are working at the normal rate. Look at any IT firm in the US for example. Anywhere from 40%-80% of an IT workforce here will be south Asian. They all are here on special work visas provided by the US government. The IT firm will go to the US government and say that there is no one in the US who understands a particular technology (which is a complete and total lie) so they want to hire this person from India. The US government grants that Indian a special visa to come here, only to work, and only to work for that particular company. The Indian guy is so happy to come he will work for slave wages, the IT company knows this and pays him slave wages. The IT company is then able to layoff the native American guy making normal wages. And if the Indian guy complains, the company can very easily ship him back and get another guy from India to replace him. And since he is only here to work "temporarily", he is not going to be spending his money here, but will be sending it back to his family in India. But then again, they all end up staying here somehow.

Please see:

Nonimmigrant Work Visas (http://www.zazona.com/ShameH1B/)
Immigration and Labor (http://www.fairus.org/ImmigrationIssueCenters/ImmigrationIssueCentersList.cfm?c=15)

Friday, November 19th, 2004, 04:35 PM
The problem in this case is that corporations in the US are bringing people into the country at a much lower wage, so that they can layoff native Americans who are working at the normal rate. Look at any IT firm in the US for example. Anywhere from 40%-80% of an IT workforce here will be south Asian. They all are here on special work visas provided by the US government. The IT firm will go to the US government and say that there is no one in the US who understands a particular technology (which is a complete and total lie) so they want to hire this person from India. The US government grants that Indian a special visa to come here, only to work, and only to work for that particular company. The Indian guy is so happy to come he will work for slave wages, the IT company knows this and pays him slave wages. The IT company is then able to layoff the native American guy making normal wages. And if the Indian guy complains, the company can very easily ship him back and get another guy from India to replace him. And since he is only here to work "temporarily", he is not going to be spending his money here, but will be sending it back to his family in India. But then again, they all end up staying here somehow.

Please see:

Nonimmigrant Work Visas (http://www.zazona.com/ShameH1B/)
Immigration and Labor (http://www.fairus.org/ImmigrationIssueCenters/ImmigrationIssueCentersList.cfm?c=15)Yes , but I mean Asian Americans... the Indian or Chinese kids who were born here, not the temporary kind. The case I'm talking about is a case of proportional growth, where the more engineers there are, the more people and the more economic growth they create, and in turn creating more IT/engineering jobs... Proportional growth. I see what you are talking about, but it's not what I'm addressing.

Monday, October 10th, 2005, 12:14 PM
In my last editorial, "Living in a Topsy Turvy World", I wrote about my experience in Lijiang, a beautiful, historic old town in south-west China.

See: http://www.sovereignlife.com/essays/26-09-05.html

In November 2004, I wrote of my first experience of China, in Beijing and Chongqing - in "A Most Unlikely Freedom Haven".

See: http://www.sovereignlife.com/essays/22-11-04.html

In fact, my current three month sojourn in China is my fifth trip to this country since May 2004. And I have to say it has opened my eyes in many surprising ways. It has also caused me to reappraise many assumptions I had about the place, and to ponder the likely future of this huge country - and its impact on the rest of the world.

I'm back in Chongqing now, with three more weeks to go before departing, and have had a chance to reflect on what I've experienced and to try to make sense of it all.

Yesterday I visited an historic building, turned into a museum, which records the large immigrations of various ethnic groups into Chongqing. But it was the drive there, in the taxi, that got me thinking.

We were driving from Nan Ping, over the Yangzte River, to the city centre - and doing 90 km/hour, which is quite common in this city without traffic cops and published speed limits.

When I first visited this city in September 2004, I was very afraid of the taxis. It seemed that stepping into one was to enter a lawless zone, where anything goes, and where your life could end at any moment. You have to drive in this place to really know what I'm talking about.

There are lanes on the roads, but nobody observes them. Cars weave in and out of these phantom lines in a constant effort to gain some advantage - at quite hair-raising speeds, and with the constant use of the car horn.

There is a dearth of traffic lights, so most intersections are negotiated simply by wriggling your way through - with no apparent road rules as guidance.

Pedestrians freely mingle with the traffic, so the Chinese have never heard the term "jaywalking"! And "zebra" crossings appear to have no meaning in real life - as venturing out on to one in no way ensure cars will stop for you. However, the traffic is most forgiving of people, tolerating them in ways inconceivable in most western cities.

Night time is another matter. All the vehicles have headlights, but perhaps only 70% actually use them - including buses. And you have to watch out for those damned covered motor-rickshaws, which seem to exist in a safety standards time warp - judging by the physical state of most of them.

Then there's the buses! I tried to avoid them where possible - as they are terribly overcrowded, not to mention the distinct lack of leg room between the seats. Besides, with taxis being so cheap, buses seemed so plebeian.

Yes, the driving is chaotic - but so is the parking. I've never seen such creative parking in my life. People parked right on the corner of intersections. Cars parked on the bends in roads. Cars parked in all the areas westerners would assume were "no parking" zones. And not one parking meter in sight! Western local city bureaucrats would have a field day here, trying to get order into, and revenue out of, the place.

However, with all this apparent disorganisation on the roads, don't get the impression it is really so. No, not at all, as I have learnt. The initial impression of chaos turns out to be a form of order in its own way. And what I've found, now that I've been here a few times, is that although there are no apparent speed limits, rules of "engagement" and so on, the traffic still works - and surprisingly, I didn't see one traffic accident, nor
any "dings" in the many new cars populating the roads.

But back to my visit to the immigration museum.

I wasn't able to read much of the text, being as it was mostly in Chinese. However, there were plenty of photos and illustrations, not to mention tools and artefacts of trade and every day living on display. There were also full-sized recreations of town life giving examples of the existing social order at the time.

What became immediately apparent was the long history the Chinese have had of trading and doing business. It's in their blood. And I realised that the "blip" of communism, starting with the revolution of 1949, was but an aberration on an otherwise highly organised and productive society.

Communism was bound to fail of course, but its demise was given a "boost" in the late 70s, by Deng Xiaoping, who was the first leader of the post-Mao period. He basically reversed the collectivist nature of enterprise in China, and ushered in the practical free market. The "new" Communism.

China hasn't looked back since.

The "market" is everywhere. Whether you're talking about the hundreds of shoeshine vendors and home-made food sellers, or the house-front mini-shops, workshops and hairdressing salons, or the bustling shops and department stores - everyone, it seems, is in business of some sort. And if you're not in business, then you're out peddling your labour on the streets - if you don't have a job.

Labour-for-hire is everywhere. Groups of men sit around with their mini-tool kits around their waists, or in in a bag, waiting for someone to hire them. Folk from the country walk around with long poles, which are used for carrying stuff - on demand.

The city skyline is riddled with construction cranes - and work goes on 24 hours a day. I've never seen so many apartments being built at one time. Most the workers appear to be migrants from the country - and are no doubt working for minimum wages.

A typical manual worker here earns around 400-600 yuan each month - or around US$50-$75. Not exactly a king's ransom. But in this non-welfare state, you either work or starve. It's as simple as that.

The contrasts are amazing. One minute you can be walking around a first-world department store, with literally everything you can get in the west. Then you can be walking around the market, where chickens are slaughtered on demand, and where strange body parts are bought for their "health" properties.

You can eat in the most sophisticated of restaurants, with impeccable service, or you can eat noodles in a local street cafe, sitting on an old plastic stool.

You can walk down the street and see trendy young women strutting their stuff, while their poor country-cousins shuffle past in their continuing struggle to make a living.

You can turn on TV to watch "Super Girl" and participate in the craze for reality TV and pop music, or you can stop and listen to the street musician demonstrating his talent on some traditional instrument.

Gaudy neon lights. Chronic air pollution. Girlie magazines and dubious "playgirl" shops. Street vendors shouting about their wares - at 6 am in the morning. Four day funeral events, with loud music at the crack of dawn. Mobile phones everywhere. Food, food, and more food - and usually very HOT (as is the Sichuan style). Mah-jong and card playing on every street corner. Pop music blaring out of shops. Noise everywhere. And, surprisingly,
huge numbers of trees to soften the brazen landscape and provide shelter from the hot summer sun.

Then there's the hairdressers. And I must say this was a real experience. I paid 20 yuan (around US$2.50) - which, to my surprise gave me a 1.25 hour session which included extensive head massage, upper body massage, double hair wash - and finally the hair cut itself. This was all carried out in a trendy salon, with the usual modern music sound track and young people sporting crazy, multicoloured hair styles. Of course I was interested in
the final result, and I can report that it's one of the best haircuts I've ever received. Did I mention the ear-cleaning??

This is one bustling, crazy, hectic metropolis. I can only imagine what Shanghai must be like!

So, what do I make of China? Well, first it has trashed any impression I had that these people were living under some sort of miserable dictatorship. These people know how to work and enjoy themselves - and do both with gusto. I have lived here long enough, and spent enough time with the locals to get a feel for their lives and aspirations. I can tell you, in all the essential ways, these people are as free to live and make a living as you
and me. And if you're wondering how China manages year-in-year-out GDP of around 9%, I know the answer. They have low overheads.

I'm not talking about low wages, I'm talking about a low state "overhead" on the lives of ordinary Chinese. If you're an average worker here, chances are you pay no tax at all. Even if you're the up and coming middle class, your tax bill (if there is any) is likely to be miniscule. In fact, I have it on good authority that most people and companies pay virtually no tax. And if they do pay tax, it's only on the declared income - not the "hidden"

The Chinese invented the principle of keeping two sets of books. And they have a vastly superior grasp of the importance of financial privacy. Sheesh, even a bank will give you a mortgage without any financial statement of income. If you can't make the repayments, they simply reclaim the property.

There is no social welfare to speak of. The Chinese government raises revenue via a VAT of some sort, and various duties and miscellaneous taxes. But the sheer number of Chinese workers means this state "overhead" is almost negligible, giving people virtually 100% control and ownership over their own income.

The Chinese save like you wouldn't believe - even when they are earning close to nothing. But they are not opposed to a bit of ostentation, and it is clear to me that aspiration is a much more common trait than jealousy and envy. If you're rich in China, then you make sure everybody knows!

Of course, what's most amazing about China is the rate of transformation. From a North-Korean-like state of poverty to rapidly rising wealth and prosperity - all in a remarkably short period of time.

My father always said to look out for China - the "sleeping dragon". And I have to conclude he was right.

If you think Singapore or Hong Kong are successful, then imagine China the same way - with all its added size and entrepreneurial capacity. That's how I see it. I believe China is modelling itself on the successful Asian "Tiger" economies. China is turning into a giant Hong Kong.

With its minimal tax overhead, the creative energy of its millions of citizens is being unleashed in ways almost impossible (now) in the west.

I can tell you, we're in for a nasty shock in a few years. And I think it will all come together after the 2008 Beijing Olympics. I really feel that the Chinese see this event as their "coming out" ceremony - their debut on the world stage of nations. It's already all over TV here.

I'm expecting their currency, the yuan/RMB, to be fully floated by that time, and their banking and investment sectors to be mostly fully-revamped in line with modern western practices.

Right now, China is building business, trade and diplomatic relations all over the place. Their rising economic power ensures that others are listening. And in doing so, they are creating an alternative power bloc to the Euro-US one. This will have major ramifications for the future of the world, and not all scenarios are rosy. There could be a resource "war", as China consumes more and more of the world's available energy.

Then there's the potential reaction of the existing alpha-nation the USA, which is unlikely to take being "challenged" lying down. Then again, it may have no option - as its own economy is being so downgraded by present (and future?) governments that it may simply be incapable of competing with the "sleeping dragon".

Other nations will face a similar challenge, as China out-competes them on almost every front. Its competitive edge will be in the Chinese people's natural talent for business, their ethic of hard work, their capacity to save, and their low-low tax burden. It's even possible that a brain-drain could occur - in the direction of China - as they surge into such industries as
biotech, which is continually being strangled by red tape in the West.

All this will create a nation-to-nation competitive environment which can only have two possible outcomes. Either other nations will be forced to compete and enact the necessary economic reforms, or they will become increasingly impoverished and possibly revert to trade war, protectionism and forms of national socialism as a response.

As an optimist, I'm hoping that China, rising as it has out of poverty, will create an example of what is possible with copious amounts of economic freedom.

The only thing that could possibly slow them down, would be the arrival and implementation of "democracy", which (as we've experienced in the west) would simply be a front for socialism and eventual social and economic decline.

Maybe they'll be smarter than us, and over time develop a form of social order that is not incompatible with freedom. We'll see!

China has many challenges, and its future is far from certain, but if what I've seen is any indication, then they are headed for the big-time.

My advice to any freedom seeker is to keep abreast of what is happening there, as it is bound to have a significant impact on the rest of the world, and very likely your own life.

Yours in Freedom,
David MacGregor
Source: sovereignlife.com (http://www.sovereignlife.com/kickstart.html)

Wednesday, October 12th, 2005, 09:56 AM
I've just returned from nine days in the magical old town of Lijiang, China.

It was a respite made in heaven. After a couple of months in Chongqing, a major industrial city of 33 million, the sight and smell of clean, clear air was, well, "like a breath of fresh air"!

Lijiang is a traveller's mecca. A wonderful old town riddled with crystal clear waterways - a sort of Asian Venice. It's full of art and craft shops selling wares to the constant flow of visitors.

Although there were quite a few foreigners there (mostly of European origin, especially French) the vast majority were Chinese.

I can imagine, in the future, that this place will become a a major tourist destination for Westerners, so I am glad I've seen it before it becomes inundated with "foreigners".

All this got me thinking about China, and our perception of it in the West. I've had plenty of opportunity to witness real Chinese life, and to get a feel for what type of society it is.

Here I am, living in "Communist" China, so why do I feel so free?

Is it because in Lijiang I never saw a policeman? Is it because everyone seems to be enjoying themselves, and doing exactly what pleases them? Is it because of the obvious entrepreneurial spirit that seems infuse Chinese culture? Is it because China is vastly more capitalist, in many respects, than most other western countries?

All I know, is that labels like "communism", "totalitarianism" and the like seem to be completely misplaced when applied to the actual experience of living in China.

China is NOT like the old Soviet Union - with its state-owned stores, where shoes or toilet paper were forever in short supply. China is NOT like North Korea, where people are literally living in a time warp - and brainwashed to believe they live in aparadise. In fact, China is more like Hong Kong, or Singapore in the making.

I've met scores of Chinese. I've witnessed their lives. These are not people truly suffering under any totalitarian yoke. If they are "slaves", then their serfdom is in many ways better than what we put up with in the West.

Sure there are vast differences between rich and poor. Yes, there is a lot of pollution in the big cities. And yes, I cannot access the BBC.com world news web site!

I can't publish criticism of the Communist Party in the local papers - but I can easily do it on the internet, and in person, talking with other Chinese. I can keep most of the money I earn. I can aspire to riches and achieve it. I can build a life of my own design. In fact, if I'm honest, I'd have to say that middle class Chinese have all the opportunities we assume are reserved for people in "free" countries.

There are some "downsides" of course.

I would have to take care of my own health - as there is no social welfare to speak of in China. Even a visitor can quickly realise this by noticing the plethora of advertising on TV for various hospitals! I'd have to get used to paying tolls on all the highways, as the Chinese are big on "user-pays". And of course, I would have to look after my own old age.

The truth is, in China there is virtually no welfarism - something most Westerners are now addicted to. So, yes, there is the hardship that comes with self-responsibility.

This got me thinking about the nature of practical freedom – of what is really important in leading life according to one's own wishes.

Is it more important to be able to write a letter criticizing the government and have it published? Or is it more important to be able to live your life with the minimum of intrusion? Is it more important to live in a country with effectively just two political parties, and a system called democracy - or a country with just one party, and a system called communism?

Looked at from the perspective of an anarchist, both the "democratic" west and "communist" China share the same fundamental mechanism of the all-powerful state. So the real issue is, where can I live my life according to my own design and wishes - with the minimum of bureaucratic interference?

None of the Chinese people I have met seem overly-burdened by "Big Brother". They do not have their income siphoned off by the state, to the point of impoverishment. They are not watched from
every street corner, as in London. They are not bullied on the roads by revenue-collecting traffic cops. They are not stopped from making a buck. They are not hounded by the politically correct do-gooder brigade.

Of course, the Communist Party does crack down on political dissent. So dissent moves "underground" - or should I say above ground, on the internet. Yes, the government is what we'd call "authoritarian" - and seeks to manage a free enterprise system.

If I was a Falun Gong practitioner, I wouldn't be happy in China. On the other hand, if I was a Christian, there would be no infringement on my religious beliefs or practice.

However, for a business-minded person, or someone (like the artisans of Lijiang) who just wants to mind his own business, China does offer quite remarkable opportunities. And life in modern China is certainly light years away from what life was like under Mao.

But there's more to it than that.

Why do I fear entering the USA more than China? Why do I feel safer walking down the streets of this city of 33 million than most other large western cities? Why do I feel the energy of entrepreneurship and opportunity in China, compared with the lethargy and dead-weight of dealing with bureaucratic and tax hurdles in most western countries? Why do I feel less watched,
less listened to? Why does China feel on the move, while many western countries feel stagnant?

These are important questions, because they point to a disturbing fact regarding our western countries - the direction they are headed.

We are used to calling ourselves the "free world" - a badge of honour earned in a bygone age. But we are fooling ourselves if we think we are still free.

What is both fascinating and disturbing to me, is the DIRECTION different countries are taking.

China is a previously impoverished Communist country which is moving decisively in the direction of more practical freedom. In matters economic, it is proving to be a powerhouse of capitalism - where the inherent business talents of the Chinese are being liberated to create a massive growth in productivity and wealth.

This surge in prosperity and accompanying education will change the face of China in the future. And as Chinese people have said to me repeatedly, they expect their transition to more political
freedom to be just a matter of time.

On the other hand, we in the West are experiencing movement in a completely opposite direction. More socialism, more fascism, more stagnation and continual infringements of the freedoms we
say we hold so dear.

Should things get so bad that I need to escape to a bolt hole of "freedom", I would consider life in a place like Lijiang to be immensely preferable to some big western city on the verge of descent into disorder and violence - with the accompanying fascist crackdown by the state. In such a stark scenario, I know where my freedom would be best served.

And as my favourite French chef in Lijiang said, "There are no terrorists here!"

The world is not what it appears to be from a casual glance, or a moment's thought. Don't rely on what you read in the papers, or what your political leaders have to say. Their agenda is not yours. You have to go out in the world and look for yourself. And, like me, you may be surprised to find practical freedom in the most unlikely places.

Source: www.sovereignlife.com (http://www.sovereignlife.com/)

Thursday, May 4th, 2006, 01:02 PM
Diplomacy is the art of discreetly convincing other nations to do things you want them to do by convincing them it’s in their best interests. The deft French have turned diplomacy into an art form, both in foreign and boudoir affairs.

Few, by contrast, would accuse the Bush Administration of any diplomatic finesse. To the contrary, the current administration more often than not acts with all the subtly and tact of an angry bull in a china shop.

The latest example was the visit to Washington by President Hu Jintao of China. Watching this event made me squirm in embarrassment over the Bush Administration’s diplomatic ineptitude and outright rudeness.

Building and sustaining good relations with China is and will remain America’s most important foreign policy challenge for the next decade. Historically, the emergence of new powers that force change on the strategic status quo has always been a time of maximum danger and the primary generator of major wars.

Managing China’s arrival as the world’s second superpower will demand consummate diplomatic skills. The United States must devise ways of living with China’s economic competition, surging demand for resources, and inevitable growing geopolitical influence in Asia and the western Pacific while avoiding confrontation. Two highly nationalistic, muscular, and assertive great powers must somehow learn to co-exist.

President Hu Jintao’s visit to Washington was a grand way not to build a positive, fruitful relationship. First, it was not even a state visit, the type usually afforded heads of state. The visit was downgraded to an economy-class event known as an `official visit.’ This was a huge insult and major loss of face for President Hu and 1.2 billion Chinese. I was surprised that Hu did not cancel the visit.

But it got worse. The White House did not even give an official dinner for Hu and his entourage, but a luncheon. This may sound trivial, but in the world of diplomacy – or business, for that matter – such an act is a clear sign of the status of the visitor. To give a mere lunch for the leader of the world’s most populous nation that holds close to $200 billion in US debt was a diplomatic outrage and a slap in the face.

Why was the Bush Administration so grossly disrespectful? First, to please its Christian fundamentalist core supporters– known as `thoeocons’ - who are strongly anti-Chinese because of Beijing’s suppression of various Christian sects.

Second, because US East Asia policy is still being made by the same extremist neoconservatives who fabricated the invasions of Afghanistan and Iraq, and are waging an anti-Muslim jihad from the White House, Pentagon and US media.

They are bent on putting China and the US on a collision course, believing that US military power will be able to intimidate China and keep its influence penned up on the mainland. This is an extremely dangerous idea that could easily lead to a future Sino-American conflict.

President Hu, noted for blandness and platitudinous speeches, showed no reaction to President Bush’s slight, not even when a Falun Gong protestor disrupted the welcoming addresses. But in private, the Chinese must have been furious by the bargain-basement reception and convinced that the protestor’s interruption was sanctioned by the Americans.

Nor did Hu show any outward reaction to Bush’s lectures on human rights. China’s record in this regard is terrible, but public hectoring is not the way to motivate the proud, prickly Chinese to change their ways. Anyway, President Bush should be the last person to criticize other nations over human rights abuses after revelations of the horrors of Guantanamo, Abu Ghraib, kidnappings and the CIA’s secret torture camps.

When confronted by US demands that China force North Korea into giving up its nuclear weapons, Hu might have fired back by demanding the US force Israel to get ride of its huge nuclear arsenal, thereby halting a budding Mideast arms race.

Or Hu could have told Americans who scolded him about the artificially low exchange rate of China’s yuan to deal with their own reckless credit binge and gargantuan deficits first. As for Washington’s complaints that China was being too aggressive in seeking oil and other resources around the world, Hu might have reminded his hosts that America consumes three times more energy than China, and invaded Iraq, among other reasons, to grab more oil.

Regarding US claims that China is spending too much on its military, Hu could have noted that US defense spending amounts to 50% of the world’s total military spending, and while the US 7th Fleet cruises off the China coast, China’s navy keeps to the littoral of the western Pacific.

But Hu was too polite, and kept smiling without relent in spite of losing a great deal of face in Asian eyes. He and his entourage must have returned to China with the feeling that the US was still determined to dominate rather than cooperate, and that China had better keep building up its military power.


Thursday, May 4th, 2006, 01:36 PM
TEHRAN - Speaking of business as unusual. A mere two months ago, the news of a China-Kazakhstan pipeline agreement, worth US$3.5 billion, raised some eyebrows in the world press, some hinting that China's economic foreign policy may be on the verge of a new leap forward. A clue to the fact that such anticipation may have totally understated the case was last week's signing of a mega-gas deal between Beijing and Tehran worth $100 billion. Billed as the "deal of century" by various commentators, this agreement is likely to increase by another $50 billion to $100 billion, bringing the total close to $200 billion, when a similar oil agreement, currently being negotiated, is inked not too far from now.

The gas deal entails the annual export of some 10 million tons of Iranian liquefied natural gas (LNG) for a 25-year period, as well as the participation, by China's state oil company, in such projects as exploration and drilling, petrochemical and gas industries, pipelines, services and the like. The export of LNG requires special cargo ships, however, and Iran is currently investing several billion dollars adding to its small LNG-equipped fleet.

Still, per the admission of the head of the Iranian Tanker Co, Mohammad Souri, Iran needed to purchase another 87 vessels by 2010, in addition to the 10 already purchased, in order to fulfill the needs of its growing LNG market. Iran has an estimated 26.6-trillion-cubic-meter gas reservoir, the second-largest in the world, about half of which is in offshore zones and the other half onshore.

It is perhaps too early to digest fully the various economic, political and even geostrategic implications of this stunning development, widely considered a major blow to the Bush administration's economic sanctions on Iran and particularly on Iran's energy sector, notwithstanding the Iran-Libya Sanctions Act (ILSA) penalizing foreign companies daring to invest more than $20 million in Iran's oil and gas industry.

While it is unclear what the scope of China's direct investment in Iran's energy sector will turn out to be, it is fairly certain that China's participation in the Yad Avaran field alone will exceed the ILSA's ceiling; this field's oil reservoir is estimated to be 17 billion barrels and is capable of producing 300 to 400 barrels per day. And this is besides the giant South Pars field, which Iran shares with Qatar, alone possessing close to 8% of the world's gas reserves. To open a parenthesis here, until now Tehran has been complaining that Qatar has been outpacing Iran in exploiting its resource 6-1. In fact, Iran's unhappiness over Qatar's unbalanced access to the South Pars led to a discrete warning by Iran's deputy oil minister and, soon thereafter, Qatar complied with Iran's request for a joint "technical committee" that has yet to yield any result.

For a United States increasingly pointing at China as the next biggest challenge to its Pax Americana, the Iran-China energy cooperation cannot but be interpreted as an ominous sign of emerging new trends in an area considered vital to US national interests. But, then again, this cuts both ways, that is, the deal should, logically speaking, stimulate others who may still consider Iran untrustworthy or too radical to enter into big projects on a long term basis. Iran's biggest foreign agreement prior to this gas agreement with China was a long-term $25 billion gas deal with Turkey, which has encountered snags, principally over the price, recently, compared with Iran's various trade agreements with Spain, Italy and others, typically with a life-span of five to seven years.

Thus some Iranian officials are hopeful that the China deal can lead to a fundamental rethinking of the risks of doing business with Iran on the part of European countries, India, Japan, and even Russia. Concerning India, which signed a memorandum of understanding with Iran initially in 1993 for a 2,670-kilometer pipeline, with more than 700km traversing Pakistani territory, the Iran-China deal will undoubtedly give a greater push to New Delhi to follow Beijing's lead and thus make sure that the "peace pipeline" is finally implemented. The same applies, mutatis mutandis, to Russia, which has as of late been dragging its feet somewhat on Iran's nuclear reactor, bandwagoning with the US and Group of Eight (G8) countries on the thorny issue of Iran's uranium-enrichment program. The Russians must now factor in the possibility of being supplanted by China if they lose the confidence of Tehran and appear willing to trade favors with Washington over Iran. Russia's Gazprom may now finally set aside its stubborn resistance to the idea of entering major joint ventures with Iran.

Iran appears more and more interested to join the Shanghai Cooperation Organization (SCO) and form a powerful axis with its twin pillars, China and Russia, as a counterweight to a US power "unchained". The SCO comprises China, Russia, Tajikistan, Kazakhstan, Kyrgyzstan and Uzbekistan.

China, Russia and Iran share deep misgivings about the perception of the United States as a "benevolent hegemon" and tend to see a "rogue superpower" instead. Even short of joining forces formally, the main outlines of such an axis can be discerned from their convergence of threat perception due to, among other things, Russia's disquiet over the post-September 11, 2001, US incursions in its traditional Caucasus-Central Asian "turf", and China's continuing unease over the Korean Peninsula and Taiwan; this is not to mention China's fixed gaze at a "new Silk Road" allowing it unfettered access to the Middle East and Eurasia, this as part and parcel of what is often billed as "the new great game" in Eurasia. Indeed, what China's recent deals with both Kazakhstan (pertaining to Caspian energy) and Iran (pertaining to Persian Gulf resources) signifies is that the pundits had gotten it wrong until now: the purview of the new great game is not limited to the Central Asia-Caspian Sea basin, but rather has a broader, more integrated, purview increasingly enveloping even the Persian Gulf. Increasingly, the image of the Islamic Republic of Iran as a sort of frontline state in a post-Cold War global lineup against US hegemony is becoming prevalent among Chinese and Russian foreign-policy thinkers.

For the moment, however, the Iran-Russia-China axis is more a tissue of think-tanks than full-fledged policy, and the mere trade interdependence of the US and China, as well as Russia's growing energy ties to the US alone, not to mention its weariness over any perceived Chinese "overstretch", militate against a grand alliance pitted against the Western superpower. In fact, the Cold War-type alliances are highly unlikely to be replicated in the current milieu of globalization and complex interdependence; instead, what is likely to emerge in the future are issue-focused or, for the lack of a better word, issue-area alliances whereby, to give an example, the above-said axis may be inspired into existence along geostrategic considerations somewhat apart from purely economic considerations.

Hence what the SCO means on the security front and how significant it will be hinges on a complex, and complicated, set of factors that may eventually culminate in its expansion, from the current group of six, as well as greater, alliance-like, cooperation. It is noteworthy that in Central Asia-Caucasus, the trend is toward security diversification and even multipolarism, reflected in the US and Russian bases not too far from each other. In this multipolar sub-order, neither the US is capable of exerting hegemony, nor is Russia's semi-hegemonic sway without competition. In the Caspian Sea basin, for example, Kazakhstan has opted to take part in several distinct, and contrasting, security networks, including the North Atlantic Treaty Organization's Partnership for Peace program, the Commonwealth of Independent States' Collective Security Organization, the SCO, and membership in OSCE (Organization for Security and Cooperation in Europe).

Kazakhstan is not, however, an exception, but seemingly indicative of an expanding new rule of the (security and strategic) game played out throughout Central Asia-Caucasus. Economically, both Kazakhstan and Russia are members of the Central Asia Economic Cooperation Organization, and all the Central Asian states are also members of the Economic Cooperation Organization (ECO), which was founded by the trio of Iran, Turkey and Pakistan. Certain economic alliances are, henceforth, taking shape, alongside the budding security arrangements, which have their own tempo, rationale and security potential. Concerning the latter, in 1998, the ECO embarked on low security cooperation among its members on drug trafficking and this may soon be expanded to information-sharing on terrorism. Also, Iran has also entered into low security agreements with some of its Persian Gulf neighbors, including Saudi Arabia and Kuwait.

The SCO initially was established to deal with border disputes and is now well on its way to focusing on (Islamist) terrorism, drug trafficking and regional insecurity. Meanwhile, the US, not to be outdone, has been sowing its own bilateral military and security arrangements with various regional countries such as Azerbaijan, Tajikistan, Kyrgyzstan and Uzbekistan, as well as promoting the Guuam Group, which includes Azerbaijan and Georgia, formed alongside the BTC (Baku-Tiblisi-Ceyhan) pipeline as a counterweight to Russian influence. Consequently, the overall picture that emerges before us is, as stated above, a unique multi-trend of military and security multipolarism defying the logic of Pax Americana. In this picture, Iran represents one of the poles of attraction, seeking its own sphere of influence by, for instance, entering into a military agreement with Turkmenistan in 1994, and, simultaneously, exploring the larger option of how to coalesce with other powers in order to offset the debilitating consequences of (post-September 11) unbounded Americanization of regional politics.

A glance at Chinese security narratives, and it becomes patently obvious that Beijing shares Iran's deep worries about US unipolarism culminating in, as in Afghanistan and Iraq, unilateral militarism. Various advocates of US preeminence, such as William Kristol, openly write that the US should "work for the fall of the Communist Party oligarchy in China". Unhinged from the containment of Soviet power, the roots of US unilateralism, and its military manifestation of "preemption", must be located in the logic of unipolarism, thinly disguised by the "coalition of the willing" in Iraq; the latter is, in fact, as aptly put by various critics of US foreign policy, more like a coalition of the coerced and bribed than anything else.

But, realistically speaking, what are the prospects for any regional and or continental realignment leading to the erasure of US unipolarism, notwithstanding the US military and economic colossus bent on preventing, on a doctrinal level, the emergence of any challenger to its global domination now or in the future? The strategic debates in all three countries, Russia, China and Iran, feature similar concerns and question marks. For one thing, all three have to contend with the difficulty of sorting the disjunctions between the different sets of national interests, above all economic, ideological and strategic interests. This aside, a pertinent question is who will win over Russia, Washington, which pursues a coupling role with Moscow vis-a-vis Beijing, or Beijing, trying to wrest away Moscow from Washington? For now, Russia does not particularly feel compelled to choose between stark options, yet the situation may be altered in China's direction in case the present drift of US power incursions are heightened in the future. The answer to the above question should be delegated to the future. For now, however, the quantum leap of China into the Middle East and Caspian energy markets has become a fait accompli, no matter how disturbed its biggest trade partner, the US, over its geopolitical ramifications.

Kaveh L Afrasiabi, PhD, is the author of After Khomeini: New Directions in Iran's Foreign Policy (Westview Press) and "Iran's Foreign Policy Since 9/11", Brown's Journal of World Affairs, co-authored with former deputy foreign minister Abbas Maleki, No 2, 2003. He teaches political science at Tehran University.

Source: http://www.atimes.com/atimes/Middle_East/FK06Ak01.html (http://anonym.to/?http://www.atimes.com/atimes/Middle_East/FK06Ak01.html)