Dec 042012

  The swift hand of Chinese justice has accused, tried, and convicted for murder the wife of a man who had had the summit of China’s leadership within his grasp. Soon we shall hear more about the whistle blower in the Gu Kailai murder case, Chongqing police chief Wang Lijun.  It would appear that Mr. Wang, as so many before him, will go into what one might call the Chinese version of the witness protection program.

In the United States, an insider of extraordinary value in the prosecution of a major criminal case may be given personal protection by the government. In Wang Lijun’s case, he is expected to be tried for treason for the “unauthorized” visit to the American consulate. Thus Mr. Wang will be silenced and the state will have protection from a witness who might otherwise reveal further embarrassing details regarding possible crimes and misdemeanors in high places.

The Chinese leadership proudly points to the historic arrival of China’s economic miracle. The Chinese citizenship awaits the long-overdue arrival of the miracle of true human rights.

Charles Dusenbury


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Dec 042012

    Okay, let’s play a little game of “Pin the tail on the donkey.” Here are a small handful of pins. They represent your nation’s limited military and economic resources. No blind folds here. Bring all your knowledge and information about the world to bear. Now where the map will you allocate our finite strengths? One, two, maybe several Middle Eastern countries? Iran? Yemen?

How about Africa with so many challenges such as Nigeria, Sudan, or Somalia? Maybe even some Latin American countries such as Hugo Chavez’s Venezuela, Manuel Ortega’s Sandinista suppressed Nicaragua or even America’s trouble border with ITS NAFTA neighbor, Mexico. Are you concerned about the Russian bear that is sniffing around more again?

Now who would have imagined that one’s national security might well depend on the successful outcome of just such a game? It does of course, and in a very real way. For those men and women tasked with securing our nation’s future, losing is definitely not an option.

Probably you would find that most people and most maps have unrecognized cultural orientations and assumptions in them. Take that big wall map of the world for instance. There is a good chance it is centered on America, or even more likely, the Prime Meridian, running smack dab through the center of Her Majesty’s Royal Naval College. Most likely the extra pins were in your left hand, and you reached with your right hand…to the right…to the east, the Orient by any other name. Indeed, do we not refer to the Middle, Near, and Far East? The Anglo-European mind is, so to speak, oriented to view the world that way. And therein lays an interesting phenomenon.

Had you noticed the irony? While our attention tends to be drawn geographically and geopolitically towards the east, the East itself is actually less noticed behind us there in the west.

If given just one pin to stick in a map to indicate one of the most likely places for serious future conflict to arise, where would this author place it? Having spent some considerable time and research and discussions with military planners, that pin would pass right over the seas that lap onto the shores of China and right into the heart of Southeast Asia:

The South China Sea.

Dec 042012

As has been alluded to in earlier postings, there is an understandable tendency for us in America to have our attention drawn eastward over the Atlantic, towards our founding cultures and beyond to the trouble spots of the Middle East and Africa. But as we are looking east, The East is coming up on us from the west, from across what was once the wide, exotically isolating expanse of the Pacific Ocean.

The Chinese have a salutation, actually a curse of sorts: “May you live in interesting times.” It might be hard to agree on just one term to describe the global socioeconomic times in which we live, but certainly “interesting times” would have to be at the top the list. And nowhere would “interesting times” apply more than in China itself.

2012 is the year of the once-in-ten-years handing over of power at the very top ruling positions in China. Ten years ago it all went smoothly and secretly. This year the process has all the subtlety of a Chinese New Year’s festival. One blind man has opened the eyes of the world to China’s appalling state of human rights violations. Disturbing, but not necessarily a surprisingly new revelation. More telling and much more revealing has been the recent episode of the public fall from grace of the prominent (now former) governor of Chongqing, Bo Xilai.

It is not this brief essay’s intent to cause your eyes to glaze over with all “Those faraway places, with the strange soundin’ names.”[1] But stick with this for a moment. By tracing the threads associated with just this one name, Bo Xilai, the endemic corruption of the entire Chinese ruling and economic system will become apparent and why you and your friends should be aware and concerned.

Bo Xilai is a prince among princelings: those born of the original members of Mao’s inner circle. With such nobility, much was given by way of elite education and financial advantage, and much was expected in the realm of leadership and of the keeping close the reins of power. This year he was due to be lifted up to that holy of holies, the living pantheon of the ruling Permanent Committee of Nine. But Aeschylus could not have written a better Greek tragedy.

You can imagine the American council’s surprise when, in early February, a Mr. Wang, of late a close associate of Mr. Bo, sought asylum. It turns out Mr. Wang was in charge of the police force in Bo Xilai’s megacity of Chongqing and was implicating Bo’s wife, Gu Kailai, in the death of the British Neil Heywood. She, a “princeling” (a derogatory term used by ordinary Chinese citizens) in her own right, along with her sisters and Harvard-student son have economic, political, and military connections (they’re all the same, by the way), but let’s just stick to Bo Xilai for now.

Mr. Bo’s claim to fame was his attack on corruption (thousands were arrested among the 30 million residents of Chongqing) and encouraging (actually demanding) the singing of the good old classics from those happy days of Mao’s farm collectivization, the Great Leap Forward, and the Cultural Revolution, which claimed little more than 30 to 50 million lives. Bo’s “Chongqing Way” drew many accolades and admiring visitors from the top Nine ruling committee, not the least were the head of Internal Security,  along with the presumptive new president, Xi Jinping. Thus in a corrupt system, power and influence is respected, and feared. So when Bo Xilai was able to muscle his way into Chongqing’s famously corrupt environment and replace it with his own system of corrupt cronies, his star was clearly on the ascendency…until that mysterious British citizen’s death (Neil Heywood had ties to Bo and his wife and son).

The house of chop sticks quickly began to crumble with the unsuccessful asylum attempt of the Bo’s second in command, Mr. Wang. This turned on the high beams of interest by the American and British governments and the world’s press. In Beijing, the Politburo and its secretive Committee of Nine, unaccustomed to bright lights in their cloistered lives, quickly slammed the door on Mr. Bo. But it didn’t stop there. Attention was drawn to Bo’s older brother, Bo Xiyong who resigned from the company called China Everbright International in Hong Kong. It took this humble blogger less than 30 seconds to determine that China Everbright International is located at the Hong Kong address of 88 Queensway. It is an address well known to American intelligence agencies and the “U.S.-China Economic and Security Review Commission”[2] as a hotbed for the Chinese Army and intelligence agencies. Operating from front companies, the People’s Liberation Army and the Chinese government and wealthy Chinese citizens (again, pretty much all the same people) are investing in and controlling assets and governments around the world. It is also through these dummy corporations that Chinese Intelligence operatives deal in illegal arms trades and money laundering through the likes of billionaires Lev Leviev (Israel), Pierre Falcone (France), Helder Battaglia (Portugal), and Arcadi Gaydamak (Russia-Israel). They and others have been variously charged with international arms smuggling into the Congo-Brazzaville, Guinea, Zambia, Nigeria, and most particularly, Angola. It is also through the 88 Queensway Group that China has gained considerable control of oil, again particularly in Angola. China has had no qualms dealing with civil rights abusers around the world so long as China can secure oil and mineral rights.

[UPDATE , May 17, 2012;   Here is a perfect example of how fluid and fast moving events are now on the Chinese political power scene. Within 24 hours of this blog posting, a whole bunch more about the Bo Xilai intrigues have come out. (see WSJ link below). It is reported that the Politburo became very concerned (read “threatened”) by Bo’s increasing links to the military, in particular the regiment which had been headed up by Bo’s late father under Mao Zedong. Recall that after the brutal put-down of the 1989 Tiananmen Square protests, The military secured the various Chinese provinces by roadblocks and restricting trade and communications. This gave the PLA (the army) economic and political control which has only been dialed back in the last ten or twelve years. So the Central Permanent Committee, which was already in the midst of dicey negotiations over the transition of power, feels particularly vulnerable and defensive about such palace intrigues. Note also that the military is again increasing its own economic base through real estate and manufacturing.]

At first glance, and maybe even after the second and third, China’s economy and governance may appear to be too complicated, too foreign, too, as we often used to say about the Chinese, too inscrutable. Not so.

Corruption. That’s the key. Once it is understood that China is a one-party monopoly, with all its conniving, back-biting, power-clinging ruthlessness and wealth hoarding, it all become like watching a rerun of “The Godfather”. The trouble is, this is no movie; and there are no outside enforcers of the law to contend with. So why have we as Americans allowed ourselves to be drawn into this den of iniquity? Our nation’s morals and sense of fair play have been severely compromised…perhaps irretrievably. Case in point: the very recent ruling by the federal banking system to allow at least two of the only four major Chinese banks to buy into banks here in America. Are our people in government oblivious to the fact that the banks are majority owned and totally controlled by the Chinese Central Government? Are they not aware that the only reason these Chinese banks look so good on paper is that some years ago four parallel “bad” banks were formed into which the massive amounts of nonperforming previously government-mandated loans were offloaded and that now these four banks have been ordered…mind you “ordered”… to make a whole bunch of new “stimulus” loans into an already inflated building and infrastructure construction environment? Are our folks in Washington unaware of the over 18000 people who have fled China while absconding with millions upon millions of dollars from the banking and industrial sectors of China?

Of late this writer has been researching the topic of modern China’s socioeconomic environment. An unpleasant situation has arisen quite often: In the midst of reading about governmental manipulation of the banking sectors and its choosing of industrial winners and losers, it is many times impossible to distinguish between what has gone on in China and is now going on in America. To see where the United States is heading, one has only to read where China is now. It all looks flashy on the surface, but as the bloggers in Beijing allude to, the “one safe place” in China is the American Embassy. So consider, do you really feel safe about what’s going on in Washington?

Yes, we now all “live in interesting times”. The sooner we take a real interest in that seemingly “far away country” and get used to “those strange soundin’ names”, the sooner we will be able to respond appropriately to the challenges of a corrupt Middle Kingdom in this 2012 Chinese Year of the Dragon.


[Here are a couple of very useful and very readable books on the subject of modern rule and economics in China. Modesty insists that the last suggested one is this blogger’s]

“The Party”  Richard McGregor

“Red Capitalism”  Carl E. Waters and Fraser J.T. Howe

“Eastworld”  Dr. Charles Dusenbury

Also, “The Economist Magazine” has man articles on China, as does the “Wall Street Journal”. Just type in “China” in the search box and the screen will light up with fascinating and well written articles.

Here is the WSJ link regards Bo Xilai and the army:

Dec 042012

 The Senkaku Islands, three basically uninhabitable clusters of rocky ridges just north of Taiwan, are again making headlines in Asia. They should be making more headlines in America, too. Not much bigger than icebergs, the Senkaku Islands are just the tip of the growing animosities between China, its Asian neighbors, and particularly Japan.

Whether or not one agrees that this is the Century of China, most would agree that China’s burgeoning wealth has fueled an increasingly capable air force and navy. In December, 2008, China sent elements of the People’s Liberation Army (PLA-N) Navy’s Southern Fleet through the South China Sea, past Singapore and out of the Malacca Strait to the piratical waters off the African coast of Somalia. In so doing, China announced that for the first time in 500 years, its modern fleet of destroyers is a global naval force to be reckoned with.

In recent years there have been an increasing number of headlines about maritime conflicts involving China and its neighbors over disputed authority to potentially oil-reach sea beds and abundant fisheries, primarily in the South China Sea. China (and Taiwan), along with the Philippines, Malaysia, Brunei, and Vietnam  have a myriad of overlapping claims to the semi-submerged islands of the Spratlys and the Scarborough Shoal, west of the Philippines, and the Paracels off the Vietnamese coast. Maps made public by China in recent years show a dotted line that basically encircles most of the South China Sea and designating it as a region of core national interest, putting these strategically important waters on a par with Tibet or Taiwan. At the 2010 ASEAN regional meeting in Hanoi, Secretary of State Hillary Clinton expressed to Chinese Foreign Minister Yang Jiechi that this same region remains an important national interest to the United States

But that line of Chinese special concern doesn’t stop within the South China Sea, and that’s where the Senkaku Islands comes in. The line’s extension is called by China its “First Island Chain of Defense.” It extends northward  just inward of the Philippines and encompassing Taiwan, along the western shores of the Japanese chain of islands that include Okinawa and looping up just inside of Japan to the Korean Peninsula. The Senkaku Islands (Diaoyu to the Chinese) lie within this Chinese “Chain of Defense.” And it is to this chain of islands that America could become linked to a military conflict in Asian waters.

The 2010 Chinese National Defense white paper, released in 2011, stated that “Asia-Pacific security is becoming more intricate and volatile.” China repeatedly emphasizes an “unswerving” resolve to defend its territorial claims, making it clear that its military had the physical and cyberspace capability to go on the offensive should the need arise. The 2012 Defense of Japan white paper repeatedly points to China as a major source of potential military conflict, placing Senkaku (Diaoyu) squarely on their own maps of maritime concerns and force projection. Okinawa is stated to be the very core of Japanese efforts in Asia Pacific. Particularly telling is the Japanese defense report’s emphasis on its strengthening ties with American forces. Some months ago, President Obama announced an increasing deployment of marines to the region, especially to Australia. More recently, Defense Secretary Leon Panetta said there will evolve a shift of naval forces from 50-50 Atlantic/Pacific to a 60-40 weighting towards the Pacific.

Want to get away to a peaceful deserted island? Perhaps it would be best to scratch the Senkaku (Diaoyu) Islands off your list. In the exotic South China Sea and its broader Asian Pacific surround, unoccupied islands and their offshore waters have a not so funny way of being cluttered with a whole host national flags.

Charles Dusenbury

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Dec 042012

     “Things are real there,” quotes the Wall Street Journal* of a Chinese millionaire, referring to America. “Here you don’t know what to believe.” Well, there is one thing one can believe: some 30 years on, expansive globalization is reconsolidating. What has been proffered as a burgeoning “economic interdependence” has been in fact a dependence on draining off the creative and monetary energy from freer and more democratic nations. Now it would seem that tide is beginning to change. The successful within China see the approach of the limits of a closed and corrupt. They, including many of the princelings, the heirs of the old guard, have sent their children on ahead to be educated in the west.

America had been at the forefront of this modern episode of globalization, particularly beginning with the 1970’s. So it at there that this brief examination of the motivating ideas behind globalization and it current manifestations begins.

The 1970s does indeed mark the beginning of the modern concept of globalization, particularly as it relates to the most influential economic and military power of its time, the United States of America. That said it is important then to briefly review some of the major events that shaped America’s attitude towards itself and towards its relationships to the family of nations.

It would seem that a discussion about globalization is at its core a discussion about societal values. Certainly for America, the 70’s were a time of reexamining what it was and what it stood for. For instance, it can well be argued that the “Age of Globalization”, certainly in the United States, really derived from the 1970’s mantra “It is the Dawning of the Age of Aquarius.” To the beat of tambourines and bells on dancing feet, our culture was assured that a “New Age” was dawning, “when peace shall guide the planets and love will steer the stars.”

For America, the decade of the 70s was a time when its self-confidence was shaken to its core. Actually, the 70’s was in many ways simply an extension of what is often referred to as the 60’s, a time when the “counter-culture” and its “back-to-the earth” narrative held sway in our society. It was a time when the focus was on seeking the “exceptions” in “American Exceptionalism”; and in those times, they were not all that hard to find.

The war in Vietnam, with its bloody images and body counts brought into our living rooms on the nightly TV news, kept hammering our nation’s morale farther and farther into the ground. The free-speech movement introduced shocking words once only written on bathroom walls. Images of beaten civil rights workers introduced many to a cruel and shocking reality. The assassination of yet another Kennedy, the shooting of Martin Luther King, and the burning and looting in many cities of the United States left the nation numb and shaken as it greeted the new decade of the 1970’s. But there was much more ahead to try a nation’s soul.

The American decade of the 70’s had bookends of major tragic events. That first spring, four students died at Kent State University, as inexperienced National Guardsmen attempted to control an anti-Vietnam war demonstration. In the autumn of 1979, Iranian militant students seized 66 Americans at the United States embassy in Tehran, keeping a nation hostage and its president impotent.

And somehow, in just those ten short years, America managed to squeeze in a whole lot more societal-altering events: The First Earth Day often called the launching of the environmental movement. Daniel Ellsberg broke his pledge of secrecy and revealing pentagon secrets at a time of massive antiwar demonstrations. Arab terrorists killed nineteen Israeli athletes at the Munich Olympics. The Arab oil embargo probably shook the American society its core more than any other single event since Pearl Harbor. A vice president resigns. A year later, the president of the United States resigns, leaving behind a legacy of governmental mistrust and an increased influence of the press that lingers to this day. Then there was the Three Mile Island release of radioactivity into the atmosphere and the revelations of dumped pollution percolating up through the ground in the community of Love Canal. Given all these events and many others, where was a disoriented society to turn? A craving for a “Peace in Our Times” gave an opening to those organizations and individuals who held a more utopian vision for America, and for the globe.

“Globalization” for some might almost be viewed as a “share the wealth” of America’s perceived unfair advantages. It was promoted as having the theoretical advantages of allowing the “efficiencies” of each nation and culture to contribute to the rise in the globe’s total economic wealth. Well, in many ways it did, but now viewed from the advantage of hindsight, this global engine of prosperity needed a driving energy force. And that force? The American consumer’s prosperity and demand. To some observers, there exists the irony of promoting globalization through such things as lowering trade barriers; often as a “temporary” one to aid so-called “disadvantaged” nations and NAFTA, certainly raised the wealth and power of other nations, with China of course being a prime example. Those advantages, with its initially lower labor costs and the artificial restraint on the value of its currency are clearly evident today. What is also evident is the dimming of the economic fire in recent years that fueled much of the apparent Chinese and Global wealth: the American consumer.

“Americanization” became a catchall term that encompassed all the perceived wrongs that were wrought by man and machine on human kind. America had, in the eyes of some increasingly vocal citizens, used a disproportionate amount of the world’s natural and energy resources and had grown economically and militarily too far out ahead of the other nations on this globe


While globalization is more often a term used to describe an economic model, it is at its core an expression of a collective set of values.

And “collective” may indeed be THE term that best summarizes those values.

Implied in “collective” is the sense of the sacrifice by its individuals for the benefit of the whole. Thus it is incumbent on the “haves” to “share” with the have-nots. The idea here is that through such a mechanism the cumulative average would be raised and then, all together, the whole would then prosper and increase. It would be rather like taking the varying ingredients for pizza dough, compressing and combining them into a homogenous mass, then having the baker spin them in the air to expand outward yet interconnected.

NAFTA was one of those “homogenizing” mechanisms. By freely allowing the flow of capital and technical resources, the cost of the final product from one area, Mexico for example, would make for a lower priced product that would benefit the end user American consumer. And it worked…for a while.

But always what was required was an external supply of economic energy. In this case, an “excess” of monetary “energy” that could buy those cheaper imported products while still producing and selling a product for profit within America’s own borders. Yet, just like the dream of perpetual motion, economic laws behave very much like the laws of physics and gravity. To keep this economic wheel, spinning, and external impetus of cash wealth had to be constantly applied. And as in in market, after the initial lowering of price, the ingredients into the manufacturing process rise. Labor cost, and the cost of the commodities rise. Host governments see a source of income by attaching more taxes, and manufactures also begin to see the potential profit by beginning restrict the very supply of the product that is being consumed. Also all along the supply chain, each step sees profit potential by easing upward their fees and profits.

It’s unsustainable. Ironic since one of the driving core values implicit in globalization is sustainability.

So “sharing” with the less economically endowed and “raising up” of those populations is part and parcel of Globalization.

Implied in Globalization is the “breakdown of empire”. So if you want to look at who the proponents are and what is their intent, look at the anti-empire rhetoric used. The whole antithesis to empire and the model held up is that of the British Empire. Well the sun has certainly set on it and examples abound of many of its previous colonial holdings are prospering.

Like so many things inherited form Great Britain, America now has inherited the ire of many globalists by referring to the “American Empire”, and by extension the supposed benefits that will be released to the underdeveloped world, the “Third World” countries with its demise.


Unintended Consequences:

There was a Coca Cola advertisement during those early years of Globalization: “And the world will be a better place.” “And see the world in perfect harmony”

The concept was that if the world were more economically dependent on each other (interdependent). Each country would have an economic stake in the continuing and expanding world trade. Thus, it was predicted, disputes between regions would be handled by negotiations, not military threats or actions

The unintended consequences have been the very use of a perceived economic edge being used as a tool, a negotiating weapon if you will, to forward a nation’s political goals. An example of this would be when Vladimir Putin’s government had Russia cut off the supply of natural gas to the Ukraine during the winter of 2006 in a price and payment dispute. The consequences reached far beyond the region because that same gas line helped supply a dozen other countries, sending a price increase jolt around the world.

The threat of a considerable increase in pollution of the land, water and atmosphere was not generally foreseen. China’s industrial expansion has increased enormously in recent decades in order to meet global demand for its products. With it has come a huge increase in its consumption of energy, supplied primarily by the burning of coal. There has been considerable soil and water pollution because of a lack of farsighted preventive regulation or out and out corrupt bypassing of existing laws.

Even less foreseen and unintended was the recent trend of thousands of wealthy Chinese who are packing their bags for the west. At first blush this comes as a surprise to many westerners. They were under the impression that the Chinese hold an ancient sense of cultural superiority. It would seem the ambitious within China see that democracy and freedom is indeed a superior environment within which to succeed.

America’s founding fathers intended it that way.



Dec 042012

  Reading Joseph Sternberg’s “China, the World’s Greater Fool?” (Opinion, WSJ, 8/16/2012), the image of Walt Disney’s cartoon robot, WALL-E, came to mind. As the article pointed out, China is paying top dollar for technologies such as electric car battery maker A123 and troubled oil and gas producer NEXEN. Call in the mindless robot to stack these among the others in the bulging warehouse of Beijing’s previous Five-Year-Plan mandates.

WALL-E could vacation in one of the several ultra-modern Chinese cities recently built and filled with every modern convenience yet devoid of human habitation. Or perhaps he could take an uninterrupted stroll down Zhuhai Sanzao International Airport’s 13,000 feet long seldom used runway while looking longingly overhead at the abundant air traffic vectored to the surrounding airports of Hong Kong, Macau, Shenzhen, and Guangzhou. Certainly the little metallic robot would feel attracted to Shanghai’s multibillion dollar Maglev magnetically levitated train. Reaching speeds up to 268 miles per hour, it covers its entire track length of 18 miles from Pudong International in less than eight minutes. However, WALL-E would need to transfer to more pedestrian conveyances at Longyang Road, far short of the epicenter of Shanghai’s 23 million residents on the other side of the Huangpu River.

Cities with no people, airports confined by military airspace restrictions, subway exits to vacant fields, are all part of a “Build it and they will come,” central planning mindset that is running out of cash to stoke into the engine of the Chinese version of hope and change. When over 1.3 billion Chinese loose hope in the largely artificially stimulated changes around them, it is going to take more than a little WALL-E to handle the mess.

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Dec 042012

Rising star of Chinese leadership falls to earth. Can the leaders in Beijing repair the hole in the Great Wall of administrative secrecy in time for the once every 10 year transition of rulers?

News of Drama in China Consulate Reached Obama” The Feb. 6 encounter directly drew the Obama administration into internal Chinese politics, as Mr. Wang told American officials of his suspicions concerning the November death of a British businessman, Neil Heywood, according to top British officials. The wife of a senior Communist Party official, Bo Xilai, is a suspect in the death.
Just that headline alone brings up the topics of:
-The once every 10 years change in China’s top rulers.
-The rampant corruption of business, banking, and wealth by the “Princelings” who are the offspring of the original generals with Mao Zedong.
-The deep internal struggles between the “Conservatives” who, ironically are actually called the “New Left” return-to Maoism folks,  and the more “Liberal” who, again in the Alice in Wonderland topsy turvy Middle Kingdom definition, are actually the smaller central government, more individual entrepreneurial, free market advocates.
-And the military, which has strong influence, especially in this Year of the Dragon power struggle. They are flexing more muscle especially in the South Chine Sea, which of course brings up all the conflicting multinational commercial, fishing, and undersea oil rights claims.
Like the son of Icarus, Bo Xilai, a son of the Maoist-era founders, has flown to close to the high heat of the inner workings of Chinese rule. Bo, the head of the Communist party in Chongqing was much admired by 6 of the 9 members of the Permanent Ruling Committee. Now they too may be sucked into the vortex of Bo’s rapid plummeting.
This game of Chinese Checkers is going to be for all the marbles.


Dec 042012

    America has developed an unhealthy codependency on China. How else to describe a relationship with a cheating and abusive partner that keeps us willingly hooked and addicted to attractively priced consumer technologies, while coercing or out and out stealing the wealth of our nation’s intellectual properties and threatening the safety of our friends and neighbors?

And as is so often the case in such codependency relationships, do we or the Chinese really wish to face the consequences of any fundamental changes in behavior within the governing and economic systems of China?

“The Chinese Economic Miracle,” has been a common phrase that until just recently tripped easily off the lips of western national leaders and local laborers alike. The first decade of the 21st Century has seen a remarkable economic quadrupling in the most populous nation on the planet. From the country into the cities, the Middle Kingdom has experienced a migration of biblical proportions involving a population larger than that of the entire United States. With it has come much of the benefits to a growing middle class and now also the challenges for the one-party rulers amidst the rising demands for greater openness and freedom.

The author would be remiss if not noting that as the research and writing of this book progressed, it began to feel as if it were taking on some aspects of a morality play; indeed that may well be an apt description of the book’s theme. There is endemic corruption that pervades and influences every aspect of life in Communist China. The real question now is  how dependent has America become on China and have our national  values and guiding principles been irrevocably compromised?

Co-de-pen-den-cy: a psychological condition or a relationship in which a person is controlled or manipulated by another who is affected with a pathological condition. (Merriam-Webster)

Nov 112013


In China, so much of it now looks so familiar, so normal, so “West”. Yet, if one walks behind the scenes, peers through the windows of the many vacant buildings, and opens the financial books, a queasy feeling begins to develop in the pit of the stomach. In Michael Crichton’s 1973 movie, WESTWORLD, people paid to play out their Old West fantasies on a movie set. Today, it is looking like westerners may be playing out their financial fantasies in China. What investors perceive as familiar, be they architectural or financial structures may indeed be elaborate props constructed by the Chinese to deceive the West…and perhaps themselves.

Welcome to EAST WORLD

Recent articles in the ECONOMIST and the WALL STREET JOURNAL reveals a quickening pulse of concern in the banking and securities world: “Auditors Sharpen Queries in China”, “China Curbs Sales of Risky Wealth Management Products”, “Buffett-backed China Venture Falters”, “How China’s Banks Break the Rules”, “How Manageable is China’s red Ink?”, ”How real is China’s growth?”, “China; Rising power, anxious state”. All these headlines sound a sour note in the previous optimistic tune about the “Chinese Economic Miracle”. Suddenly it seems both regulators and investors are starting to hum a different tune… “How long has this been going on?” So what has been going on behind the scenes?

Seduction. A feeling of comfort is essential, be it in the bedroom or the board room, and here the Chinese have placed all the props to make global investors feel right at home. Messrs. Carl Walker and Fraser Howe, authors of the excellent book, RED CAPITALISM describe, “[It] involves a picture that outside observers…feel comfortable with since it makes China resemble other emerging markets.” [Italics added]. “[This includes] developed stock and debt-capital markets, a mutual funds industry, pension funds, sovereign-wealth funds, currency markets, foreign participation, an international central bank, home loans and credit cards, a burgeoning car industry and a handful of brilliant cities.” Thus, as the authors point out, it looks like the West! So it is easy for investors to be both stimulated yet at ease.

Certainly the crowded streets, busy commercial buildings, and humming factories are not all there just for some director to yell “Action” whenever westerners arrive. But the point is; only an estimated 2% of the debt that is financing all this growth and activity is held by foreign banks. Indeed, even accounting for the raising of capital in the stock markets, still 70% of the invested capital is done by the Chinese government itself. In other words, investment risks are not widely distributed as in more developed equity markets but instead China itself is the single most vulnerable to defaults.

While we are on the subject of banks, let’s take a quick look at China’s Big (an only) Four. As the 20th Century came to a close and the China was having one of its ten-year cyclical deep recessions, the banks were left with a whole pile of bad debts on its ledgers. Oh what to do? Hey gang, here’s a great idea! Let’s form four “Bad Banks”, transfer all that bad paper from the four national banks, thus reburnishing the balance sheets and make them the “Good Banks”, then sell equities on the global markets for these bright shining examples of Communist Capitalism.

Recently the SEC has suspended trading on about a dozen or so stocks with connections to China. There has been a recent trend for “reverse mergers”, where Chinese companies have purchased and “merged” with American companies traded on Wall Street. Concerns are being raised that regulators are not confidently able to audit the auditors of those Chinese investors and holdings. Terms such as “Ponzi Scheme” are now being used as Canadian-listed Sino-Forest shares dropped from 18.21 Canadian dollars to 3.19 as short-sellers circled in for the kill. Nine Dragons Paper, controlled by China’s richest woman (Zhang Yin, worth US$5.6 billion) had its Standard and Poor’s rating withdrawn.

Mdm. Zhang, the daughter of a Red Army officer with good contacts within the Chinese government, is a perfect example of what the Chinese refer to as “The Princelings”. This next generation is succeeding the old ruling elite who earned their bones in Mao’s Long March and is now taking over the full reins of governing.

This whole topic of the Princelings, the rapidly expanding and modernizing military, and China’s growing bellicosity as it looks to the South China Sea and yells, “Everybody, out of the pool!” are fascinating topics covered elsewhere on this website and in my current writings and lectures. Stay tuned.

Now, after having had a glimpse behind the Bamboo Curtain, to paraphrase Groucho Marks, “Who are you going to believe, them, or your own eyes?”

Wall Street Journal; active link list of related articles on China

The ECONOMIST, active link list of related articles on China Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise (9780470825860): Carl E. Walter, Fraser J. T. Howie: Books

A very readable yet detailed book on the Chinese financial system.

Open link, read book summary with Q&A of authors. Very brief and very informative.


The Party: The Secret World of China’s Communist Rulers.

By Richard McGregor; This Amazon link also has a good summary and excellent insight into the irredeemable institutional corruption of China’s rule.


China’s Brand New “Empty” City: Ordos, Inner Mongolia

This YouTube video is of a recently built city, beautiful residential area, high-rise condos, and wide avenues, built for one million. It is not really deserted because it has never been occupied! If you are not a regular viewer of Qatar’s Al Jazeera TV, you may be impressed by the quality of this reporting.

It would seem that in this jet Age, Western constucts of reality have been on a Slow Boat to China.



Dec 042012

Continuing our look at CHINA “behind the scenes”, we look at the military and explore possible motivations for its build-up and its often belligerent actions.

Here in EAST WORLD, even military hardware may not be what it seems. Since Mao’s Long March and then the founding of the People’s Republic, assessing Chinese capabilities has been a continuing difficulty. Underestimating China’s prowess can have grave consequences, as the United States learned the hard way when the Red Chinese Army swarmed south over the Yalu river and pushed our forces practically into the sea at Pusan, South Korea. Another shock early in the Korean War was when our predominantly propeller driven air force was greeted by advanced Mig 15s in the skies overhead. Alternating bellicosity and benign cordiality, statements from the leadership make it difficult to be sure as to what China’s intentions are. Sometimes it even appears the leaders themselves are not clear. Either way and from any point of view, there is always the concern that acting on an assumption is…


A Gamble


China’s first aircraft carrier is a refurbished former Soviet Bloc vessel. Purchased from Ukraine under the guise that it would become a floating casino in Macau, its threat of force projection in such troubled waters as the South China Sea may yet prove to be a dangerous gamble.


China has been annually increasing its spending on military research and development. This expansion of its ability for force projection is particularly evident on the sea. By openly challenging the maritime claims of the bordering nations of the South China Sea’s politically churned waters, China is increasingly intimidating those countries and their chief ally in the region, the United States. These actions would appear to be a big gamble. Its launching of its first aircraft carrier is a case in point.


The Chinese carrier is a refitted used Ukrainian [?]vessel, the Varyag. It was purchased by a Chinese company for $20 million in 1998. The originally stated intent was as a floating casino in Macao, China’s gambling enclave. But not to worry. As a high ranking spokesman said, this new carrier is just for training and familiarization. Pilots need to learn to operate off a carrier and a supporting fleet must be established to utilize such an important asset


China’s expanding ability to project force beyond its borders is driven by several factors, a major one being a deep sense of grievances for what it sees as a long period of humiliation. The launching of its first carrier was heralded as another step in China’s Long march back to what it views as its rightful place as a global major power. “From the Opium War in 1840 to the founding of the People’s Republic of China in 1949, China suffered more than 470 offenses and invasions that came from the seas,” said the official Chinese newspaper, Xinhua on the occasion of the carrier’s launch. This explicit keeping of a tab of offenses is a source of rising concern that China may intend to settle some scores. The increases in the numbers and complexities of its arsenal do nothing to allay such fears.


Many ask just why is it China appears and often acts so bellicose, especially when the actual inventory of China’s military hardware is compared with that of, for instance the ASEAN countries, plus Japan, South Korea [not ASEAN members?] and that largest of military might, the United States. What is it that China has to gain by projecting such an offensive/defensive posture? Certainly a sense of grievances and humiliation, as discussed earlier, is a factor. It may well be that at the heart of it there is an underlying factor: Fear.


What does China really have to fear? After all, China has the largest land mass, population, uniformed military, and now, having surpassed Japan, the region’s largest economy. The answer is “A lot” when viewed from the inside looking out. A quick look at a map showing the activity of the world’s shipping lanes gives one answer. China depends almost exclusively on these very busy shipping routes to import the energy and raw materials it needs. The, the goods produced go back out over these vast, mostly unprotected waters. One only has to read the now familiar headlines about piracy to see just one aspect of this concern. Lines of communication represent another strategic vulnerability.


In this day and age of the internet, Wi-Fi and cellphones, the public may have the sense that all this data is beaming happily up and down through a nearly invulnerable constellation satellites circling thousands of miles out in space. Not so. The reality is the vast majority of all these bytes of digitized data we have all come to depend on in our daily lives is transported by good old fashioned land and underwater cables. Well, not so old fashioned, in that they are fiber optic cables, able to handle thousands of separate communications on each hair-thin strand. There are over 500,000 miles of fiber optic cable lying on the ocean floor around the world. And much of it gets funneled through the narrow vulnerable accesses of the South China Sea.


And then there are the natural resources under the sea, proven and imagined. There is inherent vulnerability in having such resource gathering facilities, such as oil rigs scattered over the open waters. The other factor and the one driving much of the naval activity at the moment is the argument over just who gets what, particularly in the South China Sa.


Another explanation for the increased incidences involving China on the high seas may be part of that old philosophy; the best defense is offense. Perhaps China uses some of the headline producing maritime actions as a way to intimidate its seafaring neighbors


And perhaps the greatest fear of all, from a military point of view, is the huge technological and capability gap that was exposed as the world’s military looked on with shock and awe at the United States’ capabilities in the 1991 Gulf War. That wake up call, plus a determination to access the growing coffers within the Forbidden City, has perhaps motivate the military to engage in instances of conflict so as to encourage Beijing to allocated more funds for defense. The 17% increase in the 2011 budget is a case in point.


The recent startling public revelation of the new Chinese stealth fighter, the J-20 seems to have caught the military command centers around the world by surprise. “I am intrigued by developments and am quite interested in the quantities and different types of technologies that we didn’t expect…”[1] said Vice Admiral Dorsett, director of naval intelligence. Though the “surprise” is perhaps an understandable laps in obtaining military intelligence due to the very closed nature of the Chinese system, it may be symptomatic of another problem: America’s military and economic distractions in other parts of the globe. Whatever the reasons, the announcement of yet another advancement, an anti-ship (read anti-American aircraft carrier) ballistic missile, capable of mid-ballistic trajectory aiming corrections, means that the U.S. Navy must be beginning to feel the splash from China’s warning shots across the bow.


It is not just breakthrough advances in new concepts that make the PLA, the Chinese People’s Liberation Army, an increasingly powerful force to be reckoned with. Take the PLAN’s submarines for instance (the Chinese navy and air force are branches of the PLA). Yes, they do have nuclear submarines, five of them at last count, but they are not really the backbone of China’s underwater strategy. It is the century old concept of diesel-electric propulsion, brought to a high degree of refinement that makes them one of the PLAN’s greatest threats.


This new class of diesel-electric boats is not your father’s submarines. Those who’s concepts of diesel-electric boats were formed from WWII movies such as “Run Silent, Run Deep” and the German classic, “Das Boot” may find it hard to grasp the dangers these air-breathing machines pose. First of all, there are at least 35 of them (some estimates reach 80 or more), distributed among the Northern, East, and South Sea Fleets. And then there is the fact that when running on the battery powered electric motors, they are among the very quietest and stealthy of the world’s silent services. Given that their main mission is littoral, near-shore protection, that is not much of a real problem. But an increasing number of them have another trick up their sleeve; one learned from Russian and German innovation.


Battery powered means of course the batteries need recharging. Diesel engines need air to function, necessitating the oft portrayed WWII submarine motoring on the surface, crewmen with binoculars scanning the horizon for threats. But what if a diesel could operate under water, independent of the air above? Enter the Russian AIP (Air Independent Propulsion) advanced diesel-electric Kilo Class submarine. Picture a Killer Whale with a snorkel, and you won’t be far off. It is not the intent of this writing to get too technical, so suffice to say that AIP is a process whereby oxygen is created and recycled while submerged. Over time many countries have worked on the AIP concept, but the Russian Kilo Class has proven to be one of the most successful and the design that appears to have most influenced recent Chinese AIP developments. The Song Class 039A/B entered service in 2004,[2] followed by the more advanced Yuan Class 041 bringing to a total of an estimated six in service. Now, instead of maximum of about 48 hours submerged for a conventional diesel, an AIP powered sub can remain below for a week or more. Other advantages of Air Independent Propulsion over nuclear include lower cost, the potential for adapting older vessels to the newer propulsion, and the ability to keep the submarine smaller than nuclear powered ones, thus reducing cost and making them more maneuverable a stealthy and adaptable to the more confined waters of, say, the South China Sea.


But really, can such submarines really be effective against the combined might of the United States Navy and its allies? Ask the commanders in charge of a 2007 U.S. naval exercise in the ocean between Japan and Taiwan. As reported in the British Daily Mail, “American military chiefs have been left dumbstruck by an undetected Chinese submarine popping up at the heart of a recent Pacific exercise and close to the vast U.S.S. Kitty Hawk – a 1,000ft super carrier with 4,500 personnel on board.”[3]All this in spite of protective shield of escort vessels, aircraft and two nuclear submarines. As was mentioned, these Song Class submarines are very difficult to detect when running on just its electric motors. As the editor of the authoritative Jane’s Fighting Ships noted, “It was certainly a wake-up call for the Americans.

“It would tie in with what we see the Chinese trying to do, which appears to be to deter the Americans from interfering or operating in their backyard, particularly in relation to Taiwan.” And, it might be added within the entire region China has now declared as its own core national interest, the South China Sea.



In December of 2008, pirates were surprised to see elements of China’s Southern Fleet operating off the coast of Somalia. They weren’t the only ones to take notice. The PLA-N guided missile destroyer DDG -169 Wuhan[4] arrived with a UN mandate, 16 anti-ship and 48 surface-to-air missiles on board as well as a special forces assault team and two support ships. It was a clear signal; some might call it a shot across the bow, to the nations of the world that China intended to operate as a blue water navy. It was not lost on naval historians that it was on these very same waters that Admiral Zhueng He sailed the last Chinese military fleet in the 15th century.


The world had not seen much of the Chinese navy until recently, but that is changing very quickly. China now makes visits with its impressive missile destroyers on courtesy visits at many ports around the world. They seem particularly interested in impressing their neighbors who surround the South China Sea. Recently, in what was perhaps just an innocent coincidence of timing, there occurred in Brunei an event that could be viewed as an illustration of the current situation in South East Asia. The Brunei Times newspaper ran a pleasant little article quoting the departing American attaché. He expressed his family’s regrets upon the leaving of the nice people he they had met there in the capital city of Bandar Seri Begawan. Overshadowing that news was a large photograph and headlines, welcoming the guided missile destroyer Guangzhou that had just arrived at Maura Port. Striding down the guided missile destroyer’s gangway was none other than the Chief of Staff of China’s South Sea Fleet, Senior Colonel Zhang Wendan. If you ever wanted a boat to impress your neighbors, the Guangzhou is the one to do it. This 5,850 ton stealth technology hull destroyer uses conventional diesel power for normal cruise speed, but can kick into direct jet turbo shaft drive when she really wants her top speed of 30 knots. As a multirole ship, the Ghuangzhou, and her sister ship, Wuhan bristles with 16 YJ-83 anti-ship and 48 SA-N-12 Grizzly surface to air missiles. Then there are the 8 HN-2 land attack cruise missiles, 6 torpedo tubes, 2 anti-submarine mortars, a dual-purpose deck gun and two radar controlled Gatling guns that can pump out 5800 rounds per minute. Clearly America was greatly overshadowed by this event.


All this advancement in military hardware has been the direct result of intense long term planning and determination. In march of 2011, the head of the Chinese Communist Party and Chair of the Central Military Committee, Hu Jintao, admonished the PLA to “enhance the sense of opportunity, sense of urgency, and sense of historic mission. … Speed up military preparedness, resolutely safeguard the nation’s sovereignty, security, and interests, and resolutely safeguard the current important period of strategic opportunity for China’s development.” This and other comments seem to come from the recognition that the United States is preoccupied elsewhere and its military expenditures are being curtailed. This at a time of significant economic growth in China as well as the ever increasing importation of scientific and military technology. It should also be noted that President Hu also emphasized the need for intense education and commitment to correct political thought, this at a time of increasing rehabilitation for Chairman Mao’s teachings.


[1] Aviation Week & Space Technology, Jan 6, 2011


[3] Daily Mail, Nov 10, 2007