China

Trump and China

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sse-stock

Trump has, famously, gone after China on its trade policy.

In January 2000, President Bill Clinton boldly promised China’s inclusion in the World Trade Organization (WTO) “is a good deal for America. Our products will gain better access to China’s market, and every sector from agriculture, to telecommunications, to automobiles. But China gains no new market access to the United States.” None of what President Clinton promised came true. Since China joined the WTO, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs. It was not a good deal for America then and it’s a bad deal now. It is a typical example of how politicians in Washington have failed our country.

There is an interesting analysis of China’s stumbling economy in the Observer today.

Here is a top ten guide for the perplexed.

Central Planning: Central planning, central planning. The history of the abject failure the Soviet Union’s five-year plans should tell you everything. Command and control economies that report to one man (in a nation of 1.3 billion people) are doomed from the start. Top down economic decisions often look bold and start out highly stimulative, but then degenerate into inefficiency, waste, politics and fraud.

Political Corruption: As the command and control economy generates liquidity, the demand and direction of the distributed capital becomes a political tussle. Decisions on how much steel, cement, coal, glass solar panels, high speed trains and shopping malls—in short everything—are not done in China as a cost benefit analysis by risk capital, a job difficult enough in itself. (Witness the capitalist economies’ booms and busts.) In China, this liquidity was allocated by political muscle, massive bribery and kickbacks, rather than economic justifications.

Basic Gangsterism: Counterfeiting, knockoffs, copyright infringement, theft of intellectual property these were a part of the booster rockets of China’s economic rise. It was all supposed to go away after China joined the WTO in 2001. It didn’t. It just became more institutionalized. Foreign companies needed Chinese “partners” in auto production, healthcare and technology. These “partners” crippled the potential productivity of the investments and led to frequent disputes and even more corruption… as in the GlaxoSmithKline scandals.

There are a total of nine reasons, many addressed in Trump’s piece above.

Now, the economy of China may be in free fall.

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Sic Transit Gloria China

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  • Shoeshine boy trading club, China chapter

    • There’s an old Wall Street legend about Joseph Kennedy, bootlegger and head of America’s original soap opera political family. At the height of the stock market mania in the ’20s, he received a stock tip from a shoeshine boy. It goes something like this:

    But the boy was not of the timid kind. “Oh yeah,” he yelled back at Kennedy, “well, I got a tip for you too: buy Hindenburg!” Intrigued, Kennedy turned around and walked back. “What did you say?” “Buy Hindenburg, they are a fine company,” said the boy. “How do you know that?” – “A guy before you said he was gonna buy a bunch of their stocks, that’s how.” “I see,” said Kennedy. “That’s a fine tip. I suppose, I was a little harsh on you earlier,” he said, pulling off a glove and reaching in his side pocket for some change. “Here, you’ve earned it.”
     
    Little did the boy know that Kennedy, a cunning investor, thought to himself: “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.”

    This is supposedly how Joe avoided the financial ruin of the crash. He was probably too busy stockpiling whiskey to really care very much, but it does make for a good story.

    We’re reminded of this old saw today with some distant rumblings in the markets. Last week I was wondering what might cause our stock market to break out of its summer doldrums. Over the past few days we may have gotten the answer. While everyone was looking at the Greek crisis, China’s stock market has been crashing.

    The Shanghai Composite Index more than doubled in the last year up until a few weeks ago. All that time it was rising, economic reports indicated the Chinese economy was slowing. Since the peak in mid June, it has dropped over 30%. Last night it was down another 6%, and it would have been more if not for the Chinese government halting trading in most of the stocks. Bloomberg is reporting that Chinese regulators have banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months.

    Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.

    This rule sounds like it’s meant to ban bigwigs and fatcats from bailing out on the economy. However, like Kennedy in the ’20s, all the big money already exited and left regular citizens holding the bag. The Chinese always had a high rate of savings, but recently they have been putting more of it into their stock market using margin to to double down on already precarious positions.

    Chinese brokers have extended 2.1 trillion yuan ($339 billion) of margin finance to investors, double the amount at the start of the year. But this often-cited figure is only part of the mountain of debt taken out to finance share purchases. Another 1.7 trillion yuan may have flowed into stock market investment from wealth management products, online lending sites and other sources, according to a Bloomberg survey of analysts.

    This was a good old fashioned bubble, and now it looks like it’s bursting. This will have repercussions all over the world. As of this morning, US stock markets are down over 1%. With the reliance of our industrial and financial industries on the hyper-interconnected global markets, this one probably won’t go down quietly.

    The Chinese Strategic Tradition: A Research Program (II)

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    This post is the second in a series. It was originally published at The Scholar’s Stage on the 26th of May, 2015. I strongly recommended readers start with the first post in this series, which introduces the purpose and methods of this essay. That post focused on what is published in English on Chinese strategic thought. This post focuses on what has been written about Chinese strategic practice–that is, the military, diplomatic, and political history of China’s past.

     

    A map depicting the most famous military campaign in East Asian history, decided at the Battle of Red Cliffs (208 AD) in modern-day Hubei.
    Source: Wikimedia

    STRATEGIC PRACTICE 

    In the West, the study of traditional China has been the domain of the Sinologists. For reasons that are entirely natural but also too complex and lengthy to explain here, this has meant that historians studying traditional China have focused their efforts on the history of Chinese philosophy, aesthetics, literature, and religion, as well as the closely related fields of archeology, linguistics, and philology. The much lamented decline of political, diplomatic, and military history across the American educational system had little perceivable effect here, for there was not much political, diplomatic, or military history to begin with. [1]

     It should not be a surprise that many of the most important books on Chinese military and diplomatic relations have not been written by historians, but by political scientists. The interest political scientists might have in these topics is obvious, for theirs is a field devoted to the scientific and theoretical exploration of politics and international relations. The real mystery is why it took so long for political scientists to start writing about traditional East Asian international relations in the first place (most of the important books are less than a decade old). The answer to that question is not too hard to find if one looks at the books being written. The new crop of scholars writing these books hail from the international relations (IR) side of the science, and are part of a growing critique of the grand IR theories the discipline traditionally used to make sense of international affairs. [2] These theories were for the most part developed and tested in reference to traditional European great power politics.  One of the central barbs of these critiques is that we cannot know if the grand theories of generations past describe truly universal laws  or simply describe patterns unique to European history if these theories have not been tested on case studies outside of the last few hundred years of European politics. In response, scholars have searched for case studies outside of Europe with which they can test these theories or find the data needed to develop new ones entirely. East Asia, a region filled with bureaucratic states thousands of years before their development in the West, was a natural place to start.

    The problem these researchers repeatedly ran into was that their fellow political scientists were not familiar enough with East Asian history to follow their arguments and there were no good primers on the topic to refer them to. So theses scholars ended up writing the historical narratives others would need to read before they could assess their theoretical arguments. Thus Victoria Tinbor Hui‘s chapter on the Warring States (453-221 BC) in War and State Formation in Ancient China and Early Modern Europe is one of the best narrative accounts of Warring States great power politics; Wang Yuan-kang‘s Harmony and War: Confucian Culture and Chinese Power Politics contains one of the only accounts of Song Dynasty (old style: Sung, 960-1279 AD) foreign relations and one of the most fluid narratives of the Ming Dynasty‘s (1368-1644) adventures abroad; and David Kang‘s East Asia Before the West: Five Centuries of Trade and Tribute has the most coherent discussion of the Chinese “tributary system” written in the last five decades. Historians have lauded these books for the amount of historical research that was poured into them [3], and I second their appraisal. As a field IR should take Asia more seriously and it should engage with historical sources more thoroughly than is common practice. However, I cannot help but lament the circumstances that pushed IR scholars to adopt these methods. Hopefully historians feel some shame over the sorry state of the field and how difficult it is for outsiders to approach their research.

    One example will suffice to prove the point. I mentioned that Wang Yuan-kai’s War and Harmony has one of the few complete accounts of the Song Dynasty’s international relations. As far as scholarship goes, the amount of material devoted to this topic is middle-of-the-road: there are some periods where scholarship is more plentiful–say, the Late Ming, or the Qing (Ch’ing, 1644-1912), and there are some other periods where the scholarship is much more scarce–say, anything about the Tang (T’ang, 610-907 AD) or Han (206 BC-220 AD) dynasties. It is an interesting period to work with, for it is one of the few times in Chinese history when China was faced with external enemies whose military power was undeniably stronger than her own. It was the time of some of the most famous military figures and most horrible military disasters in Chinese history.  It also saw some of the most historically influential debates about how to manage civil-military relations and the relationship between economic prosperity and military power.

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    The Chinese Strategic Tradition: A Research Program (I)

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    Mao Zedong writing On Protracted Warfare (Yan’an, 1938)
    Source: Wikimedia.

    This essay was originally published at The Scholar’s Stage on 26 May, 2015. Because of its length it has been divided into two posts, both lengthy in their own right. This–the first of these two posts–is republished here at Chicago Boyz with little alteration. The second half of the essay shall be posted here later this week.

    INTRODUCTION


    Last fall I wrote a popular series of posts outlining the history of the eight decade war waged between the Chinese Han Dynasty and the Xiongnu (old style: Hsiung-nu) nomadic empire. My posts were a response to a prominent American strategic theorist who misunderstood the history of the Han-Xiongnu relations in his search for enduring patterns in China’s military and diplomatic history relevant to China’s foreign relations today. Unfortunately, this experience was not a singular event. It seems that every month some new book or article is published pushing a misleading version of Chinese history or a strained interpretation of classical Chinese political thought to shore up a new theory of what makes China tick. I could devote this blog solely to refuting these poorly sourced theories and never run out of things to write about.

    Despite these errors, I have a great deal of sympathy for those who pen them. They face a nearly insurmountable problem: many of the thinkers, strategists, and conflicts most important to the Chinese strategic tradition have next to nothing in English written about them. Critical works have yet to be translated, translated works have yet to be analyzed, histories of important wars and figures have yet to be written, and what has been written is often scattered in obscure books and journals accessible only to experienced Sinologists. English speakers simply do not have access to the information they need to study the Chinese strategic tradition.

    This needs to change. It needs to change both for the sake of strategic theory as a discipline, which has essentially ignored the insights and observations gleaned from 3,000 years of study and experience, and for understanding the intentions of our rivals and allies in East Asia, who draw upon this tradition to decide their own political and strategic priorities. But in order to make these necessary changes we need a clear picture of where we are now. This essay attempts to provide this picture. It is not a bibliographic essay per say, for I will freely admit that I have not read all of the books and research articles I will mention below. Some titles I have only read in part; others I have not read at all. However, the goal of this post is not to review the results and conclusions of all these works, but to outline where research has been done and where more research is needed. For this purpose awareness suffices when more intimate knowledge is lacking.

    Mastering 3,000 years of intellectual and military history is a gargantuan task. But in order to find the answers to some of the questions inherent in the study the Chinese strategic tradition, it must be done. I make no such claim of mastery. My expertise is uneven; I am most familiar with both the strategic thought and the actual events of the China’s classical period (Warring States through the Three Kingdoms era, c. 475 BC-280 AD), and am probably weakest when discussing the first two decades of the 20th century, a time critical to the development of the tradition but difficult to master because of the number of political actors involved, the complexity of their relations, and the great intellectual variety of the era. Despite these weaknesses I know enough to chart out the broad outlines of current scholarship, a charge most specialists in strategic theory cannot attempt and most Sinologists would not desire. These biases and proclivities have kept the two disciplines far apart; there is an urgent need for these two scholarly bodies to draw together. If this essay–which is addressed primarily to the first group but should be accessible to second–helps in some small way to bring this to pass I shall consider it a grand success.

    This essay shall have three parts divided over two posts. The final section is a list of recommendations on how to establish and develop the study of the Chinese strategic tradition as an academic sub-field, as well as some thoughts on where individual Anglophone scholars might focus their research. The two earlier sections will review what has been published in English about the Chinese strategic tradition already. The term “the Chinese strategic tradition” is usually used in reference to the thinkers and the theorists of Chinese history, not the commanders and ministers who actually implemented policy. In the West this is almost always how the topic is discussed. Texts like Sun-tzu’s Art of War (hereafter, the Sunzi) are dissected with little reference to the way its thought was consciously implemented by those who studied it most carefully. This is a mistake. Most of the pressing questions in this field can only be answered by looking at how Chinese soldiers and statesmen actually behaved, and most of the errors common to Western punditry can be sourced to this tendency to ignore actual events in favor of theory. [1] In the case of ancient histories–whose account of events were highly stylized and moralizing–this distinction blurs. However, for the sake of organization I shall maintain the distinction between strategic thought (a subset of intellectual history) and strategic practice (a subset of diplomatic, political, and military history), covering each in turn.

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    Future History Friday — China’s “Days of Future Past” Come Closer

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    Back on July 25, 2014 I posted a column here called “Future History Friday — China’s Coming “Days of Future Past” where I stated that China’s hyper-aggressiveness with its neighbors would make Japan act like a “normal nation,” increase its military defenses of the Southern Ryukyus and make military alliances with its neighbors to contain China. Today, a “flaming datum” of that prediction arrived. Japan has just announced steps to bring those “Days of Future Past” closer for China. The Japanese are moving to militarily garrison Miyako and Ishigaki with ground troops and mobile anti-ship missile batteries.

    JGSDF Type88 Anti-ship cruise missile in truck mobile launcher. Batteries of which are to be deployed to the Southern Ryukyus islands.
    JGSDF Type88 Anti-ship cruise missile in truck mobile launcher. Batteries of which are to be deployed to the Southern Ryukyus islands. Image Credit: Wikimedia Commons

    See:

    Japan prepares to deploy troops on Miyako and Ishigaki｜WantChinaTimes.com

    Watch Out, China: Japan Deploys 600 Troops, Missiles near Disputed Islands | The National Interest Blog

    The May-June 2015 Issue | The National Interest

    Miyako and Ishigaki were air bases for Imperial Japanese Army and Navy Kamikaze planes based on Formosa — modern day Taiwan — during the March – June 1945 Battle for Okinawa. Today, they are being prepared to support any operations Japan’s Self-Defense Forces are ordered to do by the Japanese government…including communications to and air support of Taiwan in case of a Mainland Chinese Invasion.

    A Google map of Miyako and Ishigaki islands, part of the Okinawa Prefecture. They are now to be the site of mobile anti-ship cruise missile batteries.as well as ground troops to secure them
    A Google map of Miyako and Ishigaki islands, part of the Okinawa Prefecture. In March – June 1945 they were forward bases for Kamikazes attacking the US Navy. Today they are become the site of Japanese Self-Defense Force Type 88 Surface-to-Ship Missile Batteries, as well as Japanese ground troops to secure them.

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