China's search for a grand strategy: look no further

Xi Jinping

Interesting piece in Foreign Affairs by Wang Jisi, Dean of the School of International Studies at Peking University and a key adviser to President Hu Jintao: "China's Search for a Grand Strategy."

Summary: With China's clout growing, the international community needs to better understand China's strategic thinking. But China's core interests are to promote its sovereignty, security, and development simultaneously -- a difficult basis for devising a foreign policy.

John Milligan-Whyte posted our grand strategy "term sheet" details in the comment section of the piece on the FA site.

We had tried to meet with Wang Jisi in December, but didnt' break through.  Clearly though, he's on the same wavelength in terms of searching for a grand strategic approach for China that puts it in a better relationship with the US.

As for the summary statement that promoting sovereignty, security and development simultaneously is a difficult basis for devising a foreign policy, I consider that an odd excuse. Countries combine those desires all the time in crafting a foreign policy.  What's so unique about China's attempt? Read into the text and you'll see:  the fear that internal unrest will trigger external meddling that attempts regime change.  Sounds like Libya, yes?  

Clearly, Jisi wrote his piece long before the Facebook Revs, but China's behavior since confirms this deep fear. China's fears in this regard are its Achilles heel.  Its history says that whenever China fears for its internal stability, it becomes very conservative and timid in its foreign policy.  These fears also why a new relationship with the US must be built, one that allows China the confidence to move ahead with political reforms without fear of external meddling.  

The system simply can't withstand a China implosion now, but it definitely desires - across the board - serious movement on political reform within China.  No one wants the push to come to shove, but the truth is, it has to happen sometime.  But as long as the US-China relationship contains such profound strategic distrust, it's far less likely too.  Sadly, strategic distrust of China on the US side contributes to our own inability to make necessary internal changes.

In the long run, we all know the US and China will run this world more than any other two states. The great third will be India. Nobody else will compare.

The realist realizes this and moves forward to shape the relationship toward what it needs to be.  The paranoid types on both sides stick with the status quo, piling up strategic weaponry in a hair-trigger deterrence mode. Our grand strategy term sheet seeks to break that logjam and force a new conversation, one less constrained by "separate tracks" US logic that condemns us to marginal progress.

Here's a harsh truth: the delta between our growing network-economic connectivity and our lagging pol-mil connectivity will be erased, one way or the other, in the future. We can see it evaporate in conflicts or we can see it retroactively boosted in response to them. Or we can act preventively, but not with the combined containment/outreach package we currently pursue. That is designed, almost cynically, for failure. It suggests that we will simultaneously seek China's cooperation and its internal regime change. So long as we imply the latter - however subtly, the trust will never develop and then we won't have the relationship we truly need when those domestic reforms are finally triggered, one way or the other, by the Chinese people themselves - on their schedule.

If President Obama truly believes in the "organic" revolution, he needs to do more to lay the groundwork for the strategic trust that allows America to be part of that inevitably and hopefully incremental process, because our current stance hinders those developments - to our and the world's disadvantage.

Hu is done, as his farewell DC tour in January indicated.  This is now all about making something happen with Xi Jinping (pictured above), who is a careful enough fellow in his own right, but not the constrained thinker Hu was/is.

WPR Feature: Managing Global Supply Chains a Key U.S. Advantage

co-authored with Stephen F. DeAngelis

While many in the West fret over the challenge of "rebalancing" the global economy after the recent global financial crisis, several trends suggest that the field of supply chain management could offer a key advantage for an America eager to double its exports by 2014. On the surface, supply chain management might not sound too sexy, but understand this: In today's globalization, neither companies nor countries compete -- supply chains do. Companies like Wal-Mart have known this for some time. Thus, positioning America to be the world's pre-eminent provider of secure, transparent and efficient supply chains will ensure that our economy masters globalization's competitive landscape in the fullest sense. 

Read the entire column at World Politics Review.

See also Steve's broader post on transforming global supply chains.

Charts of the day: The decline of state capitalism . . . in China!

From an Economist feature on rising entrepreneurship in China and how its "economic dynamism owes much to those outside the government's embrace."

More than twice as many enterprises since 2000, but the number of state-owned ones barely rises while the non-state number goes up more like 8-fold.  State-held assets less than 50%, with profits and sales less than 30 percent.  

Point:  the rise of state capitalism can be overstated.  China isn't succeeding through state capitalism, but despite its lingering presence.

WPR Feature: Demand as Power in a Resilient Global Order

One of the most revealing features of today's international system is that only two nations, America and China, possess sufficient power to truly disrupt it -- either directly, through the application of military force, or indirectly, by unleashing an uncontainable economic crisis. In fact, to truly derail globalization in its current trajectory, the two would need to act in concert, either by fighting each other directly or experiencing simultaneous economic collapses. Short of those two scenarios, modern globalization remains highly resilient to shocks of all sorts. That resilience is the only power that really matters in this world. It defines our global present, and it enables a global future worth attaining.

Read the entire feature at World Politics Review.

Chart of the Day: Why China's size matters in globalization

All that connectivity buys you a whole lot of constraints - on both sides.  But that's the essence of my rule-set logic.  Too bad our mil-mil can't keep pace.

China spends more on security inside China than defense outside

Crouching dragon, rolling SegwayPic here

FT story a while back, noting that Chinese internal security spending now bigger - at least officially - than defense.  Of course, both numbers are probably underreported, just equally so.

Source was new budget released by China, saying public security will now cost 624B RMB and defense 602B RMB.

In the US federal budget, I would say defense outweighs "security" by more than 2-1.

You want to know why China can never be a true superpower without being democratic?  Good example, there.

CoreGap 11.08 released - Obama’s “Chinese menu” of Past Presidential Doctrines

Wikistrat has released edition 11.08 of the CoreGap Bulletin.

This CoreGap edition features, among others:

• Obama’s “Chinese menu” of Past Presidential Doctrines
• Disaster in Japan and instability in Gulf likely alter global energy landscape
• China steps on growth brake, hunkers down on potential domestic unrest
• Mexico, at wit’s end over blood-soaked drug war, pushes US for relief
• Egypt’s political change agenda proceeds, but tougher economic reform awaits

The entire bulletin is available for subscribers. Over the upcoming week we will release analysis from the bulletin to our Geopolitical Analysis section of the Wikistrat website, first being "Terra Incognita: Obama’s “Chinese menu” of Past Presidential Doctrines"

To say that President Barack Obama’s foreign policy plate is full right now is a vast understatement, and it couldn’t come at a worse time for a leader who needs to revive his own economy before trying to resuscitate others (e.g., Tunisia, Egypt, South Sudan, Ivory Coast – eventually Libya?).  Faced with the reality that America’s huge debt overhang condemns it to sub-par growth for many years, Washington enters a lengthy period of “intervention fatigue” that – like everything else, according to the Democrats – can still be blamed on George W. Bush.

It is estimated that 30 percent of the current US federal deficit was set in motion by the Bush administration and another 30 percent by Obama trying to correct those mistakes.  But the biggest problem remains the 40 percent triggered by entitlements growth – the simple aging of America.  With China now applying the brakes, Japan suddenly and sensationally damaged by mega-disaster, Europe still processing sovereign bankruptcies, and Arab unrest pushing up the price of oil, there appears no obvious “cavalry” riding to the global economy’s rescue.  It would seem that America’s “circle the wagons” mentality has gone global, as every beleaguered leadership now looks out for itself.

Read the full piece here

More about Wikistrat's Subscription can be found here

To say that President Barack Obama’s foreign policy plate is full right now is a vast understatement, and it couldn’t come at a worse time for a leader who needs to revive his own economy before trying to resuscitate others (e.g., Tunisia, Egypt, South Sudan, Ivory Coast – eventually Libya?). Faced with the reality that America’s huge debt overhang condemns it to sub-par growth for many years, Washington enters a lengthy period of “intervention fatigue” that – like everything else, according to the Democrats – can still be blamed on George W. Bush.

Referenced from Wikistrat: http://www.wikistrat.com/geopolitical-analysis/obamas-chinese-menu-of-past-presidential-doctrines/#ixzz1Gs4QTx6a

Chart(s) of the Day: Re-imagining China as countries/US states

Per the popular US map that shows similar country GDPs, The Economist (by way of Robert Jordan Prescott) generates one for China.

Then there's Nicholas Vardy's version in his "Global Guru" newsletter (by way of Dan Hare). 

Which does up China with comparable US states.

Both designed to help you realize how big China is becoming in economic output.

Appearance on "The Alyona Show"

Where I blew it:  I moved around too much.  I have a terribly hard time holding still, because the more still I am, the more boring I am, and the more I move, the better I sound--but don't look.  I also got too close at points, letting my chin get covered by byline and making me too big relative to her in the 2-shot look.  Next time I will hang a cut-out over the screen so I know where my head should be.  Beware the big head!

It is a conundrum.

Other thing:  I have a clip-on mike that I could have and should have used!  Could have lit myself better too. Next time I will do better.

I had spent a good chunk of time just beforehand spreading mulch outside--hence the raccoon-like lower eyelids.

I will say, though, so much nicer just to do from office as opposed to the 2-3 hour effort to go all the way downtown, etc.  that part I simply love.

WPR piece on Indian strategist's take on China-US "term sheet" effort

Piece by Saurav Jha in World Politics Review on piece K. Subhramanyam wrote on the term sheet just before he died.

I excerpt the parts that included by rebuttals, which I gave Saurav via emails.

With Indian newspapers still carrying obituaries of the country's strategic doyen, K. Subhramanyam, who passed away in February after almost a half-century at the forefront of New Delhi's strategic debates, it is worth considering the object of Subhramanyam's concern during his final days: the implications for India of a proposed U.S.-China grand strategy agreement hammered out by a group of policy experts in Washington and Beijing. The document proposed a series of strategic compromises between China and the U.S., including a massive Chinese investment in the U.S. economy in return for an informal nonaggression pact, particularly with regard to the U.S. military's posture toward China in Taiwan. Indian analysts led by the late Subhramanyam, however, saw the proposal as a ploy by the Chinese to "use the U.S. to attain hegemonic power in Asia."

In the proposal, Subhramanyam heard echoes of the Nixon-Deng compact, born out of the expediency of the Cold War. That agreement saw the United States push huge sums of commercial technology investment into China, ultimately followed by the outsourcing of mass manufacturing. Now, by contrast, it is high technology that would be transferred to China in return for the $1 trillion that Beijing would invest in the U.S. private sector. Over time, these transfers would enable China to leverage its demographic advantages to become the world's dominant economy.

However, Thomas P.M. Barnett, one of the proposal's architects, rejected the significance of China's advantage in absolute demographic numbers. "The volume of bodies no longer determines strength in this world, especially when hundreds of millions of [those bodies] are impoverished, as they are today and will remain for decades in China," said Barnett. "It is much smarter to consider age." As Barnett explained, both China and the United States currently have a median age of 36. But with China aging four times as quickly as the U.S., its median age will hit 48 in 2050, while the U.S. will only have reached 39 . . . 

Subhramanyam highlighted the fact that, despite spelling out agreements on Taiwan and Iran, the strategic proposal is completely silent on Pakistan and its nuclear and missile-technology relationship with China. He questioned whether that amounted to conceding Pakistan and South Asia to the Chinese sphere of influence. Barnett disputes that interpretation. "The proposal wasn't meant to be universally inclusive," he says, "but to reference only those issues that created deep strategic mistrust between the U.S. and China. [For the U.S.], Pakistan doesn't qualify, for obvious reasons" . . . 

The timing of the strategic proposal was also suspect in Subhramanyam's eyes, who felt that its release just after Obama's visit to India was an attempt by Beijing to tempt Washington away from New Delhi with the offer of a major U.S economic bailout. His prescription was for India to move more quickly on forging closer ties with the U.S. and for proponents of nonalignment in India to reconsider their stand. 

Clearly, despite the world's shift toward multipolarity, the remaining superpower is still highly sought after by the most dynamic new poles, located on either side of the Himalayas. And the fact that an unofficial backchannel proposal attracted the attention of such a heavyweight as Subhramanyam reflects the stakes involved.

The China-India rivalry throughout Asia is obviously operative and growing, with Pakistan a key potential flashpoint.

One scenario that lightens this:  once US out of Afghanistan, US attention will shift to containing Pakistan and its many instabilities.  This may become the common goal around which new understandings are possible among Washington, Beijing and New Delhi.

Plopping a $1B bet on China getting old

Altered photo found here.

FT story from last month on Fortress Investment planning to raise $1bn fund to invest in housing for China's growing elder population. Fund is US-based and operates the largest senior independent living facilities in NorthAm.

Piece references the 4-2-1 problem (four grandparents, two parents, and one child to rue them all!).

Today 155m of 1.3b are over 65.  Add 100m by 2020.  

Focus will be on major cities with the funds to support development.

Interesting.

WPR's The New Rules: America Need Not Fear Connectivity Revolutions

A lot of international relations theories are being stress-tested by events in the Arab world right now, with some emerging better than others. Two in particular that are worth mentioning are Ian Bremmer's 2006 book, "The J Curve," which predicts a dangerous dip into instability when closed, authoritarian states attempt to open up to the world; and Evgeny Morozov's new book, "The Net Delusion," which critiques the notion that Internet connectivity is inherently democratizing. (In the interests of transparency, I work as a consultant for Bremmer's political risk consultancy, Eurasia Group, and penned a pre-publication blurb for Morozov's book.)

Read the entire column at World Politics Review.

India's Achilles heel: the Gandhian/Jeffersonian ideal

versus

Gandhi reified the village as the center of Indian life.  There you find the ones left behind in the rapture that is globalization's narrow advance into "shining India."  Gandhi is the modern Jefferson, and he shows you just how wrong that guy was.

Western investors may take eager note of India’s economic growth rate of nearly 9 percent a year. But that statistic rings hollow in India’s vast rural areas. Agriculture employs more than half the population, but it accounts for only 15 percent of the economy — and it has grown an average of only about 3 percent in recent years.

Critics say Indian policy makers have failed to follow up on the country’s investments in agricultural technology of the 1960s and ’70s, as they focused on more glamorous, urban industries like information technology, financial services and construction.

There is no agribusiness of the type known in the United States, with highly mechanized farms growing thousands of acres of food crops, because Indian laws and customs bar corporations from farming land directly for food crops. The laws also make it difficult to assemble large land holdings.

Yet even as India’s farming still depends on manual labor and the age-old vicissitudes of nature, demand for food has continued to rise — because of a growing population and rising incomes, especially in the middle and upper classes. As a result, India is importing ever greater amounts of some staples like beans and lentils (up 157 percent from 2004 to 2009) and cooking oil (up 68 percent in the same period).

Food prices are rising faster in India than in almost any other major economy — and faster than they did during the 2007-8 surge.

The whole India-v-China model is a fascinating experiment in Jefferson versus Hamilton, or Gandhi versus Deng.  It's not a state capitalism versus market thing, because the ratios there aren't all that different.  It's really a question of whether you like cities and industry versus villages and agriculture.  

China's Aviation Industry Corp plans another team-up with US firm

Get used to this line-up

WSJ story on how AVIC (Aviation Industry Corporation), which has already announced a joint effort with GE on commercial airliners, is now teaming with a small CA-based avionics firm (US Aerospace) to offer its signature big helicopter in US markets, to include defense markets and possibly even a bid on the Marine One contract to supply the White House.

Yes, there will be push back, but eventually these things will happen.

For years now, I've fantasized about China Southern buying Southwest Airlines, for no particular reason other than they have similar names and, when I flew China Southern and was warned in advance by so many people how much it sucked, I found that its service was just fine and actually on par with my favorite SWA.

But think about it:  We used to have this huge shipping fleet, and now most of it flies under other nation's flags.  Why?  Got so routine and so thin margin, that US companies got out of it, abandoning to cheaper providers.  I've heard plenty of pilots in the US airline industry say the same thing will eventually happen there, and the logical flagship companies will hail from nations with the biggest flier markets.

And you know who that will be eventually.

So yeah, if you want to compete globally, you have to compete in China, and if you want to compete in China, you'll need to be - partially - Chinese.  That is how it works in economics and trade and it won't change over China's rise.

Resource war ahead! China "tightening its grip" on rare earths!

Chart found here.  It all looks so suspiciously similar huh?  Like production magically rises to meet global demand.  Pretty strange, that.  Like some invisible hand guides the process . . .

China, which controls 90 percent of production of rare earths globally right now, is believed to be stockpiling a strategic reserve (always suspicious when somebody else does it, but entirely sensible when the US does).  The US, for example, still has defense-tended stockpiles of strategic commodities from WWII!  China, as in all things, simply catches up, like creating a strategic petroleum reserve like ours.

WSJ gets it right:

Many rare-earth minerals aren't actually rare, and China doesn't have a monopoly on deposits of any particular rare-earth elements.

China has half the world reserve total, then the FSU has just under one-fifth, then the US with about 1/10th, and the rest of the world owns the remainder one-fifth.

Naturally, there are calls for the US to start similarly stockpiling rare-earths, rather than rely on potential enemy China.

Not a big trick.  Somebody's just got to spend the money to make the US mines profitable.

But it's interesting:  the more China connects to the world, the more nervous we get--and plan to protect ourselves with these various dreams of autarky.  Quite the reversal from the Cold War, huh?

Listen to the podcasts of Tom Barnett on Colorado talk radio (Sun, 30 Jan 2011)

Go here for the one-hour (two segments = 5 & 6).  Good show!

Fallows and I are of similar minds on China

Jim Fallows was supposed to be on that NPR segment with me and Gideon Rachman, or so I was told by host Guy Raz. It didn't happen for whatever reason, but clearly Mr. Fallows was tuned in and came away feeling that we shared a very similar perspective on China.

In 2005 Fallows bought a spot in the "The New Map Game" that my little consultancy then, known as the New Rules Sets Project put on with Alidade, a Newport-based gaming firm.  He was very quiet during the 3-day event, pretty much camped out in the China Team room and taking furious notes. I think he saw it as part of his prep work for his eventual move to China.

Anyway, Fallows was really taken by my old bit about "What would it take for America to look and feel like China?" which I used in the NPR interview.  He ran with that for a bit in a series of posts, and got some interesting feedback from readers.

The posts:

• Are Thomas P.M. Barnett and I the same person?
• Imagining America as China
• More on 'Being Like China'
• More on Imagining America as China

Esquire's Politics Blog: Who Should Worry About the Tunisia Fallout, Really?

Details of the downfall of Tunisia's longtime strong man Zein el-Abidine Ben Ali are familiar enough: The spark that triggers the street-level explosion of social anger (a young man, hassled by the government for his pathetic gray-market activities, decides Plan B is to set himself on fire); the frantic government attempts at crackdown (close school!); only to be followed by the offering of sacrificial lambs (take my minister — please!); and, finally, the embarrassing departure of the big man himself. At this point, the rump government is throwing anything it can into the angry fire, hoping it will burn itself out. And the "unity" government doesn't seem to be doing much better.

With any such revolution (color this one green — as in money, despite all the Iran-esque web chatter), there is the temptation to read into it all sorts of larger meaning. This time around, I think the best route is simply to note which parties — outside of Tunisia — should be made supremely nervous by the unfolding events. With the possible exception of Crazy Qaddafi....

Read the entire post at Esquire's The Politics Blog.

On NPR's "All Things Considered" Weekend Edition with Guy Raz

Did the interview in local PBS studio back on the 6th during snowstorm.  Was told by host Guy Raz that I would be mixed in with Gideon "Zerosum" Rachman of FT and Jim Fallows of Atlantic. Latter apparently didn't happen, because the 11 mins is just Rachman and I.Guy Raz

Here's the excerpt from the site text on the segment, which is labeled, "The U.S. And China: Rivals That May Need Each Other":

Chinese President Hu Jintao's scheduled visit to the White House this week comes at critical moment in U.S.-China relations.

America has entered a new year with a rising national debt and deficit projections. Meanwhile, China continues its ascent as a global economic player. In the years to come, an economically bruised U.S. may have to share the superpower spotlight with the competition.

Still, former Pentagon strategist Thomas P.M. Barnett tells NPR's Guy Raz, American hype over China's rise is overblown, while foreign affairs commentator Gideon Rachman predicts that China-U.S. relations will get "bumpier" over the next few years . . .

Overblown China Hype

Yet Barnett, chief analyst at Wikistrat and contributing editor for Esquire magazine, cautions that Americans' concern over China's rise is "really out of control."

"It's very similar to the way the British looked at us, say, around the turn of the century," Barnett says. "They imagined we could have bought and sold them. The Chinese couldn't do the same with us. Their economy is still a fraction of ours."

That economy may be growing, but it will still be decades before China's people reach an economic status equal to Americans, he says.

Thus, a cooperative U.S.-China relationship is not only a good idea, Barnett says, but it's also "absolutely essential when you consider a global middle class aspiring to a lifestyle that the planet cannot sustain if we use old resource models."

The end of America's status as the world's sole super power wouldn't be a bad thing, either, Barnett argues. Part of the American contribution after World War II was establishing a global economic system that allowed great powers to rise without instigating a war.

"We've created the system for these people to rise, and now we seem uncomfortable with the fact that we're not going to be the sole pole anymore in the system," Barnett says. "And we don't seem to know how to ask for anybody else's help."

Our challenge with China, he says, isn't about competition. "Our biggest problem with them is getting them to come up to the level of responsibility that their networks and their influence around the world actually demands from them."

"We need that help," Barnett says, "because based on our own efforts, we can only do an Iraq and an Afghanistan — and not much else."

Go here for the audio and "story."

Tomorrow or Thursday:  Jim Fallow's various posted responses to the segment.

WPR's The New Rules: Why America Needs to Demonize China

President Barack Obama came into office promising a new sort of bilateral relationship with China. It was not meant to be. Washington hasn't changed any of its long list of demands regarding China, and Beijing, true to historical form, has gone out of its way to flex its muscles as a rising power. With the recent series of revelations concerning Chinese military developments, the inside-the-Beltway hyping of the Chinese threat has reached fever pitch, matching the average American's growing fears of China's economic strength.

Read the entire column at World Politics Review.