ARTICLE: The $1.4 Trillion Question, by James Fallows, Atlantic Monthly, January/February 2008

A pretty good piece that poses a fabulous question and then gives you a "Casino"-like tale of money movement. Like Scorsese's movie, then, the article intrigues and informs but is somewhat unsatisfying: the "what do we/they owe" question is never really addressed. What Fallows doesn't address in China's vast surplus/savings is the huge and very real current sovereign debts and future mandates that are hidden in this development scheme: overseas resource dependencies demanding investment stakes, future aging costs, current and future enviro costs, future requirements to build out (and up) the poor interior, and so on. Those are real sovereign liabilities because the people will expect some/much government help in these matters over time to ensure continued development and sustained movement up the product chain (gotta get as rich as possible before getting old). Having said all that, Fallows' analysis of the government's logic is dead on. I suspect that, with all his time spent in China, we'll see a book that does a big turn in explaining China to America. That will be a huge journalistic endeavor, and most welcome from someone with his considerable narrative talents. As for the larger strategic question, we owe China a quiet international security order within which to develop, and sufficient partnership so as to obviate too much defense spending on their part. Eventually, Deng's "grand compromise" of 1992 (PLA supports him on market acceleration in return for money and cover to modernize) must be tempered so that China doesn't field a military for a war that should never happen and which it could never win. It needs to field a SysAdmin-heavy force that partners with us in mutual dependence: we can't rule the peace with our Leviathan-heavy force, but they can't rule war with their Leviathan-lite force either, so we must cooperate in extending and protecting globalization to our mutual advantage.. We owe China this strategic understanding before the 5th/6th generations of Chinese leadership hit some of the fish-or-cut-bait moments that must inevitably arise for them in coming years. Fallows hints at those underlying tensions at the end of the piece. (Thanks: TurcoPundit)