China: moving ahead with yuan-settled trade

WSJ story noting that "China government will expand a trial program for settling trade deals in yuan to most of the country . . . in an effort to accelerate the internationalization of the Chinese currency after a slow start."

The program started just last July, replacing the long-held norm of denominating trade deals using dollars or other foreign currencies.  Until now, only Shanghai and Guangdong-province companies could settle in yuan and only with companies based in Hong Kong, Macau and a few foreign nations.  Now the program grows to 20 provinces and major cities.

The goal?

... to gradually make its currency more important internationally, and reduce is reliance on the dollar, which [Chinese officials] have said leads to outsize impact from U.S. economic policy on China and other countries.

The fear is natural enough:  ". . . U.S. deficits could lead to inflation that weakens the value of the dollar."

This shift will be slow, because as China proceeds, it moves into an undiscovered territory.  But it's a good thing and an inevitable shift. Frankly, we need China to make the dollar less relevant as a global reserve currency.  It won't stop being one--ever.  But it should not dominate as it has in the past, because that reality allows us too much freedom for fiscal irresponsibility.

As I have said here many times, I would like a future global economy where the euro and the yuan (or some "asia" that includes the yuan) can, in combination, overshadow the dollar and force its corrections in value. This is the next, most natural iteration of the global economy, and however China moves itself and us collectively down that path, we must welcome the evolution, as unsettling as it may seem to us in the here-and-now.

Do not fall into the fallacy of thinking this shift only benefits China and only penalizes us. The discipline we gain is much needed, and China will find itself ever more constrained by this new financial connectivity.

Africa: the stronger hand this time around?

FT special report on African oil & gas.  The somewhat optimistic but seemingly justified vibe:  this time around Africans hold a stronger hand:

African countries with oil and gas reserves have grown accustomed to hearing how exciting they are. Less explored and than the Middle East, possessed of sweeter crude than Latin America and in no position to imitate Russia’s strongarm tactics, they are, energy experts keep telling them, the future.

Explorers have opened up new swathes of the continent, from Lake Albert in the east to the 1,100km offshore frontier discovered in the Gulf of Guinea. Ghana and Niger are due to pump their first barrels in the coming months.

Billions of dollars have poured into deepwater and natural gas developments in Nigeria and Angola, the industry’s linchpins.

“In the past 10 years, African oil producers have become the beautiful brides,” says Charles Ukeje, an international relations specialist at Nigeria’s Obafemi Awolowo University. “We are witnessing a new scramble.”

But crude is trading at roughly three times the average of the previous two decades and African governments have begun to respond to the surge of interest by asking with increasing vehemence: “What’s in it for us?”

Their hand is certainly strengthening. US dependence on African crude is projected to hit 25 per cent by 2015. Late last year, Nigeria surpassed Saudi Arabia as the third biggest supplier of crude to the US.

In April, China imported more oil from  Angola than anywhere else. Europe is hoping a gas pipeline across the Sahara will reduce its dependence on Russian oil – and was rattled when Gazprom tried to muscle in on the project. 

But the days when international institutions exhorted African countries to offer incentives to lure investment at all costs are gone.

“African states are entitled to receive a fair deal for the exploitation of their natural resources,” said the authors of a survey of the continent’s economies last month by the African Development Bank (AfDB) and the Organisation for Economic Co-operation and Development.

Oil investors’ ability to strike workable bargains in Africa will go some way to deciding whether what are believed to be the world’s biggest untapped hydrocarbon stocks will remain in the ground or whether the region will shoulder a greater share of global production.

Nigeria, home to 60 per cent of sub-Saharan Africa’s proven oil reserves and 70 per cent of its gas, although hampered by graft and mismanagement, has been the most abrasive battleground for this renewed reckoning.

While I will still maintain our Africom has nothing to do with this: the big oil producers for the US are in West Africa, whereas all the AQ activity is to the north and east.  Plus, quite frankly, the oil flows out of Angola and Nigeria no matter the level of violence--sad fact (although the truth is that Angola, after all those years of violence, is amazingly stable right now).

More to the point: the bulk of the new suitors are Asian--not American.

The difference this time for Africa?  In the past, the Western interest was always defined by boom-and-bust mechanics, whereas the Asian demand this time around will be substantial and sustained.  America's long efforts to encourage marketization and integration in Asia have helped create this historic opportunity. That's why Africom's primary focus, in my opinion, should be in enabling this "scramble" by improving local capacity for security provision (yes, target the baddies, such as they appear, but focus most on making this good happen in a sustainable fashion).

There is no question that social tensions will be created, and that governments in Africa will respond sub-optimally, but this is a huge opportunity not to be screwed up, and a perfect locale for Sino-American strategic partnership to emerge.

One thing to chase the race leader, another thing to lead the race

Nice Fareed Zakaria piece in Newsweek.

The quote below struck me:

A Chinese businessman said to me over lunch in Beijing, “In many ways the financial crisis and the discrediting of the American model has been bad for us. You see, we don’t really have an ideology anymore. We don’t know what we believe in. We used to think it was some version of the American Dream—liberalize, open up, grow. But then you had your crisis. We can say, it proves we’re strong. But where do we go now?”

Leading a race is VERY hard, because you're never quit sure how fast to run.

The Chinese are coming! The Chinese are coming!

Maddeningly inscrutable people! What could they possibly be thinking?

Old "Blueprint" citation said 100m Chinese tourists by 2020.  Chart in this FT piece showed 50m by 2010, so right on target.

The Chinese have something to learn on touring:  their tendency, just like when they emigrate, is to stay highly enclaved (one Balinese guide:  "The problem we have is they come on package tours with their own guides, stay in their own hotels, and east in their own restaurants.")

Training-wheels, perhaps, for now, but getting them to branch out will be natural enough over time:  they'll learn more foreign languages, and more of us will learn Chinese.

It is a common theme of great science fiction that someday, we'll all speak some Mandarin.

The Chaiwan free trade deal moves that much closer to fruition

The lastest on the deal's advance from the FT (6/14):

China and Taiwan have reached agreement on a wide-ranging trade deal that would be an important milestone for the warming of relations between the two cold war rivals.

The deal, called the Economic Co-operation Framework Agreement, or Ecfa, would also pave the way for Taiwan to join in the flurry of free trade deals being made by other Asian countries. China had previously blocked such efforts by Taiwan as it claims sovereignty over the democratically ruled island, but that opposition is expected to fade with the signing of the new agreement.

Without the opportunity to participate in trade deals, Ma Ying-jeou, Taiwan president, said last week that his country would be “sure to lag behind, to be forced out of the global economic sphere and to be marginalised”.

Negotiators from both sides said they had made key breakthroughs after a third round of talks held in Beijing on Sunday, particularly in the “early harvest list” of what sectors would be included in the initial round of opening. The contents of that list had been the main sticking pointin previous negotiations.

The breakthroughs allow the deal to be formally signed at the next semi-annual talks between the two sides. It also secures the centrepiece of Mr Ma’s policy of rapprochement with China, which is by far Taiwan’s biggest export market and where more than 1m Taiwanese already live and work.

The agreement, however, is facing strong political opposition within Taiwan, amid fears that economic integration could lead to political reunification and that the economic benefits of the deal will not be as great as Mr Ma has indicated.

My continuing point:  this is the third great member to join China's future Asian Union, after Macau and Hong Kong. Eventually, we are talking one Asia, many systems.

Chart of the day: China's dependency on foreign oil surpassing our own "addiction"!

NYT source.

This is why Sino-American cooperation--especially in the naval realm--on security access to oil is a crucial building block of global security.

The Chinese have already voiced this possibility.  We need to make it a reality, and end this pointless friction over the now-dead-in-the-water Taiwan scenario.

WPR's The New Rules: China’s Factory Unrest Signals Peak of Cheap Labor

China’s spreading labor unrest is rightfully portrayed in the Western press as an immense challenge to that country’s status as the “world’s factory floor.”  But to Beijing’s bosses, it’s likewise a tool for addressing rising income inequality, which is why the Communist Party has remained most reticent to address it head on.  Such a hands-off approach carries additional dangers, however, the most prominent being that, once emerging labor activists get a taste for pressing their collective demands, China’s political leaders could find themselves riding a Solidarnosc-like trade-union tiger that’s not easily tamed.

Read the entire column at World Politics Review.

China to world: screw off on global warming, we got coal to burn

NYT piece analyzing China's future energy plans.

Bradsher story comes with pretty pics of solar panels and wind farms, but this photo from previous Bradsher story more applicable to the content.

Gist:  secure sources win out over the environment--meaning lots more coal to be used.  You have to understand that China's energy profile is already stunning skewed toward coal--like no other major economy on the planet.

But get used to this logic:

In other words, as China counts on more years of global leadership in economic growth, global warming remains a secondary concern. Secure sources of energy to fuel that growth are what matter most, whatever the implications for world energy markets and the global environment — not to mention foreign investors, who may or may not have a significant role to play in China’s energy industry under the draft law.

The proposed law, which is expected to be adopted by early next year, says that “energy supply should be where you can plant your foot on it,” meaning that as much as possible should come from within China, said Li Junfeng, a senior energy policy maker and member of the interagency committee drafting the law.

That belief has underpinned China’s rapid expansion in renewable energy, because it tends to be made in China, Mr. Li said. China has just emerged as the world’s largest manufacturer of wind turbines and solar panels, and plans to be the world’s biggest builder of nuclear power plants in the coming decade. It invested nearly twice as much as the United States last year in renewable energy.

But energy security also explains the continued reliance on coal, for which China has the world’s third-largest reserves, after the United States and Russia. Burning coal, which produces four-fifths of China’s electricity, has already turned China into the world’s largest emitter of greenhouse gases by an ever-widening margin each year since 2006.

The vaunted China model will take a severe beating as the leadership stubbornly sticks to this path, because it will reveal to the world that China puts itself before the planet when it comes to energy--just like everybody else.

The future face of China captured in a perfect NYT headline

David Barboza (frequently brilliant) piece in NYT with perfect, crystalizing headline:  

In China, Unlikely Labor Leader Just Wanted a Middle-Class Life

Story comes out of the recent strike at a Honda factory.

The dynamics here are also perfect:

Tan Guocheng is hardly a self-styled labor leader. Age 23 and introverted, he grew up among rice paddies and orange groves far from China’s big factory towns.

But last month, an hour into his shift at a Honda factory in the southern city of Foshan, Mr. Tan pressed an emergency button that shut down his production line.

“Let’s go out on strike!” he shouted. Within minutes, hundreds of workers were abandoning their posts.

Colleagues described Mr. Tan’s leadership as an uncharacteristic act of courage; Mr. Tan said he simply wanted a pay raise. Regardless, he has helped touch off a wave of strikes at Honda plants and other workplaces in China that are still playing out in surprising and significant ways.

Though Mr. Tan has since been fired by Honda for “sabotage” and moved back to his village, striking workers at another Honda plant less than 100 miles away in Zhongshan marched in the streets on Friday and made a new demand: the right to form an independent labor union.

“This is a remarkable development,” said Anita Chan, a labor expert at the University of Technology in Sydney. “Most strikes in China tend to be about not being paid or being mistreated. This was different. The workers were demanding very high salaries. And they want to elect union leaders democratically.”

The two-week strike at Mr. Tan’s plant forced Honda to shut down its four assembly plants in China and to eventually offer 1,900 workers in Foshan a 24 to 32 percent pay raise. That got to the heart of Mr. Tan’s complaint.

Leaving his home in central China four years ago, Mr. Tan had hoped that working on an assembly line for a global company like Honda would be his path to a middle-class future.

But the pay was meager, he says, and inflation ate away at his earnings. And last January, when Honda offered to increase his $175 monthly salary by a mere $7, Mr. Tan, who planned to marry soon, was distraught. It was not enough money to buy a house or raise a child.

“I couldn’t understand how they could give us so little,” he said. So he decided to fight back.

This is a story about what China becomes when it's all grown up and industrialized.  

There will be countless more Tans in this story, and they will be the best thing that's ever happened to the country.

God bless the fellow for just wanting what he's due.

Roach on resilient Asia

As someone with a lopsided head myself, I got to love this crooked face.

Fabled Stephen Roach in the FT. He decouples as chairman of Morgan Stanley Asia and joins the faculty of Yale this summer.

Roach is famous for his bearishness.

Here, he's pretty bullish.

Three lessons stand out from his three years in Asia, he says:

First, Asia learnt the painful lessons of the 1997-1998 regional crisis very well

Hence, the huge build-up in reserve currencies.

Second, there is the China factor.  As I have criss-crossed the region, there has been no mistaking Asia's new China-centric character.

Another frequent theme here.

Third, Asia cannot presume that just because it weathered the global crisis it has discovered the holy grail of economic prosperity.  In an increasingly complex and integrated world, trouble has an unpredictable way of mutating.

I'm on board for all three judgments, as readers of this blog will attest.

Roach notes that in the late 1990s, exports made up 35% of GDP among developing economies.  Now it's 45%. Asia has a "full plate," says Roach, when it comes to the rebalancing issue.

I also concur with Roach's concluding fear, something I've been saying for the past decade actually:

But I leave Asia with one big worry--that the rest of the world doesn't get it.  I worry, in particular, about the steady drumbeat  of China-bashing in Washington--especially as we approach mid-term elections this year.  

Thus Roach heads off to academia to change some minds as best he can.

We can only wish him well, cause they come no smarter.

The New Core not doing what they're told!

I want you to frickin' behave!Pair of NYT articles about "pliable ally" Turkey now playing "thorn" and China's PLA types being all blunt in their criticism of U.S. foreign policy and perceived meddling (always, the Taiwan thing!).

Naturally, the NYT frets: these are signs of America's diminished power.

Boo hoo! say I.  Integrating rising great powers into a stable system ain't for sissies or whiners or the self-doubting types.

The fear and the reality:

Turkey is seen increasingly in Washington as “running around the region doing things that are at cross-purposes to what the big powers in the region want,” said Steven A. Cook, a scholar with the Council on Foreign Relations. The question being asked, he said, is “How do we keep the Turks in their lane?”

From Turkey’s perspective, however, it is simply finding its footing in its own backyard, a troubled region that has been in turmoil for years, in part as a result of American policy making. Turkey has also been frustrated in its longstanding desire to join the European Union.

“The Americans, no matter what they say, cannot get used to a new world where regional powers want to have a say in regional and global politics,” said Soli Ozel, a professor of international relations at Bilgi University in Istanbul. “This is our neighborhood, and we don’t want trouble. The Americans create havoc, and we are left holding the bag.”

Turkey’s rise as a regional power may seem sudden, but it has been evolving for years, since the end of the cold war, when the world was a simple alignment of black and white and Turkey, a Muslim democracy founded in 1923, was a junior partner in the American camp.

Twenty years later, the map has been redrawn.

Washington does want everybody in their lane all right; it's a very old habit born of a superpower rivalry.  And now, there are so many types in DC who are desperate to recast China's rise in the same manner.  So when China doesn't start being more American right quick, we get nervous.  And those fears expand that much more when previous strategic employees like Turkey start acting like they think they're actual partners--as in people who balance each other's interests instead of just obeying!

Turkish foreign minister Ahmet Davutoglu seems to have a head on his shoulders:

“Economic interdependence is the best way to achieve peace,” he said at his home in Ankara last weekend. “In the 1990s we had severe tension all around us, and Turkey paid a huge bill because of that. Now we want to establish a peaceful order around us.”

Nations sharing economic interdependencies do get meddlesome in their neighbors's affairs.  For a long time, the biggest dependencies for most nations were bilateral ones with the US or a former colonial power. Nowadays, these interlocking relationships are all over the place, so rising powers are taking all sort of cues from all sorts of players, meaning America's voice, while awfully important, no longer drowns out everybody else's.

And so we better get used to being lectured to by powers who expect to do their sharing of lecturing--in addition to the usual receiving of lectures from us.

As for Chinese flag officers getting more forceful in public and closed-door sessions with US officials, understand two things (and no, I don't direct the following rant particularly at the general who made the forceful comments in front of Gates at the recent Asian security gathering, because his comments struck me as pretty routine in their grievance airing):

First, way too many of these guys are political and economic retrogrades, like they are most everywhere else on the planet (yes, there's been huge, beyond-evolutionary improvement in our ranks these past two decades but I do remember the Cold War dinosaurs well). Yes, they know their own business well enough, but almost to a man, these guys have no normal-world experience outside a life lived exclusively in the military. Put a mike in front of them and they will make some of the stupidest economic and political statements you've ever heard.  We've gotten used to a whole new generation of flag officers in the West who are so smooth in these circumstances that they sound like PR machines (minus any ideological DNA), but these skills don't yet exist in places like China, where they will utter the most foolishly bold comments with little sense as to how they are perceived (or what bullshit they're spouting).  And even when they speak in more military terms, their lack of awareness of any connectivity between their dreams of warfare and that big old world of economics out there is just stunning.  They will brag on all sorts of capabilities with almost no understanding of the real-world limits of those capabilities. They're blowhards--pure and simple.

And yeah, our experts and our media tend to lap it up big-time: "Oh my God! Did that Chinese general just say/write that!"). Why? The usual self-serving reasons.

Second, also understand that Chinese general have almost no experience in international or bilateral venues. Most of these guys have been kept under wraps for their entire careers. When I've spoken at military conferences in recent years, it's not unusual to find out that such-and-such an event was only the first or second time the PLA has ever participated, so the experience base just isn't there. These guys therefore tend to be a strange combo of loose cannons and overly-scripted.  The more we interact with them and the more they interact with the world, this experience gap will fade, and I've met plenty of mid-level PLA officers (my age) who impress the hell out of me for their superbly sophisticated minds and better skills at expressing themselves, so we won't be waiting for long.

Per the embedded link above to the WAPO story about a Chinese navy admiral voicing the opinion that all that's good in US-Chinese relations is due to them and all that's bad is due to America, I have no doubt that this sort of blunt one-sided is truly thrilling for Chinese officials to witness.  They do feel like they're doing all they can and they do harbor significant--and hardly irrational--fears that America will inevitable make them its primary enemy--just out of habit.  We will witness plenty such, getting-it-off-their-chest bravado in coming years, and we should take it stride--just like the Brits did with us a century ago.  The Chinese have--quite frankly--no idea what they're getting themselves into with assuming more of a global leadership role.  So let their arrogance lead them into situations that their wisdom will eventually rescue them from.  You can't force socialization on this scale; the Chinese will be who they imagine themselves to be for as long as possible, refusing to change--again, just like we acted for a very long time (arguably, the Chinese will have no such luxury in this rapidly evolving globalization era). 

Primary point of this admittedly snotty rant: don't get wrapped around the hype.  Countries, just like people, grow into roles. Whether they're "ancient civilizations" or not, their current rise puts them in unfamiliar territory, and no, there ain't no ancient Chinese secrets for what lies ahead.  Everybody is making it up as they go along, because a global landscape with multiple rising, prosperous, and strangely peaceful great powers is completely unprecedented.

But it was bought with your US tax dollars, so show some pride and act--as they say in the NFL--like you've been in the great-powers' endzone before.  As always: play up to potential and not down to the competition, but respect the competition.

Chart of the day: Why China will survive a real estate bubble burst

Economist story subtitled, "China's economic boom can survive a property bust.

First reason is the fact that most Chinese mortgages are for less than half the house's value, so hard to go "underwater" (unlike in US, where the habit became, between first and second mortgages, one of being 100% in debt, so any drop in prices immediately put a lot of people underwater--i.e., owing more than the house was now worth).

Second reason shown in the chart:  why the yuan value of all mortgages in China is skyrocketing, as a percentage of GDP, the total still remains quite low (less than 16%).  In the US, the share is more like 80%, so a lot more potential impact when a bubble bursts.

Good news for China and the global economy.

Gates: a 5GW warrior working a wedge

PLA Daily photo.

WAPO piece by way of WPR's Media Roundup.

The gist:

Defense Secretary Robert M. Gates accused China's military on Thursday of impeding relations with the Pentagon, taking exception to its unwillingness to invite him to Beijing during his trip to Asia this week.

Gates told reporters that there is a clear split between China's political leaders, who he said want a stronger military connection with Washington, and the People's Liberation Army, which he said does not.

"I think they are reluctant to engage with us on a broad level," he said. "The PLA is significantly less interested in this relationship than the political leadership of China."

Beijing's political and economic relations with Washington have gradually improved in recent years, as the emerging global superpower and the established one have tried to come to terms with each other. But military cooperation has lagged, a source of frustration for Pentagon officials.

They say that communication with the People's Liberation Army needs to improve to deal with regional crises, such as South Korea's accusation that a North Korean submarine torpedoed one of its warships in March, to broader strategic issues, such as the long-term buildup of China's military forces. Washington also has been seeking China's support -- without much success -- in trying to deter Iran from developing nuclear weapons.

We make our choices on things like Taiwan arms sales and military aid to Pakistan, and these choices allow hardliners in the Chinese and Indian militaries to make their case against stronger cooperation with us. At some point, we decide other things like North Korea and Iran really are more important, or we keep with these yin-yanging relationships that never quite come to fruition. You have to remember:  we're the established superpower, and they are the risers, so sensitivities must be observed, just like the Brits did with rising America a century ago. It's just the cost of doing business.

But I like Gates' explanation here, because it's a truthful one: the PLA can't afford too much comity with the US military, because it undercuts their own Leviathan funding and pushes the nation down the path of assuming more responsibility for its expanding global economic network ties, which will bog down the PLA in all sorts of SysAdmin work.

But in Fifth Generation Warfare terms, this is how we do it.

The Chinese take a page from my Irish ancestors

WAPO story.

The gist:

The Chinese government has begun ramping up research, production and training related to the humble spud, and hopes are high that it could help alleviate poverty and serve as a bulwark against famine.

The challenge of feeding a growing nation on a shrinking supply of arable land while confronting severe water shortages has long been a major concern here. China has to feed one-fifth of the world's population on one-tenth of its arable land, and the nation's expanding cities are consuming farmland at breakneck speed. China estimates that by 2030, when its population is expected to level off at roughly 1.5 billion, it will need to produce an additional 100 million tons of food each year.

That statistical reality could change eating habits here. Potatoes need less water to grow than rice or wheat, and they yield far more calories per acre. 

Makes you wonder why the Irish got so heavy into potatoes, because there's no shortage of water there.  Must be the tough growing season.

But the pattern is clear enough:  cut back on water-intensive crops and move into more hardier fare (rice to potatoes).  Obviously, rice isn't going anywhere, but as one Chinese ag expert put it, "Rice, wheat, corn -- we've gone about as far as we can go with them. But not the potato."

Some perspective on this shift:  China actually ALREADY produces and consumes more potatoes than any other in the world. But when it comes to consumption, because we're talking such a huge population, the Chinese lag in per capita terms, eating only one-third the amount of potatoes that Russians do and two-thirds the amount Americans eat.

If I could get every Chinese to eat a potato a day . . ..

A sense of just how risk averse the Chinese single-party state is

NYT story on China's first astronaut orbital space flight back in 

The point:

As the nation held its collective breath, China’s first astronaut, Yang Liwei, floated back to the motherland, having orbited Earth 14 times in the Shenzhou 5, or Divine Capsule.

It was October 2003, and the national broadcaster CCTV carried live coverage of the momentous event, from Mr. Yang’s famous pleasantries uttered in space — “I feel good” — to the instant that workers opened the capsule door to reveal the pale but smiling face of a hero, offering irrefutable evidence that China’s maiden manned space voyage had gone off without a hitch.

Or had it?

In a lecture he gave to a group of journalism students last month, a top official at Xinhua, the state news agency, said that the mission was not so picture-perfect. The official, Xia Lin, described how a design flaw had exposed the astronaut to excessive G-force pressure during re-entry, splitting his lip and drenching his face in blood. Startled but undaunted by Mr. Yang’s appearance, the workers quickly mopped up the blood, strapped him back in his seat and shut the door. Then, with the cameras rolling, the cabin door swung open again, revealing an unblemished moment of triumph for all the world to see.

The content of Mr. Xia’s speech, transcribed and posted online by someone who attended the May 15 lecture at Tianjin Foreign Studies University, has become something of a sensation in recent days, providing the Chinese a rare insight into how their news is stage-managed for mass consumption.

Titled “Understanding Journalistic Protocols for Covering Breaking News,” the speech was intended to help budding journalists understand Xinhua’s dual mission: to give Chinese leaders a fast and accurate picture of current events and to deftly manipulate that picture for the public to ensure social harmony, and by extension, the Communist Party’s hold on power.

My point:  China's ruling party is beyond conservative.  They cannot afford defeats or losses or embarrassments or anything that suggests loss of control.

So long as China remains a one-party state, it cannot be a serious global leader.  To lead is to risk failure, and the CCP has no taste for that.  The bums cannot be thrown out, so they cannot risk anything truly significant.

Two recent mentions overseas: China (People's Daily) and Italy (Il Tempo)

Two recent overseas pieces reference the blog and the vision.  The first is an op-ed in the English-language version of the People's Daily Online, the Chinese Communist Party's mainline publication.  The authors provide this dual biography:

John Milligan-Whyte is called the "new Edgar Snow" and the "21st century Kissinger" and is the only non-Chinese to be elected the winner of the Social Responsibility Award from the China Business Leaders Summit. John Milligan-Whyte and Dai Min are the executive producers and co-hosts of the Collaboration of Civilizations television series adapted by the eight books they wrote in the America-China Partnership Book Series published in English and Mandarin in 2009-2010 that created the "New School of America-China Relations." They founded the America-China Partnership Foundation and Forum in 2008 and the Center for America-China Partnershipin 2005, which was recognized in 2009 as "the first American think tank to combine and integrate American and Chinese perspectives providing a complete answer for America and China's success in the 21st century."

 I am rightfully accused of being a peace-monger on China in a column titled, "Thomas Barnett recommends US never go to war with China."  Tripping through the piece:

Peaceful coexistence has today become both all that the US can afford militarily and economically and essential for US economic and national security. The Iran and North Korea crises are becoming impossible for the US to defuse without long over due new US policies towards China. The limitations of American military and economic power are unfortunately dangerously self-evident. The US military is already over extended and bogged down in two long wars. The US financial, economic, unemployment and government solvency crises are relentlessly entering even more dangerous stages. It is easy for the US to start or be forced into new wars that are impossible for anyone to win given the potential speed and economic impact of major wars. The world has changed. Conventional American policies and policymakers' mindsets must change faster than they can. 

Fortunately, President Obama recognizes the need for and is now urgently searching for unconventional policies capable of bring the US back from the brink of economic collapse and unbearable humiliation or catastrophic wars with Iran and North Korea that can overnight engulf the Middle East, Asia and the world in economic, social and political collapse . . . 

What is China to do? New American policies towards China are essential for the US and China to be able to solve the America's economic and the North Korea, Iran and other national security crises. Conventional American policies exacerbate rather than solve these crises for the reasons explained by the Center for America China Partnership's books and articles and now fortunately by Thomas P.M. Barnett. 

On June 2, 2010 Thomas Barnett stated that China: "can now legitimately claim to be working on behalf of the global economic security as much or more than America. In short, it can claim that 'what is good for China is good for the world,' an argument to which only America could lay serious claim in past decades. This is why we're never going to war with China; codendency on globalization is profound." 

US News & World Reports describes Thomas Barnett as "one of the leading strategic thinkers of our time." Barnett has seen and understood the world from his roles of senior advisor to the US Secretary of Defense, Chief of Staff, Central Command, Special Operations, and led the five-year NewRulesSet.Project for the U.S. military. He is the author of two books that have been profoundly influential: The Pentagon's New Map: War and Peace in the 21st Century and Blueprint for Action: A Future Worth Creating. Barnett's comments were posted on his website,http://www.thomaspmbarnett.com/globlogization/tag/china, in response to an article in the Financial Times on May 24, 2010, http://www.ft.com/cms/s/0/de337ab6-66ca-11df-aeb1-00144feab49a.html.

The Financial Times article titled "The way to increase America's exports to China" was published as the second round of the Strategic and Economic Dialogues began by Dr. Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a subsidiary of China's Ministry of Commerce, and John Milligan-Whyte, chairman of the Center for America China Partnership. Barnett quoted five paragraphs from the article stating that they are a "nice summary of China's thinking regarding our bilateral economic relationship" and "an excellent and hard-to-refute summary argument" . . . 

Thomas Barnett has an extraordinarily American reputation and track record of successfully prompting American policymakers to realize that profound changes in US military strategic thinking are required. Today the US's conventional economic and national security policies have not provided either economic or national security although the US economy is by far the largest in the world and US military spending is over half of all nations . . . 

Then we get some Paul Kennedy--not exactly my favorite take.

Then this interesting twist:

Chinese policymakers have understood for thirty years, as Thomas Barnett stated this week, that America and China must never go to war. President Obama implementing that advice requires healthy changes America's whole relationship with China. China's military spending is 12 percent of the US, although its population is 500 percent larger. China has been at peace with all nations since 1979 and had the fastest growing economy in the world because it's policymakers adopted Deng Xiaoping's policies of opening up to foreign investment and peaceful coexistence with America and all other nations. America must now reciprocate Deng Xiaoping's policies. President Obama must become America's Deng Xiaoping.

For 60 years there has been a fundamental core problem in US-China relations that only President Obama can and needs to change now: US policymakers and policies have not accepted the legitimacy of the Chinese government. Chinese policymakers were optimistic when President Obama was elected with the promise and mandate for change at a time of profound American economic and national security crises. It has been 60 years since the birth of modern China and resulting outbreak of the Korean War, which never formally ended as the sinking of a South Korean naval vessel reminded us. The views of Thomas Barnett quoted above support an unconventional perspective for American policymaking: that America should accept peaceful coexistence with the 22 percent of mankind and the legitimacy and success of their indigenous government. It has been very successful in managing sustained economic growth, social and political stability, peaceful foreign and defense policies, and reform and opening up to American investment .  .  .

The cool twist was the reverse imaging on Deng-Obama.  The second para oversells the lack of legitimacy argument, but I suppose that's a backhanded reference on Taiwan, because that's where the text goes next.

A bit down the road:

American policymakers wonder what has changed, since they are merely continuing conventional US policies of selling arms to Taiwan irrespective of China's national security needs? Everything has changed. American policymakers do not understand sufficiently that the US's relationship with China has abruptly and prematurely forever entered a new 21st century era when the US Federal Reserve Chairman Bernanke and Treasury Secretary Paulson told the world that the US financial system and economy would collapse without immediate government bail out of insolvent American banks and insurance companies. Now America is itself, like many nations, insolvent. What has changed is what Paul Kennedy feared would happen in The Rise and Fall of Great Nations published in 1987. Hopefully, President Obama will agree with Thomas Barnett's recommendations . . . 

A bit of Chinese hubris, I might argue.

Better bit, which I argue with wholly:

The third question is does President Obama believe that many existing American policies towards China undermine America's economic and national security? The White Paper cites as an example, that US policy is to prevent Chinese oil companies from buying American oil companies, prevent China from interfering with America's sources of oil and acquiring oil from nations America disapproves of such as Iran. This approach seeks to be win-win only for America and is not realistic. America and China, the two largest economies, consume more oil than they produce. Many US policymakers today believe that this makes war between the two nations inevitable. 

It means exactly the opposite. The two nations that consume 42 percent of the world's oil must be both economic and military allies, aligning their economic and national security in a new era of peaceful coexistence, or neither will have the oil they require. It benefits no nation for oil to vary in price from 47 to 147 US dollars a barrel. Collaborating America and China could stabilize the price of oil at a price of 65 to 70 US dollars a barrel benefiting all nations and militarily and economically ensure the peace that is essential for steady oil production and transportation globally. The US and China entering a new era of really collaboration, because they both recognized they will never go to war, would change the Iran and other issues profoundly.

In a style typical for People's Daily, a certain listing of grievances packs the piece, which ends with a near-term reference to the slighting of Gates.

In summary, Chinese policymakers refusing the US Defense Secretary's request to visit China signals President Obama personally that conventional American policymaking will not be effective in the Iran and North Korea crises. It signals President Obama personally that Chinese policymakers need the US to accept the legitimacy and success and reciprocate the peaceful coexistence policies of China's indigenous government, and to reciprocate and open up to Chinese companies investing, and thus creating US and Chinese economic and employment growth. That breakthrough is what is essential to make the world governable.

Overall, pretty interesting to watch a fellow peace-monger work the argument from the other side, clearly operating within certain sensitivities (e.g., all pertinent grievances must be aired--very Chinese).  To my knowledge, this guy is the only American I've ever heard of--maybe even the only foreigner--ever to have a foreign affairs column at the People's Daily, so he's certainly in a fascinating category--whatever it is.  Upon sending him an email, he sent me back a long reply that catalogues all the content he's running through their system as a one-man content empire, so once I get his most recent tome, I'll either review it here or at WPR, because it's all certainly indicative of something worth commenting on.

Anyway, something to remember:  Christianity is all about sin, so it's all about repentance equating to salvation. Confucianism deals with the problem of disorder, so the solution is all about harmony leading to social order. In other words, the old justice-versus-order conundrum.  There is a middle ground upon which the two sides can meet, but we have to have to understand how differently the Chinese view the world and its dangers.  We will accept a lot of disorder in the name of justice; they will not.  Somewhere between lies globalization's path for a long time to come.

Second reference comes in Il Tempo.

Piece about PM Berlusconi and his foreign policy ambitions in Africa, with a special notion of taming Gaddafi.

My left-over Romanian is such that I can just about understand the reference to the libro PNM.

Non a caso la Cina sta investendo miliardi di dollari in Africa e gli Stati Uniti hanno deciso di rilanciare la loro politica di cooperazione e sviluppo nell'area. Il continente dimenticato, in un mondo che si fa sempre più stretto e affollato, diventerà molto presto la scacchiera dove le grandi potenze si contenderanno il primato. In fondo la storia anche in questo caso ama ripetersi. Fu così anche nell'epoca coloniale, quando gli imperi decisero di allargare i loro confini. Fu una delle tappe della globalizzazione. Gli effetti sono quelli di una società connessa che ha le sue aree di crisi e di guerra dove è disconnessa. Quest'ultimo è un concetto sviluppato da un pensatore strategico di nome Thomas P.M. Barnett che in un libro intitolato «La nuova mappa del Pentagono» spiega come siano le società disconnesse (dalle relazioni internazionali, dall'economia, dalla rete) a creare focolai di crisi pericolosi per la stabilità mondiale. Pensateci bene, per lungo tempo anche la Libia è stato un Paese disconnesso, fuori dal network internazionale, isolato e, purtroppo, terrorista.

The piece seems to argue that Berlusconi is pursuing a strategy of heightened connectivity with North Africa. How very Roman.

Canada takes its economic cues from China now?

Bloomberg BusinessWeek piece.

The "China club" of countries whose economies are increasingly driven by China's demand for raw materials are Australia, Brazil, Malaysia and Peru.  All have been forced to raise interest rates to tamp down hot growth caused by China.

Now experts expect Canada to join that club and raise rates instead of doing the usual, which is to follow our Fed's lead.  Canada feels forced to because of the growth created by China, India, Korea and other Asian economies' demand for minerals and energy and food.

Scary for some to think Canada no longer takes it cues from us, but great for anybody who wanted pillars of demand outside of the US consumer, because while that worked wonders for two decades following the fall of the Berlin Wall--fueling the rise of hundreds of millions of people out of poverty in Asia, now it's Asia's turn to help out.

So this is good, but new and therefore disturbing to many.

WPR's The New Rules: Obama's Strategic Patience

A lot of national security experts would like a lot more fire -- and firepower -- from our president. Op-ed columnists across America worry that our friends no longer trust us and that our enemies no longer fear us. President Barack Obama's quest for more-equitable burden-sharing among great powers seems to be getting us nowhere, so why bother with more-equitable benefit-sharing?

Read the column in full at World Politics Review.

Afghanistan's minerals deposits now super-sized by U.S. geologists

Beneath the sheep be lithium

NYT story via Michael Smith and David Damast and HuskerInLA.

I know the temptation for crowing here is intense, but I would suggest going very easy on the cascading assumptions.  There are a lot of reasons why this news has remained unknown this deep into globalization's expansion.

The "shocker" here is that U.S. geologists have confirmed what has been long suspected: Afghanistan's mineral riches are significant. Just like with Iraq, once outside experts got some free range, a lot more reserves were found.  Frankly, that'd be true for any Gap nation that's remained largely cut-off from the outside world for reasons of too much dictatorship or not enough law. Hell, it was true for Russia on oil.

This is being presented as a game-changer, but I think the overselling is premature.

First off, understand that the mining world doesn't exactly get turned upside down on this basis.  This is great news and potentially game-changing for Afghanistan if a lot of things go right--for a long time, but it will not alter any larger realities in the global marketplace (where China is the demand center of the global mining industry), except to end this nonsense notion that somehow Bolivia controls the bulk of the world's lithium (Whew! Dodged that would-be superpower!).  There is lithium being found in plenty of places, trust me.  The same discounting can now be applied to China's alleged cornering of the entire rare earth market--also a vastly oversold fear.

Mineral riches in the range of $1T certainly shove Afghanistan into the big-boy category (past estimates said Afghanistan was Syria-sized in oil and had just enough minerals to qualify as resource-cursed--a line I've used to very ho-hum effect in the brief for two years now, suggesting that no American audience I've ever come across would suddenly jump and say, "Yeah baby, this changes everything!") , but the primary reason why the place has never been sufficiently checked out before now has been the security situation/lack of governance, and that doesn't exactly change overnight on the basis of this information. Nor will it change--I suspect--the Obama administration's unwillingness to sign up for a significant combat presence that drags into the next election at anywhere near the level to maintain enough security to get balls seriously rolling.  "Blood for lithium" doesn't exactly ring the average American citizen's bell.  It also won't likely make the Taliban any less fierce in their fighting--anything but.  If you don't believe me, then please remember that the Naxalite Maoists in India do best in areas where mining deals strikes the local as inequitable.

Most importantly (and this is what Enterra learned in our Development-in-a-Box work in Kurdish Iraq), the discovery doesn't change but only reveals the lack of counterparty capacity in Afghanistan--as in, plenty of outside parties willing to engage in the transaction, but Afghanistan's government is nowhere near capable of playing the counterparty.  And yeah, it takes two to tango.  Remember the first thing Jed Clampett did after he moved to Beverly Hills:  he got himself a Mr. Drysdale.  There will be a lot of entities vying for that role in Afghanistan, and in many ways, it would be better if that role wasn't hogged by the Americans.

Finally, don't assume any of this is a big surprise to the Chinese, whose overly-generous 30-year deal on the Anyak copper mine now looks like the start of a beautiful and logically far larger relationship.  China, after all, has a border with Afghanistan (76 clicks long); we don't.  The basic pattern long cited here of Americans doing the Leviathan heavy-lifting while the Chinese reap the SysAdmin winnings isn't exactly snapped by this news--anything but.

So as before, I think the key remains getting a whole lot more rising great powers deeply--and I mean DEEPLY--interested in helping secure Afghanistan for the long haul.  Mining isn't a slam-dunk but years upon years upon years of stability required for the riches to flow, and then they have to flow with some transparency and positive popular impact, otherwise you can find yourself in an endemic conflict situation that's just Afghanistan-the-failed-state-as-we've-known-it now supercharged by a fungible source of funding for any side willing to kill enough to control its resulting wealth.

Before anybody gets the idea that somehow the West is the winner here, understand that we're not the big draw on most of these minerals--that would be Asia and China in particular.  What no one should expect is that the discovery suddenly makes it imperative that NATO do whatever it takes to stay and win and somehow control the mineral outcomes, because--again--that's now how it works in most Gap situations like Africa.  We can talk all we want about China not "dominating" the situation, but their demand will drive the process either directly or indirectly.  There is no one in the world of mining that's looking to make an enemy out of China over this, and one way or another, most of this stuff ends up going East--not West.

If anything, this news should be used to leverage more of a security contribution out of regional great powers--to include China.  So less of a game changer than perhaps a very welcome game accelerator--as in, China is a lot better positioned to reap the mineral rewards that is Afghanistan, with the question being, "How long does it take for China to step up security-wise and stop low-balling its effort there?"  Certainly, the notion that we turn Afghanistan and all its minerals over to Karzai's cronies, Pakistan's ISI and the Taliban strikes me as truly cracked, but the truth remains:  we and our Western allies aren't enough to make the security situation happen on our own--not for the long timelines required.  If it were that easy, these discoveries would have been made decades ago.

I'm not trying to diminish the importance of the findings here (although, again, whenever an isolated place like this finally gets checked over, the "stunning" surprise is the same--as in, there's lots more than anybody knew previously); I'm just saying the macro dynamics aren't all that altered.

So again, less a game-changer than potentially a tremendous game-accelerator.  China is now that much more incentivized to accelerate its penetration, and it would be nice to see that happen on a timetable that helps us while effectively drawing Beijing into more explicit partnership.

Or we can pretend this is going to remain a NATO-dominated show that somehow achieves Afghanistan's potential as a long-term supplier of important minerals to the global economy.

If I've said once in the brief, I've said it a thousand times (literally!):  Americans cannot integrate a nation-state on the other side of the planet into the global economy all on our own.  Our Leviathan can rule any battlespace, but the SysAdmin's victory is necessarily a multilateral one.

Here's the simplest reality test I can offer you:  if we're just at the initial discovery phase now, we're talking upwards of a decade before there will be mature mines.  Fast-forward a decade in your mind and try to imagine the US having a bigger presence in Afghanistan than China.  I myself cannot.

Start with that realization and move backward, because exploring any other pathway will likely expose you to a whole lotta hype.

Taiwan: conquering the world--and China. They call it "Chaiwan"

Economist story.

Starts by saying the most important tech show in the world is arguably Computex in Taipei.

The numbers:

Taiwan is now the home of many of the world’s largest makers of computers and associated hardware. Its firms produce more than 50% of all chips, nearly 70% of computer displays and more than 90% of all portable computers. The most successful are no longer huge but little-known contract manufacturers, such as Quanta or Hon Hai, in the news this week because of workers’ suicides (see article). Acer, for example, surpassed Dell last year to become the world’s second-biggest maker of personal computers. HTC, which started out making smart-phones for big Western brands, is now launching prominent products of its own.

The weakness of this model:  Taiwan improves parts over time and manufactures them with great skill and speed, but it does not innovate on the leading edge, and increasingly, all that manufacturing moves to China.   In the info age, this is almost the equivalent of the "commodity trap":  your margin is always so razor thin that you cannot invest sufficiently in branding and R&D, argues one expert.

With China aspiring mightily to move up the chain, Taiwan's fate is ever-more intertwinned:  China recruits Taiwanese firms to help it set higher tech standards, and Taipei loosens restrictions on FDI and tech transfer into China.

Killer ending:

It is hard to see China dethroning Taiwan as manager of the world’s electronics factories soon, says Peter Sher of the National Chi Nan University. But the IT industry in the two countries will increasingly become intertwined, predicts Mr Ernst. “Especially in IT, Taiwan is becoming more and more part of the Chinese economy,” he says. Indeed, some tech types already fuse the pair into “Chaiwan”.

Say good-bye to this great power-war scenario.  The game has moved on.