With the challenges of deepness and complex geology, China has no choice on shale gas but to seek foreign help

FT story on how "China opens shale gas exploration to foreign joint ventures."

It's described as a "milestone policy change that will allow foreign energy companies to play a greater role in developing China's rich potential reserves of shale gas."

China has all the same ambitions as the US: reduce dependency on foriegn sources of coal and oil, plus simply move "down" the hydrocarbon chain to less CO2 emissions.

The irony:  to escape one form of foreign dependence is to invite another.

Ancient Chinese secret: Modernity shapes society just like any country in West

NYT story (As China Ages, Beijing Turns to Morality Tales to Spur Filial Devotion) shows that China not really all that different from West:  urbanization, industrialization, modernity all conspire to make "sandwich" generations (caring for kids and parents at same time) less caring about their elderly parents.

Beijing tries to instruct them with old morality tales.  It ain't working.

Great piece.

I sneak off to Denver for another speech.  This time it's a commodities (gold) focused convention.

Sign of the times: Morsi's first big foreign stop = China

Nice WSJ story on this seminal example of south-south ties.

The "bamboo network effect:  Increase your trade with China and you increase your trade with China's network and the world at large.

But the trick for an Egypt:  awfully hard to follow in China's wake, so you tend to import more from China than you sell it.

China's challenge:  demographic aging means it needs to shift some portion of manufacturing (within overall processing trade network) to cheaper labor sites as China's labor gets more expensive.

Some of that shift China wants to direct inward to its interior provinces.  Some will go to SE Asia, experiencing a big demo dividend.  Some will go to India, which experiences an even bigger one.  Some to Middle East - still more, and some to Africa - the biggest demo dividend out there.

You say it's international corps that will make all these decisions, and that's true, but increasingly those corps are Chinese.  Plus, think about who's got the cash in the system for that FDI.

If you're developing and want to emerge in globalization today, you're reaching out to China - not the West.

Split the difference on the S. China Sea disputes! Impossible! Only businesspeople are so naive!

I know the non-Tebowed Republicans like to ask, What would Reagan do?  But Reagan's example is mostly inappropriate now.

The real historical players to cite are our two best Dutch diplomats:  the Roosevelts, Teddy and Franklin.  Both were perceived (incorrectly, I believe) as hostile to business when they were all about taming capitalism's worst instincts in a massive progressive era that stretched across their two seminal presidencies.

We are in the same territory now, replete with Teddy's multiple rising great powers following a huge expansion of the globalization of that era (the rather exploitative Euro version).  

So we need to concern ourselves with, a la Clad and Manning in the FT, "What Roosevelt would do in the South China Sea."

Planting flags on islets, declaring cities where there are too few residents to fill a restaurant, and huffing and puffing over uninhabited rocks are acts more suited to a Gilbert and Sullivan farce than to nations in the 21st century.

Absurdities aside, the tensions in the South China Sea could shape the balance of power in Asia and put at risk the $18tn east Asian economy. However, a century-old diplomatic idea used by a former US president offers a solution to the crisis.

At present, things appear to be at an impasse. Legally, the overlapping territorial claims defy resolution – either through bilateral steps or through the Law of the Sea treaty. This treaty, to which China has acceded, rejects lodging “historically based” claims, which are precisely the type Beijing periodically asserts.

With the legal problems exacerbated by nationalist sentiment, practicable solutions are even harder to achieve. Yet tensions need not slide inexorably into entrenched hostility, or worse. We propose a way out that would allow step-by-step commercialisation while setting aside disputes over sovereignty.

The current surge of interest in the South China Sea is driven first, by China’s steady rise and second, by the perception (if not the reality) of oil and gas deposits that may be accessible using new technologies.

Even so, no company will invest the billions of dollars required to exploit these reserves without a stable political and legal environment. Competing nationalisms and Sino-American friction are simply adding new layers of risk to an already challenging environment.

This should present an opportunity for creative diplomacy. Chinese oil companies still need foreign partners; they lack offshore drilling technology to exploit resources that may be much less substantial than China reports. Even optimistic estimates fall far short of projected Asian demand over the next 20 years.

A creative diplomacy for the South China Sea needs, for starters, to rein in rivalry – as Hillary Clinton has this week sought to do in her tour of Asia . . . 

True enough on Hillary, but at the same time Obama pushes ahead with his "pivot," his AirSea Battle Concept (brought to you, the worse-off-than-four-years-ago-taxpayer by your friends in the Military Industrial Concept), his massive arms sales to the region, his promise to meet Chinese cyber theft with kinetic responses (the new cyber strategy), and mucho missiles in a transparent encirclement strategy.

The authors' answer?  "We might revive a type of split-the-difference US diplomacy last deployed after Russia and Japan fought a war in 1905."

Guess which sitting prez won a Nobel Peace Price (for actually doing something instead of just talking about it) for that?

Ah, but such perspectives are naive.  Instead, the region needs as much weaponry and hair-trigger warfighting strategies as possible.  

That will fix things.

Fascinating article on GM-SAIC partnership in China

From WSJ.

The USG could learn much from GM on this:  the Detroit automaker sought out SAIC about 15 years ago, which is when the US should have made its moves as well.  They embraced genuine partnership with the Chinese automaker, and worked hard to bring it up to global standards.  In the process, GM became the biggest foreign player in China's exploding auto market.

But yeah, now SAIC wants to go global with GM and somewhat on its own at the same time, and that's where the relationship gets trickier.

But my point is, GM has the right problems to manage right now, while the USG is still stuck in a host of aging issues with Beijing.

As the piece says, "SAIC wants more from its partnership with GM; GM has yet to decide how far it will go."

The great quote from GM chief exec Dan Akerson:

It's kind of like a marriage.  We have a good and viable relationship and partnership.  But to make it work, you have to have needs on both sides of the table, not just wants.

That, in a nutshell, is the big constraint on Washington's approach to Beijing:  we constantly focus on our wants and denigrate China's needs.

Would that national security strategists had the breadth of vision that GM has so ably demonstrated in this long-term engagement.

Again, that's where the US and China should be:  we facilitated China's rise and then got scared right when we should have moved closer in.

The latest US missile defense announcement re: Asia

What to say?  WSJ says US is planning yet another "major expansion of missile defenses" in Asia.

The excuse continues to be North Korea, but that's a lot of money for just the DPRK.

"The focus of our rhetoric is North Korea," said Steven Hildreth, a missile-defense expert with the Congressional Research Service . . . "The reality is that we're also looking longer term at the elephant in the room, which is China."

As usual, I ask you to consider the reverse scenario:  China placing missile defense systems around the perimeter of the United States so it could maintain "access" for its carriers and their air wings.  Imagine the Congressional hearings on that one.

But we are only being prudent while the Chinese are being aggressive.  After all, it's East Asia, where the U.S. military has long ruled as de facto Leviathan.  We did this so powers could rise peacefully - through economics, which China most certainly has (how many wars has China fought since 1980 versus the United States?), but China grows it's military quite a bit, even as observers might note just how much bigger the US defense budget has become over the same time period (let's say the US has increased its budget by $500m since 1990 and China has probably jacked its budget up by about $125).

From Wikipedia

Yes, no doubt that China is spending plenty to make it hard for the US to get in close, and that worries its neighbors.

But you really have to ask, is this an arms race we can expect to afford - much less win?  Their neighborhood: we can plant plenty of defense systems, they can stock up on plenty more missiles, but what is the end-point here?

We spent decades encouraging the peaceful rise of Asia writ large, and now we flood the place with weaponry? Triggering a race dynamic with China?

Makes you wonder where our mil-mil could be if not for the Taiwan situation holding it back all these years.

The irony: as America executes "strategic pivot" to contain Chinese military, the US economy continues to open up to Chinese FDI

FT p. 1 story: "US opens up to Chinese takeovers with record figures for M&A deals."

Almost $8b of deals announced so far for this year.  Biggest is Dalian Wanda buying my favorite movie theater chain from my college years - AMC Entertainment.  Next is a Sinopec purchase of a stake in Devon Energy.

Best year of Chinese FDI to date is $8.9b, so 2012 likely to set new record.

Why this matters: the more China buys into the US economy, the harder it gets for Washington to treat it as the military "other," because stakeholders accumulate inside the US - in addition to all those who export to China.  All these jobs add up.

China's looming populist problem

It's right out of 1880s America:

In China, less than 1% of households control more than 70% of private financial wealth.

So noteth the WSJ.

In the US today, we're talking somewhere between 40 and 45 percent.

Globally, says, John Bussey in the WSJ, the number is "nearly 40%," so America's not much off the norm.

But here's the biggest problem for China: a great deal of the wealth is connected to people with political positions (aka, the princelings like Bo Xilai and his now imprisoned wife).  In the US, if you want to get rich, you need to stay out of government (or get rich before you go in, aka, the "fuck you money" that allows you to behave yourself while in power and quit on principle if need be).

For China to truly advance and become a genuine competitive threat, the political system has to decide to divorce wealth from political power.  Otherwise we're looking at decay and decline and a very short "Chinese century."

US hit that moment and launched itself into a multi-decade progressive era that cleaned up a lot of things but government most of all.

As I have said many times, the world needs a small army of Teddy Roosevelts right now - but China most of all.

Some common sense on S. China Sea dispute, where US China hawks are losing all perspective

I've known Doug Paal for many years now (going back to my early Naval War College days), and he's an eminently sensible fellow with a huge background in Chinese affairs.

Some key bits from a Diplomat piece just published:

The South China Sea presents complicated issues of evolving international law, historic but ill-defined claims, a rush to grab declining fish stocks, and competition to tap oil and gas reserves. Beijing’s much discussed “nine-dashed line,” that purports to give China a claim on about 80 percent of the South China Sea and its territories, used to be an eleven-dashed line. Two dashes separating Chinese and Vietnamese claims were resolved through bilateral negotiations years ago. This suggests that the remaining nine dashes are equally negotiable. But China rigidly refuses to clarify the basis for its claims, whether they are based on the accepted international law of the United Nations Convention on the Law of the Sea (UNCLOS) or the less widely accepted historical assertions. Beijing’s refusal to choose suggests it wants to maximize its legal and political leverage, even as the growth of its military and maritime assets gains physical leverage over its weaker neighbors.

Beijing is not alone. Hanoi has leased oil exploration blocks in contested waters, and Manila is trying the same. Their colonial occupations left a discontinuous record of historic claims, inclining them to rely more on UNCLOS to manage disputed resources. They eagerly encourage American weight thrown onto their side of the competition with China for free.

This is where the United States needs to move with caution and only after thinking many steps ahead . . . 

Point being, while China is clearly strong-arming and pushing its claims even more so than others, it is not the only country rattling sabers and pushing boundaries.  

Now, by singling Beijing out for criticism, but not the others, Chinese observers believe the United States has taken sides against China. This has undermined the U.S. assertions of a principled approach based on international law by appearing not to be impartial.

U.S. direct interests in the South China Sea are not unlimited . . .

The Obama Administration has clearly decided to champion this cause as a means of "standing up" to China, thus raising the "losing of face" dynamics, which means, instead of our usual approach of trying to cool things down, we've decided to purposefully heat things up.  Why?  A lot of Washington political and budgetary interests are served by this choice - just like in Beijing.

Today, the South China Sea is not at the “Sudetenland” moment of the twenty-first century, which calls for standing up to aggression and the rejection of appeasement. China has not militarized its foreign policy and does not appear equipped to do so for a long time. Its neighbors are not supine, and they show on occasion, when needed, that they are able to coalesce against Chinese actions that they judge as going too far. At the same time, China and those neighbors have more going constructively in trade, investment, and other relations with each other than is at risk in this dispute.

This suggests the makings of a manageable situation, even if it remains impossible to resolve for years to come. Different Asian societies are quite accustomed to living with unresolved disputes, often for centuries.

No kidding.  There are numerous missing peace treaties in Asia, which is part of this problem of ill-defined territorial boundaries, but leapfrogging from that reality to a rerun of WWII is hyperbole of the worst (meaning unthinking) sort. Frankly, you know your counterparty in any argument has run out of ammo whenever they pull out Hitler.

A very sensible piece worth reading.  Might just keep you off the budgetary gravy train that is AirSea Battle Concept.

China's worker-to-retiree ratio will be as bad as West's come 2050

Fascinating chart.  When you run the numbers globally, the worker-to-retiree ratio was 12 to 1 in 1950 and 9 to 1 in 2000.  But when you jump ahead to 2050, it's down globally to 5 to 1.

But then you note the distinctions:

• Old Core West is 2 to 1
• New Core East and South is 5 to 1
• Gap is still 10 to 1.

Now, you look at that and think China's doing okay, but as my research into the mean age by nation shows, China moves from the mid-age cohort (where it exists with US now at about 36 years old) to the old-age cohort (Russia, Europe, Japan) by 2050, when China's mean age will be 47-48 years old and the US will still be just under 40 years old (thanks to higher birth rate and immigration).

Well, this chart confirms how unique China is among the New Core "risers" just as the US is unique among the Old Core great powers.

Among the Old Core powers, the US simply doesn't age like the rest:  by 2050, the US mean age is still a hair below 40 while the rest are all deep into the 40s.

And among the New Core powers, China will suffer a PSR (potential support ratio) come 2050 that's more in line with the Old Core's 2-to-1 PSR instead of the New Core's 5-to-1.

Further proof that China gets old before truly rich, or perhaps better said, by the time it gets rich, it'll be as old as the old West (with only Japan serving as demographic lead goose, as it does today).

And - again - truth be told, China should track Japan as its future, far more than the US should ever feel it should.

A complication that displays the interdependency between the Chinese and US economies

Great WAPO piece on how China's economic slowdown can complicate relations with the US.

Some bits:

Chinese leaders are under pressure to take steps to help the economy as a rare change in power looms. This fall, the Communist Party will choose a new general secretary and officials through the government.

“They cannot afford, during a period of political transition and political turmoil, to suggest any loss of economic control,” [Eswar] Prasad said.

China and the United States are the twin engines of global growth, and both need each other to take steps to keep economic activity going.

China has a number of tools at its disposal to stimulate economic growth — some harmful to the United States, others potentially neutral or helpful. China routinely subsidizes companies that locate there, reducing the competitiveness of U.S. businesses. More favorable programs include China’s effort to boost government spending and lower interest rates to increase lending . . .

It’s also possible the United States might take steps that could aggravate relations with China.

When the Federal Reserve embarked on another aggressive campaign to lower interest rates in late 2010, China howled, saying it would devalue the dollar and help U.S. exports. And indeed, the dollar did come down some, and exports boomed.

But the dollar has since rebounded, likely as investors have sought security in U.S. Treasury bonds.

China might signal similar concern this September, if the Fed launches a round of so-called quantitative easing to jolt growth.

Point being, we are locked in a symbiotic relationship with China.  There is no good global economy without us and there is no good global economy without them.

This is what gets me when Pentagon strategists casually consider war with China, to include direct attacks on the Chinese homeland.  What happens to the global economy when the two intertwinned biggest national economies decide to start blowing each other's citizens up?  The global economy would tank at a speed that would stun everybody.  There wouldn't be any days or weeks of bombing campaigns.  We'd have global economic turmoil of a stunning nature well before that, as the markets would freak out.

But I advise people to read the CSBA scenarios as they pertain to war with China, because they are downright hallucinatory.  From my China Security piece of a while back:

Reading through CSBA’s full-up exploration of ASBC, the resulting war between China and the United States strains credulity beyond all reason.[3] Three maps in particular depict what are logically lengthy strike campaigns against China’s radar/space facilities, ballistic missile facilities and submarine bases. In total, they suggest a China-wide bombing campaign by the United States of such tremendous volume that, as CSBA’s authors note, America would be required to dramatically ramp up short-term production of precision-guided munitions. Toward that end, one supposes, America should preemptively terminate all trade with China; trade that would financially underwrite the production lines of such weapon systems—again, to service a theoretical protection of “the free movement of goods around the world.”

Beyond that fantastic scenario extension lies CSBA’s plans to basically destroy the entire Chinese air force and submarine fleet, plus institute a “distant blockade” that would see us interdict and search—and here the irony balloons—China’s seaborne trade, which ought to be fairly simple since so much of it involves the US economy.  And because it’s not easy to stop committed large ships (don’t tell Somalia’s pirates), CSBA broaches the notion of using Air Force bombers to “provide ‘on-call’ maritime strike.” One can only imagine how many thousands of Wal-Mart containers the US military could send to the bottom of the Pacific before the White House would hear some complaints from the US business community. But why let that reality intrude?

Sounds crazy enough, right? 

Nice critique of the sheer - and reckless - overkill that is ASBC

Written by an Aussie strategist for The Diplomat.

Here is the best chunk.  I italicize the parts I found most compelling.

By denying China’s capacity for anti-access, the United States intends to preserve its options for sea-control and power projection, reinforcing its primacy and role as the region’s guarantor of free navigation. This decision, in turn, reflects a deeper, more quixotic judgement that such an objective is both vital to the United States and attainable at a level of cost and risk commensurate with US interests in the region.

On both counts, though, there are reasons to be sceptical. First, the cost of AirSea Battle is likely to be prohibitive. Though it remains a largely notional concept, AirSea Battle will depend on an expansive set of upgraded capabilities: a hardened and more dispersed network of bases and C4ISR systems; more and better submarine, anti-submarine and mine-warfare capabilities; and new, long range conventional strike systems, including bombers and anti-satellite weapons. Then, of course, there are the aircraft carriers and other major surface combatants, strike-fighter aircraft, and possibly even amphibious ships.

This strategy is no panacea for the region’s problems, of course. It wouldn’t be cheap or easy and it would involve Washington making some hard capability trade-offs as well as accepting greater limits on its capacity for intervention in the Western Pacific. But there are benefits as well. In particular, maritime denial would allow the US to continue to play a strong role in the region. It would enable Washington to fulfil its defensive commitments to regional allies, prevent Chinese dominance and, at the same time, by reducing its visible military footprint, give Beijing more political breathing room. To that end, a US maritime denial strategy would also help avoid the worst aspects of crisis instability that AirSea Battle would provoke. And all without breaking the bank.

Needless to say, these are expensive capabilities. Many are disproportionately costly (and vulnerable) relative to the platforms against which they’re being fielded. And in some cases, particularly anti-submarine warfare and ballistic missile defence, their prospective cost greatly exceeds the operational effect they can be expected to produce. All of this would be exacting for the United States in peak economic condition. In a new era of fiscal stringency, with US debt expanding and the Pentagon looking to save hundreds of billions over the next decade, expecting the US military to do more with less is at best unlikely, and at worst wholly untenable.

It also risks failing to learn from history. Strategic competition in the Western Pacific is beginning to echo the Cold War, only this time the United States is at risk of reprising the role of the Soviet Union. Washington has already repeated Moscow’s mistakes in Afghanistan. With AirSea Battle, Washington is trying to do too much with too little. It’s facing off against an opponent in better economic shape whose smarter, more asymmetric strategy will impose a disproportionate military burden. For Washington, adopting such a maximalist doctrine risks playing into China’s hands and, like the Soviet Union, spending itself into penury.

But cost factors are only part of the danger. An arms race is already underway in Asia. AirSea Battle will accelerate this process, with serious implications for regional stability and crisis management. First, by creating the need for a continued visible presence and more intrusive forms of surveillance in the Western Pacific, AirSea Battle will greatly increase the range of circumstances for maritime brinkmanship and dangerous naval incidents.

Second, AirSea Battle’s emphasis on pre-empting China by striking early against the PLA will continue to compress the time available to decision-makers in a crisis. As military plans become increasingly dependent on speed and escalation, and diplomacy fails to keep up, a dangerous ‘use it or lose it’ mentality is likely to take hold in the minds of military commanders. This risks building an automatic escalator to war into each crisis before diplomatic efforts at defusing the situation can get underway.

And finally, AirSea Battle calls for deep strikes on the Chinese mainland to blind and suppress PLA surveillance systems and degrade its long-range strike capabilities. Such an attack, even if it relied solely on conventional systems, could easily be misconstrued in Beijing as an attempt at pre-emptively destroying China’s retaliatory nuclear options. Under intense pressure, it would be hard to limit a dramatic escalation of such a conflict – including, in the worst case, up to and beyond the nuclear threshold.  

Taken together, the costs and risks associated with AirSea Battle spell trouble for US primacy in Asia, and for the sea control and power projection capabilities on which it relies. Yet while Washington’s comfortable hegemonic habits will be hard to kick – especially after so many peaceful, prosperous decades – it’s not all doom and gloom. Primacy, after all, is only a means to an end, a way of preventing China from attaining regional dominance. There are other, more cost effective ways of doing that, including by playing China at its own game. That would involve developing a maritime denial strategy, focused mainly on the use of submarines, designed to inhibit China’s use of the sea for its own power projection. Indeed, the same capabilities that imperil US power projection in the Western Pacific would have an equally profound effect on China’s own fledgling efforts.

A very smart analysis of the dangers and costs.  And the "out" provided by focusing more on subs would make even me a serious believer of increasing our capacity there versus CSBA's somewhat insane notion of bombing the breadth and length of China and somehow not triggering a nuclear escalation.

People are going to construe being against the CSBA's notion of AirSea Battle as capitulating to Chinese domination of East Asia.  That is, of course, complete nonsense.

Proponents of ASBC will also toss in the if-you-only-know-the-secret-stuff-I-know-you'd-buy-into-ASBC card. That secrecy argument is the equivalent of patriotism-as-the-last-refuge-of-scoundrels temptation - as in, when you can't win the argument on cost and feasibility and dangers and operational success, then simply hide behind the "ominous" signs that only you and yours are privy to.

There are, as this article points out, cheaper and more sensible alternatives.  To those provided here, I would simply add selling plenty of military capabilities to the rest of East Asia (which we're already doing).

As I said before, ASBC suffers greatly from aspiring to be an Air Force-Navy Full Deployment Act.  Like any force structure wish list, it must ramp up the storylines - hence the fantastic war-gaming of CSBA that is intellectually fradulent to the point of being laughable.

There is no strategic logic that says the US should get in an absurdly expensive spending war with China over a scenario that happens just outside China's front door.  There is also no logic in promising a hair-trigger standoff where we pre-emptively bomb the length and breadth of China just to get them to back off from some aggressive shenanigans in their neighborhood.  For America, already deeply intertwinned with China on trade and investment and debt, to adopt such a posture is simply ludicrous.  These notions remain the fantasy of strategists who live "inside baseball" lives and have little to no clue about how this larger world works.  "Strangelovian" is not too strong a term.  In fact, it's right on the mark, because it implies a closeted world of strategists with no sense of proportion or connection to the wider dynamics of power in this era.  This is dinosaur thinking at its worst, and it needs to be opposed whenever and wherever possible.

Keeping China from doing something truly stupid in East Asia is not hard.  We need to undermine their asymmetrical approach by - as this article argue - creating our own, and NOT by setting ourselves up for a rapidly escalating great-power war.  Bombing the length and breadth of China in the opening hours of some crisis is just plain stupid and reckless and painfully unimaginative.  This is a massive retaliation response that pretends China isn't a nuclear power capable of significant retaliation.  

Sometimes I feel like I'm the only person who hasn't taken the crazy pill on this one:  YOU DON'T CONDUCT WIDESPREAD BOMBING CAMPAIGNS AGAINST THE HOMELANDS OF NUCLEAR POWERS!  

There is no clever way to spin ASBC's logic.  It promises a sheer - and therefore reckless - overkill that defies any sensible strategic logic.

This is not a "revolution in military affairs."  This is Cold War thinking at its most rigid - somehow surviving within our ranks.  It pretends, in the classic domino thinking approach, that if China pulls off anything in East Asia, we will have lost the entire competition!

Again, can you get any more narrow in your reading of the entirety of our world or our capacity to lead globally versus that of China's?  That's were ASBC truly sucks:  it reduces all our enduring strengths to one specific threat and then asks us to roll the dice on nuclear war over that one scenario.  Why?  BECAUSE IF WE DON'T ALL WILL BE LOST AND CHINA WILL RULE THE WORLD!

Honestly, doesn't that logic strike you as cartoonishly bad?  Remember when the Commies won everything by grabbing South Vietnam?  Or does it seem strange that we're now allying with Vietnam against China?

The "primacy" impulse dies hard within our ranks, especially among those who imagine that it resides solely with our military means to wage war.  The naive simplicity of this argument is almost beneath serious debate for anyone not trapped in the Pentagon's self-serving notions of "power!" (meaning 99.9% of the world as we know it).

But this is, sad to say, all part and parcel of the politics of protecting one's budget, so get used to hearing all sorts of bad strategic logic tossed in your faces.  In virtually every instance, the goal will be the same: to scare you into accepting the mis-allocation of resources within the US defense budget.

We live in a world of small wars.  That is the reality of the world America spent the last seven decades creating and defending.

But we are still far too dominated and influenced by an elite that sees the world only in big-war terms, because those capabilities are what that elite believes will continue to provide for American primacy.

Simply put, we created a world in which numerous great powers could rise, but some of us continue to freak out over that achievement.

I will readily confess: the more time I spend in international business, the less I find I have in common with the national security community in the United States. That whole mess strikes me today as being more divorced from reality than at any previous time in my career.

From the CSBA report on ASBC: the section entitled "Executing a Missile Suppression Campaign."

From the CSBA report on the ASBC: the section entitled "Blind PLA ISR Systems."

These two maps detail the places where CSBA advocates that the ASBC campaign should target in the opening salvos of any war with China. 

Again, imagine the Chinese bombing on similar terms across the length and breadth of the continental US and then consider what our strategic response might be.

China comes back to even in its trade with the world!?!

Economist story: "for the first time since 1998 more money leaves China than enters it."

On the surface, you say, "balanced trade!" when what you should really say is "balanced investment!"  But even there you'd be missing the subtext, so sayeth The Economist:

MAINLAND China can now boast over 1m wealthy citizens (qianwan fuweng) each with over 10m yuan ($1.6m), says the latest edition of the “Hurun Report”, which keeps track of China’s capitalist high-roaders. But the mainland seems to be having trouble keeping them. According to the report, published on July 31st, more than 16% of China’s rich have already emigrated, or handed in immigration papers for another country, while 44% intend to do so soon. Over 85% are planning to send their children abroad for their education, and one-third own assets overseas.

The affluent 1m have profited handsomely from China’s economic boom. But only 28% of those asked expressed great confidence in the prospects over the next two years, down from 54% in last year’s report.

Them's some stunning numbers:  60% of the rich plan to emmigrate and 85% are sending their kids abroad - thus perpetuating the attraction of leaving the Mainland.

Frankly, those are numbers and dynamics one associates with post-Cold War Russia or Africa of the past several decades.  There is a looting quality to this circumstance, driven primarily by the sense that China is becoming a dangerous place to have wealth.

Now, we can all get jacked with the dominant populist vibe (check out the "Dark Knight Rises"), but it's a very negative sign when your rising economy's rich people don't want to stick around.  For China it says, we don't trust the - now longstanding - reforms will stay in place.  It also says, we want to go where our wealth translates into genuine political power (rich people are like that).

True political pluralism usually arises when the rich realize that the only way they can keep their wealth is to open up the system for a stabilizing middle class to take the reins of political power. No, they don't enjoy the process, but it beats the alternative - revolution typically from the lower classes.

This dynamic is presenting itself across much of the developing world right now: we see the rise of a truly global middle class and - big surprise - amidst all that wealth creation a super-rich emerges (happens every time), thus the richest-to-poorest delta is fantastically large.  That's when you get nasty populism that, by and large, can either be deflated nicely by a long progressive period of cleaning up the system, environment, politics, etc., or can explode into something far more destructive.  

Europe got that initial middle class about the same time America did, and Europe came up with two scary alternatives:  Bolshevism to prevent that dastardly bourgeoisie from emerging, and fascism, which pretended to protect those "shopkeepers" from radicalized workers but really was about keeping the rich safe and everybody else wound up by freakish nationalism and militarism.

America split the difference brilliantly, plowed through a lengthy progressive era, and centered its political system - along with its economy - on a stable middle class.

We are rerunning that Western experiment now on a global scale, with the biggest democratization process to come being - obviously - China, which faces the daunting task of democratizing amidst a progressivist dynamic (like virtually everything China does, it's a combination that's unusual in its "cramming it in" ambition, but there you have it).  Meanwhile, the West is coming to grips with two stunning problems:  it no longer can manage a blue-collar middle class status and hasn't adjusted its educational system from its industrial era origins, and it's facing a demographic aging wave (less so the US) that forces it to revamp its industrial age pension and healthcare systems rather drastically.

The progressive age that must inevitably unfold globally so as to tame globalization's natural excesses (in this period of rapid expansion) is the most important challenge humanity faces in the next several decades.  Truth be told, global warming will by and large have to await that process before being truly addressed on a systematic level (even as much progress should occur thanks to the fracking revolution and its triggering of widescale movement "down" the hydrocarbon chain).

But back to the point of the piece:  China's movement toward accepting a progressive era is crucial to initiating this process on a global scale, because a China that moves down this path will be less frightening to an America that is currently using the excuse of "scary" China to delay its own internal reforms (the AirSea Battle Concept being just one telling symptom of a general political escapism).

And this is where I go back and forth in my fears and hopes for China.  Whenever I'm there I meet so many in the elite who are acutely aware of all this and realize the global responsibility China's internal development represents.  But then I also meet plenty who can't rise above their own fears for their own status.  So no, this battle is not decisively waged in either direction, even as I take great solace in the whole Bo Xilai Affair and its diminishment of the brain-dead Red revivalism in the interior.

Interesting times ...

Time's Battleland: NATIONAL SECURITY AirSea Battle: The Military-Industrial Complex’s Self-Serving Fantasy

China's Great Wall: an ancient AirLand Battle plan

NOTE: My post from Saturday, expanded a bit and reposted at Time's Battleland at that blog's request.

Nice Washington Post piece (by Greg Jaffe, of course) on the great COIN counterattack that is the Pentagon’s AirSea Battle.

As scenario work goes, what the Center for Strategic and Budgetary Analysis has done in its war-games has to rank right up there with the most egregiously implausible efforts ever made to justify arms build-ups.

Read the entire post at Time's Battleland blog.

The self-serving Military Industrial Complex fantasy that is AirSea Battle

This post was removed in deference to its reposting at Time's Battleland blog on 7 August 2012.

Chart of the Day: North Korean mobiles

Kim Jong-Eun is presenting himself in the guise of his grandfather, discounting the military and presenting a "great father of the natio" motif.

Now, with one million-plus phones, and all those portable cameras, the place opens up considerably.

My projection:  KJE is going to try and reform the place in the Chinese way and thinks he can handle the process.

My hope: it spirals out of control in a Gorby manner.

Whatever the mid-term outcome, nice signs and good progress in all of this. I honestly believe that DPRK is off the danger radar in five years.

That way, we can all get jacked about arresting fishermen in the South China Sea, pretending it serves as prelude to a high-tech war with China.

(WPR Feature) Skipping Out on the Bill: Obama's Cost-Free Drone Wars

Thanks to the Obama administration’s aggressive use of classified leaks to the press, we are encouraged to believe that President Barack Obama has engineered a revolutionary shift in both America’s geopolitical priorities and our military means of pursuing those ends. As re-election sales jobs go, it presses lukewarm-button issues, but it does so ably. But since foreign policy has never been the president’s focus, we should in turn recognize these maneuvers for what they truly are: an accommodation with inescapable domestic realities, one that at best postpones and at worst sabotages America’s needed geostrategic adjustment to a world co-managed with China and India.

Read the entire article at World Politics Review.

The only solution to our immigration "crisis" that matters

In the 1950s, there was a scare (mostly in NYC) about the seemingly endless influx of Puerto Ricans (you remember "West Side Story" and Leonard Bernstein's attempt to dance the problem away?), but the stream thinned out dramatically when the local GDP per capita reached somewhere in the region of 40% of the US's number.  When it got to that point, all things being equal, PRs preferred staying in PR.

This dynamic is well know and has been pointed out many times before in print.

Point of these charts from WAPO story about how returning migrant workers are bolstering Mexico's middle class is that we are reaching that point on Mexico, where - commensurately and with no surprise - the birth rate falls dramatically.

No, it doesn't end the flow of immigrants from LATAM writ large, but the point is made:  as long as a huge opportunity disaparity exists, they will come.  If you want a more manageable flow, you need to whittle down that delta along the lines I just described.

From the story:

 For a generation, the men of this town have headed north to the land of the mighty dollar, breaking U.S. immigration laws to dig swimming pools in Memphis and grind meat in Chicago.

In the United States, they were illegal aliens. Back home, they are new entrepreneurs using the billions of dollars earned “on the other side” to create a Mexican middle class.

The migrants “did something bad to do something good,” said Mexican economist Luis de la Calle.

Where remittances from El Norte were once mostly used to help hungry families back home simply survive, surveys now reveal that the longer a migrant stays up north, the more likely the cash transfers will be used to start new businesses or to pay for homes, farm equipment and school tuitions.

From Santa Maria del Refugio, a once rural, now almost suburban, community of 2,500 in central Mexico’s Guanajuato state, young men have gone to the United States seeking the social mobility they could not find at home.

Their money, and many of the workers themselves, have since returned, as the U.S. economy slowed in the global recession. For the first time in 40 years, net migration is effectively zero. About the same number of Mexicans left the United States last year as arrived. Migration experts expect the northward flow to pick up again as the U.S. economy improves. It is also possible that as Mexico provides more opportunity for upward mobility, some potential migrants will stay home.

In Santa Maria, dollars scrimped and saved in the United States have transformed a poor pueblo into a town of curbed sidewalks, Internet cafes and rows of two-story homes rising on a hillside where scrawny cattle once grazed.

“Look at this place — it’s practically a city now,” said Roberto Mandujano, 50, who moved back to his home town and opened a hardware store five years ago. “There was nothing here when I left.”

Mandujano is a member of a new demographic in Mexico, the anxious, tenacious, growing middle class who own homes and cars and take vacations. They see the United States more as a model than an exploiter.

Another argument for the US focusing more on amping up growth across LATAM: If we want to grow long-term above what history says we should be restricted to as a mature economy, then the best way to achieve that is for countries in our neighborhood to be experiencing rapid growth. [NOTE: this is ultimately why China will need to cool it on seabed territoriality disputes, but no, this logic does not rule out Beijing's stupid behavior in the meantime - as humans have an unlimited potential for letting idiocy trump logic.]

The resurrection of cheap energy in the US is the lure we should use in such an integration effort, and yes, we should most definitely be thinking about adding more stars to our flag.

You either get busy growing or you get busy shrinking in this globalized world.

Reasons to be optimistic regarding the global economy's response to global warming

US experiencing warmest year on record and 13 hottest years (going back to 1880) for the planet have all occurred since 1998.

David Leonhardt (whom I like a lot and always read) writing in NYT speaks of a non-punitive vector that seems to be emerging among the big players:

Behind the scenes [of the disappearing public debate on global warming], however, a somewhat different story is starting to emerge — one that offers reason for optimism to anyone worried about the planet. The world’s largest economies may now be in the process of creating a climate-change response that does not depend on the politically painful process of raising the price of dirty energy. The response is not guaranteed to work, given the scale of the problem. But the early successes have been notable.

Over the last several years, the governments of the United States, Europe and China have spent hundreds of billions of dollars on clean-energy research and deployment. And despite some high-profile flops, like ethanol and Solyndra, the investments seem to be succeeding more than they are failing.

The price of solar and wind power have both fallen sharply in the last few years. This country’s largest wind farm, sprawling across eastern Oregon, is scheduled to open next month. Already, the world uses vastly more alternative energy than experts predicted only a decade ago.

Even natural gas, a hotly debated topic among climate experts, helps make the point. Thanks in part to earlier government investments, energy companies have been able to extract much more natural gas than once seemed possible. The use of natural gas to generate electricity — far from perfectly clean but less carbon-intensive than coal use — has jumped 25 percent since 2008, while prices have fallen more than 80 percent. Natural gas now generates as much electricity as coal in the United States, which would have been unthinkable not long ago.

The successes make it possible at least to fathom a transition to clean energy that does not involve putting a price on carbon — either through a carbon tax or a cap-and-trade program that requires licenses for emissions. It was exactly such a program, supported by both Barack Obama and John McCain in the 2008 campaign, that died in Congress in 2010 and is now opposed by almost all Congressional Republicans and some coal-state and oil-state Democrats.

The real goal, according to one scientist, is the emergence of disruptive technologies that push the planet "down" the hydrocarbon chain (wood-->coal-->oil-->gas-->renewables & hydrogen).

The more we shift from threatening fines to promising record profits, the migration will occur as it should.

Fascinating for me to watch a dozen years after I ran that global warming-focused "economic security exercise" with Cantor Fitzgerald atop World Trade Center One.

NOTE: the falling USG support for renewable energy research is why the influx of China investment is so important.

Why the Chinese military can only get so big

Pentagon hawks tend to do these wonderful extrapolations of Chinese defense spending: taking the highest estimates of gross economic size and then imagining that nothing changes in Chinese politics or economics or society that would threaten the military's share.

This is, of course, complete and utter nonsense, to wit:

WSJ interview with CEO of Frensenius, one of the largest health-care companies in the world.  Based in Germany, already huge around the planet (one-third of the dialysis in US), and gearing up for a big push into China.

The focus?  Dialysis.

What? China has all these patients all of a sudden?

Well, yes.

Yes in that it's always had a sizeable portion of people who've needed it, but maybe had their demand unmet due to poverty.

Yes also in that dialysis requirements tend to rise with the wealth of a country.  The truly poor tend to go without, but the middle class and rich, as their numbers swell . . . tend to demand it - go figure.

Then there's the rising "wealth" of the government itself: China can, and is more willing to, pay for such services as part of government-sponsored health-care:

WSJ: How's the dialysis business in emerging markets?

Mr. Schneider: Fantastically well. [Historically] there's not that much demand for dialysis products or services because it's a fairly expensive treatment. Now, there's a whole lot of catch-up demand. Once a country nears $8,000 to $10,000 in annual per capita GDP, [governments] and insurers really start to pay for dialysis. That's when things take off.

Coincidentally, a lot of non-democratic governments tend to go democratic in that range.