China’s 9 Dash Lines and the demise of the $ (Part I)

By Chemrock

I had wanted to do a follow up on my November 2016 blog on the Rube Goldberg US$ printing machine, but following Distant Observer’s article on “Scarborough Shoal, it’s not about fishes or oil, it’s about power”, I decided to tie 2 issues together. Due to its length, I’ll publish in 2 parts.

The Chinese objective for their 9 Dash Lines covering the seas in SE Asia has commonly been attributed to:

  1. The food supply — a growing China is coping with depleting food resources. They want to monopolize the fishing grounds.
  2. The energy resources — China’s insatiable appetite for energy drives them to block the gas deposits under the West Philippines for themselves.
  3. Chinese hegemony — good old fashioned physical dominance of the region.
  4. Secure the oil and commercial supply lifeline to Japan, Taiwan and Sorkor.
  5. Defensive strategy to push back US offensive capabilities.

(1) and (2) can be easily discounted for the simple reason that there are easier and cheaper options open to them.

(3) Hegemony is unlikely their objective. Historically, China has had friendly relations with SE Asian countries. The 9 Dash Lines effectively puts them in conflict with Asean countries (except the Philippines and Cambodia). The militarization of the islands is also drawing Australia and New Zealand into the conflict, while the rest of the world are concerned with the freedom of navigation in the area. For dominance over the Asean countries, China could have been much more effective by taking the humanitarian and mutual respect route. Why would they want to exert brute power at a time when their military technology is 20 years behind the West?

(4) Control of oil and commercial supply lines seem plausible at first. In times of conflict, they can choke Japan and the American forces in Sorkor. However, control over the supply lines lie not in the 9 Dash Lines. It is at the narrow Straits of Malacca. A blockade at this point can easily counter the Chinese move. Malaysia may be a problem, but Singapore and Indonesia will be willing parties to such a blockade.

It is probable that they see a weakness at the Straits of Malacca which is why they have developed ports in Gwadar (Pakistan), Bangladesh and Myammar to transfer shipments onto the rails in which they invested heavily to go direct to Beijing. That would be China’s wartime supply line. I don’t know about Myammar, but ports in Bangladesh and Pakistan are notorious for pilferages. The Chinese can build the hardware, they can’t control the software. It would require a tremendous amount of re-arrangement of the regular liners and container distribution channels on a worldwide scale. Certain products cannot be shipped via trains, including petroleum. Would transshipments at Pakistan, Bangladesh, Myammar and then via rail be more cost effective than continue with a direct passage through the SCS? I very much doubt that. So in peace times, it will likely be a white elephant, other than for products sourced directly from those 3 countries.

The Straits of Malacca is key to counter the Chinese dominance. Should freedom of navigation be denied by the Chinese, the world has to reply with a blockade at the Straits. I have never seen anyone bringing this up for discussion.

(5) Defensive strategy

Chinese aggressive move on the 9 Dash Lines and militarization of the reclaimed islands in the WPS is not a projection of it’s new found powers. The Chinese air force is largely untested, it has a new untested aircraft carrier, it’s navy is weak, its submarine technology is years behind the US, and they have no experience of undersea warfare. Its missles and delivery systems have improved tremendously, but remain years behind the west. It is not yet a rotweiller. In military warfare, one avoids taking an offensive move from weakness. In the infantry we learned that if the numbers are 1-3 against us, don’t engage. But if it’s a defensive act, better to do it even at 1-100 odds. I believe what the Chinese are doing is a defense strategy which I’ll explain below. First let me digress a little.

 

What were the Chinese thinking?

One needs to understand the Chinese mentality or cultural nuances. In tactics or strategies, whether it’s statecraft, military, or commercial challenges, embedded in the Chinese mind are ancient arts that survive to this day. No, NHerrera, they don’t play GO for that. They have great reverence to Sun Tsu’s Art of War (around 450 BC) and the great war games played out during the period of the Warring States, particularly between 220 to 280 AD, immortalized in the novel Romance of The Three Kingdoms. To get a sense of perspective, more people died during the Warring States than WW2. Chinese leadership to this day, including the late Deng Xiao Peng, Pres Xi, party leadership and military brass, talk and quote from these 2 books over coffee, in state planning, and in meetings.

Romance” is really very interesting. After decades of brutal warlordism, 3 states remained and they couldn’t have been more diverse in political ideology. The state of Wu was pacifist and basically sought to protect their fertile lowlands. Shu professed humanitarianism and intelligence, it used wit to survive, it had a great lord Liu Bei, a great general Kuan Yu (who is deified as the God of War – you can see him with his long saber in triad homes or business offices) and a great tactician in PM Zuke Liang. Cao seeks power and subjugation of others. It was a period of great strategies, counter-strategies, or loyalties and treason, of weakness pitted against strength. Understanding China today, we need to analyze their moves whether it is a Wu, Shu or Cao initiative.

My personal belief is that China is now in a Shu state mentality and its moves in the 9 Dash Linse is a defensive strategy. If it’s defensive, the question is why? China fears the impending catastrophe that the US national debt will unleash on the world. Various intitiatives by the Chinese point to this fear factor. They were one of the first to ask the US to reign in their debt problem years ago. They have moved to build up gold reserves and decrease their US$ holdings. (Yes I appreciate to an extent they are using $ to prop up the RMB). They have taken lots of initiatives to move away from $ in their trade. The RMB is now included in the basket of currencies for the IMF’s Special Drawing Rights.

Let’s compare the experiences of Japan and China in their miracle years. In post-war Japan, the Yen was about 360 to the $. By 1970/80, Japan has already become the 2nd largest economy in the world after the US. The Yen appreciated by 276% to 130 levels in the 80s. Their economy sucked in vast sums of US$ and all this cash need to go somewhere. Japanese corporations and individuals splashed on American assets. A Japanese insurance magnate paid US$40 mm, a staggering sum in those days, for Picasso’s Sunflower. Sony Corporation practically bought Michael Jackson and they invested heavily into the entertainment industry. All that money that went back into US assets suckered the Japanese as the Yen soared.

Meanwhile, the Japanese government, through MITI (Ministry of Internation Trade and Industry), recycled the money through the Bank of Japan, lending to local banks who further lent to designated kereitsus. That caused an industrial boom and the companies extended vertically and horizontally, locking foreign companies out. That was a time of paradox in Japan Inc. The conglomerates were not interested in short term profitability. They were watching their net interest income. State interference often throws up unintended consequences.

Coming from a command economy, China struggled with the intricacies of a free market economy, particularly with exchange rate management. When China opened up after Deng Xiao Peng, they pegged the yuan to the $. From 1997 to 2005, it was pegged at 8.37 to the $. It was an undervalued rate giving China unfair trade advantages. Under pressure from US, the Yuan was floated in 2006 at a rate of 8.31, but it was still centrally controlled. It is a managed float, not a free float.Today, it is about 7.0.

In 2011, China overtook Japan to become the 2nd largest economy, and as of Dec 2014, became the largest economy in the world. Similar to Japan, China’s economic boom sucked in vast amount of dollars which needed to go somewhere. The new wealth found its way back to the US as filthy noveau riche Chinese snapped up chunks of US real estate. Those who bought in before 2006 benefited tremendously from the suppressed Yuan.

By today’s valuation, the Chinese are definitely still better off than the Japanese. Unlike Japan, China benefited from globalization and allowed foreign companies in to drive its initial growth. This would be the Shu mentality. Again unlike Japan, the Bank of China allowed the liquidity to flow into the asset market, creating huge bubbles that are now about to burst. Flushed with trade money in the country, the govt diverted the resources into a huge offshore economy, the One Belt One Road program. This is the Wu mentality.

What has this Japan/China economic digression got to do with the 9 Dash Lines? The Cao mentality sees the Americans gaming the $. The huge US debt will bring America financially to it’s knees, thus wiping off China’s tremendous gains. The sub-prime crash of 2008 is nothing compared to the one that’s coming. There is a potential for military conflicts as countries fight to survive. China’s move in the SCS is a defensive strategy in light of this reading.

 

The Area Access / Area Deny Strategy:

submarineBeneath the South China Seas, American nuclear-powered submarines prowl the waters in stealth. They have the capability of launching strikes on Chinese coastal cities easily. Chinese turbine-powered submarines are no match and China has no combat experience in submarine warfare. American bases in Okinawa, Singapore and Vietnam pose a real and present threat

The Chinese response to this is to build a massive undersea sonar grid the length of its Southern coastline. The missiles on the islands are for the defense of the sonar grid. Once the A2/AA grid is operational, American submarines will be pushed further out and this will render the coastal cities out of their missile reach.

This then is the puzzle to China’s 9 Dash Line move. It is of such national importance that they are willing to face international vilification for their transgression. My guess is the Chinese will still allow freedom of navigation during peace times. This has no impact on all their undersea structures so there is no reason to alienate the world. A sense of normalcy should then prevail. China will then settle down and build relations with Philippines; the more Duterte’s position weakens, the more effort will they put in.

I conclude with an inference to make this article relevant to Philippines. I have seen so many comments in the internet by Singaporeans that China’s One Belt One Road strategy is to punish Singapore for its strong support for the US. The Philippines, on the other hand, is so over the moon that the assertiveness of the president has made world powers line up to buy favors. The Japanese pledge of a $8b aid recently has been touted as a great example without understanding this was part of the $130b assistance the Japanese promised President Aquino when he made an excellent pitch to the Japanese parliament in Jun 2015. To input such a faux importance on oneself is really laughable. The truth is that Singapore and the Philippines are just flies on the wall in China’s war games.

As I mentioned above, China and Japan invested heavily in infrastructure after their economic boom using the vast reserves built up over the years. Singapore, Sorkor and Taiwan did practically the same thing. The Philippines is now initiating the so called ‘golden infrastructure age’ relying heavily on borrowed funds. Where will this lead?

 

Comments
108 Responses to “China’s 9 Dash Lines and the demise of the $ (Part I)”
  1. Very apt, thank you for sharing!

    Sent from my iPad

    >

  2. josephivo says:

    The word China is our invention, but the Chinese themselves live in Zhōng Huá, the Land in the Middle. For most Chinese this Land in the Middle is it, the rest is peripheral. Understanding Chinese actions requires to take a viewpoint from their middle of the word and look outwards. As we do with “Jerusalem” and the uniqueness of its Christian values. Excellent article, curious to see part 2.

    In the meantime Trump blamed the media for denying that the world is flat and denying that he was the first man on the moon.

    • chemrock says:

      Thank you Josephivo

      What do you have in mind when you say the Chinese viewpoint is from the middle looking out?

      To me, the ancient ‘middle kingdom’ reference had nothing to do with geography. It reflects a society who felt themselves more advanced than all other countries at that time. It was their way to describe a status quo equivalent to the way we talk of 1st world or 3rd world countries.

      • josephivo says:

        A few years ago I was in the Dutch maritime museum in the room with globes from the 16e and 17e century, behind me a Dutch tour guide explain a group of Chinese tourist “Here you can understand how the world was discovered”!!! Chinese live in the center of the world. Can a mouse “discover” an elephant? Don’t you hear and smell it from miles away?

        “We live in the center, we have a continuous history of a centralized country for thousands of years. Outside live the barbarians, we had the superior thinkers, the superior culture. And yesterday’s humiliating experience lies behind us.”

        Chinese people think with the “attitude” of people living in the middle of it all, able and responsible to pull all strings, just as people capitals do. “Manila”, “Brussels”, “Washington” all the centers of their country, a level higher you have China as the center of the world.

        Think as “What is necessary to prevent a new humiliation?”, “We have to lead, control, it is our role!”, “What is out there that we could use?”, “What is out there we have to keep out?”

        • chemrock says:

          Josephivo

          That is interesting. How much of that is mainstream thought I don’t know. That tends to be the way most foreigners think the Chinese mindset is. But from my own perception, based on the thousands of Chinese I have met, almost all from the diaspora, a handful from PRC, I discern no feeling of racial superiority nor the humiliation of their history of foreign occupation.

  3. Oldmaninla says:

    Chemrock, congratulation for your article….your observation analysis of the China historical three kingdom is interestingly thought provoking, honestly, I’m encourage to research further to understand and satisfy my curiosity of your analysis. I have to reread your article again to make sensible further comments…….nice article.

  4. karlgarcia says:

    I appreciate the extensive research and the knowledge imparted. Thanks Chemrock.

  5. NHerrera says:

    Chemrock,

    As others have already expressed explicitly or impliedly — awesome in scope and well argued. Like others too, one is moved to explore the digital world not to counter your perspective but to learn more of the Chinese minds of old.

    Lastly, hahaha: yes, GO is not the preferred strategy here. 🙂

    Still I enjoy relaxing with it, though. And strangely or not too strangely the game has a way of stimulating the mind for the different lessons or metaphors that it provokes. For example, capturing the opponent’s pieces or “stones” in the language of GO, is only a small part of the game — almost a distraction. It is the patient activities and associated focus, with the end in view, that is important. Which connects well with the Chinese mind, no?

    • chemrock says:

      To you last para … what connects well with the Chinese mind in all sorts of games — if there is money on the table.

      • NHerrera says:

        Of course, that too — in fact, the common denominator; the grease that lubricates the gears of the Chinese mind. (Sorry, that is meant to be a praise.) 🙂

        Funny that word grease it “rhymes” with bribe.

  6. Vicara says:

    Wonderfully thought-provoking article. Chemrock, you point out that the PRC sees itself as essentially occupying a defensive position, given the weakness of its military hardware compared with that of the U.S and allies, etc. From a bird’s-eye perspective, it would be ideal if the PRC then progressed into the Shu State mode of “humanitarianism and intelligence,” with wise, farsighted leaders rising to the top like cream. You in fact suggest that they are in Shu mindset already; but how could the rest of us be sure? Pre-WWII, a militarized Japan, also playing the defensive, oppressed-by-the-West card, took an entirely aggressive approach. How do we ensure that the PRC does not go down that warlike Cao State path? After all, there are so many other geopolitical variables to consider.

    Under the Shu State approach, you foresee that China will “settle down and build relations with Philippines; the more Duterte’s position weakens, the more effort will they put in.” Er, in the Philippines we’ve had many, many decades of benevolent influence/intervention–or “effort”–by different powers, if such influence/intervention is what is being anticipated under the PRC in Shu mode. And there is a belief subscribed to by many thinking Filipinos–from across the broad political spectrum–that the Philippines has been messed up by that. (Leaving aside for the moment the issue of our own culpability for the mess.) There remains the perception is that external benevolent intervention from outside is BAD. Case closed.

    Also, China seems to have a spotty record–ranging from oppressive/totalitarian (Tibet) to relentlessly, carelessly extractive (in parts of Africa)–in terms of their dealings with other nations. As in all courtships, suitor PRC looks to be on their best behavior. But after…. even if a highly detailed pre-nuptial agreement were to be worked out… can one trust either or both (under Duterte) parties?

    Josephivo points out that we have to consider China’s long-ingrained views of the world and its place in it. Much of the rhetoric that the Party has encouraged in social media–not just by the “50-cent Party” of paid trolls, but also by sincere citizens–suggests that China should consider itself innately superior to its pesky neighbors.

    • Vicara says:

      These are not ideal building-blocks for healthy relations.

    • chemrock says:

      Thanks Vicara.

      “How do we ensure that the PRC does not go down that warlike Cao State path? ”
      That’s a great question. Pres Xi is the first modern Chinese leader – intelligent and open minded. But he still has to contend with remnants of the Old Guard. By the time the next leader comes around, I think the old hardcore commie generation would have died out. Let’s hope he will be someone more in the liberal democratic mold.

      “There remains the perception is that external benevolent intervention from outside is BAD”
      This is debatable. Some ex-colonies benefited tremendously, and some don’t. It is always the WHAT IF question, is’nt it? Supposing no Brits, Japs, Spaniards,Americans, Portuguese, ever came to Philippines. Would the Philippines be much better off today? The material aspects can be argued, but the Spanish colonisers did Philippines one big favour, the adoption of family names. The Malay race had no family names which leads to inbreeding in turn leading to degeneration.

      “China seems to have a spotty record–ranging from oppressive/totalitarian (Tibet) to relentlessly, carelessly extractive (in parts of Africa)–in terms of their dealings with other nations.”
      Yes PRC is bad in Tibet. It wants Tibet as a buffer state, very much like Russia wants Ukraine.
      Yes Chinese development works in many of the extractive projects in Africa have been ecological disasters. Perhaps the money men that followed through ministerial projects never tolled govt lines?
      But let’s place the above 2 facts against this observation:
      All colonisers of old – the British, Dutch, French, Portuguese, Spanish, Germans, Japanese, Belgians, all set out to take territories, gain control of resources, change the way of live of the populace. Their will imposed by force. They came, they fought, they kill, they conquer. Do you know how many thousand wars have been fought in Africa? In contrast the Chinese came, they put in their monies, they made agreements, they develop and construct, they made numerous ministerial visits, they pay for what they take. They have practically taken over the whole of Africa WITHOUT FIRING A SINGLE SHOT.

      That is the reason why I am at odds with the Chinese occupation of Scaborough and Spratlys. It is against their nature. The A2/DD project provides the rational, but stillnot a justification.

  7. Oldmaninla says:

    Article and comments are intellectually provoking analysis, with very sharp penetrating questions…….
    Will the real value of nine dash-line be revealed crystal clear? Later?

    • chemrock says:

      Thanks OldMnl
      Those dash lines has no value for anyone except China. The values are non-quantifiable. They are not operational yet. When operational, it’s value is temporary as US defense technology will find a way to counter it. And so it goes.

  8. edgar lores says:

    *******
    1. There are many motives that drive human behavior: selfishness, ambition, envy, and vision. But the three greatest motivators are love, greed, and fear. Of these three, it is generally agreed that fear is the great motivator.

    2. Chemrock’s thesis is that fear, and not empire, is behind China’s nine-dash lines. I think it is a credible motive.

    3. After all, isn’t fear also the motive behind America’s lead in the armaments race? And what is the other face of fear? It is security.

    4. China has land buffers in the north (Inner Mongolia), west (Xinjiang), and south (Tibet). In the upper east, the land buffer is North Korea. In the middle and southeast, there are two sea buffers, the East China Sea and the South China Sea. Because it is not a naval power (yet), China perhaps feels vulnerable in this area.

    5. It’s interesting. China built the Great Wall of China to protect itself against the barbarian hordes. Now, per Chemrock’s thesis, it is building this Great Underwater Sea Wall.

    6. I cannot help but think this new endeavor is as futile as the old one. Security is not to be found in distrust, aggression, and the building of walls. Well, yes, perhaps temporary security can be found here. But, certainly, not a permanent security.
    *****

    • NHerrera says:

      MILITARY CAPABILITY: US VERSUS CHINA

      It is generally a consensus that the current military capability of the US (in air and sea and most probably, the digital world — not in land; its number of soldiers is no match) is far superior to that of China.

      In a RAND study for its client — the US armed services — antedating Chemrock’s fine article, it suggests these much:

      * In the short term (the early part of 2015-2025, the period of the RAND analysis), any serious armed conflict initiated or provoked by any side, US or China, will inflict damage to both, but much more so to China than the US;

      * It is thus suggested by the study that China will quite hectically develop its capability so that by the end of the study period, an attempt by any side to start a conflict — whether out of fear of empire-building to connect with present blog — will be disastrous to both sides in equal measure or order of magnitude;

      * The study pragmatically and logically concludes that the rational leaders of both sides, in the long term, should urgently explore a better strategy — not the Mutually Assured Destruction (MAD) strategy into which both are heading, a strategy much studied by Game Theorist at the time of the cold war between the US and USSR. Fundamental to the concept of MAD is military-capable parity.

      With the recent statement of Trump about its military, the question — serious or not — is whether the US (meaning Trump) will attempt something before the concept of MAD becomes operable, as perhaps Bert implied in the previous blog.

    • chemrock says:

      Is China’s fear bordering on the paranoia?
      In the same way, was the US fear of Soviet nuclear missiles in Cuba during Kennedy’s time similarly paraoic too?

      • edgar lores says:

        *******
        That’s an apt comparison.

        Paranoia? Both Russia and China are ringed and hemmed in by American air bases, military seaports, military alliances, and aircraft carriers. Just on the latter, America has 10 in service, and Russia and China have 1 each.
        *****

      • NHerrera says:

        Interesting question.

        Garden variety fear, paranoic fear, A2/AD, or garden variety empire-building, the net effect is that China is on a military-capability buildup. And so is everyone else, including India, Japan, North Korea, South Korea, etc. And the big players still seem to be US, China and Russia for some foreseeable future. So not butter only, humans prefer both butter and sword.

        So one may rightly ask, so what else is new?

  9. madlanglupa says:

    When I was younger, about 15 years ago I penned an unpublished sci-fi short where the so-called “first island chain” countries — Japan, Taiwan, Philippines — become vassal states, and the yuan becomes the world’s eminent currency.

    Digesting all this information, rather than autarky as traditionally espoused by pure Maoists, China is trying to prepare for the scenario where America and Europe — now with right-wing leaders on the rise — could soon collapse on its weight in socio-political strife and economic crisis. In addition, what China couldn’t make up for its physical military arsenal, it’s known that they have created a corps of state-sponsored hackers who have already taken on foreign governments and corporations alike, to steal information and/or perform sabotage for national advantage. They’re going to great lengths for that scenario, even investing in places traditionally considered off-limits to the West, such as supporting China-friendly governments not known for human rights, in exchange for food and resource security.

    • Care to publish it here? I’d welcome it.

      • NHerrera says:

        I very much second that. I am highly anticipating the discussion here in TSH that will come from the blog that treats of cyber warfare/ sabotage/ data mining. Please share with us this creative piece, madlanglupa.

      • madlanglupa says:

        Unfortunately it was lost, the whole chapter was saved in a diskette.

        • Ahhh, too bad. I had a similar problem. I wrote about 75% of a great novel, saved it with a password, went off to do other things for a couple of years, and forgot the password. I feel your pain.

        • NHerrera says:

          Madlanglupa, Joe:

          I do not know if you have an experience similar to mine. If I have worked on a math problem, putting the work, say, on loose sheets of paper and somehow lose them I feel very much the pain and great loss. But then I decide to work on it again, this time taking care to put the work down on a notebook, so as not to easily lose it.

          I find, in doing it again that not only has it resulted in a better work, I have discovered new insights in doing so, something which I thought I would not have gotten had I not gone back to work on the lost piece. Of course, one should be driven enough to do it again — a great pain itself.

          Just putting down something related to your experience. They are a loss indeed: that chapter on the diskette lost by Madlanglupa; and the 75% finished novel by Joe lost because of a forgotten password. (Which indicates to me on the latter, that it must indeed be an important novel you were working on to be protected by some elaborate (?) password.)

    • chemrock says:

      “what China couldn’t make up for its physical military arsenal, it’s known that they have created a corps of state-sponsored hackers who have already taken on foreign governments and corporations alike, to steal information and/or perform sabotage for national advantage”
      China leapfrogged into modern technology with much industrial espionage. That is true, but it certainly is’nt the unique country. Every body’s in the game. US nuclear prowess came not from stealing the info, they stole the German personnel. Japanese industrial prowess in their miracle boom years came from reverse engineering.

      “They’re going to great lengths for that scenario, even investing in places traditionally considered off-limits to the West, such as supporting China-friendly governments not known for human rights, in exchange for food and resource security.”
      TRUE. But just step back for a moment and consider your options if you were PRC. You want to step up and get into various countries. Most, let’s say the good countries, those with good economy, good humanitarian records, good governance etc these are into trading blocs, have working relations with certain country groupings, have long established relationships with developed countries. You are Johnny come lately. What would you do. As per my reply to Vicara’s above, China’s approach have been entirely different from all colonisers of days past. Today, they have almost taken over the whole of Africa without firing one single shot.

      My comment here is amoral, just laying out the fact. I’m not saying whatever they did is right or wrong, that’s for a different argument.

      I wish to add something very important here. The first quote of yours is a common accusation directed on the Chinese. But make no mistake. Progress did not take place, in fact could never have taken place, if the driver was simply stolen industrial knowledge. There were a whole host of things that went on to make it successful. What does it take to land a Chinese crew on the moon within 30 years? Downloading some NASA data sure helps but you got to have the human capability.

      It is dangerous to overplay Chinese success on industrial espionage . Basically, the Chinese have a scientific mind, so they were quick to catch up. Ancient Chinese were at the forefront of scientific ideas, but somehow they lost out on the application part of those ideas. Take gun powder. They invented it, but did’nt know what to do with it. Today’s Chinese scientific input are everywhere. They filed the most patents. Look into any important major software development, you see Chinese scientists there. After waking up from a hundred years slumber under communism, they have caught up with technology within 30 years. Just imagine what they can do in another generation’s time. That is the danger I was referring to. Never to understimate the competoiion or enemy.

      Here is a real life example
      In the missing Malaysian flight MH370 were 4 Chinese nationals from Suchou City. They were engineers from US tech firm Freescale Semiconductor. There were actually 20 engineers of the company on board but these 4 were special. Together with Freescale these 4 had submitted patent application for something new in radar gadgets with military applications. The patents were approved 3 or 4 days after the disappearance (presumed crash). The law is such that all patent rights go to the survivor, Freescale. We are talking big big money here, so it provides a good motivation lead on the case. Adding to the suspicion is the fact that Freescale is owned by the Carlye Group which is owned by Mr Illuminati Jacob Rothschild, a guy who has supposedly created wars in furtherance of the One World objectives.Downing a civilian airliner is not a problem for him.

      The gist of the MH170 is Chinese genius stolen by the West.

      • NHerrera says:

        Great elaboration there of the scientific-technical engine of the Chinese mind: mining data and putting it to use in synergy with the receptive, cultured scientific-technological minds.

        Thanks too for titillating this geriatric’s mind on the espionage-like thriller using the right buttons: Illuminati, Rothschild.

  10. karlgarcia says:

    You are correct, the Chinese are bothered by the “Malacca Dilemma”
    —-
    “But securing oil production isn’t China’s only worry; shipping, of course, is also a key concern. More than 80 percent of Beijing’s imported oil has to wind its way through a global choke point, the Strait of Malacca—a channel near Singapore that shrinks to less than two miles wide and handles more than 15 million barrels of oil shipments a day. In a 2003 speech, Hu Jintao, then China’s president, articulated the “Malacca dilemma”: the fear that “certain major powers”—code for the United States—could cut China’s energy lifeline in this narrow passage, mirroring what America did to Japan during World War II. In turn, Hu accelerated a naval modernization program, which has continued under President Xi Jinping, with the launch of China’s first aircraft carrier, the introduction of its first anti-ship ballistic missile, and a tripling of its destroyers, frigates, and attack submarines. Some of this progress has been on display since 2008, when China deployed long-term anti-piracy patrols in the sea lanes off the coast of Somalia and in the Gulf of Aden—its first overseas naval mission in 600 years. And in a step intended to eliminate its seaborne vulnerabilities, China opened a gas and oil pipeline across Myanmar in late January 2015.”

    http://foreignpolicy.com/2015/03/26/chinas-thirst-oil-foreign-policy-middle-east-persian-gulf/

    • chemrock says:

      Thanks for the link Karl.
      I have not heard of the term Malacca Dilemma (I always mistype Delima). It’s a catchy term ya. Goes to show these guys think very long terms.

      Malacca is one of the states of Malaysia, from which the straits got it’s name. By the way, somewhere along the Malacca coast, there is a very very huge project going on. The Malaysians always try to outdo Spore. If we have a zoo, they will come up with a bigger one. If we have state of the art mall, they will come up with an elephant mall. If it’s in the spirit of competition, that’s fine. But we suspect a silent motivation to undermine Spore, it’s an emotional baggage from founding fathers’ times. So this project is a huge port, with intent to cut into Spore’s monopolistic hold on the industry. This is a non-govt Malaysian and Chinese co-operation.

      • karlgarcia says:

        You are welcome Chempo. Yes, Delima and Dilemma gets mixedup a lot nowadays.
        Regarding Malaysia and Singapore, I hope it is in the spirit of competition.

  11. karlgarcia says:

    Chemrock or Google Phd lance,
    I seldom ask for links, but this time, I will. Can I have a link for the underwater SONAR grid.

  12. karlgarcia says:

    “Secure the oil and commercial supply lifeline to Japan, Taiwan and Sorkor.”
    Oil from Persian Gulf will be a major major problem because of A2/AD of SCS.
    Will Russia start to be friendlier with South Korea, and Japan?

    https://en.m.wikipedia.org/wiki/Eastern_Siberia%E2%80%93Pacific_Ocean_oil_pipeline

    • karlgarcia says:

      The North Pacific route from Alaska to Japan and the Korean penninsula can provide extra oil if Siberian oil is not enough.

  13. karlgarcia says:

    Will Trump negotiate debt? Will the US bond holders allow it?

    • NHerrera says:

      Thanks karl as always, for adding to my numbers-oriented brain.

      • karlgarcia says:

        You are welcome Manong!

        • andy ibay says:

          from popoy del r. cartanio:

          DEBTS, DEBTS, my foot. Think of Canadians and Americans dominant standard of living: decent and not obscene. Never mind elitist math and its statistics which can not democratize equalization of the right to borrow on a stable monthly income, to be allowed like topnotcher well-off Americans are allowed? to have an average annual credit balance of US$70,000. GO FIGURE what will happen to the millions of regular Filipino employees in the public and private sector if allowed to have a credit card running balance of just 40% of their annual salaries. More gridlock traffic in metro cities perhaps because of pre-used cars? Darn, it probably has started happening on condos. Go tell the PNP or the Coast Guard!.

          • karlgarcia says:

            Hi sir(s),
            I was only trying to connect this to what the author was trying to say about debt.

            It is true that there is also the debt trap going on here in the Philippines. Gridlocks, property bubbles, foreclosures,etc.

            Now the government is trying to regulate micro lending, by getting rid of 5-6 lenders,but for the tricycle drivers,vendors, this is taking away their access to cash.
            But the government’s intent is to provride low interest lending.

            • popoy del r cartanio says:

              Nothing wrong there Karl. I thought 99+ per cent of what get posted here in TSOH are of immense value to the search for the ONE BEST WAY (OBW), as American Engr Fred Winslow Taylor, the “man with the hoe” (backhoes yet to be invented) started digging industry soil to plant the seeds of scientific management. OBW is like a grade school ruler or a carpenter’s meter of yore before calculators, notebooks and I pads became game changers; before OBW has become to me a conceptual tool to understand larger than life concepts like politics or economics in their macro or micro-perspective like FIVE-SIX.

              What I know is that 5-6 which charges 20 per cent simple interest daily (when the law says 12% for 365 days) after compounding could end up on a roll into 7,280 % interest per annum, that 100 pesos could grow (on a 5-6 roll) into 728,000 pesos after one year. That in Metro Manila public markets 5-6 scheme was recording 100 per cent loan repayments as was found by the USAID Manila consulting team which validated the project proposal for a US$20 million SMED (Small and Medium Enterprise Development) to be implemented by the DTI .

              Micro credit solution against rural and urban poverty is old hat in Bangladesh (Grameen Bank) and in the Philippines (Makati Rural Bank, eh!). But what happened decades after?
              Piling up failure after failures exhausting them till there is no more left but success? Nope. Not for the Philippines who did quite good enough for the day-to-day survival of the have-no-money Pinoy city and town dwellers. Daily these have-no-cash citizens always make their last three seconds shots because of 5-6.

              Being a copycat requires NBA’s long 3-point shots and years of practice. It’s MACRO over there in USA and Canada. How they manage with minimal corruption the interaction and balance of the country’s fiscal pillars like revenue, expenses, taxation and debt management, where, might lurk the dumdum bullet that will kill 5-6. Killings of persons however, doing whatever do not kill concepts.

  14. Fascinating, absolutely fascinating.

    I wonder if there is not a defensive effort going on that has nothing to do with the US or any outside nation, but is the internal dynamic of how a historically abused society finally gets to stake a claim to being whole again, or even superior. The need to show face I suspect is huge, and the push outward certainly elevates nationalism. I’m inclined to think there are smaller games going on within the larger one hypothesized in the article.

    Take the case of Scarborough, where rumors say the US has, or had, drawn a red line against Chinese militarism of the shoal. If conflict emerged there, China might bear a huge cost for crossing the line, in terms of sanctions or warfare, but might be inspired to do that to preserve its legitimacy. The failure to defend Chinese legitimacy could pose a huge problem internally.

    So it is not a defense only against outside forces, but inside ones.

    • NHerrera says:

      Joe,

      Your comment is equally fascinating. This blog article has a synergistic effect in my mind, my GO-player mind, that is, and this blog.

      You see in GO (I hope the readers will indulge me, particularly the owner of the blog and the article writer) but in GO which is much larger game in board grid size — 361 as against only 64 in Chess (not Chinese Chess, that is an altogether a different game), there are larger pockets of the game being played in the board compared to the BIG one which is the entire 361 board. I make this comment in quick retort to your,

      I’m inclined to think there are smaller games going on within the larger one hypothesized in the article.

      There, we can now go back to the serious matter at hand, after your indulgence.

      (I promise not to mention another word of the GO game in this blog.)

    • Vicara says:

      Joe, you are right. Analysts have pointed out that traditionally, China’s identity is enmeshed in the notion of a centralized governing power; and one of its fears–well-founded or not–is that the Communist Party’s hold on the center of the PRC will not hold and that the whole enterprise will break up into spin-off states.

      So a key tactic employed by the Party to counter public rumblings of dissatisfaction and cement its legitimacy is to simultaneously whip up Chinese nationalism and xenophobia (which includes constant harping on how China has been humiliated by the West for the past century, aided by craven tuta like us.). Again, not a healthy building-block for relations with neighboring Asia. Tolstoy said that while “happy families are all alike, every unhappy family is unhappy in its own way.” Great powers are expansionist in their individual ways, and China will follow its own history-driven trajectory.

      It is true, Chempo, that its expansionism and takeover of major industries across Africa was done “without firing a shot.” But it’s early days yet, insofar as empires–or hegemonies–or “benevolent” giants–go.

    • chemrock says:

      Joe
      “….defensive effort going on that has nothing to do with the US or any outside nation…”
      The Hanisation of the Xinjiang province is one such example.

      On Red Lines — I learnt from a very young age to never issue a threat if you are not prepared to act, nor face the consequences. Give me the apple or I’ll punch your face! The Chinese island grabs, the US redlines (if made public) are not Duterte flip flop type announcements. There will be serious consequences.

  15. Grace Lim Reyes says:

    An Approach to Deconstruct the Chinese

    The Chinese mindset is quite different from that of its Western counterparts. China thinks “in terms of concrete analogy, which somehow puts the situation in a form easily grasped in its entirety” (Xing 14+). China also approaches its problems using common sense and resolves them by using synthesis, intuition, concrete image, and proverbs (Xing 14+). Recall that China once used Chinese proverbs to ridicule or threaten the Philippines: “The mantis stalks the cicada, unaware of the oriole waiting in the backdrop” (See Louis Bacani article in Philippine Star http://www.philstar.com/headlines/2015/08/...)

    People are quite puzzled that China does not accept or recognize the findings of the Tribunal as legally binding and within the bounds of the law. Frederickson (614) suggested that this attitude might have originated from the Confucian concept of social order, which contradicted the Western context of the rule of law. Chinese philosopher Confucius believed that, “…a plethora of new laws, a proliferation of minute regulations, amendments, and amendments of amendments. . . . For a society, compulsive lawmaking and constant judicial interventions are a symptom of moral illness” (Frederickson 614).

    To understand China, one must be aware of the two most important Chinese behavioral patterns, namely, Guangxi and Mianxi. Guangxi has no exact English translation, but it similarly means as attending to relationships on mutuality. Such relationships should be based on goodwill and personal sympathy (Deresky 506). Meanwhile, Mianxi (face) pertains to the most “precious possession” of a person. Keeping face is important to the Chinese because it is the face that is first presented to society before anything else (506).

    Works Cited
    Deresky, H. International management – managing across borders and cultures 4th Edition. NJ: Prentice-Hall, 2003.
    Frederickson, H. George. “Confucius and the Moral Basis of Bureaucracy.” Administration & Society 33.4 (January 2002): 610-628.
    Xing, Fan. “The Chinese Cultural System: Implications For Cross-Cultural Management.” SAM Advanced Management Journal 60.1(Winter 1995): 14+

    • NHerrera says:

      Thanks for additional nuggets on the Chinese way of seeing, doing things.

    • chemrock says:

      I’m inclined to feel ‘guangxi’ and ‘miangxi’ and over-hyped. ‘Guangxi’ is nothing more than networks or the Brit’s ‘old school ties’ relationships, but add to it ‘fixers’ and ‘grub’ money. We have the equivalent in Philippines, it’s called ‘frats’. In the early days of China’s opening, many foreign business people lost money to ‘guangxi’ scams. Money changed hands and nothing got done. As to ‘miangxi’, face is not something that only the Chinese value. Every race has a face they treasure.

      • Grace Lim Reyes says:

        Being born to a Chinese family in the Philippines (4th Gen) also made it confusing to me regarding “guanxi” and “mianxi,” but I have been exposed to such relationships among the Chinese community here in the Philippines. I think it is quite different from the “fixers” and “grub money” you refer. I think associations formed based on the original surnames of Chinese Filipinos here was a type of “guanxi” network and used purposely to help fellow Chinese kababayans to start or promote a business. The benefits extend to the children as these associations provide scholarships and cash grants to exceptional students. My parents have received the same goodwill from these associations because of my performance in school. “Guanxi” networks also work for the new Chinese immigrants to the Philippines because they sort of guarantee jobs and opportunities for them. “Guanxi” networks also serve as character reference, which is very useful to job seekers or entrepreneurs. As for “mianxi,” it is the equivalent of “hiya” in Filipino in which the Chinese strives to put his best face forward and avoid shameful acts (which is a scarce commodity nowadays). There is a Chinese Fookienese expression for “makapal ang mukha” which is “kaw bin peh” and literally translates to “thick face skin.”

        • Oldmaninla says:

          Very true in Philippine Chinese fookienese expression “kaw bin peh”.

          • Oldmaninla says:

            I’ll share some observation regarding Quanxi and Mainxi…..
            Nonoy and Cory Aquino being chinoy has strong Chinese ” Quanxi ”
            and good “Mainxi” ,
            But Ninoy Aquino has lost face, his “Mainxi” to the Chinese….. why?
            The answer is Ninoy has no history sense of South China Sea dispute…even as Chinoy.
            Just a cent of opinion.

        • chemrock says:

          Grace, that is very interesting. What you are referring to is the underlying formula for the success of the Chinese diaspora all over the world. It’s called clans. The collectivism that Irineo and others talk about, the Chinese equivalent is clanship. Everywhere the Chinese go in the world, they set up clans association. The clans would be firstly on dialectic groupings — Hokkiens, Cantonese, Teochews, etc and bigger population townships will have sub clans based on surnames — the Lims, Uys, Ongs, Lees, etc. These clans are critical because they promote self help and that’s how the Chinese can survive all over the world. Even in a dysfunctional environment, the Chinese immigrants survive and prosper because they get themselves organised. The Chinese clans function in a way no other ethnic immigrant community does. I totally understand what you are saying here. And I totally understand when I see Chinese volunteer fire engines at Ongpin and elsewhere in Philippines.

          I remember Lee Kuan Yew was once asked for his opinion on the problems of America’s blacks and he went on to explain, by way of difference, the Chinese clans, and black families where the menfolk disappears when the baby arrives. By the way, Lee has stressed that clans need to evolve and play a role in the national community of the host country. I am not acquainted with the Chinoy clans here and do not know to what extent have they worked at the national levels. They should.

          However, back in the mainland, the so-called guangxi is very often a pathway to loosing money for foreign businessmen. Everybody professes to have connection to somebody in officialdom that can get you the passes.

          I said guangxi exists everywhere, it’s not a Chinese exclusivity. A very long time ago I was in New Delhi, India and I wanted to take a detour to Srinagar, a very beautiful lake district (no longer so now due to armed conflicts). I needed to go book a ticket personally, there was no internet then. The book advised caution, it said air tickets always seem to be sold out and every tout round the corner all seem to have connection to someone who can get you the tickets. It did’nt say guangxi, just connection. So there I was at Amex office, true enough all New Delhi – Srinagar flights were fully booked. As I walked away, a guy came up to me and politely offered assistance. He has a relative that can get me a ticket.

        • These seem to be in line with what I learned from some people that have some Chinese influences. For a specific one, there was one that told me about his workplace ( Filipino in a Chinese company). Basically, he was saying that the benefits package for retirement were somewhat subpar compared to other companies. But to compensate this, I was told that they had an excellent program for helping people establish their own business and guide them through it. Complete with loans and help from business advisers and whatnot. One could probably see how it would benefit both. So in a way, this is probably the ‘guanxi’? But the catch is: They’ll help you but only if you help yourself? And in addition to that, while also not biting the hand that helps you, which is ‘mianxi’?

          And to share a video, this is a documentary about the Shenzhen District of China. As with the title: The Silicon Valley of Hardware. Very interesting to say the least. =)

  16. Zen says:

    I am gobsmacked by all these intelligent conversation. Thank you everyone for all the pieces of information starting from the logic of basing Chinese behaviour on ancient codes Yu,Shu and Cao down to Guangxi and mainxi. Most exhilarating read. Thank you all for sharing. I hope that somebody can counter a Filipino way of resolving the issue using our own ancient, cultural and positive mentality or is there no hope at all?

    • Oldmaninla says:

      Ask DU30. He must know something we don’t know.

    • chemrock says:

      “…is there no hope at all?”

      Your guess is as good as mine. Take the Russian occupation of Kuril Islands. There is no way as of now that Japan can retake the islands.

      Actually, Japan had a chance, but they missed it. The golden opportunity presented itself when the USSR broke up. Had Japan seized the opportunity, they might have got away with it.

      The hint to your question lies in the opening stanza of the Romance of the Three Kingdoms :

      ****** The empire, long divided, must unite; long united, must divide.*******

      It means every country that’s disunited, tend towards unity, every country that’s united, tend towards division.

      Can you see where the idea for Philippines federalism is coming from?

  17. andy ibay says:

    Only this commentor not Popoy del R. Cartanio said good bye to TSOH and Popoy after a short hiatus wants to be read again by KarlG and others who can nicely put up with cobweb ideas of an elderly. JoeAm keeping unlocked and ajar the door to those who care for Ph’s destiny might explain this trespass.

    Dear JoeAm, Popoy says . . . .

    I correctly with a big smile anticipated your answer having read you comment about postings on Donald J. Trump. Just to share an ego massage, I am wondering how I can most of the time predict after analyzing divergent alternatives the possible outcomes on issues. Old age may be and lots of readings and very varied experiences. I knew Du30 and DJT will win.

    Unlike in USA, historical precedents showed Ph16 milllion voters did not really make the recent one a president, but instinct for survival, the money and fanatical followers and strong tribalism of two former presidents sank the Roxas Titanic. The event therefore should NOT be reason enough to support, worse to justify any off-shoot lethal or fatal national policy.

    DJT won because of support of US clueless media, many Hollywood celebrities, illegal aliens and Afro-Americans—political muscle groups which tried (they’re still trying) forcefully to stop a runaway apolitical train. BOOMERANG it was. Familiar only to Crocodile Dundees and the Abus (admiration intended having enjoyed some R and R in Darwin) down under. Or be stupid to believe it’s CREDIBILITY not economics of these agglomerates of seemingly waning, dying political correctness.

    To write about the Philippines now I am like looking at crystal ball bigger than any of those being used by fortune tellers in Carriedo and Plaza Miranda. Let me guess the trigger for a Ph martial law will occur outside the country and it is not about war or make-over diplomacy.

    I think JoeAm you’re dead wrong about USA issues not being germane (even in TSOH) to Ph. It is system theory like human anatomy or the earth galaxy as system. The relationship is systemic and probably eternal. If all the powers-that-be in both countries support and push it, a nation-wide PLEBESCITE (perhaps even ASEAN-wide, even more US states-wide) no sweat can make Ph a 51st US State. By their citizens each country is a permanent interest to the other, hegemonic ambitions of other countries notwithstanding. Only then can Philippines be more than a drop in the bucket in USA’s new Greatness.
    In the rim of fire that will be tectonic intensity 10 producing tsunamis liquefying geo-political ambitions not the destruction of physical infrastructures in the region. Hello! Helooo? Hello DJT and DU30?

    For the minutes este seconds you allow this to remain in this web page, Thanks JoeAm. Pero paalala lang sa lahat: laging INGAT. Mi lukim ya from popoy.

    • To say we can learn from Trump is like saying red is a beautiful color. But that is not the issue. The issue is how much red do you want in a particular painting to have it present what you want to present. My judgment, as the painter of this blog, is that too much commentary by Americans about the American president is not what I want the blog to represent. Filipinos in the Philippines have a certain nationalistic spirit and can actually get turned off by the color red, so I have to take care. That’s essentially why I asked LCX to take the Trump discussion elsewhere, unless it is somehow made to teach an explicit lesson about the Philippines, and why I declined to publish your article about President Trump.

      • popoy del r cartanio says:

        I conjecture: I see no problem there JoeAm for us, me think we both speak not with fork tongue but from different tangents; in art paintings, I treaded in the impressionism, cubism and surrealism and somehow got stranded, awed and confused. And voluble. You probably preferred the classics sufficed and ennobled by the beauty of hot colors (red) and the calms of cool (blue) colors.

        I see US and the Philippines as whole canvasess where US is big brush strokes of political parties where one’s mistakes is subsequently corrected or made worse by the other in alternate repetitive succession; where the Philippines is a bastardized work of art of small brush strokes of numerous pseudo political parties, more likes the work of half-blind Van Gogh. Still acclaimed magnum opus of art.

        In Music we both appreciate singer and song but I focused more on the songs because most song outlived their singers. White House singers linger longer than Malacanang singers. More, I blabber of US and Ph as space with ethos and ecology while you do an involved dissection of leaders and people ethics. I write like a bystander non-stakeholder, you see the high stakes and write fighting. We may differ in form and focus but our admired art content is the same: the truth unblemished by molecules of lies.

  18. Oldmaninla says:

    Chemrock’ article and your comments are intellectually stimulating analysis, with very sharp penetrating presentation….my last question,
    Will the real value of nine dash-line be revealed crystal clear?
    Chemrock noted it has no value? Then what is its meaning?

    Since intellectually stimulating analysis, very sharp penetrating presentations are they just entertainment?….like the six blind men unreal presentations about the huge elephant metaphor?

    The reality of the SCS nine dash line has historical significance like the elephant, they have its source, effects and real life effects. What is the real story?
    He who can see and fully perceive the true elephant story can share the SCS Nine Dashline.

    • Oldmaninla says:

      What is its origin? Historical or fiction? When? How is Nine Dashline came about? Why did China consider it a core interest? …….

    • chemrock says:

      I’m sorry if my response to your question earlier could have come across as trivialising it. I did not say the 9 Dash Line has no value. I said it values only to the Chinese, but how can you quantify it, similarly like how do you quantify the effort of the little Dutch boy who stayed awake all night with his little finger in the little crack in the dyke.

  19. caliphman says:

    Not to change the topic but there are two alternative facts I am flabbergasted with the last couple of days. One is the statement that Trump and his spokespersons claiming that Friday’s inaguration crowds were the largest ever inspite of photographic proof contradicting it. The other is that the economy of China has surpassed the United States, presumably in terms of size or other more commonly used measures. Without belaboring the point, the reality is last year the US GNP was around 18 trillion dollars and China’s about 12T. If the recent average 2-3% US growth and China’s 6-7% historical trend persists, then Uncle Sam will cease to have the largest economy sometime in 2026.

    That aside, my friend Chemrock is attempting in this blog to connect some rather farflung and possibly tenuously unrelated ‘dots’ including the global economy and Chinese unclear aspirations in their claimed Middle Sea bounded by their 9Dash line. Perhaps this might be a successful endeavor but it is no news that we are not both agreed that a crushing economic collapse will be brought on by the gargantuan US national debt.

    There are very many blog statements I agree with including what primary reasons do not motivate the Chinese to act on their Middle Sea claims. I agree that there is a defensive intent as Beijing likes to announce but only to protect militarily every inch of its disputed territorial claims. That they are not in a military or legal position to defend what they claim to be Chinese seas should be evident and the hostility they arouse by such a sea grab from the region goes against their economic and trade interest. My own suspicion is that it is driven by internal politics more than by anything else as the competing blocks within the Politburo in the end curry favor for political power which ultimately flows from the barrels of the peoples army and navy.

    • chemrock says:

      Caliphman, good comments. Sharp and focussed as usual from a legal brain.

      Congratulations, you are the only one to call out the claim that China was already the number 1 economy in the world 2014. I left that in there for impact. That claim is based on IMF index based on purchasing power parity adjusted GDP. The renminbi is artificially undervalued so that impacts greatly PPP adjusted figure. IMF estimate for 2016 is China $29.3T and US is $18.6T.

      I appreciate your confidence in the $, but that is not the issue. The demise of the $ is a Chinese fear, from which they fear the fallout will be military conflicts, and their response is the A2/DD, for which they needed the 9 Dash Lines excuse. Those were the dots I connected.

      If you could be more specific how internal politics played out. This line of thought (pardon the pun) would be more aligned with the historical background of the 11 or 9 Dash Lines. You seemed to indicate it was the top brass that drove the initiatives.

      • caliphman says:

        Whether one uses purchasing power parity to adjust dollar denominated measures of the size of a country’s economy as the IMF is a departure from what most other financial and economic institutions consider meaningful in measuring national wealth and wellbeing. In the first place one would argue the real measure and proper comparison for that would be real or PPP adjusted GNP on a per capita basis. With China’s teeming billions that would place its economy behind Turkmenistan. In the second place, the figures given out by the Chinese government are notoriously unreliable and exaggerated and are the basis for IMF and WB PPP economic statistics. Thirdly, the use of PPP in a country like China where the typical basket of goods typically consumed by the populace is radically different from that purchased by the typical American family can be quite questionable. This is the precise reason why there is a cost advanrage in having goods manufactured in China and exported to other countries with higher price cost indices.Which is not to say that China is not an economic giant but to say that it has surpassed the US in economic and financial power is seriously questionable.

        I do not see myself as having a surfeit of confidence in the strength and leading role of the US dollar in the world economy. If anything is convincing in the present global economy, it is that the US is leading what hopefully will be a worldwide recovery from a slump that affects Europe and even a slowdown in China, not to mention Japan and Russia which are the leading economies by IMF’s PPP adjusted count. It is not that the US national debt is of no concern to conservative economists if which I am one, but no, the dollar sky is not about to fall. When the risk to most world economies is recession and deflation and interest rates are low or negative, it is a financial rule of thumb that it borrowing is good and paying off debt not so good. Particularly when one’s currency continues to be the standard exchange medium and as a store of value provides a higher yield than gold or other reserve currencies.

        But enough of the economic minutiae as I am not convinced that China’s leaders are paranoid that a US economic or dollar collapse will lead to a military confrontation with the US. China’s longterm strategic military concern is not a nuclear or conventional strike on its mainland by the US, which it can carry out with or without its Trident submarines loitering off the Chinese coast. Instead its socalled area denial concept is directed at preventing US carrier and surface fleet forces the ability to intervene in a future effort to reunite Taiwan as part of the mainland. A major component of this concept is the huge budget allocated to building the large number of Yuan–class small short-range submarines with their anti-ship missile capabilities which pose more of a threat to a US military response in case of a Chinese deployment against Taiwan.

        The Chinese seizure of Scarborough and their buildup and fortification of the Spratley islands and reefs have little to do with their strategic military concerns in connection with the US. Neither that nor the sonar grid would impede a US nuclear strike against their coastal cities or in their heartland if the US wanted ir had to do so.

        • chemrock says:

          PPP and metrics — we use whichever most suited to underline a point. It’s not an alternative truth, just data representation.

          The economic minutia — I note your consistency in the view the sky is not about to fall on the $, and here a little admission on no suffeiting confidence of the strength of the $ as a leading currency in the world. We’ll cont’d in Part 2.

          “The Chinese seizure of Scarborough and their buildup and fortification of the Spratley islands and reefs have little to do with their strategic military concerns in connection with the US.”
          What then is the reason for the Chinese actions, may I ask?

          • caliphman says:

            Well the reasoning I have set forth to discount the military strategy hypothesis is at least no less forceful than those you and others have used to eliminate the other potential .explanations. That some other unstated or unknown motivation is behind China’s flashing its military muscle. It is possible that the Chinese leadership itself maybe in a quandry as to whether the risks of pursuing their current posture is worth whatever advatages it might achieve. The Chinese leadership may not be a monolithic one-minded, power block like a Mao or Putin who can dictate and control the political and military agenda of the state. One key question is if the leadership realize the continuing folly of what they are doing. One can just hope the point of no return has not been passed and turning back is still a viable political option.

  20. Chempo, thanks for this very enlightening backgrounder, looking forward to Part II.

    The Year of the Fire Rooster is close, and THIS is how the Chinese see Trump..

    • http://www.bbc.com/future/story/20170118-how-east-and-west-think-in-profoundly-different-ways – within the more general topic of Eastern vs. Western mentalities:

      ..Some of the most notable differences revolved around the concepts of “individualism” and “collectivism”; whether you consider yourself to be independent and self-contained, or entwined and interconnected with the other people around you, valuing the group over the individual. Generally speaking – there are many exceptions – people in the West tend to be more individualist, and people from Asian countries like India, Japan or China tend to be more collectivist…

      ..Crucially, our “social orientation” appears to spill over into more fundamental aspects of reasoning. People in more collectivist societies tend to be more ‘holistic’ in the way they think about problems, focusing more on the relationships and the context of the situation at hand, while people in individualistic societies tend to focus on separate elements, and to consider situations as fixed and unchanging…

      there is a direct reference to Confucianism as well: Nisbett points out that Western philosophers emphasised freedom and independence, whereas Eastern traditions like Taoism tended to focus on concepts of unity. Confucius, for instance, emphasised the “obligations that obtained between emperor and subject, parent and child, husband and wife, older brother and younger brother, and between friend and friend”.

      One theory centers on crops: Growing rice requires far greater cooperation: it is labour-intensive and requires complex irrigation systems spanning many different farms. Wheat farming, by contrast, takes about half the amount of work and depends on rainfall rather than irrigation, meaning that farmers don’t need to collaborate with their neighbours and can focus on tending their own crops. now I think of Banaue…

  21. a distant observer says:

    Thanks for the thought-provoking article chemrock! I particularly liked your reference to the Wu, Shu and Cao mentality and your comparison between Japan’s and China’s “rise”. Interesting stuff.
    I think your and my assessment of the situation do not contradict each other, they rather complement.

  22. NHerrera says:

    MAD ON THE ECONOMIC FRONT

    Cielito Habito, an economist and former Head of NEDA describes the elements of MAD (Mutually Assured Destruction) between the US and China, although of the trade-war kind, not nuclear-war type MAD is usually associated with. And Habito believes that if Trump follows through with his pre-inauguration statements on the imposition of 45% tariff on Chinese products, the “destruction” will be more punishing to the US.

    http://opinion.inquirer.net/101093/looming-new-war

    • NHerrera says:

      And this results in a dilemma to — at the moment — the most powerful country of the world. A threat carries strength or credibility for future such threats if the one threatening is willing to bloody his nose, otherwise it will be cheap talk. And cheap talk has negative consequences.

      • NHerrera says:

        This recall’s chemrock’s comment above which I elaborate with a story:

        Two boys not known to each other chanced upon a basket containing a small green apple and a big red luscious-looking apple. Though the smaller of the two, one of the boys was quick to get the red apple, and the bigger boy the small green one.

        Now we know what apple carries a higher value. Whereupon, the big boy says to the small boy: exchange my apple for yours or I will punch you on the nose. As to be expected the smaller boy will not do such a thing. If now the big boy does not follow through with his threat, there will be a problem. He has to fight, and probably bloody his own nose too, even for a bit, to make true his threat. IF NOT, his credibility is shot and if made known to the boys in town, has negative future consequences for him.

    • chemrock says:

      Calvin Cheng, a guy from my FB, made an observation of the paradox that we see today:

      The most capitalistic country in the world is anti-trade.
      The biggest communist country in the world is fighting for global trade.

  23. chemp,

    I’m reading the article a 3rd or 4th time now, and I just want you to know that you’ve shifted my paradigm re China. This was an excellent continuation to your Rube Goldberg US$ article , if that article made me want to move to Brazil ; this article makes me want to move to Australia (far from the US but close enough to China to get a share of their windfall, LOL! )

    I’ll comment more on your Part II of this article, I’m still looking for a copy of “Hero” with Jet Li , I need to re-watch it.

  24. RHiro says:

    Nice long piece but completely out of date. All the troubles presently in the M.E. and terrorism are the symptoms for the geo-political struggle of the three Big Powers namely China, Russia and the U.S. The American Century formally ended with Trump’s inauguration.

    The contest for dominance of Eurasia is on. The key players being Iran, Turkey, Syria and Saudi Arabia. Trump got elected by his shock and awe tirades vs China and Mexico. Russia is moving quite effectively in the region will eventually link it with its sphere of influence in Central Asia.

    Also it is time to stop writing about the problems about U.S. debt. Not a big deal. Just look at how much of national income is used to pay the interest. A little over 2%.

    Trump’s open gambit to court Russia is meant to to try to divide the Chinese and Russian relationship.

    Fossil fuels still matter even though man is moving to renewable sources.

    U.S. is no longer out to push its values but as Trump said SELF-INTEREST.

    U.S. FOREIGN POLICY NOW IS ABOUT ENERGY……..IT IS ABOUT CONTROL OF

    PIPELINE-ISTAN.

    • Interesting piece that gives President Trump credit for being a strategic thinker, vs seat of his popular pants. I suppose the PH is a mere pawn in the playoff between Russia/China. How do you see Japan aligning in that playing field? Also interesting is how relations with Canada will evolve, given the oil and NAFTA chips, which seem at odds based on Trump’s moves.

      • RHiro says:

        Mexico is an easier foil than Canada and Trump’s people have already told Canada that trade deficits are not an issue with Canada.

        Kindly note the populist line vs trade with China was meant to muddle the issue and gain support in the primary battleground states. There he won the electoral college vote by a measly one tenth of one percent of the votes cast in three crucial states. . De-industrialization was a potent weapon but the reality that the shift of jobs from manufacturing to service started from 1950 till today. From over 30% of the labor force to over 10% today in manufacturing. Mexico and China did not steal that many jobs. Automation did the most damage. Manufacturing comes from the words to make with the hands.

        Peak oil happened in the U.S. in 1970 and thus paved the way for the massive oil increase in the 1970’s.

        Look the only reason the Philippines is crucial to the U.S. is that it provides a base that is close to China. Look at the line of U.S. bases in Japan then Taiwan then us. Look Vietnam controls the most territory in the Spratly archipelago. Why no fuss about them…

        Eurasia where most of the remaining proven reserves of energy lie is still a strategic part of geo-politics today

        Russia’s intervention in Afghanistan was meant to protect Russia’s interest in central Asia. Pakistan was more a U.S ally.

        The Sunni Wahhabi/Salaffi insurgency vs the West was a direct reaction of direct Western involvement in Arab lands. Sponsored unwittingly by the U.S. in Afghanistan when it supported the mujahadeen with training and weapons. Saudi Arabia supplied the ideology of jihad using the Wahabbi cult version of Islam.

        Look Russia will go to war over Crimea to defend their warm weather port in the Black Sea. Now they have a base in Syria and soon Turkey and Iran will move towards their sphere. Who will control the pipelines to the West and East of the M.E. and Central Asia in Eurasia.

        “One Belt One Road”

        Our President appears to be an Idiot and almost totally Ignorant about the world. However he respects wealth and power. He knows the game and that means never disturb the powers at be.

        The business of the U.S. is business.

        • Makes a lot of sense. How does Japan play into China/Russia/US? Japan let Russia down in WWII, as I recollect. I don’t really know their relationship today, but I don’t think they are a pawn like the PH. Maybe a rook. 🙂

      • RHiro says:

        As for Japan she is moving slowly to get out from under the post world war II era and will be competing for influence with China in ASEAN and other parts of Asia. The end of America’s century is now ushering Asia’s century.

        Human resources, energy resources are here in Asia. Japans technological advancement can help. The U.S. is redundant….

        It abused its power and wasted it on military adventures rather than using its moral soft power…

        All the multilateral institutions it sponsored since after the last war is seriously in need of major reforms.

        Trump is the symptom of the disease the U.S. has fallen into. Liberal democracy cannot exist without a vibrant prospering middle class.

        Trumps own dark description of the U.S. as having been ravaged is true but he blamed the foreigner. Supply side economics more popularly known as Reaganomics did the job and now Trump will finally bury what is left of the middle class.

        • Ah, thanks. Our comments crossed.

        • NHerrera says:

          RHiro,

          If I may summarize (paraphrase) your notes:

          – Notwithstanding his rhetoric, Trump after trying to please his supporters in some ways, will settle to being comfortable with US traditional allies — except Japan and countries in SEA who may undertake some adjustments due to geopolitical realities — and establishing a “life-line” to Russia, distancing themselves (US/ Russia/ traditional allies) in some degree from China;

          – On the part of China and Japan, they will vie for influence in this part of the world;

          – That the driving force in all this is energy and human resources; and in this area the trade and technology with and of China/ Japan can greatly enhance the viability of the new world order in this part of the world.

          Am I greatly off the mark in my paraphrase?

        • Oldmaninla says:

          RHiro, you have profound summary observation……….to the point.

          ” All the multilateral institutions it sponsored since after the last war is seriously in need of major reforms.

          Trump is the symptom of the disease the U.S. has fallen into. Liberal democracy cannot exist without a vibrant prospering middle class.”

          Just an appreciation from the old man.

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