Asia: The Next War?

From: Real Clear World

Don't look now, but conditions are deteriorating in the western Pacific. Things are turning ugly, with consequences that could prove deadly and spell catastrophe for the global economy.

In Washington, it is widely assumed that a showdown with Iran over its nuclear ambitions will be the first major crisis to engulf the next secretary of defense -- whether it be former Senator Chuck Hagel, as President Obama desires, or someone else if he fails to win Senate confirmation. With few signs of an imminent breakthrough in talks aimed at peacefully resolving the Iranian nuclear issue, many analysts believe that military action -- if not by/around_the_world/united_states/United States -- could be on this year's agenda.

Lurking just behind the Iranian imbroglio, however, is a potential crisis of far greater magnitude, and potentially far more imminent than most of us imagine. >China's determination to assert control over disputed islands in the potentially energy-rich waters of the East and South China Seas, in the face of stiffening resistance from>Philippines along with greater regional assertiveness by the United States, spells trouble not just regionally, but potentially globally.

Islands, Islands, Everywhere

The possibility of an Iranian crisis remains in the spotlight because of the obvious risk of disorder in the Greater Middle East and its threat to global oil production and shipping. A crisis in the East or South China Seas (essentially, western extensions of the Pacific Ocean) would, however, pose a greater peril because of the possibility of a U.S.-China military confrontation and the threat to Asian economic stability.

The United States is bound by treaty to come to the assistance of Japan or the Philippines if either country is attacked by a third party, so any armed clash between Chinese and Japanese or Filipino forces could trigger American military intervention. With so much of the world's trade focused on Asia, and the American, Chinese, and Japanese economies tied so closely together in ways too essential to ignore, a clash of almost any sort in these vital waterways might paralyze international commerce and trigger a global recession (or worse).

All of this should be painfully obvious and so rule out such a possibility -- and yet the likelihood of such a clash occurring has been on the rise in recent months, as China and its neighbors continue to ratchet up the bellicosity of their statements and bolster their military forces in the contested areas.

Vatican lauds ordination of China's missing bishop :: Catholic News Agency (CNA)

From: Catholic News Agency (CNA)

The Vatican has praised the approved ordination of a Chinese bishop, who is now missing after announcing his split from the state-controlled Catholic association during his ordination.

“The ordination of the Reverend Thaddeus Ma Daqin as Auxiliary Bishop of the Diocese of Shanghai on Saturday 7 July 2012 is encouraging and is to be welcomed,” said a July 10 Vatican communique.

During the ordination ceremony, Bishop Ma revealed that he was quitting his posts within the government-run Catholic Patriotic Association which refuses to acknowledge the authority of the Pope.

“After today’s ordination, I would devote every effort to episcopal ministry. It is inconvenient for me to serve the CPA post anymore,” he said, according to the Catholic UCANews agency which reports on the Church in Asia.

The announcement by the 44-year-old native of Shanghai was made in front of several state officials and was seen by many as a rebuke to China’s communist regime. The 1000 strong congregation in the city’s St Ignatius Cathedral responded with rapturous applause.

Bishop Ma, however, has not been seen in public since. Various media outlets suggest he was whisked away by state-officials following the ceremony.

UCANews reports that priests and nuns in Shanghai have since received a text message from Bishop Ma’s cellphone claiming to be sent by him.

It states that he was “mentally and physically exhausted” and needed “a break” to make “a personal retreat.” It also claims he is residing in the Sheshan seminary near Shanghai.

The mystery surrounding Bishop Ma comes on the day the Vatican formally announced the excommunication of 48-year-old Fr. Joseph Yue Fusheng following his illicit ordination as bishop of Harbin in north-east China on July 6.

“Consequently, the Holy See does not recognize him as Bishop of the Apostolic Administration of Harbin, and he lacks the authority to govern the priests and the Catholic community in the Province of Heilongjiang,” the July 10 communique reads.

The note also stipulates that those licitly ordained Catholic bishops who took part in the ordination have “exposed themselves to the sanctions laid down by the law of the Church” and must now “give an account to the Holy See of their participation in that religious ceremony.”

It commends all Chinese Catholics who “prayed and fasted for a change of heart in the Reverend Yue Fusheng” and urges them to continue to “defend and safeguard that which pertains to the doctrine and tradition of the Church.”

“Even amid the present difficulties, they look to the future with faith, comforted by the certainty that the Church is founded on the rock of Peter and his Successors.”

China has an estimated eight to twelve million Catholics, with about half of those worshiping within the Catholic Patriotic Association.

Biden Says Cities in China Are Better Than in America

China Is No Longer Predictable by Robert D. Kaplan

From: Stratfor.com

The United States has had it easy over the past third of a century in regards to China. Washington has been able to proclaim moral superiority over the Communist Party dictatorship in Beijing, even as those very dictators provided Washington with a stable, businesslike relationship that fostered immense opportunities for American companies in China and for the American economy overall. China's rulers, ever since Deng Xiaoping consolidated power in 1978, may have been nominally communists, but they have also been professionals and technocrats who have ruled in a self-effacing, collegial style. Yes, they may oppress dissidents, but they have also been enlightened autocrats by the standards of the suffocating rulers who have governed in the Middle East.

But the purging of the pseudo populist boss of the megacity of Chongqing, Bo Xilai, may indicate that a less predictable period in Chinese politics lies ahead. Bo was something not seen in China since Mao Zedong: a leader with real charisma. Bo may indicate that the age of the technocrats will give way to the age of politicians -- and politicians, even in liberal democracies, exploit people's emotions. That could lead to more erratic, nationalistic rulers.

It is famously said that democracies don't go to war against each other. But the problem is not democracy; the problem is a vast and unruly state like China in the messy, decadeslong process of liberalization. The truth is that these Communist dictators in Beijing, whom the media love to hate, may turn out to have been the most benign and easy-to-deal-with Chinese leaders that Americans will see in their lifetime. President Hu Jintao is as good as it gets from the point of view of a State Department policy planner.

China's autocrats have for many years been nervously riding a domestic tiger. With communism no longer a philosophical organizing principle for the state, they have had to justify their rule by delivering double-digit annual economic growth -- or close to that -- to provide jobs for a potentially restive younger generation.

Thus, even while China has amassed impressive new air and sea power, it has -- by and large -- not tried to employ that power in a particularly hostile way. China's communist rulers have had too much domestically to worry about without creating new problems for themselves by constantly challenging the United States or its allies on the high seas. While China's push to acquire air-sea power most specifically dates to 1996, when Beijing was humiliated by Washington's ability to drive two aircraft carrier strike groups through waters near the Taiwan Strait, the building of a substantial air force and navy have so far been part of the natural, organic process of a new and rising great power. At least so far, it has not been particularly destabilizing to the world or regional order, unlike Iran's push to develop a nuclear capability as part of a drive for Near Eastern leadership. China's rulers may be dictatorial, but they are not radical and messianic.

Drilling off Keys to begin by December

From: Miami Herald.com

A giant, semi-submersible oil rig en route from Singapore will probably be drilling in the Florida Straits between Key West and Cuba in mid-December. The rig could arrive earlier, but Repsol, the Spanish oil company, wants to wait until after hurricane season ends before it begins drilling.

This latest report on the progress of the Italian-made Scarabeo 9 oil rig comes from Lee Hunt, the chief executive of the International Association of Drilling Contractors, who just returned from a trip to Cuba last week as part of a joint delegation with the environmental group, the Environmental Defense Fund.

Hunt also said that Repsol plans on having one well drilled by the end of the year.

Along with Hunt, the fact-finding delegation included William Reilly, a former Environmental Protection Agency administrator and co-chair of the White House task force investigating the 2010 BP oil spill in the Gulf of Mexico, Richard Sears, former vice president of deepwater drilling for Royal Dutch Shell, and Dan Whittle, a senior attorney for the Environmental Defense Fund.

Their goal was to learn how committed the Cuban government is to operating offshore oil and natural-gas rigs safely and responsibly, and to find out the best way for American companies with oil-spill expertise to work with Cuba, despite a 50-year-old economic embargo by the United States.

“We’re shooting ourselves in the foot by not working together,” Whittle said in an interview this week. “There was a lot of speculation in the past about if Cuba will in fact begin drilling. Well, now we know Cuba is moving forward as quickly as it can.”

Because of the embargo, Repsol would have to rely on companies from the United Kingdom, Norway and Brazil for help if the Scarabeo 9 caused a spill, Whittle said.

Whittle and the rest of the group met with senior officials in Cuba’s Ministry of Basic Industry, which regulates the country’s energy, geology and mining and basic chemistry sectors. They also met with officials from the Ministry of Environment, as well as senior members of CUPET, Cuba’s state-run petroleum company.

Whittle and Hunt said they were encouraged by what they heard from their hosts during the trip. Whittle said he was especially pleased to see how interested these officials were to hear Reilly talk about his task force’s recently-released report on the DeepWater Horizon oil spill.

“They’re taking the lessons of the BP spill very seriously. They were dog eared whenever the report came up,” Whittle said.

“They could have easily distanced themselves from what happened and said theirs is a different situation from BP, and said ‘thanks very much, but we don’t need your help.’ The very opposite happened. They were eager to hear from Bill Reilly,” he said.

Whittle also said that CUPET workers have been training on offshore oil rigs in Brazil, and they have been taking part in exchange programs with Canadian oil and natural gas companies.

Pentagon report: China closer to matching modern militaries

From: Washington Times

China's military buildup has made impressive gains that pushed the Communist Party-controlled People’s Liberation Army closer to matching modern militaries, according to the Pentagon’s annual report to Congress made public Wednesday.

“Militarily, China’s sustained modernization program is paying visible dividends,” the report said. “During 2010, China made strides toward fielding an operational anti-ship ballistic missile, continued work on its aircraft carrier program, and finalized the prototype of its first stealth aircraft.”

While the report cautioned that the Chinese military continues to have gaps in key military capabilities and has large amounts of outdated hardware and a lack of operational experience, it concluded that the People’s Liberation Army “is steadily closing the technological gap with modern armed forces.”

By the end of this decade, China will be able to project military power and sustain a modest-sized force of naval and ground forces for smaller conflicts “far from China,” an assessment not included in earlier Pentagon reports.

China recently began sea-trials of a refurbished Soviet-era aircraft carrier and is developing a unique anti-ship ballistic missile to target ships at sea, the report said.

The report appeared to back away from statements made by Adm. Robert Willard, commander of U.S. forces in the Pacific, who said earlier this year, based on the anti-ship ballistic missile’s extensive testing, had basically been deployed. The Pentagon report said China was “developing” the new missile, echoing a statement made in January by a senior Chinese general.

China also is continuing aggressive cyberintelligence gathering and targeted numerous computer systems around the world, the report said, noting the intrusions “appear to have originated within the PRC.”

“These intrusions were focused on exfiltrating information,” the report said, noting that the same skills can be used for “computer network attacks” in warfare.

China’s cyberwarfare capabilities likely would serve future military operations by gathering intelligence, constraining enemy action or slowing their response, and bolstering conventional attacks during crisis or conflict. Chinese military writings state that China plans to use its cyberwarfare weapons to achieve information superiority and to counter a stronger foe.

China's military is continuing to use deception about its military but it is becoming tougher to hide its new weapons systems.

“Many of China’s new military capabilities are difficult or impossible to hide,” the report said. “Examples of such capabilities include advanced aircraft, long range missiles, and modern naval assets.”

For future space warfare, while China increased its number of satellites in 2010, space weapons and related missiles require testing and exercises before being deployed. “The PLA’s growing inventory of these new assets and the ranges at which they operate effectively prevents their concealment,” the report said.

China and Cyber WArfare

From: Vanity Fair.com

Lying there in the junk-mail folder, in the spammy mess of mortgage offers and erectile-dysfunction drug ads, an e-mail from an associate with a subject line that looked legitimate caught the man’s eye. The subject line said “2011 Recruitment Plan.” It was late winter of 2011. The man clicked on the message, downloaded the attached Excel spreadsheet file, and unwittingly set in motion a chain of events allowing hackers to raid the computer networks of his employer, RSA. RSA is the security division of the high-tech company EMC. Its products protect computer networks at the White House, the Central Intelligence Agency, the National Security Agency, the Pentagon, the Department of Homeland Security, most top defense contractors, and a majority of Fortune 500 corporations.

The parent company disclosed the breach on March 17 in a filing with the Securities and Exchange Commission. The hack gravely undermined the reputation of RSA’s popular SecurID security service. As spring gave way to summer, bloggers and computer-security experts found evidence that the attack on RSA had come from China. They also linked the RSA attack to the penetration of computer networks at some of RSA’s most powerful defense-contractor clients—among them, Lockheed Martin, Northrop Grumman, and L-3 Communications. Few details of these episodes have been made public.

The RSA and defense-contractor hacks are among the latest battles in a decade-long spy war. Hackers from many countries have been exfiltrating—that is, stealing—intellectual property from American corporations and the U.S. government on a massive scale, and Chinese hackers are among the main culprits. Because virtual attacks can be routed through computer servers anywhere in the world, it is almost impossible to attribute any hack with total certainty. Dozens of nations have highly developed industrial cyber-espionage programs, including American allies such as France and Israel. And because the People’s Republic of China is such a massive entity, it is impossible to know how much Chinese hacking is done on explicit orders from the government. In some cases, the evidence suggests that government and military groups are executing the attacks themselves. In others, Chinese authorities are merely turning a blind eye to illegal activities that are good for China’s economy and bad for America’s.

Cardinal Zen: Chinese Communists Renew Crackdown on Chinese Catholics

From: HUMAN EVENTS

The titular leader of Catholics in China in an exclusive July 10 HUMAN EVENTS interview in the rectory of Washington's St. Mary, Mother of God Church spoke out against the religious policies of that country's Communist government, including the renewed arrest and torture of priests, coerced participation in government-staged ordinations and the pending takeover of Catholic schools in Hong Kong.

“All the examples in history show that when the bishops are under the control of the government, the Church goes wrong,” said Cardinal Joseph Zen, the retired archbishop of Hong Kong, who still commands respect for his years of outspoken support for religious freedom inside his homeland.

The cardinal is a slight man who wore his black cassock with the red buttons, piping, fascia and zucchetto of the prince of the Church. His stop in the nation's capital is one of 10 visits to Chinese communities in America and Canada. Before celebrating Mass in Chinese with the co-located Our Lady of China Parish, Zen celebrated the church's regular scheduled traditional Latin Mass.

A priest traveling with the cardinal, who asked that his name be withheld, said in addition to the visit was an opportunity to visit old friends and to keep Chinese Catholics in the two countries informed about the struggles of the Church to operate freely.

“In France, England and Eastern Europe—it is always a disaster for the Church when it abandons its traditional independence,” said the cardinal.

Today in China, the Catholic community is divided into two, by the government's creation of an official church referred to as the “open” church, which is sanctioned by the government and the underground church that never wavered in its unity with the Holy See.

“People should understand, we are one Church and one family, so they must open their hearts, understand each other and respect one another,” he said. “On the spiritual level, we must work to create rapprochement of hearts.”

But, a structural merger is very difficult. The open church is completely under the control of the government, so how can we unite with that? It is impossible. If you unite with that you are wrong,” he said.

On the other hand, it is impossible for the open church to merge into the structure of the underground church, he said.

For a time, since 2007, the Vatican and the government were trying to find a way to cooperate, but those efforts stopped when the Communists began ordaining new bishops without Rome's approval.

The cardinal said he knows priests and bishops who attended the ordinations against their will.

“There are three kinds who participated: those brought by force, those brought by heavy pressure and those who went willingly,” said Zen, a native of Shanghai, who was ordained a priest in 1961.

“It's very bad that people have to be forced—but, it is even worse for us—more sad for us—that some went willingly,” he said.

The retired prelate said he there are bishops who have been corrupted by the government. “Some bishops who go get paid a good sum of money. We know one bishop who received 200,000 renminbi and for another it was 300,000. We know many things in Hong Kong about what is going on. It is no longer possible to keep things secret.”

The bribes and bullying have been accompanied renewed arrests and tortures despite greater scrutiny and communications, he said.

“When they arrest a priest they don't put him in the prison, they put him in a guest house of the police,” he said.

Beijing belligerence

From: NYPOST.com

Thirty-six years after chasing the United States out of Vietnam, the com munist rulers in Hanoi now want us back. The ironies of this bizarre turn of events are many, but the reason is simple: China.

Beijing has been flexing its newfound military muscle and geopolitical ambitions in the face of its neighbors.

Together with its global cyberhacking offenses, China is looking less like an emerging superpower and more like an out-of-control bully.

The latest run-in with Vietnam -- once China's ally, now its steadfast foe -- is over oil exploration in the South China Sea, where China claims sole sovereignty and where Vietnam has staged live fire naval exercises to protect its rights. China has responded with three days and nights of its own exercises, although it says it won't "resort to force" to resolve the dispute. Still, Vietnam has issued a strong statement welcoming foreign help -- a veiled but unmistakable invitation to the US and its Navy.

There's an opportunity here for US policy, not just to close the circle on our most divisive war but to find a new, more realistic approach in dealing with the rulers in Beijing. Because there's trouble brewing for the Middle Kingdom -- and not just in its dealings with its neighbors.

Over the last several weeks, a serious wave of unrest has roiled China's cities with outbreaks of violence -- even bomb blasts -- against the Beijing regime.

There's no sign of an organized uprising a la the Arab Spring. But the number of what the authorities call "mass incidents" has risen steadily. As many as 127,000 occurred in 2008. They are going to get worse before they get better -- and not just because Beijing authorities still can't get a handle on suppressing dissent on the Internet.

China's phenomenal economic growth is sputtering. Rising oil prices and growing inflation are erasing many economic gains. If the US economy, a major source for exports, doesn't recover soon, it could threaten China's long, unbroken record of growth -- setting the stage for more trouble there.

India inches toward Shanghai

From: Asia Times Online

Indian Foreign Minister S M Krishna declared his country's desire for "a larger and deeper role" in the Shanghai Cooperation Organization (SCO). That pronouncement at the forum's recently concluded tenth summit makes supreme sense for India, since as a geopolitical and geo-economic reality that bridges the former Soviet space, East Asia and South Asia, the SCO is hastening the global shift towards multipolarity.

India shares with the SCO the limited goal of a more "democratic international system", wherein power is widely diffused among multiple centers even as many of the organization's member states - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan - and applicants have undemocratic regimes.

Yet, as the summit in the Kazakhstan capital of Astana finalized

negotiations for India (and Pakistan) to join the SCO, New Delhi will be aware that its eventual promotion from "observer" status to full membership of the group will necessitate subtle policy shifts that would require moving away from its close embrace with the United States on certain issues.

If the historic purpose of NATO was to "keep the Germans down, the Americans in and the Russians out", then SCO is at least minimally united around the motto of "keeping the Americans out". India's strategic establishment is contradictorily keen on keeping the Americans in Afghanistan for as long as possible, believing that a US withdrawal would throw open the doors to renewed Pakistani (and indirectly Chinese) hegemony in a geostrategic lynchpin.

However much the SCO's leading lights - China and Russia - verbally deny that the SCO is a countervailing military alliance against the US-dominated North Atlantic Treaty Organization (NATO), it has undeniable value in the "new Cold War" that Moscow has broached on and off.

The latest iteration of an impending escalation was uttered by Russian President Dmitry Medvedev last month in the context of the United States pressing ahead to build a recalibrated missile defense shield in Eastern Europe. Russia used the summit in Astana to reinforce this warning to the West via a denunciation of "unilateral and unlimited build-up of missile defense" in the joint declaration from all member states.

Russian Foreign Minister Sergei Lavrov claimed that this veiled attack on the US was a "consolidated position" of all six members of SCO and that Moscow did not have to push to get this critique included in the final summit communique. Most interestingly, he added that the US's missile shields "also covers the Southeast Asian region" - an allusion to China's fears that Washington is encircling it with a chain of anti-missile systems operable from Japan, South Korea and Taiwan.

As has been the practice since the SCO was created a decade ago, China lets Russia do the hard talking and snorting against the US, but agrees behind the scenes that it too would like to whittle down American power and military encroachments in the territories and waters that it prefers to dominate in Asia.

Characterizations of the SCO as a "NATO of the East", or as a present-day Warsaw Pact, may therefore be inept insofar as there is no single principle setting its agenda, but the comparison is not preposterous as the SCO does act as a counterbalancing power center against the US. The more SCO matures in joint military exercises and its use of diplomatic pressure against American expansion, the less becoming the fiction that it is a purely regional entity for fighting terrorism and sharing intelligence.

India must be conscious that its impending full membership of SCO would entail being called on to make statements similar combative to the one just out of Astana. The SCO has suffered from absence of unanimity on key global questions in the past, and it would be an exaggeration to expect that its two major patrons will impose conformity on all other members.

Three Gorges Dam crisis in slow motion

From: Asia Times Online

Dams are big and stupid things. The Three Gorges Dam on China's Yangtze River is bigger and stupider than most, so it attracts a lot of criticism. Much of the criticism is deserved. Some of it - such as accusations that it has significantly exacerbated the drought gripping China - is, perhaps, undeserved.

All of the criticism, however, is an important harbinger of mounting political problems for China's authoritarian model of national development.

The Three Gorges Dam, or TGD, is very much the bastard child of the Tiananmen democratic movement of 1989 and the ensuing crackdown.

Popular activists, led by author Dai Qing, tried to stop the dam in

the name of transparency, accountability and democracy. After Tiananmen, the Chinese government built and promoted the dam as a symbol of the government's determination to pursue economic development over political reform and in the teeth of international economic sanctions.

TGD was also a public vote of confidence in then Chinese premier Li Peng, who was at the time internationally excoriated as "The Butcher of Beijing" for ordering the crackdown. Li, trained as a hydropower engineer, was an enthusiastic advocate for the project, and allegedly had strong family as well as professional and public interest in the construction of the dam.

Because of its potent symbolism, negative reporting on the dam was actively discouraged in the Chinese national press for two decades.

Therefore, it was significant news when the State Council, China's cabinet, went public recently with the information that it was necessary to throw another 20 billion yuan (US$3 billion) or so at the Three Gorges in order to deal with landslide, pollution and relocation issues.

Most probably, the State Council announcement reflected the priorities of Premier Wen Jiabao. Wen, who is responsible for projecting the friendly, caring face of the Chinese government, has made it his priority to respond to popular dissatisfaction with bloated, destructive hydropower projects promoted by greedy local governments and powerful national utilities.

Famously, Wen pulled the plug on the Leaping Tiger Gorge Dam in 2008, after reading an investigative report by Liu Jianqiang in the Guangzhou-based Nanfang (Southern) Daily blasting the rogue project.

The Western press, however, decided not to spin the State Council announcement as "China's government makes a belated but welcome step toward transparency and public engagement by breaking silence on TGD problems".

Instead, some outlets decided to use the Yangtze basin drought as a news hook for the story. As the Washington Post reported, "Amid severe drought, Chinese government admits mistakes with Three Gorges Dam." [1] CNN pitched in with "Has the Three Gorges Dam created Chinese drought zone?" [2] Associated Press: "China drought renews debate over Three Gorges Dam." [3]

In example of the bloggy "it would be irresponsible not to speculate" writing that news outlets increasingly turn to in order to fill their pages and attract readers, Elaine Kurtenbach of AP reported the allegation that "many villagers and some scientists suspect the dam ... could also be altering weather patterns, contributing to the lowest rainfall some areas have seen in a half century or more."

Misconceptions About China?

From: TIME

Wang Qishan, China's vice-premier, caused a bit of a stir this week when he accused Americans of having “simple” ideas about his nation during an interview on “The Charlie Rose Show.” According to a transcript, Wang said:

It is not easy to really know China because China is an ancient civilization and we are of the oriental culture. And for the Americans, the United States is the world's number one superpower, and the American people are a very simple people. If they're asked to choose to understand a foreign country, their first choice would be the European countries, and the South American countries may come second. It was not only until recent years that the American people have begun to pay more attention to China. But over the years American media coverage of China has been scarce, and if there were some coverage, most of them are lopsided.

Wang's views about the “simple-mindedness” of Americans when it comes to the world are widely held by people just about everywhere – and they sting. I am American and I am confronted by this accusation wherever I go. My experience tells me that the average American is no more narrow-minded about the world than the average person anywhere else – let alone in China, where the Chinese aren't allowed free access to information by their government.

But Wang's comments got me thinking about American attitudes towards the China-U.S. economic relationship. In my opinion, many Americans don't seem to fully grasp the complexity of the Chinese economy and U.S.-China economic ties, and that generates tensions between the two countries. There is a gap – and in some cases, a pretty wide one, in my opinion – between what many Americans seem to believe about China and what is truly the reality on the ground. Here are what I believe are some common misperceptions:


Common Belief One: China steals American factory jobs.

Reality: Yes, it is true that the U.S. has experienced a major decline in manufacturing employment over the past 30 years, and China is partially responsible, since much of the world's labor-intensive manufacturing (clothes, electronics, shoes) has become based in China. Even some of America's high-tech inventions, like the iPhone, are assembled in China. But where Americans get things wrong is the idea that these jobs are being “stolen,” as if something nefarious is going on. The only crime committed by the Chinese people in this regard is that they are much poorer than Americans, and thus willing to work long hours in factories for a fraction of the wage demanded by workers in the U.S. or other wealthy nations.

China Wants a Peek at Stealth Helicopter

From: ABC News

Pakistani officials said today they're interested in studying the remains of the U.S.'s secret stealth-modified helicopter abandoned during the Navy SEAL raid of Osama bin Laden's compound, and suggested the Chinese are as well.

The U.S. has already asked the Pakistanis for the helicopter wreckage back, but one Pakistani official told ABC News the Chinese were also "very interested" in seeing the remains. Another official said, "We might let them [the Chinese] take a look."

A U.S. official said he did not know if the Pakistanis had offered a peek to the Chinese, but said he would be "shocked" if the Chinese hadn't already been given access to the damaged aircraft.

The chopper, which aviation experts believe to be a highly classified modified version of a Blackhawk helicopter, clipped a wall during the operation that took down the al Qaeda leader, the White House said.

The U.S. Navy SEALs that rode in on the bird attempted to destroy it after abandoning it on the ground, but a significant portion of the tail section survived the explosion. In the days after the raid, the tail section and other pieces of debris -- including a mysterious cloth-like covering that the local children found entertaining to play with -- were photographed being hauled away from the crash site by tractor.

Aviation experts said the unusual configuration of the rear rotor, the curious hub-cap like housing around it and the general shape of the bird are all clues the helicopter was highly modified to not only be quiet, but to have as small a radar signature as possible.

China As No. 1? Give Us A Break

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Comparative Economies: This just in from the International Monetary Fund: China could pass the United States as the world's largest economy as early as 2016. With all due respect, the IMF has it wrong again.

A new IMF report blithely forecasts that the "Age of America" will end as the U.S. economy is overtaken by China. And on the surface, it's tough to argue the point.

Officially, China's GDP is growing at 10% while ours is expanding at about 3%. At those rates, China's economy doubles every seven years, America's about every 24.

But such forecasts are based on a straight-line extrapolation from current trends: So if China's growing at 10% now, it'll always grow that fast.

As Inflation Surges, Central Banks Run Amok

FROM: CAIXIN ONLINE

Super heroes for the world economy they're not, as the Federal Reserve's inflation-stoking policies prove

Inflation is rising around the world, and none of the major central banks have shown serious interest in containing it. To prosper now, under these inflationary conditions, one needs thick skin.

The Bank of England has the thickest skin of all: It no longer gives excuses for ignoring inflation. The U.S. Federal Reserve is constantly inventing new theories while trying to explain away inflation, and while trying to justify its QE2 quantitative easing project despite inflationary signs aplenty.

The European Central Bank has the thinnest skin of all, and recently raised interest rates to defend its credibility in targeting price stability even though, unfortunately, the ECB won't be able to maintain this stance. The Bank of Japan is still shy, but it will have to out-QE the Fed to help its government pay for post-earthquake reconstruction.

Price stability is supposed to be central banking's main goal. But these days, central bankers think they're super heroes who should rescue the world and make everyone happy.

Inflation, since its negative effects are spread thin and take time to materialize, is ignored. Today's central banking is about so many things except inflation. This is why inflation will worsen for a long time to come.

Indeed, inflation is the main theme for the current decade. A change will occur only when the current generation of central bankers is replaced.

Inflation's Hold
When western governments decided to bail out their bankrupt financial institutions in 2008, I foresaw inflation ahead. I argued it would start with commodities and in emerging economies, and then spread to developed economies. But now it seems inflation has already taken hold in developed economies.

The euro zone inflation rate reached 2.4 percent in February and 2.7 percent in March year-on-year, marking the third and fourth months that the rate topped the ECB's 2 percent target. More importantly, it's been on a solid upward trend for the past two years. Inflation's dip in 2008 seemed a temporary phenomenon due to negative demand shock. Actually, structural forces have been inflationary for a long time.

The U.S. Consumer Price Index increased 0.5 percent in March from the month before and 2.7 percent from the same month 2010. The index has risen an average 2.7 percent over the past 12 months, much higher than the Fed's assumed target of 2 percent. However, the Fed insists on focusing on core CPI, which excludes food and energy. That indicator averaged a 1.2 percent increase over the previous 12 months.

The problem with the Fed's view is that its policy is partly, if not mostly, the reason for a rapid increase in food and energy prices. If it continues on this policy track, this price trend will continue. And core CPI will eventually catch up with general CPI.

Britain's inflation rate conveniently fell 0.4 percent from the previous month to 4 percent in March. The decline was cited as the reason why the Bank of England has not raised interest rates. Britain has had an inflation rate above its policy target for nearly two years, but it hasn't raised rates. This seems to be a pattern. Data from a single month hardly matters.

Is the ‘Age of America’ Really at an End?

From: Pajamas Media

You’ve no doubt read the ghoulish MarketWatch headline: “IMF Bombshell: Age of America near end.” The story goes on to report that “China’s economy will surpass that of America in real terms in 2016 – just five years from now.”

Well — yes and no and how much does it really mean?

China is indeed riding high. While the U.S. has yet to fully recover from a recession which “officially” ended almost two years ago and continues to struggle with 20% underemployment, China’s economy grew by almost ten percent and created more than 15 million new jobs just last year.

Beijing has unashamedly made an economic colony out of much of Africa, while American power is being frittered away through piecemeal attacks in Libya and an overcommitment in Afghanistan.

The yuan is weak because China wants it to be, fueling an export-driving boom that has taken China from a backwater to a major power in 30 years. Meanwhile, the U.S. dollar plummets because nobody in D.C. can implement a policy to make it do anything else — and the resulting inflation threatens us with a double-dip recession.

But there is more to the story.

Measured dollar-for-dollar, China’s GDP is less than half that of the United States’ — it’s only by measuring “Purchasing Power Parity” that the numbers are even close, even all the way out to 2016. Per capita, most Chinese are quite poor, making little more than $4,000 a year. Grade on the PPP curve, and your average Chinese still makes only around $7,500. Per capita GPD in the U.S. is a much-comfier $47,132.

America enjoys other strengths China lacks. “Soft power” might not win wars, but it does help develop and strengthen friendships. China can count its closest friends on the fingers of one hand, with three left over for making rude gestures: North Korea and Burma. If you judge a country by its friends… China comes up short.

In trade, China’s “brand” is probably best summed up as “dirt cheap crap.” That’s not how this country or Japan came up in the world.

China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

From: Zero Hedge.com

All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?


From Xinhua:

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:

Thanksgiving Question Nearly Deports Tortured Christian

From: Real Clear Religion

An immigration judge cannot quiz asylum seekers on religious doctrine to see if they are credible about their faith, the Ninth U.S. Circuit Court of Appeals reiterated in a January ruling. The State Department made the rule because persecuted Christians often lack access to religious training and literature.

The problem in the case of Chinese Christian Lei Li, the court said, was not only had he been tested on doctrine, but that his answers weren't wrong.

Li says he became a Christian while visiting Korea in December 1999 and hosted a house church when he returned to China. Authorities raided the church in 2001 and held Li for 19 days, repeatedly beating him. Li was fined about $900, lost his job because of the arrest, and left for the U.S. on a visitor visa. After he violated his visa by working, he applied for asylum.

Li's immigration judge said Li failed to prove that he was a Christian. He couldn't answer basic questions about Christianity, explained the immigration judge.

A Chinese car company carrying great expectations stalls

From: The Economist

IF ANY company captured the optimism (and possibly hype) emanating from China, it was BYD, whose three letters are said to be short for “build your dreams”. The Shenzhen-based company makes mobile-phone batteries, cars and solar panels, thereby combining growth prospects with green virtues. This appealing combination received a credibility boost in 2008 when a subsidiary of Warren Buffett’s Berkshire Hathaway bought a 10% stake.

Mr Buffett seemed to have picked another winner. Within a year the price of BYD’s shares had risen ninefold. The battery business, which had been a huge success, was drifting, but car sales were accelerating at a stunning pace, from none in 2003 to more than 500,000 last year, including the F3, a small sedan with a modest 60,000-yuan ($9,150) price tag and numerous features like electric windows, cup-holders and iPod docks, which quickly became the most popular car in China.

China, Turkey, and a Waiting World: Armed and Active

From: Commentary

Americans need less of a reminder today than we did a year ago that the world waiting beyond U.S. power and international consensus is not a gentle, stable one. But the reminders are accelerating. Two cropped up this week on opposite ends of Asia.

In Taiwan, Tsai Der-Sheng, the director of the National Security Bureau, briefed a legislative committee on China’s deployment across the strait of what he characterized as an entirely new type of ballistic missile. According to Tsai, the new missile’s destructive capacity is beyond anything previously deployed with the Chinese forces. The range of the missile, which he called the “Dongfeng-16,” would allow China to target U.S. facilities in Guam and Okinawa as well as Taiwan.

One Western analyst suggests that the new missile may be an upgraded version of the Dongfeng-15 (or DF-15), a tactical ballistic missile in service for some time with the Chinese army. That may be clarified in the coming days; what is more significant about this situation is that there has been no notice from foreign intelligence agencies that China was developing either a wholly new DF-16 or an upgrade like this one to the DF-15. The implication of that is that China’s missile-development cycle has been — at least in this case — considerably shorter than in the past, when Chinese development efforts were recognized and tracked for years before weapons were fielded with the operating forces.

At the other end of Asia, Greece has lodged a complaint with Turkey for sending a warship to interfere with an Italian cable-tending ship operating in an international strait in the Aegean Sea. The Italian ship has Greece’s approval for its activities, which involve entering Greek waters. The delineation of territorial waters is a particularly sticky problem in the Aegean; it is not self-evident which competing interpretation — Turkey’s or Greece’s — is “correct.” But the ascendancy of NATO and U.S. maritime power has held this and other such disputes in check for decades.

Not surprisingly, the cable-laying operation in question is related to an agreement between Italy and Israel to install an undersea communications cable linking the two countries. Industry analysts suggest that the cable will position Israel as the region’s most attractive high-speed communications hub. It’s becoming a pattern for a weapon system to pop up where economic activity is expected to benefit Israel — but the broader perspective on this trend is equally worrisome.

In the past 40 years, the Mediterranean has been almost entirely free of the kind of maritime intimidation regularly attempted by China against its neighbors. A Turkish warship harassing one of Italy’s civilian cable ships, as it operates under contract to Alcatel-Lucent, is the kind of threat China has used against third parties’ marine assets in its economic disputes with Vietnam. No particular armed vigilance has been required to discourage such power moves in the Mediterranean — as long as the U.S. and other NATO leaders were perceived to have the will to counter them. Small incidents like this one in the Aegean are early indicators that that perception has changed.