SCARY TO THE IGNORANT (via George Soler):

China, looming large: Will this ancient empire steadily eclipse America? Only if we let it (Dan Simpson, December 08, 2004, Pittsburgh Post-Gazette)

China is a bit scary at the moment. Last month the city government of Beijing cancelled an order for software from the American firm Microsoft because the Chinese government assessed that Chinese customers were not buying enough Chinese-made software, thus discouraging Chinese production.

Two pieces of this action are scary for Americans. The first is that someone, somewhere in China is looking over the whole Chinese economy and making judgments like that, which are then translated into action.

By contrast, the manufacturing of vaccine against the flu that threatens America annually was left more or less unobserved by the U.S. government until it discovered late in the game that the American firm making the vaccine in Britain had made a mess of the job, thus putting in danger the lives of thousands of Americans.

The second alarming aspect of China's action in the Microsoft deal is that some people in the Chinese government and economy are clearly thinking about the fact that imports of American products that could be made in China cost China something in terms of both technological development and jobs. The American version of how to approach that issue is that Wal-Mart buys as much stuff cheaper from China as it can and American consumers climb all over each other to buy it. Never mind the damage to American companies -- from manufacturers to wholesalers to retailers -- just get it a little cheaper; outsourcing of jobs is not something to think of, unless it's my job that just went away.

Some of the Chinese "threat" is even more concrete and quantifiable. They currently hold some $174 billion in U.S. treasury bonds. Worse, if the Chinese did not continue to buy U.S. debt, the federal government would be in trouble. With a budget deficit this year of $413 billion, it needs to attract $2 billion a day to pay the bills.

The other fact is that, if, by chance, China were to choose this awful moment to seek to do with Taiwan what it has done with Hong Kong and Macao -- eliminating them as a separate entity -- there would be virtually nothing the United States could do about it, stretched as we are militarily in Iraq.

These three "threats" are absurd:

(1) You'd think the notion that there were advantages in a highly centralized and planned economy would have died in 80s Japan, if not in the Soviet Union.

(2) The Chinese can't make what American software companies make--it's too rich in creativity.

(3) China probably can't beat Taiwan on its own, but if it started to there'd be nothing we'd do there with infantry anyway. It would be missile time--and them we have no shortage of.

MORE:
With its buying binge, is China shopping for security? (Howard W. French, December 13, 2004, The New York Times)

[M]any analysts look at China's global push for resources, and especially the hefty prices it is paying, as a sign of weakness and national insecurity.

The reason for Chinese anxiety, particularly in energy markets, is that big Western companies are already well established in the richest oil regions and can outdo China's producers financially. China also sees the U.S. military presence in places like Iraq, Afghanistan and Uzbekistan as part of a drive to control Central Asia's rich oil reserves.

"China can be competitive in markets where they face the junior varsity, but not with the varsity," said Andrew Thompson, a China expert at the Center for Strategic and International Studies in Washington. "Paranoia is one way to describe their behavior. I would call it an acute awareness of their vulnerability.

"The new kids on the block who lack faith in the rule of law because they don't have it themselves, they don't see the international system as being in their favor and engage in a constant quest for vertical integration in their business dealings, wanting to control every aspect of whatever it is they need," Thompson said. "The basic reality, though, is that they don't have the ability to compete internationally yet."

A few nations where China is signing expensive oil deals are major producers, like Iran, where Beijing committed $200 billion last month, but most are niche players.

China is spending a reported $1 billion in an oil deal with Brazil that includes building a pipeline, an investment that some analysts say may cost three times the market value of the oil involved.

China has also invested heavily in Sudan to find, drill and ship an estimated 70,000 barrels of oil a day, a relatively small return. In Angola, China recently committed $2 billion to exploit an oil field with an estimated daily output of just 10,000 barrels.

Posted by Orrin Judd at December 14, 2004 6:38 PM