A global investment house has warned that China faces a financial crisis within the next decade as government and private debt rise to unsustainable levels.
“I think there is a risk, to almost near certainty, of a banking and financial crisis in China sometime in the next decade, but I think it’s very unlikely to arise for the next couple of years,” Mr Kaletsky said.Sponsored Ads
Such actions, and the poorly played political geostrategic gamesmanship that lies behind them, will inevitably bring China into conflict with the United States and its allies. Fortunately for the United States the sites for these future conflicts are well understood and established, and U.S. long-term investments in long range stealth, directed energy, precision strike, and hypersonic weapons can target the maritime ground zero that these straits represent. China’s strategic miscalculation is that their economy needs access to use the straits, while the United States’ does not.
Strategy involves choices about the vision of war a nation chooses to pursue; one of annihilation, attrition, or exhaustion. Geography, however, remains an unmoving, constraining factor, as the Chinese are re-learning. The United States should seek to develop the doctrines, organizations, and technologies to exploit these ironclad limitations to their aspirations in the most economical manner possible. Sensors, mines, missiles, and unmanned air, surface, and subsurface craft can force China back on the defensive, and shape their spending in the decades ahead while freeing our own resources to focus on other domains.
American people and assets in the China may be more in at risk this year than at any time since 1989 (China Brief, May 11, 2016). Official and popular suspicion of foreigners is also reflected in China’s continuing anti-spy campaign that urges citizens to report suspected espionage activity in exchange for large potential rewards (Beijing Ribao and BBC, April 10; Chinese State Security video via SCMP, April 12). Though these and other signs of a declining U.S.-China relationship are easy to observe in the headlines, some American organizations with exposure there remain less than prepared for a real crisis and may overestimate the ability of the U.S. Government to assist them in an emergency.
“Riding out” a political crisis or widespread civil disturbance is by far the easiest and least expensive business contingency plan, as long as the CCP and its subordinate government remain committed to protecting foreign businesses on their soil. But history shows circumstances under which this situation might quickly change.
With Washington in disarray, the Belt and Road Forum kicking off this weekend in Beijing should be a blaring wake up call that U.S. leadership in Asia is in peril. For two days, China will play host to more than 1,200 delegates from 110 countries, including 29 heads of state. The event will be centered on China’s “One Belt, One Road” program — more recently rebranded as the “Belt Road Initiative” (BRI) — which aims to provide much-needed infrastructure to connect Asia, the Middle East, and Europe.
Last month, oil started flowing from a pipeline in coastal Myanmar to southern China, bypassing the Strait of Malacca choke point through which most of the larger nation’s crude imports pass by ship.
Earlier this year, Africa’s first electric transnational railway began running from landlocked Ethiopia to Djibouti, where China has set up a foreign military outpost. And last year, an inaugural freight train from eastern China arrived in Iran days after the easing of international sanctions on the Islamic republic.
Such projects represent China’s most ambitious steps yet to reshape half the globe into a world order tethered more to its orbit than the United States and Europe’s.
The culprit is massive state intervention. In 2013, Chinese President Xi Jinping promised that the market would play a decisive role in the allocation of resources. In fact, Communist Party and government bureaucrats have increased, not decreased, their role in the economy via industrial policy and mercantilism, and factory closures and production cuts are now the purview of policymakers rather than businesspeople. Under the “Made in China 2025” plan and other similar initiatives, billions, if not trillions, are being thrown at strategic industries from semiconductors to artificial intelligence. That is why, for example, almost two dozen Chinese provinces are investing simultaneously in fabrication facilities to pump out memory chips. Companies and research institutes are filing worthless patents in record numbers because they receive a fee from bureaucrats for doing so. And state-backed credit is still flowing freely to high-priority projects around the country, which is why the economy grew at 6.9 percent in the first quarter of 2017 despite tepid private-sector enthusiasm.
Confucius Institutes operate in a fundamentally different way than their Western counterparts. Whereas Germany, France, Spain, and Britain erect their own stand-alone institutes that offer extracurricular courses, China insists on planting its Confucius Institutes inside existing colleges and universities. China has poured plenty of money into this effort; although Confucius Institutes only started operating in 2004, China now has 513 of them worldwide, plus another 1,074 Confucius Classrooms located in primary and secondary schools. That’s far more than the Goethe-Institut’s 159 schools or even the Alliance Française’s 850 outfits. And this investment is heavily targeted at the United States, which is home to more Confucius Institutes and Classrooms than any other nation — 39 percent of the total. And Western universities, for their part, have eagerly seized on the opportunities offered by Confucius Institutes.
But those opportunities come with plenty of strings attached. …
China’s Limac Corp. and North Korea’s Ryonbong General Corp. established a joint venture in 2008 to mine tantalum, niobium, and zirconium—materials that can be used in nuclear reactors and missile technology. The U.S. sanctioned Ryonbong for its involvement in the production of weapons of mass destruction in 2005, and the U.N. followed suit in 2009.
Limac told the WSJ that it has been trying to dissolve the partnership since 2009, yet the joint venture maintained a registered corporate office in China until February. Limac’s website reportedly showed that Ryonbong and Limac representatives discussed advancing the relationship in 2011, and 14 Limac employees visited North Korea as part of a company-sponsored vacation in 2014. This information has since been deleted from the website.
The US Navy will still challenge claims by nations such as China to exclusive access in the South China Sea, Pacific Fleet Commander Scott Swift said, insisting a hiatus in “freedom of navigation” patrols doesn’t mean the disputed waterway is a lower priority for the Trump presidency.
“We just went through a change in administration,” Admiral Swift said on Monday at a briefing in Singapore. “I am not surprised that process has continued in a dialogue as the new administration gets its feet on the ground and determines where would be appropriate to take advantage of these opportunities and where we may want to wait.
Despite the illusion of a stable new status quo, AMTI has previously documented that the Chinese ships entering Japanese-claimed waters are growing larger and better-armed month by month. Since the August 2016 incident, Chinese government vessels have also reportedly begun to linger in the waters around the Senkakus longer during each trip, further challenging Japan’s administration. China’s annual fishing ban begins again on May 1, and there is reason to worry that its expiration in August will bring another large Chinese fishing fleet to the Senkakus, and with it another excuse for China to test Japanese determination.