According to a recent report from Nomura Securities, China ”is displaying the same three symptoms that Japan, the US, and parts of Europe all showed before suffering financial crises, that is, a rapid build-up of leverage, elevated property prices, and a decline in potential growth.”Sponsored Ads
The catch with these sorts of scenarios is that one day there has, always, to be a reckoning. The minute someone says “this time the paradigm is different”, is when you start looking for the exit. Fast.
The Philippine Navy is substantially inferior to the emerging blue-water Chinese navy and lacks the capability to defend its presence on Second Thomas Shoal in the event that China is determined to dislodge its marines. Nevertheless, Manila may put up a fight. The potential for a military skirmish between the two sides will increase under either of the following scenarios:
- (1) if China blocks provisions from being delivered to the Philippine forces on the shoal, Manila could seek to air drop supplies from a helicopter. Chinese interference in the operation could result in an exchange of fire and potential loss of life;
- (2) if the Philippines were to attempt to erect structures, as China is reportedly doing on Scarborough Shoal, the Chinese would likely seize the opportunity to publicly accuse the Philippines of provocation and commence their “cabbage” strategy or even attempt to tow away the rusting vessel.
Either scenario could escalate to military conflict. Even if conflict is avoided, heightened tensions could deal a blow to efforts to launch early talks on negotiation of a Code of Conduct between China and the members of ASEAN (“The South China Sea Dispute (Part One): Negative Trends Continue in 2013,” China Brief, June 7).
Most polls show that Venezuela’s government candidate Nicolás Maduro is likely to win Sunday’s elections thanks to an unfair election process in which the government controls an overwhelming share of TV time, but — even if he wins — Maduro’s future is gloomy.
If most polls are right and Maduro wins despite a significant narrowing of his advantage over opposition candidate Henrique Capriles in recent days, a lot will depend on his margin of victory, and on whether Capriles concedes as readily as he and other opposition leaders have done in the past. It may not happen quite that way this time.
Judging from what I’m told by well-placed Venezuelans, there are five major scenarios of what may happen after Sunday’s vote to elect late President Hugo Chávez’s successor. Here they are, in no particular order:
In one of the more alarming scenarios, analysts estimate that Iran—using only declared nuclear material and declared sites for uranium enrichment—already has the technical potential to produce nuclear explosive material for its first nuclear weapon in a matter of a few months. What’s worse, if Iran has undeclared sites for uranium enrichment, analysts worry that Iran’s possible timeline for breaking out overtly—or sneaking out covertly—of the international inspections regime and building its first nuclear bomb could further shorten.
The study, entitled “In the Dark: Military Planning for a Catastrophic Critical Infrastructure Event,” concluded that there in fact is “very little” in the way of back-up capability to the electric grid upon which the communications infrastructure is vitally dependent.
The study pointed out that likely scenarios caused by solar storms and EMP forecast a power grid in failure mode for much longer than any backup power source would last, “maybe even a year or more if a significant number of high power transformers are destroyed and would have to be remanufactured.”
As President Barack Obama begins his second term in office, China poses a major policy challenge to the United States largely because of the unpredictable trajectory of both China’s domestic transformation and foreign relations. While there has been much attention paid to China’s rapid economic rise and growing international clout, two other scenarios have been overlooked: domestic revolution and foreign war. While some might view these events as “black swans”—low probability, high-impact developments—the Obama administration should be proactive and think through its policies options should these events unfold.
One of the instruments for doing so is history, as discussed. But there also is a perceptible universal trend to events that cuts across borders. Last fall, we told you about the 11 indicators of energy and geopolitics (here are the original 10; here is the 11th, added in November). Now, we present 14 rules governing geopolitical events. These rules do not divine the future. Rather they allow you, generally speaking, to separate yourself from the unruly, conjectural maw of global opinion-makers and decipher for yourself what is going on, and the probable scenario or scenarios to unfold next. Neither are they complete—please send along your own rules (firstname.lastname@example.org) and we will publish the best.
This is the first of two posts. The second, derived from the rules here, will be published later this week and include our forecasts of global events for 2013.
The rules of global events
1. Muddle-along rule
The projection of the future of the South China Sea is structured along six key determinants of stability. The six drivers are first, the presence of a hegemonic power that has the capacity and incentive to create a stable order, second, the equal distribution of military power and avoidance of overly aggressive behavior, third, the adherence to international norms of peaceful settlement of disputes, fourth, a preference to maintain international economic ties and development, fifth, the presence of institutions to regularize dialogue and cooperation, and sixth, united domestic entities that prefer win-win and peaceful solutions.
So, what does the future hold for the South China Sea? Do the six factors correspond to the current situation? There are three possible scenarios; the apocalypse scenario, the dream scenario and the status-quo scenario.
1. There is no hedemonic power that is willing to create a stable order. The US is in decline. US leadership is sleeping.
2. There is no avoidance of overly aggressive behavior by China.
3. China appears to want only bilateral talks with individual countries. This is a divide and conquer strategy. No regional solution appears in the horizon.
4. China has already used economic strategies to punish Japan and Philippines.
5. Institutions for dialog exist, but they are not being used effectively.
6. The concept of win-win does not appear in the Chinese language. I’m not making this up.
What are those dire scenarios? The report gives a list of eight “Black Swan” scenarios — a reference to Nassim Nicholas Taleb’s book “Black Swan,” which posits that history is built on unforeseeable, surprise events.
Global Trends 2030’s potential Black Swans
1. Severe Pandemic
2. Much More Rapid Climate Change
3. Euro/EU collapse
4. A Democratic or Collapsed China
5. A Reformed Iran
6. Nuclear War or WMD/ Cyber Attack
7. Solar Geomagnetic Storms
8. U.S. Disengagement
Yet a growing number of China watchers have been raising the alarm that all is not well in the world’s second-largest economy. Indeed, any discussion of China these days would be far more foresighted to focus on the growing challenges and potential dangers that the new leadership is facing. The implications of China experiencing an unexpected economic crash or major political crisis, let alone a military conflict, should be as much a part of strategic planning as plans based on more optimistic scenarios. Not so long ago, the U.S. government and CIA were caught flat-footed by the collapse of the Soviet Union. To avoid surprise, the following is a short list of things that governments and policy analysts around the world should pay attention to: