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Joo Rip Gwa Rhhee
Joined: 25 May 2003
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 Posted: Sun Jul 31, 2005 1:31 pm Post subject: We're losing the intelligence war against China |
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washingtonpost.com
Advantage, China
In This Match, They Play Us Better Than We Play Them
By James McGregor
Sunday, July 31, 2005; B01
BEIJING -- We're losing the intelligence war against China.
No, not the one with spy satellites, human operatives and electronic eavesdropping. I'm talking about intelligence : having an intelligent understanding of and intelligent discussions about China -- where it's heading, why it's bidding to buy major U.S. companies and whether we should worry. Above all, I'm talking about formulating and pursuing intelligent policies for dealing with China.
The Chinese government today understands America much better than our government understands China. Consequently, the Chinese government is much better at pulling our strings than we are at pulling theirs. China's top leaders, diplomats and bureaucrats have a clear framework from which they view the United States, and they are focused and unified in formulating and implementing their policies toward us.
In contrast, our government's viewpoint on China is unfocused, fractured and often uninformed. Is China still the Red Menace of the Cold War or a hot new competitor out to eat our economic lunch? Both views as well as a hodgepodge of other interpretations can be found in the halls of the White House, Congress and the Pentagon. Add to that confusion a vicious domestic political culture that brooks no compromise, and the chances of formulating a coherent China policy approach nil.
Playing the barbarians off against each other has been a core tenet of Chinese foreign policy since the imperial dynasty days when China's maps depicted a huge landmass labeled the "Middle Kingdom" surrounded by tiny islands labeled England, Germany, France, America, Russia and Africa. China was the center of the world and everyone else was a barbarian. That's why the Chinese are delighted by spectacles such as when rival members of a U.S. congressional delegation screamed at one another in front of their Chinese hosts in the Great Hall of the People. And what should they think of the time top Chinese officials laid out clear policy objectives to an American business audience and a U.S. cabinet member responded by saying "Jesus loves the Chinese people"?
Since the 1989 Tiananmen Square massacre, China policy has been a political football that American politicians kick back and forth to score points against one another. In the 1990s, it was a penalty-free game because the United States had the upper hand. China needed our capital, technology, know-how and insatiable consumer market to build its economy, as well as our blessing to join the World Trade Organization (WTO).
But those days are over. China's raging consumer market, its massive export machine, voracious appetite for global resources and more than $700 billion in foreign exchange reserves puts the ball in its court. It is difficult to overstate the transformation that has swept China in the past 15 years. To frame it in terms of comparable historical changes in the United States, China has been simultaneously experiencing the raw capitalism of the robber baron era of the late 1800s; the speculative financial mania of the 1920s; the rural-to-urban migration of the 1930s; the emergence of the first-car, first-home, first-fashionable-clothes, first-college-education, first-family-vacation middle-class consumer boom of the 1950s; and even aspects of social upheaval similar to the 1960s.
Today Chinese government officials and business executives admire, fear and pity the United States. They admire our entrepreneurial culture, free markets, legal system and ability to unemotionally discard what doesn't work while our best-in-the-world universities and enormous R&D capabilities create new products and services. China's economic reforms over the past 25 years have been aimed at creating a Chinese variation of the U.S. economic system and its ability to unleash entrepreneurial instincts and harness markets to build a world-beating economy.
China's fear stems from seeing our high-tech military machine in action. I will never forget standing in front of the Beijing train station during the first Gulf War, amid a sea of Chinese workers, thousands of whom had stopped their bicycles in the street to watch slack-jawed as huge outdoor TV screens displayed footage of American missiles screaming down Baghdad smokestacks. Just a few blocks away in the leadership compound of Zhongnanhai, Chinese officials imagined such destruction raining down on Beijing and realized that their strategy of defending China with swarms of peasant soldiers was as outdated as Maoist philosophy. They immediately embarked on a multi-decade plan to build a military as advanced as ours.
Chinese pity comes from their belief that we are a country in decline. More than a few Chinese friends have quoted to me the proverb fu bu guo san dai (wealth doesn't make it past three generations) as they wonder how we became so ill-disciplined, distracted and dissolute. The fury surrounding Monica-gate seemed an incomprehensible waste of time to a nation whose emperors were supplied with thousands of concubines. Chinese are equally astonished that Americans are allowing themselves to drown in debt and under-fund public schools while the media focus on fights over feeding tubes, displays of the Ten Commandments and how to eat as much as we can without getting fat.
China is all about unity, focus and leverage. Chinese officials and business executives are obsessed with a single question: What advantage do I have over you? No surprise then that Chinese officials are delighted to be funding ever larger portions of America's budget deficit. They know that if they sat out one U.S. Treasury auction, the U.S. stock markets would tumble. They yawn when Congress threatens to impose huge tariffs on Chinese imports, knowing that the resulting huge price increases at Wal-Mart, Best Buy and the Gap would cost some members of Congress their jobs. And while the Chinese do not relish sharing a border with the nutso North Koreans, they are happy to turn this bad situation to their advantage. The Bush administration desperately needs China's help in quelling the hermit kingdom's nuclear ambitions while we are bogged down in Iraq.
Still, China isn't even a fraction as powerful as it pretends to be. Beneath the bluster, it is a nation beset with internal problems. Pollution chokes its air and water. The growing gap between the haves and have-nots and rampant government corruption are triggering almost daily demonstrations. And China has no ideology other than enriching itself. The relentless commercial drive that has shaken China out of its imperial and socialist stupor has now become an end unto itself, leaving a population that is spiritually adrift. So far rapid economic growth, looser lifestyle strictures and straightforward political repression have held things together, but the Communist Party leadership knows that it needs a different formula for long-term success.
From a U.S. perspective, China's untempered commercialism suggests a nation out to milk us of everything it can. What is being lost in our vicious battles over China policy is that China and America have manageable differences and many complementary interests. With an intelligent and consistent China policy, the United States could help China and itself at the same time.
I offer these humble suggestions as a patriotic American who has lived in Beijing for 15 years -- and as a person who respects the Chinese people and what they are accomplishing.
Domestic politics should stop at the U.S. border. Trench warfare on China policy between the political parties and executive branch factions only plays into China's hands.
Stop preaching instant democracy. After the Tiananmen massacre, China's state media engendered a "nationalism of resentment." Aimed at cooling the ardor that young Chinese felt for America, the media portrayed the United States as having a secret agenda to keep China poor so that America can stay rich. A key part of this message is that America wants China to democratize because it will plunge the country into chaos. Those who survived the insanity of the Cultural Revolution see the point. Even Chinese people I know who are unhappy with their government believe that a nation with two millennia of top-down rule can only pluralize gradually. America can best help China inch toward political pluralism by trying to strengthen China's court system and rule of law and by making visas plentiful again for Chinese to attend our universities and public policy forums.
Let Chinese companies purchase or merge with U.S. companies unless the American company has genuine advanced military technology. We should also require reciprocity. Take the recent China National Offshore Oil Corporation Ltd. (CNOOC) bid to purchase Unocal Corp. Hysteria led to passage of a ridiculous House resolution by 398 to 15 expressing national security concerns about the deal, which involved a scant 0.8 percent of U.S. oil production. Instead, the United States should have responded as China would: Use the deal as leverage. America's politicians should have welcomed the CNOOC deal as long as China changed its own oil policies, which prevent foreign companies from operating gas stations in China, compel them to use Chinese companies when exploring for oil and almost always offer exploration leases for foreigners at the edges of promising fields to help China pinpoint the location of the biggest reservoirs for its own drillers.
Develop smart, workable rules on technology exports. Since the mid-1990s, China has been able to purchase almost any commercial technology it desires from Japan, Israel, Russia or the European Union. Bogged down in a bureaucratic quagmire of ever-changing rules and approval processes, U.S. machine tool makers and silicon chip equipment manufacturers have fallen behind. If this continues, we will endanger our own national security base by weakening our technology companies and their R&D capabilities. Nevertheless, many in Washington favor "catch-all control" regulations that could, for example, block a U.S. truck engine manufacturer from doing business with a Chinese firm that supplies some engines for Chinese army trucks. European and Japanese truck engine makers doubtless will be deeply grateful.
Vigorously push trade issues that provide a long-term win-win for China and its trading partners. Our focus should be intellectual property rights (IPR) protection. China's original modernization model was to invite foreign firms to manufacture for export in joint-ventures with Chinese companies. China was then supposed to learn to build its own companies and products. But many huge companies have been built through the wholesale theft of intellectual property and rampant copying of products. Within a three-block radius of my Beijing apartment, there are several dozen shops selling any Hollywood movie or American television series of note for $1 per DVD, copies of Prada and Louis Vuitton handbags for $10, nearly perfect copies of Callaway or Taylor Made golf clubs for $150, and fake North Face parkas for $35. Copied pharmaceuticals, car parts and the whole gamut of industrial products are plentiful across China. Worse, more and more such products are being exported. Chinese piracy is rapidly undermining political support for China in Congress and hampering the growth of its most innovative companies.
China knows the problem needs fixing but fears job losses and potential unrest in the towns and villages that host copycat factories. New U.S. Trade Representative Rob Portman could take a lesson from a predecessor, Charlene Barshefsky, who drafted a road map to guide China to WTO accession. As with WTO, China lacks the political will or consensus to come up with a plan on its own. The U.S. government should also back a new effort by the U.S. Chamber of Commerce and the American Chamber of Commerce in China to rate Chinese provinces and cities by their level of IPR enforcement. Public embarrassment and internal competition for foreign investment may prove to be stronger motivators than foreign complaints.
I understand America's genuine security concerns regarding China. But they should not be overblown to the point where they undermine our economic security. I also understand that reaching a political consensus isn't easy. But I am worried about the erosion of the sensible center. Chinese and U.S. politicians share the blame. As a global economic power, China can no longer employ IPR policies appropriate for a banana republic. And responsible members of Congress can no longer gin up China hysteria to get votes.
The stakes are getting too high.
Author's e-mail: [email protected]
James McGregor is a journalist-turned-businessman and former chairman of the American Chamber of Commerce in China. His book "One Billion Customers: Lessons From the Front Lines of Doing Business in China" (Simon & Schuster/ The Wall Street Journal Books) will be published in October. |
http://www.washingtonpost.com/wp-dyn/content/article/2005/07/29/AR2005072902172_pf.html |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Sun Jul 31, 2005 2:18 pm Post subject: |
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The guy makes some good, common sense points.
One point that could have been brought out stronger was the 'lack of political will' in both countries. He mentioned both but didn't draw as clear a comparison as I thought he was going to.
I'll leave the critique of China to those who know more about than I do. Although I will say that the reform of allowing county (?) officials to be elected is a good sign of the gradual democratization process. It is reasonable to argue that they need time to develop it from the ground up.
It cannot possibly be good international political strategy to drive your own country into massive debt voluntarily. Especially if your party sells the debt to the one possible rival that you also like to beat up on for political advantage. That strikes me as suicidal. What is it, $750 billion that China owns?
It is a unipolar world now. Are there any other alternatives than:
a) the Neo-cons going after a real empire?
OR
b) developing a multipolar world with a much more united Europe and an India that is not allied to China? |
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Butterfly
Joined: 02 Mar 2003
Location: Kuwait
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| Posted: Sun Jul 31, 2005 4:38 pm Post subject: |
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| b) |
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VanIslander
Joined: 18 Aug 2003
Location: Geoje, Hadong, Tongyeong,... now in a small coastal island town outside Gyeongsangnamdo!
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| Posted: Sun Jul 31, 2005 5:32 pm Post subject: |
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| Who is "we" again? |
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Joo Rip Gwa Rhhee
Joined: 25 May 2003
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| Posted: Sun Jul 31, 2005 7:09 pm Post subject: |
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There is not any a) b)
The US is going to try to be in the best situation it can be . Just like every other nation tries to be.
Why does the US have to be different? |
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Gopher
Joined: 04 Jun 2005
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| Posted: Sun Jul 31, 2005 7:39 pm Post subject: |
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deleted
Last edited by Gopher on Fri Nov 09, 2007 3:48 am; edited 1 time in total |
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JacktheCat
Joined: 08 May 2004
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| Posted: Sun Jul 31, 2005 7:54 pm Post subject: |
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| Ya-ta Boy wrote: |
It cannot possibly be good international political strategy to drive your own country into massive debt voluntarily. Especially if your party sells the debt to the one possible rival that you also like to beat up on for political advantage. That strikes me as suicidal. What is it, $750 billion that China owns?
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US total trade with China is at a whopping 230 billion dollars, very much in China's favor.
America's huge budget deficit, economists say, is being bankrolled by China to the tune of one billion dollars per day through its purchase of US Treasury bills -- 200 billion dollars last year and possibly as much as 300 billion dollars already this year.
Full Article Here
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Intelligence be damned, all China has to do is cash in those T-Bills or refuse to provide more credit and they could bring down the U.S. economy like a deck of cards. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sun Jul 31, 2005 9:52 pm Post subject: |
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I have not yet seen any good, viable reasons advanced for suggesting the US is in decline.
The problem with most criticisms of American power (or panegyrics on India/China) is that they mistake modern-day power relations for the simple nationalism games of 75 years ago. The day of enclosed nationalist states with largely self-contained economies with brisk or not so brisk trade are over.
| JacktheCat wrote: |
| Intelligence be damned, all China has to do is cash in those T-Bills or refuse to provide more credit and they could bring down the U.S. economy like a deck of cards. |
And why would they do that? The Chinese are at least as dependant upon the American economy to consume their goods as the Americans are dependant upon the Chinese to provide them with goods and credit.
Below are some statistics that are presented in the context of showing the worldwise rise in productivity accompanied by the stagnation of wages. They still provide statistics that give a real sense for how dependant the Chinese are on foreign markets and investors to sustain their growing economy. Bold-face and italics are mine.
http://www.atimes.com/atimes/Global_Economy/GG28Dj01.html
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A 2004 study by the US Conference Board found that China has been losing more manufacturing jobs than the United States as productivity surges in the world's most populous nation. China lost 15 million manufacturing jobs between 1995 and 2002, compared with 2 million shed in the US. This is not surprising, since industrialization has been occurring at a faster pace and from a lower base in underdeveloped China than in already developed US.
...But worse than in the US, rising productivity has translated even less into higher wages in China. This is because 60% of the Chinese export sector is financed by foreign direct investment, which has no incentive to raise local wages, since demand for their export products is independent of local purchasing power.
Chinese labor productivity grew at an annual rate of 17% between 1995 and 2002, meaning factories in the country were producing more with less labor. But rises in wages have been averaging below 10% annually from an already excessively low base, discounted by an average annual inflation rate of over 5%. The year 2001 saw a per-capita annual wage rise of 14.6%, the number of employed workers decreased to 54.41 million and the wage sum totaled 572.18 billion yuan, a growth of 12.2%. Average total income per worker, including wages and welfare funds, amounted to 11,881 yuan in 2001, a 14.1% rise over 2000, with an 18% gap from the productivity growth rate. This means Chinese wages measured by productivity were actually falling. Because of widening wage disparity, both average and median income rose at a slower rate than GDP. Twenty-six of China's 38 major industries registered job losses over the period surveyed, according to data from 51,000 companies. At the same time, jobs in China's service sector were increasing, consistent with economic development. |
The thesis of the article is that the importance of industry in this world is coming to a close, and that developing countries are caught in the lurch. When productivity rises, unskilled labor becomes less valuable. So tell me, which countries are in danger of falling behind?
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| The world's fastest-growing economy is also losing manufacturing jobs because of a faster rise in productivity (17%) than GDP growth rate (9%), then the world's industrial economy is going through what its agricultural economy went through a century ago. Overcapacity is the plague of the modern industrial economy, as agricultural overproduction was the plague of the agricultural economy of an earlier age. |
Meanwhile, according to the article, what is US economic policy in this day and age?
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| Federal Reserve chairman Alan Greenspan told Congress in public testimony that thinking jobs are better than doing jobs. The US will keep higher-paying jobs in financial services, management, design, development, sales and distribution and let the emerging economies have the low-paying assembly line jobs in factories owned by US companies. |
One could argue that the US is really dependant on China (and many do so), because China is footing the bill for American purchases. But step back and reassess for a moment. Which world market is the deepest for a developing country with a large manufacturing base? Which people consume the most?
http://www.atimes.com/atimes/China/FL21Ad03.html
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The United States gave China precisely what it lacked, namely an open market for goods, access to financial markets, and a store of value for savings, among other things. Providing a global reserve currency has been America's decisive contribution to Chinese success.
China's half-trillion dollars of foreign-exchange reserves, according to the same critics, display China's strength and the United States' weakness. On the contrary: the reserves are there because the government of China knows that the Chinese trust US banks rather than Chinese ones, and wisely keep a hoard of rainy-day savings in US funds. |
Which other country in recent history preferred to finance and invest in America rather than their own? Japan.
| Gopher wrote: |
| and by the way, wasn't it just ten years ago that we heard similar warning calls about Japan buying up America? |
The truth is, there are many unskilled laborers out there waiting to make 50% more than next to nothing to scratch out a living. There are very few developed countries as fat and glutted and hungry as America. Contrary to the opinions of the article presented by the OP, financing the American budget deficit is not a Chinese strategy to gain power over the US, but rather it is an investment in a needed and necessary market that is fueling their growth. While I am not here to paint the deficit as necessarily a draw-back for the Chinese or a boon for the Americans, I will argue that it is not the great menace for America that columnists are fond of pointing it out to be. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Mon Aug 01, 2005 7:00 am Post subject: |
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| I have not yet seen any good, viable reasons advanced for suggesting the US is in decline. |
I agree with both Kuros and Gopher that the US is not in decline. Yet. But I see us adopting policies that seem designed to produce just that.
One of the notable books of the last quarter century was �The Decline and Fall of the Great Powers�. It may not be the last word on the subject, but it did have some important things to say.
One of them, imperial over-reach, got more attention than it deserved, but it is an important point. One thing that is worrisome to me is the number of countries we have troops stationed in. I don�t remember the exact number, but it�s about half the countries in the world. That is a huge financial burden to carry. The country is rich, but the government has voluntarily created a massive debt. It doesn�t make sense to commit troops if the government doesn�t have the money to support them without borrowing. If the troops are there to protect the national interests of the country, it seems common sense to pay the cost now rather than pay cost plus interest later. It�s just foolish to pay a higher price for something than it is worth.
Secondly, these high tech weapons systems are awesome but very expensive. The trouble with them is that there are cheap ways around them. For instance, don�t present a target for them to be used on. Its nice to be rich enough to spend billions on radar but your enemy can buy a roll of aluminum foil for $2, cut it up into little squares and toss them out of a plane and �foil� the radar. It�s fine to have bunker buster bombs and smart bombs, but if your enemy can make home made bombs out of fertilizer and blow up a couple of your soldiers every day, are you really ahead of the game? It�s great having Homeland Security, but all it takes is a 50 cent phone call to put all the security forces on alert for a few days, costing millions. The terrorist doesn�t even have to follow through on the threat. What I�m trying to say is that there are very cheap ways to force the US to spend its borrowed money. As they say in Congress, a few billion here, a few billion there. Sooner or later you�re talking real money.
A second point that Kennedy made in �Decline�, and one I think didn�t get nearly as much attention as it deserved, was about the access to national wealth. He used the example of the French/English duel for empire in the 18th Century. The British had developed their economy in a way that spread the wealth more equitably around the population than the French did. At the same time, they developed a political system that could call on that wealth when the government needed it. The French did the opposite. The money was concentrated at the top and was then exempted from taxation.
Does that sound familiar? It should. There was a time when a family of 5 could live on the income of one factory worker. On that income, they could buy a house, feed, clothe and educate themselves and still have money for a summer vacation. What was maybe even more important, those families believed they were middle class. They felt they shared in the American Dream. They had dignity, a sense of accomplishment and stake in the future of the country.
Well, that kind of economy is gone. Maybe that is good, but there is a problem. Not everyone can be a computer engineer. A larger proportion of the population is being forced to work at Wal-Mart, with no insurance, no hope of buying a house, no way to raise a family on one income and hard pressed to do it with two incomes. All the while, the government lowers taxes on the wealthy, producing massive debt. We�re becoming 18th Century France.
It was great having the dot.com boom. A new technology produced a huge amount of new wealth. Terrific. But where did the money go? It went to China to buy rubber duckies made out of a disappearing resource so the kids could have a toy to play with in the bath tub. None of the money stuck in the country developing long-term wealth sources. Similar to what Spain did in the 16th Century. The Spanish treasure fleets did little more than stop by Spanish ports for a prostitute-call before sailing on to foreign ports to pay for all the imports the Spanish needed, or went to bankers to pay off the loans for all the wars the government got itself into.
Almost finally, immaterial things matter. Reputation matters. The prestige of the US is shot. When little old Dutch ladies who kissed the liberating troops in �44 now considers the US a bigger threat than Saddam on KJI, things are in a bad way. At some point, that kind of attitude will translate itself into economic terms. Like when her grandson wants to go to grad school. More and more will choose other countries rather than the US because of the anti-Americanism. When the best and brightest from Timbuktoo want to emigrate they�ll go elsewhere. Why buy a HP computer when you can buy a brand from Korea, Taiwan or anywhere else if you�re *issed off at the US over some issue? And I haven�t even mentioned the reputation of the dollar. It�s a sign of international respect and dominance when your currency is the preferred one. For short-term goals we�ve given that up for the foreseeable future.
Really finally, leverage. In 1807 Britain and France were at war. Had been for years. Would be for years more. Both adopted trade policies that Jefferson objected to. His response? Embargo all trade. We closed our ports and refused to export. Yes, export. Our economy pretty much shut down to spite the foreigners. We shot ourselves in the foot.
Is it not possible that something could happen in Taiwan or somewhere else that could upset the Chinese enough to decide to take a blow to their own economy in self-defense? How about triggering a mild depression before a US election to affect the outcome? There are a lot of possible scenarios. My point is, when you owe the bank, the bank owns you. You have lost your freedom by giving leverage away needlessly.
So no, I don�t think the US is in decline, but I do think we are creating the conditions for it to happen. And I suspect a good many foreigners are smirking about it. All they have to do is be patient. We're doing it to ourselves. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Mon Aug 01, 2005 7:07 am Post subject: |
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| The only constants in the universe: accident and error; and nothing lasts forever... |
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