US CRIES CHINESE WOLF

David Isenberg

Asia Times, March 31, 2009

On March 25, the United States Department of Defense released the 2009 unclassified edition of its annual report "Military Power of the People's Republic of China" to Congress.

As a description of the ongoing development of China's military forces it is a reasonably informative document. But if it was supposed to be an alarm about the threat posed by Chinese military forces it failed badly. For this we should be grateful.

Ever since the demise of the Soviet Union many members of America's politico-military-industrial sector have been looking for another country as a replacement, if only to justify the huge military and security expenditures the United States appropriates annually. And, by default, given its sheer size, population, and increasing economic importance, China is seen as the new threat standard. Indeed, China now provides the rationale for at least a quarter of the Pentagon's budget.

Yet, unlike the waning years of the Cold War, when the Reagan-era Pentagon released its annual Soviet Military Power, giving an estimate of the Soviet Union's military power and strategy, the 66-page Chinese version is more nuanced and far less alarmist. And even the passages warning of threatening Chinese military developments seem unconvincing.

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WE’RE IN A WHOLE NEW TERRITORY
Nobel laureate Joseph E. Stiglitz on the coming global economic order.

Rana Foroohar

Newsweek, From the magazine issue dated Apr 6, 2009

The power shift from west to east continues, as developing nations flexed their muscles at the G20 in London recently, and China and Russia called for a new international reserve currency to replace the dollar. Nobel laureate Joseph E. Stiglitz, who pioneered the idea of "global greenbacks" in his book "Making Globalization Work," and is now at the center of many debates over the future of global capitalism, spoke to NEWSWEEK'S Rana Foroohar about Asia's big bucks, America's bad loans and why the European welfare state still works.

FOROOHAR: You've been talking for years about how the dollar reserve system is broken. Why is everyone getting on the bandwagon now?
STIGLITZ: A reserve currency has to be stable to be effective, and for some time now, it's been clear that the dollar is not. The financial crisis has brought this home with a vengeance. The Fed's balance sheet is surreal. They are in uncharted territory, and there are serious concerns about inflation, and its subsequent effects on the dollar. The Chinese are clearly very concerned about this. They see that some of their investments in the U.S. (like Blackstone) have gone badly wrong, and they worry that they will have worked so hard to save their $2 trillion in reserves, only to see it blown away by inflation. At the same time, there's this broader concern about how the current reserve system basically entails poor countries lending to the U.S. at very low interest rates. It's inequitable, and it also reduces consumer demand at a time when it's really needed.

Why can't the euro help fill the currency void?
A two-currency reserve system would be even more unstable than what we have now, because people would move in and out of the dollar and the euro depending on which is up or down, increasing volatility.

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CHINA HAS ROOM TO CUT INTEREST RATES ON LOW INFLATION

Li Yanping

Bloomberg, March 28, 2009

China has room to cut interest rates as consumer prices may end the year unchanged, the central bank said after inflation fell in February for the first time since 2002.

“The central bank still sees room for more rate cuts,” Zhang Jianhua, the research head of the People’s Bank of China, told an economic forum in Beijing today. “We haven’t yet cut rates because money market rates have dropped to quite low levels and banks have abundant liquidity.”

China’s consumer price index may stand at zero for 2009 and the nation may escape deflation because of “strong loan growth” and the government’s 4 trillion yuan ($585 billion) stimulus package to spark an economic recovery, Zhang said.

Plunging prices have increased the risk that deflation will become entrenched, prompting consumers to delay purchases, squeezing company margins and triggering wage cuts. Premier Wen Jiabao, who this month set a 4 percent inflation target for 2009, is relying on a surge in lending and the support measures to spark an economic recovery.

Wen said March 13 the nation’s 8 percent growth target for this year is “difficult but possible” to achieve. People’s Bank of China Governor Zhou Xiaochuan said this week that leading indicators are pointing to an economic recovery.

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THE U.S.-CHINA GEOPOLITICAL GAME

Hari Sud

UPI Asia Online, March 27, 2009

Toronto, ON, Canada, — With the United States in a serious recession and under a credit lockdown, there is an interesting geopolitical game in progress. U.S. Secretary of State Hillary Clinton paid a low-key visit to Beijing at the end of her four-nation tour of East Asia from Feb. 20-22. President Barack Obama had sent her to sound out the Chinese on supplying money the United States desperately needs.

As of January this year, China held US$739 billion of the U.S. Treasury debt. It cannot afford to buy more. The domestic situation is precarious: exports fell 25 percent in the last two months and unemployment is spiraling. The government is pumping huge sums into infrastructure projects to stave off social unrest.

Still, the United States is hoping to be the sole depository for China’s 2009 export earnings. That is what Clinton was indirectly asking.

The financial meltdown is causing deleveraging by both U.S. businesses and private citizens. The vaulted era of leveraged buyouts by businesses and uncontrolled consumer spending is over. Only the U.S. government, in the name of stimulus packages, has decided to spend its way out of recession. Its argument is that without this spending, 10 million people could be out of work.

Hence China comes to mind. China has two types of money at its disposal – high domestic savings, which could be pumped into its own economy, and a huge trade surplus, which could be used to lend money to the needy – such as the United States and Europe.

U.S. government debt to China is tied down in U.S. Treasury bonds and is not cashable. China has a total of US$1.8 trillion in worldwide reserves, 65 percent of it in U.S. currency. The Chinese consider the disposition of their reserves a state secret, hence the known information is incomplete.

It is known that at the end of 2007 China had about US$120 billion in mortgage-backed securities, or subprime loans, and $200 billion in sovereign funds, in addition to its U.S. Treasury bonds. This huge investment gives China a geopolitical advantage; but if the debtor cannot pay, it is a serious concern.

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SINO-EU TIES HIJACKED BY TIBET ISSUE

Jian Junbo

Asia Times, March 27, 2009

SHANGHAI - This month, the European Union (EU) parliament passed a resolution on the Tibet issue, urging the Chinese government to resume dialogue with the Tibetan spiritual leader in exile, the Dalai Lama, for "real autonomy for Tibet". However, a Chinese government spokesperson immediately rejected this, saying the call was interference in China's "internal affairs".

Not only the EU, but also all of its member states acknowledge that the Tibet Autonomous Region is a part of China, and they all adhere to the "one-China" policy, at least according to their laws and official statements.

This raises the question of why the EU parliament would endorse such a resolution when it was bound to be rejected by China, especially in the current economic climate, when the EU wants to build closer relations with China?

Firstly, the issue of human rights will always carry weight in the EU's foreign policy, and the Tibet issue fits into this category, that is, China's Tibet policy is perceived as human rights abuse. Moreover, the EU parliament passed the resolution on March 10, the 50th anniversary of the failed Tibetan armed uprising against Chinese rule, which ended with the Dalai Lama's fleeing Tibet for India, where he resides to this day.

So, for the EU parliament, it was a convenient date to bring up the Tibet issue. By doing this the EU could display its image of "normative power", while also showing that it has the resources and will to spread its Western values to other countries even when the world economy is in recession.

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LIQUID WAR: WELCOME TO PIPELINEISTAN

Pepe Escobar

Asia Times, March 26, 2009

What happens on the immense battlefield for the control of Eurasia will provide the ultimate plot line in the tumultuous rush towards a new, polycentric world order, also known as the New Great Game.

Our good ol' friend the nonsensical "global war on terror", which the Pentagon has slyly rebranded "the Long War", sports a far more important, if half-hidden, twin - a global energy war. I like to think of it as the Liquid War, because its bloodstream is the pipelines that crisscross the potential imperial battlefields of the planet. Put another way, if its crucial embattled frontier these days is the Caspian Basin, the whole of Eurasia is its chessboard. Think of it, geographically, as Pipelineistan.

All geopolitical junkies need a fix. Since the second half of the 1990s, I've been hooked on pipelines. I've crossed the Caspian in an Azeri cargo ship just to follow the $4 billion Baku-Tblisi-Ceyhan pipeline, better known in this chess game by its acronym, BTC, through the Caucasus. (Oh, by the way, the map of Pipelineistan is chicken-scratched with acronyms, so get used to them!)

I've also trekked various of the overlapping modern Silk Roads, or perhaps Silk Pipelines, of possible future energy flows from Shanghai to Istanbul, annotating my own do-it-yourself routes for LNG (liquefied natural gas). I used to avidly follow the adventures of that once-but-not-future Sun-King of Central Asia, the now deceased Turkmenbashi or "leader of the Turkmen", Saparmurat Niyazov, head of the immensely gas-rich Republic of Turkmenistan, as if he were a Conradian hero.

In Almaty, the former capital of Kazakhstan (before it was moved to Astana, in the middle of the middle of nowhere) the locals were puzzled when I expressed an overwhelming urge to drive to that country's oil boomtown Aktau. ("Why? There's nothing there.") Entering the Space Odyssey-style map room at the Russian energy giant Gazprom's headquarters in Moscow - which digitally details every single pipeline in Eurasia - or the National Iranian Oil Company (NIOC)'s corporate HQ in Tehran, with its neat rows of female experts in full chador, was my equivalent of entering Aladdin's cave. And never reading the words "Afghanistan" and "oil" in the same sentence is still a source of endless amusement for me.

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AS CHINA'S OLYMPIC GLOW FADES, SO DO HOPES FOR REFORM

Simon Elegant

Time, March 25, 2009

It wasn't supposed to be like this. Many members of China's fledgling dissident community had hoped that after the successful hosting of the Olympics last summer, the control that authorities had exercised over the country's dissenting voices would ease up. Some human rights advocates, academics and other analysts in and out of China even expressed optimism that long-awaited reforms to the judiciary, the media, in labor relations and in the treatment of non-governmental organizations would finally materialize.

To many rights advocates, it has become increasingly clear in recent months that those reforms are still a long ways off. "It used to be the case that whatever the negative developments and systematic smothering of dissent, there were always some signs of hope and potential advances on other fronts," says Nicholas Bequelin, a China researcher with the New York-based Human Rights Watch. "But recently the good news has been very few and far between. There has been a total lack of progress on legal reform, the media, rural reform, labor. These issues were very much carrying forward hope for opening up of Chinese society, but now there's just nothing on the horizon."

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