China

If the Russian situation isn’t enough to keep you up at night, our “policy” in the Far East should do the job.  North Korea threatens us with nuclear tipped missiles it hasn’t quite perfected  and we agree to a summit that can do nothing but enhance the prestige of that country’s dictator.  We are counting on China. to apply pressure on the  North Korean Dictator Kim to give up his Nuclear weapon systems, at the same time we are on the verge of a trade war with them over their predatory trade policies. Seems China is in a fortuitous of position to get a pass on trade if they help us on North Korea.  How did China get in this position and we ended up on the horns of the dilemma?

Now, North Korea is a Chinese Satellite much the same as Belarus is to Russia.  Both look to their masters before taking any action. What if Belarus President Alexander Lukashenko was determined to undertake a nuclear program to threaten its NATO neighbors especially Poland, Lithuania and Latvia. Would our President meet with him to get him to give up his program? Of course Putin would  offer to mediate the problem if we would remove our sanctions on Russia for his good offices. One would like to think we wouldn’t fall for this and would properly hold the puppet master Putin responsible . and go right after him.

Yet this is the same as our East Asia Dilemma. If Kim didn’t know his master he wouldn’t have been on the next train to Beijing when Xi whistled. Don’t be fooled with the reports China has been taken aback by North Korean actions.  If China didn’t want North Korea to have Nuclear missiles it would never happen. Kim would get the message and stop the program or he would be gone and someone more obedient would take his place  After all China is the only country providing anything of value to North Korea. There would be no collapse sending millions of starving Koreans into China, just a quiet military coup.  Those that have profited so handsomely from  North Korean Stalinism only have to be assured of their positions with the new boss. So why doesn’t China make the move?  Simply because this situation serves China’s purpose.  Think about it. China threatens major trade routes counter to our and our allies interests. They steal our and other’s intellectual property along with other unfair trade practices.  Without the North Korean situation, we would be taking a much more adversarial attitude towards China. Yes we’ve threatened put on some tariffs but those will probably go in payment for any help China gives in halting the North Korean Nuclear program.  You just can’t punish someone when you’re simultaneously begging for their help.  China has us just where they want us.

So how did we get in this situation? In the nineties when North Korea first started down the nuclear arms route, we saw China as a friend who broke with the Soviet Union during the cold war.  After Mao, Deng Xiaoping was seen as a liberalizing leader and in the economic realm he was.  With the collapse of the Soviet Union, the state directed economic model was seen as a failure.  China’s opening their economy appeared to be a first step on the journey to a Western type of Democratic state.  Maybe Tiananmen  Square should’ve been a warning, but we kept expanding our engagement with China. It was seen as helpful when the Clinton Administration came to what they thought was a solution to a Korean nuclear program. Instead of holding the master responsible for the actions of the servant, we dealt with the servant. The laws of agency were ignored,, as we wanted to believe China was our friend.  After-all, we did get an agreement and we could go on with the roaring nineties.

Of course, North Korea never kept its part of the bargain, going on with their Nuclear Program till the present day.  It is impossible Chinese Intelligence  wasn’t aware of the subterfuge, yet it did nothing.  This means it was not only OK with them, but   likely part of their plan.  Why else would they allow a nuclear power on their border unless they had zero to fear.  They have nothing to fear because they’re in control.  Now we can argue whether China was ever really liberalizing or just loosening enough to avoid a collapse or irrelevance in the modern world.  After all,  Lenin in 1921 when faced with the Kronstadt Rebellion eased up on Communist control with his New Economic Policy.  That lasted only till the Russian ship was righted, then the clamps were harshly reimposed and Russia descended into Stalinism .  Could Deng’s “reforms” have been just a  “New economic Plan” om steroids?  Now that China is re-established as a great power maybe the party is restoring and perfecting the clamps before the liberalizing  gets out of hand and threatens its hold on power.  A president for life, central planning laying out areas for future domination and the “Social Credit System” are hardly the path to a liberal society.  More likely we are moving back into a contest between a la the Cold War between dictatorial state directed China vs  the liberal free market world.

So what do we do now?  First there are things we absolutely shouldn’t do.  No meeting between a President of the United States and Kim.  This implies a parity between the two raising Kim’s stature and lowering Trump’s. Worse it allows China to be the arbitrator.  Think Russia arbitrating between the US and Belarus.  Unthinkable. It puts us in a no- win situation while increasing the prestige of Kim and XI Jinping  The best we could get is a promise of a backing away from North Korea’s nuclear operation with some inspections.  Been there, done that.  So long as China is their master, Kim will find a way to cheat. They did it before and there is no reason to believe that down the line they won’t again.

Putting tariffs on China as we are threatening also is a no-no.  While some may believe a trade war will hurt China more than us, that may or may not be true.  In our democracy those hurt will be heard and politicians will  listen.  In China this will played as an attack on their nation.  This will allow Xi Jinping to wrap himself in the flag and blame any troubles on the nasty US.  China in any case may be facing troubles arising from increased labor costs leaving them open to competition from other advancing nations. An aging population adds to the problem.  Anyone looking at the huge credit expansion in China much of it to unprofitable state entities, can see trouble ahead. All of this points to slower growth in China. Yet growth with its attendant better life is what Xi and the party give as their reason to maintain power.  A huge middle class with rising expectation may not take kindly to rough times.  Now if they come during an American inspired trade war it would allow China’s rulers to blame it all on the US.  China threatens to take us to the world court as violators because of our tariffs.  Our tariffs concede the moral high ground and make us appear to many as a bully. After-all, Cuba and Venezuela have played similar  cards to excuse their nowhere economies and their rulers have stayed in power. Many Americans suffer and the Communists get to strengthen their hold.  Not a great bargain.

So what should we do?  Recognize the obvious.  China isn’t a friend.  It’s an increasingly dictatorial aggressive state using its pawn to threaten us and other for their ultimate gain. We should stop thinking and acting as if China and North Korea are these separate nations and start treating them as a single unit. If the Chinese don’t eliminate North Korea’s nuclear program, it should be told any attack by its minion on us or our allies will result in a response on China itself.  A Korean attack on Tokyo or Honolulu and kiss Shanghai goodbye.  Looking down a gun barrel should fix the Chinese mind. Further, sanctions on North Korea should be extended to China.  Chinese banks and companies especially if state-owned or directed aiding Korea should be sanctioned resulting  in pain for China, especially financial.

Entering into trade pacts with other nations tired China’s intellectual property theft and  predatory trade practices banning  these practices would isolate China.  This should be easy especially with those nations close to China.  Oh wait, we did that with the Trans Pacific Partnership and we pulled out of it.  Just when we should be isolating China we pull the rug out from under our friends.  Can’t just blame Trump, Hillary who forged this ground breaking treaty which included protection for intellectual property abandoned it in the face of Democratic opposition.  If we could rally the vast majority of like-minded nations we could force China to choose between playing by the rules or losing markets resulting  slower growth.  If companies thought they would be unable to import China produced products into major markets they would look to invest in production elsewhere. In China firms with investment from abroad while only providing a minority of China business are far more efficient, using far less capital but achieving far better results.  Given China’s debt situation it could hardly desire a shift of this capital to other nations with better trade relations.  Of course at present it may be hard to find nations not offended by our present administration to get together on trade pacts.  Besides dumping TPP, we’re fighting with almost all our friends over revising trade treaties,  imposing tariffs, seeming to walk away from friends (the Kurds among others) and our strange attitude towards Russia.  Just when we should be acting as leader of the free world we have the lowest trust level in the world in long time or maybe ever.   If we want to succeed in meeting this growing Chinese challenge we need to rally our friends but we are doing the opposite.

Another simple point is to let the Chinese people know that we like them and if some of them find living in police state not to their liking they would be welcome to move and contribute in the free world.  Domination of future  businesses, services  and trade ultimately depend on people and we should encourage the potential movers and shakers in China to do it here or our with our friends.  Again our present administration is going in the opposite direction by proposing reduced overall immigration.  With a 8 million plus US worker deficit coming the near future in the US, this is bad policy that actually may help China by keeping their brainpower at home.  Again we need to wake up and change direction.

Some people may wonder why we propose Sanctions and isolating China from major trading systems are preferable to the proposed Trump tariffs.  One inflicts great pain on our own people while begging for the a Nationalistic response from China.  Sanctions over the North Korean Nuclear program are targeted and could hit China in its financial weak spot.  More important it targets China for having its satellite threatening others with nuclear destruction.  Not something their masses might rally around.  Further, the loss of access to markets  because China is judged a thief may not be as popular in the
Chinese business community as responding to the Bully Trump.  Being excluded over intellectual property theft among other things also means nation not in a pact with China would be free to steal their intellectual property.  While not a big thing now, as China invests in cutting edge areas it may find it was in their interest to have protection.  What goes around comes around.  Our plan puts the onus where it should be right on Xi Jinping and the Communist Party.

Lastly, no response to China will work as well as it should without the Chinese People knowing what’s going on.  As a more modern economy China has to rely on the internet and we all know how vulnerable it is.  Not only should we stealing their secrets both government and business, but even more important is getting the word out to the Chinese People that any pain they’re enduring is a direct result of their own government’s actions.  We need to make the point, if you’re a solid contributor but you’re stymied  or fear you might have a low “Social Credit” Score  there is a place for you on our side.  By its own actions the Chinese Government let us know their great fear of real news undercutting its support.  That’s why we should pull out all stops in providing it directly to the Chinese People.  The message has to be we like the Chinese People but your government is a predictor.   We invited you to dinner and you stole the dinnerware and threatened the hosts. Remember China has historically  been mannered society.

We know our approach is in many areas diametrically opposed to the present administration’s approach, but we think ours is workable while the administration is leading us to a world of hurt which little chance of success.

 

 

 

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