CHINAwatch

China succeeds in mass extraction of combustable methane hydrates in the South China Sea

According to a Weixin report (in Chinese) on 22 October, 2019, using a semi-submersible drilling platform (Blue Whale One) measuring 117m x 92.7m x 118m tall in the South China Sea, China achieved the world's first breakthrough in extracting scalable quantities of methane hydrates ("inflammable ice"). The project was reported in the South China Morning Post on 19 May, 2017

The strategic significance is obvious. As the largest energy consumer, China has to rely on oil and gas imports over long distances through "choke points" (e.g. the Strait of Hormuz and the Malacca Strait) vulnerable to foreign powers. On the environmental front, China is the world's largest coal consumer, contributing to carbon emissions and smogs in many Chinese cities.

Methane hydrates are a lot less polluting but ten times more energy- rich per unit compared to coal, oil, and natural gas. It is estimated that one cubic meter of methane hydrates is equivalent to 160 cubic meters of natural gas.

The global reserve of methane hydrates is twice as much as all other known fossil fuels combined, enough for 1,000 years of human consumption. China's gas hydrates reserve is estimated at 100 billion tons of oil-equivalents, of which 80% lies in the South China Sea.

The successful extraction marks a significant milestone in utilization of alternative sources of energy for China. It also explains why China has been so assertive to safeguard territorial claims in the South China Sea.

State of The Play on US-China Competition - Center for Strategic and International Studies

Audio interview with Steve Hadley, former National Security Advisor, on 8 October, 2019, touching on the debate on U.S.-China competition.  "Is the Washington panic on China out of step with how the rest of the country views China? How can we best encapsulate the current state of the relationship? Are China’s domestic politics or foreign policy shapeable".

China at 70 has much to celebrate, but its biggest challenges lie ahead

Cary Huang's column of 29 September in the South China Morning Post gives an up-to-date catalogue of China's impressive achievements under the Communist Party of China. In just seven decades, what would have taken the West centuries, a poverty-stricken, internationally weak, and backward Chinese nation has been turned into an economic and geopolitical powerhouse, a leading engine of global growth projecting influence across continents and oceans. A video clip From Ashes to Prosperity shows what breathtaking transformation the nation has undergone since the ravages wrought by the Japanese invasion. 

Huang mentions that "per capita GDP rose from just US$200 in 1979 – when 80 per cent of Chinese lived in absolute poverty in rural areas – to around US$10,000 last year, firmly in middle-income territory." This is singularly instructive, as China seems to have successfully escaped the much-hyped "middle-income trap". 

At his latest address at the United Nations, President Trump suggested that as the world's second largest economy, China is already an advanced country. It cannot pretend to remain a developing nation, thereby gaming the international trading system. Huang's observation is timely that "China is still neither an advanced nor a developed country. Nor can it properly be described as a rich nation. It is a developing giant on the world stage." His assertion is supported by China's GDP per capita below the worldwide average of US$11,570, not to mention backwardness in many other metrics, including the environment and institutions. 

This helps to debunk popular Sinophobia that China is a global superpower threatening to impose an authoritarian model on the rest of the world. "To be a true superpower, a country must wield global influence in many, varied spheres: in economics, in science and technology, in military matters and in soft power." In economics, China perhaps scores an A. But the country still lags far behind the United States in global military capabilities and behind many Western advanced countries, big and small, in scientific breakthroughs. "China has just three Nobel Prizes; one for science, one for literature and one for peace (the last of which was awarded against Beijing’s will)," Huang observes. 

Above all, "Today, every single nation to have joined the 36-member Organisation for Economic Co-operation and Development (OECD) has been not only a market economy, but also a free democracy." Despite its dramatic ascendancy, China's massive deficit of soft power stands in the way of its achievement of great power status. No matter how well China may excel in other fields, and how more influential China becomes globally, this deficit in soft power of universal appeal is likely to remain a stumbling block along the nation's ambitious trajectory. 

The concentration of power under President Xi may be necessary to combat corrupt interests and political detractors in order to steer the nation on course to realize the China Dream of becoming a fully developed nation by 2049, the hundredth anniversary of the Communist Party of China. However, with the rapid rise of a university-educated middle class, the goal's realization is likely to depend on a willingness to embrace modernity in governance – democracy, freedom and the rule of law.  

Why China says "No" to US arms control idea after US-Russian row over Intermediate-range Nuclear Forces (INF) Treaty

Live TV panel discussion on PressTV on  23 August 2019

America Must Prepare for the Coming Chinese Empire

Writing for The National Interest on 17 June, 2019, Robert Kaplan, managing director for global macro at Eurasia Group, warns of "the coming Chinese Empire".

A different class of America competitor multiple degrees more formidable than the former Soviet Union, China's ascendancy is driven by efficient state capitalism supported by robust civilizational culture and its Belt and Road Initiative of global ambitions.

Kaplan proposes that the United States should avoid getting entangled in the Middle East and should focus instead on the Indo-Pacific. While unlikely to become a firm US ally, India's capabilities should be strengthened together with boosting Taiwan's defences, both as counterweight against the spread of China's growing influence in the region.

He concludes by saying that "the last thing American policymakers or strategists should assume is that somehow we are superior to the Chinese, or worse: that somehow we have a destiny that they do not."

Course Correction: Toward an Effective and Sustainable China Policy

The above 51-page February 2019 Report by the Asia Society’s Center on U.S.-China Relations is meticulously prepared by an impressive array of leading US China experts. The team is led by Orville Schell, Arthur Ross Director of the Center on U.S.-China Relations, and Susan Shirk, chair of the 21st Century China Center and research professor at the University of California, San Diego School of Global Policy and Strategy. Ms Shirk previously served as deputy assistant secretary of state from 1997 to 2000. 

The Report advocates a change of course in US-China relations. This is in response to President Xi's stronger, more assertive China which is perceived to behave in ways often at odds with America's norms and values supporting the existing world order.

The Report's launch panel in Washington D.C. on 12 February pointed out that while China converged with those norms on initial entry into the World Trade Organization, in recent years it has increasingly diverged from them. As a result, there is strong bi-partisan consensus for a more robust stand against a rising "China Threat".

The Report delves into the full panoply of concerns with China on trade, military and technological ambitions, the South China Sea, Taiwan, human rights and China's growing global influence, including the Belt and Road Initiative. Under a banner of "Smart Competition", it suggests all-of-government re-balancing towards clear-sighted confrontation against China's perceived transgressions without giving up cooperation on issues of common interests.

The Report warns against over-reacting towards a Red Scare which harms best American interest. It acknowledges that the American people's attitudes towards China are more balanced. It also concedes that the United States should first strengthen its own competitive capacities and avoid trampling on allies and traditional American norms and global institutions which have served American interests well.

At the launch panel, Ms Shirk wanted the United States to rise above China's "lowest common denominator" of "exclusionary" behaviour, without comparing it  to President Trump's "America First" unilateralism. China's increasing role in providing common goods such as in the Paris Agreement on Climate Change and in fielding the largest contingent of UN Peacekeeping Force, more than the rest of Security Council Permanent Members' contributions combined, seem to be forgotten or interpreted as a sign of a China Threat to supplant the United States.

The Report seems another shot across the bow against China's perceived intentions to eclipse the United States in the Asia-Pacific, if not globally.  

America's about-face towards China has been a loud wake-up call. If this is not enough, even the European Union has now called for a united trade and tech front against 'rival' China.

Even before the trade war intensified, Beijing tried to enact laws to address the legitimate concerns of foreign investors such as intellectual property protection and equal treatment. At the March 2019 National People's Congress (NPC)/Chinese People's Political Consultative Conference (CPPCC) "Two Sessions", it is reported that the New Foreign Investment Law Goes on Fast Track . This augurs well for eventually shaping a historic, comprehensive US-China trade deal that would underpin better US-China relations, even as geopolitical rivalry endures. 

However, in light of serious misgivings in Western and other countries, China will have to double down on its contribution to common goods, create a more level-playing field for everybody, enhance its transparency, and somehow transform itself into a more tolerant, less authoritarian nation, if she to realize the essence of her Two Centenary Goals, as my South China Morning Post Op-ed of 24 January 2019 insinuates. 

Trade, People, and Money: Understanding China's Unique Capabilities

Stephen Olson, Hong Kong-based research fellow of the Hinrich Foundation, in an article of 24 October, 2018 in The American Prospect, a liberal magazine based in Washington D.C., suggests that the West, (particularly the United States), needs to  negotiate a modus vivendi with China's very different economic system and unique global capabilities in trade, peoples and money, "to pursue national objectives and shape it relations—economic, trade, strategic, and diplomatic—with other countries and multilateral institutions." This may well be pivotal in helping to shape a looming Chinese Century

Belt and Road is alive and kicking

A Standard Chartered Bank special report of 9 October, Belt and Road - Making its presence felt examines the latest developments on the ground in Asia, Africa and the Middle East, including what has happened after the US has declared a trade war against China. 

The report shows that -

"Trade and investment links between China and BRI countries continue to deepen, cementing alliances, improving competitiveness and shifting the global supply chain amid the US-China trade war. Rapid BRI expansion comes with challenges and risks – BRI partner countries face widening trade deficits and rising external debt. Bilateral debt relief offered by China should help to avoid systemic debt fallout. Increased transparency would likely improve project quality, address growing concerns and facilitate debt resolution. Commercial, environmental and social viability would help ensure project sustainability."

Download Standard Chartered - Belt and Road Report 9 October 2018  

According to a report dated 26 October, 2018 in the Asia Times, China's trade with Belt and Road countries exceeds US$860 billon over the first three quarters in 2018, a rise of 13.2% from a year earlier. Over the same period, Chinese enterprises have made a total US$10.78 billion of non-financial direct investment in these  countries, a rise of 12.3% from last year. They have helped establish 82 economic and trade cooperation zones, creating 244,000 local jobs and paying taxes and fees to host countries totalling US$2.01 billion.

During a historic visit to Beijing, the first in seven years, and accompanied by a 500-strong business delegation, Japan's Prime Minister Abe pledged to change course in relations with China, from confrontation to a "new era of cooperation", paving the way to Japanese participation in China's Belt and Road Initiative in some 30 joint infrastructural projects. Click here  Not only would this breakthrough reinvigorate interest in China's global Initiative, it would also help to shore up the corporate governance and credibility of both the projects concerned and the whole Initiative as well. 

China's 36,000-character White Paper on US trade war omits reference to an all-out New Cold War

The substantial White Paper, released on 24 September, expounds on the nature of China's trade relations with the US. Entitled "Facts about the China-US Trade Dispute and China's Stance", it tries to show that the two nations are at different stages of development with very different political-economic models. Yet, trade and investments between the two countries have grown by leaps and bounds, benefitting businesses and peoples in both countries as well as the world at large. Supporting this benign relationship is mutual economic complementarity and a multilateral rule-based order supported by the United States.

However, in recent months, the United States seems to want to upend this mutual relationship and global order by resorting to mercantilist bullying and economic nationalism under the banners of "national security" and "America First". While a trade war will hurt both countries, China will not sacrifice its national interests, which it is prepared to defend to the bitter end. China remains fully committed to economic reforms and opening up and continues to support a multilateral world order. It is not enthusiastic about a trade war and always keeps the door open for negotiations on the bases of mutual respect, mutual trust and win-win relationships.

Download The.Facts.and.Chinas.Position.on.China-US.Trade.Friction

The Paper contains a swathe of trade and economic data in support of the benign trading relations between the two countries, showing how much the US economy and American businesses and people have benefitted. It tries to showcase China's progress in foreign intellectual property protection and opening up of various sectors of China's economy. It explains that even the United States practises various trade discriminatory policies and subsidizes a host of industries including agricultural and high-end strategic businesses. Indeed, China's "Made in China 2025", which seems to alarm US policy makers in recent months, was inspired by the United States' "Strategy for American Innovation" (2011) and "National Strategic Plan for Advanced Manufacturing" (2012). 

What the Paper hasn't touched on, however, is the realization that the trade war is but a manifestation of an all-out bipartisan strategic pushback against China as a rapidly rising challenger to US global economic and geopolitical dominance. Click here Despite well-intentioned rhetoric of helping to bring China into the world's multilateral trading system (WTO), the reality has dawned on US strategists that instead of getting mainly the crumbs from the table (China makes only $8.46 from an i-phone), China is fast advancing to capabilities of eating America's lunch, at least in some areas. This is happening not only in trade, but in military projection  and geopolitics in theatres such as the South China Sea and China's Belt and Road Initiative extending to four corners of the globe.

These strategic worries do not bode well for early ending of the trade war, nor, for that matter, for early return to a more benign relationship between the world's sitting superpower and its perceived rising challenger. A Thucydides Trap has sprung in the form of All Measures Short of War. Welcome to a new US-China Cold War of the 21st century. 

China Reinvests Itself but is unlikely to displace American global leadership

A six-part China Central Television (CCTV) documentary (Chinese language), first aired nationwide in January 2018, features some of the nation's jaw-dropping breakthroughs in digitization, new energies, manufacturing technologies, life sciences, space and sea explorations, and a confluence of game-changing innovations suggestive of a Rising China. The commentary soundtrack was dubbed from the voice of a deceased famed broadcaster using artificial intelligence. 

Episode One -    Information Technology, New Energies, Manufacturing, Life Sciences, Aerospace and Ocean Exploration

Episode Two -    A far-reaching revolution to capture the immense possibilities of Nature's energies

Episode Three - Game-changing manufacturing technologies including bendable ultra-thin glass panels, wide-body aircraft, super-high-precision machine tools,  world's tallest cranes, individualized 3-D printing

Episode Four  - Overcoming the challenges of aging, deceases, and death, including super-agricultural products and innovative foodstuffs 

Episode Five  -  Exploring the depths of space and the oceans 

Episode Six   -  A rising tide of transformative technologies including the world's most powerful space telescope, micro-lighting, genetic sequencing, ultra-high speed rail, suggestive of the rise and reinvention of an ancient nation driven by the innovation of every team, every project and every city. 

A glimpse of China's prowess in applied innovation and technology is embedded in my January 2018 feature article (starting from middle of third column, p. 37) of The Global Analyst, an Indian business journal, drawing on Chinese Business - Landscapes and Strategies, London and New York: Routledge, 2018.

Examples include the world's first quantum science computer, most technologically-advanced ship elevator, world's largest gene pool, and most powerful astronomical radio telescope. These are driven by the world's largest R & D personnel, numbering 3.247 million in 2012, 29.2% of the world total, drawn from some 7 million university graduates with 30,000 doctorates a year. The number of engineering graduates is seven times higher than in the USA. Supported these projects are the rise of China's patent-filing to 928,177 in 2014, ahead of the United States at 578,802 and Japan at 325,989. 

Another dimension of Chian's global heft is its worldwide connectivity. My August 2017 PowerPoint presentation details how the Middle Kingdom manages to connect the world.

According to a South China Morning Post article of 15 April, 2018 by David Dodwell, compared with the United States, China has become by far the more important market for imports and exports for the world's top 20 economies. This relative dependence is even more pronounced in the case of APEC Members.  Download Importance of China's economy compared with US

The above startling developments have fed into a rising frenzy that China is set to displace America in leading a regional, if not global, order. They have also led to intellectual debate in the West struggling to make sense of President Xi's worldview that drives China's trajectory in a "New Era". Click here

China still faces many herculean obstacles both internally and externally. Why China will not usurp American leadership anytime soon is outlined by Harvard University Professor Joseph Nye, former US assistant secretary of defense and chairman of the US National Intelligence Council, in his Project Syndicate article of 9 April, 2018.

China will struggle to close the capability gaps with the United States, thanks to its declining and aging demographics, continuing dependence on imported energy, American cutting-edge technologies, preeminent universities, predominant role of the dollar, a rich landmass strategically guarded by two oceans, and American alliances with many advanced countries integrated with creative talents in the liberal world. Hence, according to Professor Nye, America's global leadership is likely to endure long after the Trump years.