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Old 06-12-2005, 02:08 AM   #1 (permalink)
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The Emerging China Threat (?)

I've noticed the growing publice sentiment of seeing China as a "threat". I thought we could discuss what exactly does that mean.

I personally do not view China as a threat per se. At least not yet. I feel that the "so-called threat" has been a more of media fanning the flames and maybe even government re-direction or looking for a boogey-man (sp?).

The issues (as far as I know):

1. Trade - the deficit
Both the Us and EU have accused the Chinese of dumping(?) "artificially" cheap exports (textiles) and have proposed measures to counter that.

Unfortunately, I can't really make heads or tails out of the current information we have on it (sorry).

2. Currency
China has been accused of keeping the Yuan "artificially" low

I don't have expertise in this area, but from what I do understand, this could go either way. A while back, Greenspan himself said there wasn't any "real" problem with the peg, but a few days ago changed his mind. Makes me a bit suspiious, perhaps he was pressured to say so?

The issue for me is, even if the Chines float the Yuan, there's no guarantee what will happen.
a. If the Yuan goes up, US companies will simply source elsewhere (i.e. - Bangladesh, Vietnam etc.)
b. If the Yuan goes down, then the US has "egg on its face" in the sense that its contention proved wrong and then made things worse.

Unfortunately, some people think the Chinese are responsible for Americans lsoing their jobs. I used to think this too (embarrassed). But that simply is not true. The reality is, that jobs ill continue to be outsourced, go overseas. If not China, then elsewhere.

3. Military
In the current era of unipolarity, the US enjoys undisputed sole superpower status. I personally do not believe China is anywhere close to even challenging that.

For example - military spending - US, by far, I mean really far outspends China. The Chinese are at best, 50 years behind the US assuming the US does not progress (Sorry, I don't have the source handy).

The Chinese aren't a threat (IMO) to anyone but their own citizens, Tibet, and Taiwan. Also, I believe that the Chinese have "discovered" the joys of capitalism and understand the negative effects on their precious ewconomy if they cause a ruckus (Taiwan is another issue, IMO for another thread). In this way, they differ from the N. Koreans. In other words, they have a stake in "behaving". To do otherwise would be destabilizing and detrimental (in theory) to their economy. Therefore, it's in their best interest to "behave".

Sorry guys, I'm a bit drunk right now. Stress from studying and papers you know. I wil try to continue later. I think it's ok for now though.

Oh yeah, heres a link to an article on perception of the "China Threat" http://news.yahoo.com/s/ap/20050611/...us/china_fears

Last edited by jorgelito; 06-12-2005 at 02:20 AM.. Reason: forgot to add a link
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Old 06-12-2005, 07:40 AM   #2 (permalink)
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Quote:
Originally Posted by jorgelito
The Chinese are at best, 50 years behind the US assuming the US does not progress (Sorry, I don't have the source handy).
I think that is highly overexeggerated. China is currently working hard to modernize its Army (see Type 98 MBT) and especially the navy.

So the 50 Years is wishful thinking.

The Problem is that the USA and China have both interets in the asia, if thse interests collide it could lead to a war. China has a lot of potential.
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Old 06-13-2005, 06:15 PM   #3 (permalink)
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There was an article in the newspaper the other day about the perceived threat of China to global stability. The gist was that while their power (in economic, military and political terms) is growing, they are less aggressive about achieving that power than they are presented as being. The article also said that there was less chance of a war over Taiwan than anyone imagines, as many governments, the Australians included, concede that Taiwan is naturally a part of China. Go figure; I'm more worried about Indonesia than China.
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Old 06-13-2005, 06:56 PM   #4 (permalink)
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Quote:
Originally Posted by jorgelito
1. Trade - the deficit
Both the Us and EU have accused the Chinese of dumping(?) "artificially" cheap exports (textiles) and have proposed measures to counter that.

Unfortunately, I can't really make heads or tails out of the current information we have on it (sorry).
By 'artificially' keeping their exports lower than most other countries, the chinese economy leads by virtue of cost. If things are cheaper to make in china, business will go to china.

Quote:
Originally Posted by jorgelito
2. Currency
China has been accused of keeping the Yuan "artificially" low

I don't have expertise in this area, but from what I do understand, this could go either way. A while back, Greenspan himself said there wasn't any "real" problem with the peg, but a few days ago changed his mind. Makes me a bit suspiious, perhaps he was pressured to say so?

The issue for me is, even if the Chines float the Yuan, there's no guarantee what will happen.
a. If the Yuan goes up, US companies will simply source elsewhere (i.e. - Bangladesh, Vietnam etc.)
b. If the Yuan goes down, then the US has "egg on its face" in the sense that its contention proved wrong and then made things worse.
by pegging the yuan to the fluctuation of the dollar the yuan has way more power than would be anticipated in the early stages. To address your a and b, if the yuan is allowed to fluctuate according to free market economics it would level the playing field between all nations of the WTO. As it stands now, by pegging the yuan, china has an unfair advantage by always keeping their prices low at the expense of the free market.

Quote:
Originally Posted by jorgelito
Unfortunately, some people think the Chinese are responsible for Americans lsoing their jobs. I used to think this too (embarrassed). But that simply is not true. The reality is, that jobs ill continue to be outsourced, go overseas. If not China, then elsewhere.
In this, you are correct. With a global economy, lower prices will prevail. This has its advantages and disadvantages, of which, most people could care less about the disadvantages until it affects them directly. very sad.

Quote:
Originally Posted by jorgelito
3. Military
In the current era of unipolarity, the US enjoys undisputed sole superpower status. I personally do not believe China is anywhere close to even challenging that.

For example - military spending - US, by far, I mean really far outspends China. The Chinese are at best, 50 years behind the US assuming the US does not progress (Sorry, I don't have the source handy).
If china spends half of their budget on military, as does the US (round about figures) but china's military expenses are 1/4th of the US, it wouldn't take long for china to become a major world power at all.
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Old 06-13-2005, 08:34 PM   #5 (permalink)
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Thanks for your reply dksuddeth.

I am starting to understand a bit more of the currency thing. It appears to be even more in China's interest to allow it to float as well. To keep inflation down and something else I can't remember, maybe something to do with their loan rates, not sure. However, as a political issue in the states, the issue is mistated. Unfortunately, it appears as if most Americans believe that the currency and trade deficit, if resolved, will somehow bring back their jobs. Truth is, we've moved away from being a manufacturing base and have been for some time. All our job growth has been mostly in services etc. Not jeans or shoes.

I will try to address both your and Pacifier's reply on the military:

To clarify, even though China's expenses may be 1/4 cheaper, and in the long run, because of relative gains, could potentially pass the US (assuming the US is a a standstill) in 50 years (as I understood it). Secondly, we need to look at what and where they are spending. For example, their com systems still lag far behind. It's highly unlikely that they can develop "in-house" any systems at the level of sophistication that the US possesses. That leaves buying the technology. well, the US isn't going to sell it to them (as far as I know). So, that leaves Europe and Russia(maybe). I agree that China is trying to rapidly modernize, especially Navy, but there's only so much they can do. Even with technology leaps, the US is still overwhelmingly dominant.

I'm not clear on the terms of EURO regulations but I think by law they are limited in what they can sell to CHina.

A third point, China's projection of power:

A). Naval - China's navy is relatively weak and functons at best, as a coast guard to defend against smuggling and stuff like that. We know they're in the market for an aircraft carrier but that's a pretty exclusive market. As far as I know, only the US, UK, France, and Russia have them. And none of them are very enthusiastic about selling China an aircraft carrier - sole purpose, to project forward capability, presumably against Taiwan and to flex muscle in the region, maybe even "quasi-challenging" the US (regionally speaking).

Submarines - China's subs, quite Frankly, suck (pardon the expression). Mostly old, diesel, Soviet-bought, some second-hand. Their home-grown ones aren't all that great either.

B). Ballistics - I think China has recently increased its range on some ICBMs. But perhaps the most important thing is China selling missile technology to places like Iran, Syria, and possilby (but I doubt it) N. Korea. But again, their tech still lags behind the West.

C) Air Force - old school Migs an airforce do not make - Although China has increase it's air force numerically (3 x Taiwan), techwise, nothing to write home about. But, definitely something to keep an eye on. Only advantage is, numbers advantage can swam and overwhelm Taiwan even though Taiwan has "superior" air force. Too small though. Otherwise, no way China can attack Japan by air without getting thoroughly whipped (IMO).

D)Coms - China has the same problem most "developing countries" have. They lack a modern coms system to provide communications, logistics, support, intel etc.

E). Army - Even China's land army, while huge, isn't really equiped for much more than defensive measure. Example, it would really suck to invade Beijing. Even if whoever attacked sacked Beijing, China is a huge country (slightly bigger than the US), and difficult to occupy. It's that whole " ten million Chinese running amok" thing.

Lastly, I just don't think either China nor the US want war. There's just too much at stake. Especially with increased relation and foreign direct investments involved. I believe any type of war or even military confrontation would be too destabilizing. I think both powers would definitely think twice, three times before considering that option. IMO, war would serve neither's interests.

I just don't see China to be a significant threat or "world power" now or anytime soon (within 20 years). But, I also believe China is a significant power and to be taken seriously. Again, this is just my opinion.

Cheers.

Check out: janes for military stats
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Old 06-13-2005, 08:56 PM   #6 (permalink)
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Quote:
Originally Posted by jorgelito
To clarify, even though China's expenses may be 1/4 cheaper, and in the long run, because of relative gains, could potentially pass the US (assuming the US is a a standstill) in 50 years (as I understood it). Secondly, we need to look at what and where they are spending. For example, their com systems still lag far behind. It's highly unlikely that they can develop "in-house" any systems at the level of sophistication that the US possesses. That leaves buying the technology. well, the US isn't going to sell it to them (as far as I know). So, that leaves Europe and Russia(maybe). I agree that China is trying to rapidly modernize, especially Navy, but there's only so much they can do. Even with technology leaps, the US is still overwhelmingly dominant.
OTOH, they could always steal some technology, or adapt commercial technology that's readily available. Why develop in-house systems all by yourself, when you can get better results by copying and improving on what's available?

...which is exactly what some asian countries have been doing for decades. And very succesfully, I might add.
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Old 06-13-2005, 09:26 PM   #7 (permalink)
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I think that the news reports of China emerging as a threat are not accurate. China is emerging as a threat to the United States being the only superpower. It may even become the number 1 superpower in the not so distant future. And while it is the only country on the planet that can produce a multimillion man army on the fly, it lags in technology. But then, the technology industry is heading towards China, Japan, and Taiwan. While this may be due to the cheaper prices for developing the supercomputers, it may be also due to the demand for an increase in technology in an attempt to catch up to the United States (at least for China, as Japan is even more advanced technologically than the United States). The main way that China will become a superpower, if it becomes a superpower, is not through technology or military might, but through economic control and political influence. But then, that's just the way I see it right now, and is prone to error.
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Old 06-13-2005, 09:44 PM   #8 (permalink)
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I thought China has the world largest Air Force?

Maybe I'm watching James Bond too much lately...

China in my opinion is catching up to the US alot faster than what most of us thought. For starters, most Chinese household are actually starting to get some modern applications (TV, washing machines, etc).

Large corporations (Fedex, UPS, IBM, Microsoft, etc) are refocusing their marketing to grab up some chinese customers before everybody else does. For starters, UPS opened several flight route between China and the US. Fedex already established themselves in China but are looking to build several super-hub like the one that exist in Memphis. Those kind of moves by the world's largest cargo carrier shows that China business is rapidly expanding and perhaps, will soon rival that of the US or EU.
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Old 06-14-2005, 08:09 AM   #9 (permalink)
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The Chinese middle class now covers 20% of their population. While our middle class is shrinking.

What happens to a country that loses its purchasing power and has trillions of dollars in debt?
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Old 06-14-2005, 09:17 AM   #10 (permalink)
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Quote:
Originally Posted by Mantus
The Chinese middle class now covers 20% of their population. While our middle class is shrinking.
do you have a source for that? I would like to read more about that. I though China had very large poor rural population

Quote:
Originally Posted by Mantus
What happens to a country that loses its purchasing power and has trillions of dollars in debt?
That is happening in all western nations, the gap between rich and poor becomes bigger and bigger and according to the right thats the fault of the poor.
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Last edited by Pacifier; 06-14-2005 at 09:20 AM..
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Old 06-14-2005, 09:54 AM   #11 (permalink)
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Last I rememer, China's "middle class" was around 200-400 million out of a 1.3 billion population. I'm not good at math but is that around 20%? They do have very large rural poor population, around 800-900 million! Damn, those are big numbers. Sorry, no source right now.
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Old 06-14-2005, 10:04 AM   #12 (permalink)
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Quote:
Originally Posted by Dragonlich
OTOH, they could always steal some technology, or adapt commercial technology that's readily available. Why develop in-house systems all by yourself, when you can get better results by copying and improving on what's available?

...which is exactly what some asian countries have been doing for decades. And very succesfully, I might add.
True, but I don't think it's very easy to "steal" aircraft carrier technology is it? I could be wrong....hahaha! Where would they hide it?

No but you raise a good point: reverse engineering would definitely knock off years in the development, catch up race. But, keep in mind, what they lask in sophisticated weaponry or logisitics systems is not readily adaptable or copiable (IMO). It's not a matter of duck-taping a bunch of x-boes togther to run a missile battery. FOr example: China lacks serious com systems such as intel gathering, encryption tech, just about everything.

For example, a typical US air wing consists of fighter escorts, bombers, AWAC, radar jammers what-have you. Very difficult to compromise. A Chinese air wing cannot compete with that. Someone mentioned China having the largest airforce. Even if true, it's the quality not quantity that matters here. The Chinese air force pretty much becomes target practice for a much more exprienced, trained, hi-tech US airforce.

Additionally, experience is a factor. The Chinese (as far as I know) have not been involved in much engagment. They are a conscript army full of inexperienced, young men. So far, they only know how to suppress their own people and Tibetans (not trying to flame here, I'm pressed for time). The US armed forces in contrast, is more experienced.
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Old 06-14-2005, 10:15 AM   #13 (permalink)
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Chinese middle class,

In 2002 it was 15%
http://www.ncpa.org/iss/int/2002/pd012402f.html

In 2004 china reported 19%
http://www.chinadaily.com.cn/english...ent_386060.htm

Of course we still have ten times the GDP.

I don't understand why their millitary is important. It's not like they can invade us. Sure they can become agresive but as soon as that happens their economy collapses because the world will stop trading with them.

Last edited by Mantus; 06-14-2005 at 10:21 AM..
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Old 06-14-2005, 10:59 AM   #14 (permalink)
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Quote:
Originally Posted by Mantus
I don't understand why their millitary is important. It's not like they can invade us. Sure they can become agresive but as soon as that happens their economy collapses because the world will stop trading with them.
Not exactly, the Soviet Union was pretty aggressive, but their economy didn't collapse. Granted, it was pretty weak compared to United States at the time.
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Old 06-14-2005, 11:42 AM   #15 (permalink)
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Quote:
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Not exactly, the Soviet Union was pretty aggressive, but their economy didn't collapse. Granted, it was pretty weak compared to United States at the time.
I don't believe China will be a military threat in the near future to the U.S. We, the U.S. have so much invested in there, as well as the fact that China has a lot invested in us, in the form of U.S. bonds and we're one of the top exporters from China. [1]
The difference between the Soviets and Chinese economies is that at the time of the Cold War, the u.s. had little to no economic activity with them. With the both China and The U.S. Having so much invested in each other, it's unlikely that any diplomatic relations will go sour in the near future.

Further, China's abundance of natural resources and manpower make it unlikely for another country to become the U.S.'s main source of raw material and cheap labor.

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1 - heard this on NPR a couple weeks ago, a bit rushed to work now, I didn't attempt to find the link
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Old 06-15-2005, 08:59 PM   #16 (permalink)
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As China becomes more capitalistic, in my opinion it will be interesting to see whether, and for how long, a communist country can exploit capitalism before a capitalistic society will cease to tolerate communism.

My only frames of reference is in the petro-chemical industry and the steel industry, where Chinese companies have an industry-wide reputation for not playing fair and sucking up all the supply of American steel. National "corporations" have the full weight and advantage of a sophisticated and powerful government behind them in competing with non-chinese companies. (Think-Exxon getting free access to NASA satellite imagery and CIA intel on a potential field; or the massive collective bargaining power of all the heavy industry in America, if it could somehow combine to put pressure on the suppliers of entire classes of industry.)

I don't even think it's a matter of investment in China, as there has been Massive investment in China, and almost none of it, save for maybe KFC, has panned out.

There is the potential for a great and powerful nation there, but for now, it's just potential, and a pain in the ass for companies competing with them or trying to order steel for domestic use.

Strategically, (as I've stated before) the US should be encouraging Japan to figure out the whole missile-defense thing that we can't quite seem to figure out. It's kosher with their constitutionally limited military goals, and let's face it- they'd probably do a better job than we would of getting it, if properly motivated.

Until the Chinese have advanced navies, air power, and a complete package, rather than just plenty of disposable male troops (because there aren't any women for them to marry because the baby girls were all aborted) I honestly don't think we have to worry much militarily absent a freak missile attack because we have no defense for it. On the other hand, China can, and has been, a thorn in the side of US industry for years now.
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Old 06-24-2005, 02:15 AM   #17 (permalink)
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Many things to note in thsi thread..

Recently I read an article entitled "How we would fight China" in the June 2005 issue of The Atlantic and it brought up some interesting points.

First of all, militarily speaking, China is not as far behind as people here would like to believe. Its immediate advantage of course is its manpower - the number of people in the military age is as large as the population of the entire United States!

China, of course, does not have an aircraft carrier much less a large surface fleet - however, it has been constructing and buying many submarines, both nuclear and diesel powered ones. Now, one might say, these submarines suck.

However, keep in mind their strategy - they aren't planning anything agressive in the world right now, they have a defensive oriented strategy. If any engagement is going to occur against China, it will almost certainly occur near the coast of China, such as the Taiwan Straights or the China Sea. Submarines, while very expensive, can also be the most potent weapon against our own fleet. Imagine the impact if even one of our carriers was sunk? Plus, conventional aircraft do not typically fight submarines to begin with, and so it eliminates the advantage of air superiority with our conventional aircraft (meaning none antisubmarine warfare aircraft or helicopters).

Furthermore, being a defensive strategy, China would use such weapons as mobile minefields - should hostilities begin, submarines trailing ships could strike first as well. Furthermore, if engagement is to occur on Chinese soil or in Chinese air, ships and logistics to support those ships and/or soldiers would be key, meaning sea warfare. Naval wise, you'll have to google it up, but it was over the recent budget cuts to the Navy - military experts estimate China to have a fleet as large if not larger than ours within 12 years (including estimates of our own construction and decomissioning of ships) - that's pretty big. Who knows what they're building as well in terms of carriers and other ships.

China has also developed strategy to fighting the advantage the U.S. has in its intelligence tools and strategy. There are rumors that China has anti-satellite missiles or at least capabilities in disabling these systems. Furthermore, they have constructed information and power networks deep underground in remote areas of China to prevent a targetting of infrastructure from airpower.

Keep in mind that China has this strategy in part due to its geographical advantage - deep in its west, in the heart of central Asia, it is 3000 miles from its coast. For our ships and planes to get in range of their facilities there, our ships would certainly have to be along the coast of China - meaning in range of their submarines and missiles. Which brings me to another point - China has bolstered its intercontinental and surface to surface missile forces. China need only test a missile launched from deep inland China hitting a moving dummy target ship off its coast to send a pretty bold message. All these talks of missile tests and so on are in essence part of that.

The ultimate question, of course, isn't how we would fight China - it would almost certainly be more of a conventional war than these current wars - but it is how one would end it. Barring the nuclear option, neither country can realistically achieve a total victory - total victory meaning a destruction of the government in power. Landing troops on Chinese soil in a conventional WW2-esque war would be extremely costly, perhaps more than we could afford. And at the same time, simplly bombing the country from air and sea is not going to bring about government change.

However, keep in mind that business in the U.S. loves China. It is where our business and investments are going. It is just how things are. The reason I think war with China won't occur in a large military sense within the next fear years at least is because of this - too much is at stake for both countries. Unlike the Cold War, we have heavily invested in each other's economies.

Also, I dont think war between Taiwan and China is going to happen - all this talk is sabre-rattling. Even though many in Taiwan want to remain an independent country, it is foolish to talk of the two as though they are separate people - the aboriginal people of Taiwan are barely considered - the majority of people in Taiwan are descendents of Chinese be it from the 1600's when China sent an expedition there or the soldiers who fled from the communists in 1949. They have less interest in fighting, in essence, their own blood and would rather make money from a peaceful relationship, as they do have right now.

If you do pay attention to the news though, the U.S. and China are playing a game of global Chess, trying to coutner each others moves. China is making big moves to at least indirectly form economic and political ties with many countries in the world, from countries in the EU to countries in Africa and our own backyard (Carribean countries and South America). China is developing more and more advanced missile and nuclear technology as well as cyber warfare.

The U.S. has realigned many military forces to the West Coast. PACCOM (Pacific Command... like Central Command but with an actual sizeable military force free from politics at Washington) is in charge of creating a doctrine versus China. Its doctrine, however, is very similar to Bismark's realpolitik. Rather than get into a headlong engagement, the U.S. has tried to create alliances with countries near China, from Singapore to Japan to S. Korea. The idea of this is of course to make these countries realize they need the U.S. more than they need each other.

Either way as one can see, it's a game of global chess. A thing that stuck to me after doing discussions about this as well as reading about the idea of the China threat is that neither the liberal ideas of foreign policy of the neocon interventionalist methods of foreign policy would work on China. China only benefits from our expeditions into Afghanistan and Iraq as they can not only see our military in action and its tactics and strategies employed, but also wield world public opinion into their favor.

But in the end, I think the thing that can come out of this is rather than war, we have global stability. Turn China into a superpower that is on great terms with us and we can see an era where two major powers tied together economically can keep the peace in their part of the world - it would certainly be of great aid if China patrolled its own backyard where we have been fighting terrorists. Furthermore, similar to the Cold War in a way, we have two great powers afraid to go at war with one another, which in itself keeps the peace.
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Old 06-24-2005, 01:20 PM   #18 (permalink)
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Quote:
Originally Posted by Mantus
The Chinese middle class now covers 20% of their population. While our middle class is shrinking.

What happens to a country that loses its purchasing power and has trillions of dollars in debt?
China is buying up our debt and attempting to buy American corporations. In that regard, I believe they have or will become an economic threat. Japan did something similar a few decades ago.

Chinese Oil Giant in Takeover Bid for US Corporation
By David Barboza and Andrew Ross Sorkin
The New York Times

Thursday 23 June 2005

Shanghai - One of China's largest state-controlled oil companies made a $18.5 billion unsolicited bid Thursday for Unocal, signaling the first big takeover battle by a Chinese company for an American corporation.

The bold bid, by the China National Offshore Oil Corporation (CNOOC), may be a watershed in Chinese corporate behavior, and it demonstrates the increasing influence on Asia of Wall Street's bare-knuckled takeover tactics.

The offer is also the latest symbol of China's growing economic power and of the soaring ambitions of its corporate giants, particularly when it comes to the energy resources it needs desperately to continue feeding its rapid growth.

CNOOC's bid, which comes two months after Unocal agreed to be sold to Chevron, the American energy giant, for $16.4 billion, is expected to incite a potentially costly bidding war over the California-based Unocal, a large independent oil company. CNOOC said its offer represents a premium of about $1.5 billion over the value of Unocal's deal with Chevron after a $500 million breakup fee.

Moreover, the effort is likely to provoke a fierce debate in Washington about the nation's trade policies with China and the role of the two governments in the growing trend of deal making between companies in the countries.

This week, a consortium of investors led by the Haier Group, one of China's biggest companies, moved to acquire the Maytag Corporation, the American appliance maker, for about $1.3 billion, surpassing a bid from a group of American investors.

Last month, Lenovo, China's largest computer maker, completed its $1.75 billion deal for I.B.M.'s personal computer business, creating the world's third-largest computer maker after Dell and Hewlett-Packard.

After years of attracting billions in foreign investment and virtually turning itself into the world's largest factory floor, China appears to be nurturing the growth of its own corporate giants into beacons of capitalism. China wants to be a player on the world stage, and it is eager to have its own energy resources, its own multinational corporations and its own dazzling corporate names.

And some of China's biggest companies are now on the hunt, trying to snap up global treasures.

"If there's an asset up for sale anywhere in the world, people are looking to China, particularly if there's a manufacturing element involved," said Colin Banfield, who runs the mergers and acquisitions practice at Credit Suisse First Boston in Asia. "And if these two deals go through this year, no one is going to doubt the credibility of the Chinese corporates when it comes to M & A."

The deal making and bidding wars are all the more remarkable because they involve Chinese companies taking on American multinationals in a series of transactions certain to be a boon for Western lawyers and investment bankers, many of whom have been betting hundreds of millions of dollars on China's rise.

Indeed, CNOOC is being advised by an army of bankers from Goldman Sachs, J. P. Morgan Chase and N M Rothschild & Sons of Britain.

In a response, Unocal said in a statement that its board would evaluate the offer, but that its recommendation of the deal with Chevron "remains in effect."

CNOOC's bid faces an uphill battle, with hurdles that probably rise above those usually confronting a corporate bidder. Already, lawmakers in Washington are questioning whether the Bush administration should intervene to block the bid for Unocal, which was founded in 1890 as the Union Oil Company of California.

Two Republican representatives from California, Richard W. Pombo and Duncan Hunter, wrote a letter last week to President Bush, after speculation concerning the deal arose, urging that the transaction be scrutinized on the grounds of national security.

They wrote: "As the world energy landscape shifts, we believe that it is critical to understand the implications for American interests and most especially, the threat posed by China's governmental pursuit of world energy resources. The United States increasingly needs to view meeting its energy requirements within the context of our foreign policy, national security and economic security agenda."

Energy Secretary Samuel W. Bodman said at a meeting of the National Petroleum Council late Wednesday that the government's review of the deal would be "truly a complex matter," according to Reuters.

In Beijing, Liu Jianchao, a spokesman for the Foreign Ministry, told reporters on Tuesday that "this is a corporate issue," according to Bloomberg News. "I can't comment on this individual case," Mr. Liu said, "but I can say we encourage the U.S. to allow normal trade relations to take place without political interference."

TCL, a Chinese company that began by making cassette tapes in 1981, is suddenly the world's biggest television set maker, after its acquisition last July of the television business of Thomson of France, which owned the old RCA brand.

Chinese companies still have a long way to go to become global giants that can compete head-to-head with Toyota, Siemens or General Electric. Most of the China deals are small in value - about $1 billion to $2 billion - when compared with big American or European deals.

Whether CNOOC's bid will succeed on it merits is unclear. It is interested in Unocal, once known for its 76 brand, less for its exploration and production in North America than for its huge reserves in Asia. Twenty-seven percent of Unocal's proven oil reserves and 73 percent of its proven natural gas reserves are in Asia, according to Merrill Lynch.

To succeed, CNOOC will have to persuade Unocal's shareholders to vote against their deal with Chevron. The new deal would then face a shareholder vote.

Even though CNOOC's offer is worth $1.5 billion more than Chevron's, some shareholders could still decide that the regulatory review process and the time required to complete a deal with CNOOC would pose too great a risk, given the size of the offer.

Chevron, which could raise its bid to counter CNOOC, is racing to complete its deal and submit it to a shareholder vote as early as August. The company made no specific comment on the Chinese offer.

CNOOC's all-cash offer values Unocal at $67 a share. Chevron's cash and stock offer values Unocal at $61.26 a share, based on Chevron's closing price on Wednesday of $58.27 a share. Shares of Unocal jumped 2.2 percent, to $64.85, as investors anticipated CNOOC's higher bid.

In CNOOC's letter to Unocal, it went to great lengths to say that its bid was friendly, despite being unsolicited. "This friendly, all-cash proposal is a superior offer for Unocal shareholders," wrote CNOOC's chairman and chief executive, Fu Chengyu.

Trying to assuage concerns of some in Washington, CNOOC pledged to continue Unocal's practice of selling all of the oil and gas produced in the United States back to customers in the United States. The company also said it would retain substantially all of Unocal's employees in the United States.
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Old 06-24-2005, 06:19 PM   #19 (permalink)
All important elusive independent swing voter...
 
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Location: People's Republic of KKKalifornia
Yes, and Japan got burned for their shopping spree.
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Old 06-24-2005, 06:25 PM   #20 (permalink)
lascivious
 
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Quote:
Originally Posted by jorgelito
Yes, and Japan got burned for their shopping spree.
I don't think they are the same thing and Japan burned us too, they took allot of our industry, which we still haven't got back.

As long as we are the all consuming black hole for world goods we stay afloat. The moment another market emerges the world will abandon us, call in our debts and we are screwed.

Atleast that how I always hear the end of the world will come. That or aliens.
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Old 06-24-2005, 08:43 PM   #21 (permalink)
All important elusive independent swing voter...
 
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Location: People's Republic of KKKalifornia
Oh no, of course they're not the same thing, I just wanted to show another angle/side of it.

Another market to watch out for is India, 4th largest market, 2nd largest population. Walmart already has designs on making India it's flagship market.

http://money.cnn.com/2005/06/06/news...ndia/index.htm

Interesting stuff.

Cheers
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Old 06-24-2005, 11:48 PM   #22 (permalink)
42, baby!
 
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Location: The Netherlands
*pssst* did you know that the Dutch are pretty much in control of the US' economy?

The Chinese are just the next in line to buy US (and other) companies. Just like the Saudis are buying foreign companies. If they want to spend their money on US companies, so be it. You can still choose not to do business with them (if you feel like it), and these companies will still need to compete with other, US-owned companies. If it works, it works; if it fails, it'll cost China lots of money.

Perhaps you should look into the reasons *why* these companies are sold. Who is selling them, and why? Are they not making enough profit, or have the shareholders gone nuts? Apparently, it's much more attractive for the owners to sell a company (=lots of instant cash) than own/operate it themselves (=long-term cash, or loss).
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