China’s State Council issued a statement promising to promote outbound investment by Chinese firms,Xinhua reported Wednesday. Beijing plans to increase financing support to encourage Chinese companies to both invest and operate abroad. “The move will raise the international competitiveness of Chinese products, especially equipment products, boost structural upgrading of foreign trade and push manufacturing and financial sectors to a medium-high level,” the statement said.
The move to emphasize outbound investment is part of China’s push to revamp its economy, shifting away from a traditional reliance on domestic production and exports. With excess capacity at home, and a growing stockpile of foreign exchange reserves, Beijing is nudging Chinese firms to consider moving operations and investments overseas.
In fact, Chinese officials expect China’s outbound investments to surpass inbound investments for the first time in 2014. Chinese investments abroad could reach nearly $130 billion by year’s end, while inbound investment is expected to come in at less than last year’s $118 billion total. As the government adjusts to a “new normal” of slower economic growth, Chinese companies are being openly encouraged to invest in other markets.
Reuters reports in more detail on the financial policy changes in store. First, Beijing is removing red tape on currency exchanges, which will mean Chinese firms can exchange money without having to register with the government. The central government will also provide more support for “major equipment makers” seeking to grow their operations outside of China.
Within the general framework of supporting investment abroad, there are clear priorities for the Chinese government. Data on Chinese investments abroad gathered by the Heritage Foundation shows a clear emphasis on the energy sector – nearly $400 billion of China’s $870 billion in total investments worldwide are in the energy field. That includes major overseas oil and gas operations by Chinese state-owned enterprises, as well as China’s increasing focus on nuclear power. Given China’s growing energy needs, it’s hardly surprising that outbound investment would focus on securing energy supplies.
The second largest sector for China’s outbound investment, however, is transportation, which accounts for over $134 billion. This sector is poised to grow exponentially in coming years, as China continues to push forward its “one belt, one road” Silk Road projects. From building railroads in Eastern Europe to upgrading the Suez Canal, China’s Silk Road vision will require massive amounts of investment in infrastructure connecting East Asia with Europe – and Chinese companies, encouraged by Beijing, are at the front of the line for realizing these projects.
For China, transitioning to be a net investor rather than recipient of investment is a logical next step in its economic development. Beijing also sees a clear opportunity to meld strategic goals and foreign investment. In some countries, however, Chinese investment faces an uphill battle. A contract for a Chinese company to build a high-speed rail line in Mexico was scrapped soon after it was announced, due to scrutiny over the bidding process.On Monday, protests against a Chinese-run mine in Myanmar turned fatal when police shot and killed one of the demonstrators. Concerns over environmental impact and fair treatment of locals have dogged other Chinese projects, particularly in the developing world. China’s ability to regulate overseas operations by domestic companies is a work in progress — something Beijing will continue to work on as it pushes its companies to “go global.”
On the table before me, a martini glass of chilled gin, Cointreau and vermouth, spiked with a shot of crème de menthe, seemed to glow green from within. Raising slender arms, a chanteuse in a qipao — scarlet, tightfitting and sleeveless — stilled a babble of Mandarin, German and Japanese voices as she trilled the first tones of“Ye Shang Hai,” an aching anthem to the legendary night life of the China coast.
It’s been a long time coming, I thought on a visit to Shanghai this spring, but Sir Victor Sassoon would once again feel at home in the lobby bar of his grand hotel, in the city he loved most.
Never mind that I’d had to slip the bartender the recipe for the Conte Verde (one of Sir Victor’s favorite cocktails) as I’d entered the bar. Never mind that, back in the ’30s, the real parties had taken place nine floors above, in the Tower Night Club, where Charlie Chaplin and Paulette Goddard once twirled on the teak floorboards of a sprung dance floor. The night I visited, the crowd in the Jazz Bar was cosmopolitan, the playlist pre-revolutionary, the drinks divine. It would have been fitting, I thought, if a tall man sporting a monocle and a top hat emerged from the shadows to make the rounds of the tables with proprietorial ease, as Sassoon was wont to do in the heyday of the Peace Hotel.
Until recently, the name Sassoon — or, more exactly, Sir Ellice Victor Sassoon, the third baronet of Bombay — had been all but effaced from the streets of Shanghai. The scion of a Baghdadi Jewish family, educated at Harrow and Cambridge, Sassoon shifted the headquarters of a family empire built on opium and cotton from Bombay to Shanghai, initiating the real estate boom that would make it into the Paris of the Far East.
The 1929 opening of the Cathay Hotel (its name was changed to the Peace in the mid-50s), heralded as the most luxurious hostelry east of the Suez Canal, proclaimed his commitment to China. (He even made the 11th-floor penthouse, just below the hotel’s sharply pitched pyramidal roof, his downtown pied-à-terre.) Within a decade, Sassoon had utterly transformed the skyline of Shanghai, working with architects and developers to build the first true skyscrapers in the Eastern Hemisphere, in the process creating a real estate empire that would regularly see him counted among the world’s half-dozen richest men. Within two decades, the red flag of the People’s Republic was hoisted over the Cathay, which would for many years serve as a guesthouse for visiting Soviet bloc dignitaries.
Yet, over the course of the years, Sassoon’s buildings, apparently too solid to demolish, continued to stand, so many mysterious Art Deco and Streamline Moderne megaliths in a cityscape growing ever grimier with coal dust. As Shanghai once again takes its place as one of Asia’s fastest-growing metropolises, and supertall, 100-plus-story towers define its new skyline, there are signs that the city is beginning to value, and even treasure, its prewar architectural heritage. Sir Victor would have appreciated the irony: The landmarks of Shanghai’s semicolonial past, vestiges of a once-reviled foreign occupation, have lately become some of its most coveted addresses.
The last time I was in Shanghai, in 2007, the Peace Hotel was in a sorry state. In the Jazz Bar, whose faux Tudor walls seemed to be stained yellow with the nicotine of decades, I watched a sextet of septuagenarian Chinese jazzmen lurching their way through “Begin the Beguine.” (The musicians, who rehearsed clandestinely through the Cultural Revolution, are still sometimes joined by their oldest member, a 96-year-old drummer.)
I was given a tour of the property by Peter Hibbard, an author whose books “Peace at the Cathay” and “The Bund” document Shanghai’s European architectural history. He showed me tantalizing glimpses of marble and stained glass, partly hidden by poorly dropped ceilings, and explained that the lavish décor of the eighth-floor restaurant — inspired by the Temple of Heaven in Beijing’s Forbidden City — had to be papered over during the Cultural Revolution to spare it the wrath of the Red Guards. Hidden away in storerooms, he assured me, were the original Arts and Crafts furniture and Deco glasswork that had been a feature of every guest room. Mr. Hibbard informed me the hotel was about to close its doors for a complete makeover; he feared the worst.
After a three-year restoration overseen by the lead architect Tang Yu En (and a makeover supervised by the Singapore-based designer Ian Carr, completed in 2010), much of the cachet of the old Cathay has been restored to the Peace.
On the ceiling of the Dragon Phoenix Restaurant, gilded chinoiserie bats once again soar; Lalique sconces have been returned to the corridor that leads to the eighth-floor ballroom. In nine themed suites, the décor has been recreated from old photos: The Indian Room is newly resplendent with filigreed plasterwork and peacock-hued cupolas, while a semicircular moon gate separates the sitting and dining rooms of the Chinese Room. A spectacular rotunda has once again become the centerpiece of the ground floor, its soaring ceiling of leaded glass undergirded by marble reliefs of stylized greyhounds that remain the hotel’s insignia.
Some changes would surely have caused Sassoon to arch an eyebrow. To avoid spooking visitors from the south, elevators now skip directly from the third to the fifth floor. (The number 4 sounds like the Cantonese word for “death.”) The revolving door on the riverfront Bund, once the privileged entrance for such celebrity visitors as Douglas Fairbanks and Cornelius Vanderbilt, is now chained shut with a rusty padlock. (It is bad feng shui for a building’s main door to face water.)
In spite of such adjustments, Mr. Hibbard is delighted to see Sassoon’s flagship property reclaiming pride of place on the Bund. “Sir Victor changed the face, and the manners, of Shanghai,” he said. “The Cathay exemplified this. Outside, it’s so simple, clean and streamlined. Inside, it’s fanciful and buoyant. It gave society a venue to play in. It still gives people from around the globe an opportunity to have a fantastic time in one of the world’s most exciting cities.”
The building has something else going for it: location. Sassoon built his headquarters where bustling Nanjing Road, Shanghai’s main commercial street, intersected with the banks, clubs and head offices of foreign firms that lined the Huangpu riverfront. The hotel, in other words, sits at the exact point where China meets the world — which means that, to this day (and well into most nights), it is buffeted by concentrated streams of humanity.
I was not surprised that Noël Coward found the serenity to write the first draft of “Private Lives” during a four-day sojourn at the Cathay in 1929, or that Sassoon, a nomadic tycoon who could live anywhere in the world, chose it as the site for his aerie. The sensation of being swaddled in luxury at the calm center of a bewitching maelstrom is unique. After building the Cathay, all Sassoon had to do was sit and wait for the world to come to him.
Come it did, and Sassoon was there to receive it. Working with Palmer & Turner (a firm founded in 1862, and with offices in Hong Kong to this day), Sassoon went on a building binge. His favored collaborator was the British architect George Leopold (Tug) Wilson, whose travels had exposed him to Parisian Art Deco and the latest American skyscrapers. Shanghai’s swampy soil had long prevented structures from rising more than 10 stories. Wilson faced the challenge by building on concrete rafts set atop the mud, and Sassoon founded the Aerocrete Company, which produced a lighter, “aerated” concrete that further diminished the load. His clean designs, though not the first time modernism came to Shanghai, brought a touch of Gotham to a city whose architectural face had hitherto had a stodgy, neo-Classical cast.
The impressive stepped tower of the 14-story Metropole Hotel, three blocks south of the Peace Hotel, is typical. Completed in 1932, and decorated with Persian rugs and Jacobean furniture, the Metropole catered to executives rather than wealthy tourists. (It remains a hotel primarily for business travelers, if a somewhat down-at-the-heels one). The sweep of its concave facade is continued, across Jiangxi Road, by the mirror-image Hamilton House. The twin Art Deco towers, on a curved intersection designed to be downtown Shanghai’s answer to Piccadilly Circus, create an impressive, amphitheater-like urban space.
Hamilton House, though its luxurious triplex apartments and doctors’ offices were relentlessly subdivided in the 1950s, remains the most atmospheric of the old Sassoon properties. As I read a glassed-in directory in the lobby (you can still make out the name of Viola Smith, a former tenant who became American consul to Shanghai in 1939), a silver-haired man, an infant balanced on the seat behind him, drove his scooter directly into the elevator next to me. Riding up to the upper floors, I emerged into daylight. The Chinese tenants have made what were once private rooftop gardens into a world of their own: miniature penjing trees and aquariums of tropical fish now share a stunning river view with a three-foot-tall statue of Chairman Mao.
In a city dominated by low-rise brick rowhouses, Sassoon’s housing projects offered a fully serviced, air-conditioned alternative to rising damp, insects and mold. The 14-story Cathay Mansions, a luxurious residential hotel, had opened off the leafy streets of the French Concession in 1929. Six years later, it was joined by the even more opulent Grosvenor House. Separated by luxuriant gardens, the buildings gave long-term residents a choice of Old English or American Colonial-style suites, complete with claw-foot bathtubs and servants’ quarters. Thanks to Sassoon’s connections, Grosvenor House’s automatic elevators were powered by electricity from the supply stations of the nearby French Tramway Company.
While the décor of the Cathay Mansions, now a business hotel, has been effaced by an insensitive renovation, Grosvenor House has retained its charm. From a central tower in classic Art Deco, ribs of brick spread outward, like stylized bat wings. I paid a visit to a spacious model suite, whose high ceilings, parquet floors and curvaceous niches preserve the elegant simplicity of Jazz Age metropolitan style.
The Sassoon buildings were renamed the Jin Jiang Hotel in 1951, after a popular restaurant in Grosvenor House run by Dong Zhujun, the mistress of a Sichuan soldier. Taking over as director, she turned the complex into Shanghai’s most famous state guesthouse. Mao Zedong used the tunnels that link the complex to the former Cercle Sportif Français across the street to go swimming in the old French Club’s pool; in 1972, Richard Nixon stayed at Grosvenor House when he signed the Shanghai Communiqué, the first step in easing Sino-American relations. The complex of buildings, whose lobbies and gardens can be reached through a gate on Maoming Road South, remains an oasis of tranquillity in the heart of the city.
When Sassoon wasn’t sleeping in his penthouse at the Cathay Hotel or cruising the canals in his houseboat, he stayed at Eves, the country estate next to his favorite golf course (now the Shanghai Zoo). Currently owned by descendants of the Ningbo textile tycoon Li Shuxiong — the estate briefly went on the market in the ’90s for $15 million — Eves is hidden from view by a stone wall topped by razor wire. Another of Sassoon’s suburban retreats, the modestly scaled Rubicon Gardens, can still be seen from Hongqiao Road. Amid modern apartment buildings, its half-timbered walls and red-tiled roof, now overgrown with vines, suggest a Sleeping Beauty’s castle mysteriously marooned in an ultramodern megacity. It is currently uninhabited; outside, a sign warns trespassers to beware of dogs.
Other reminders of Sassoon’s influence, like the stone-and-brick Art Deco facade of the Cathay Theater, remain dotted throughout the city. At the height of his power, wags liked to point out that one rode a Sassoon-owned streetcar to a brothel rented from one of his holding companies, where one would drink beer supplied by his Union Brewery.
History brought a swift end to his empire. As fascism tore apart Europe, Shanghai’s status as a free port made it a magnet for refugees. Sassoon gave generously to the Russian Women’s Hostel, a milk fund and a committee that helped Ashkenazi refugees start new businesses, but as Shanghai buckled under occupation and civil war, he began to liquidate his Asian real estate holdings. At the Cathay Hotel, his penthouse suite would be commandeered by a Japanese officer, and foreigners were asked to assemble at the “Enemy Aliens Office” at Hamilton House, where they were issued red armbands, to be worn in public at all times, that identified them by nationality. In 1948, Sassoon left Shanghai for the last time; he would die 13 years later, in Nassau, still lamenting the grand old days in the city he’d loved the most.
There is no statue to Sir Victor Sassoon anywhere in China; nor, for obvious reasons, is one likely to be raised in the foreseeable future. The Peace Hotel, Sassoon’s grandest, meanwhile, though operated by Canada’s Fairmont Group, is owned by Jin Jiang Hotels. Even now, the state-owned group (founded by a woman who ran a Sichuan restaurant at Grosvenor House) is building the world’s tallest hotel in the upper levels of the Shanghai Tower, on the other side of the Huangpu River.
Fortunately, Sassoon built his own memorial, a fact that became evident when I visited one of his most impressive buildings.
Embankment House, whose east end rises like a ship’s prow against a bridge that could have been transported from the banks of the Seine, stretches a quarter of a mile along Suzhou Creek. Once the largest residential building in Asia, Embankment House was built to house Sassoon’s employees, though he later made its ground floor into a temporary shelter for Jewish refugees. After 1949, its best apartments were handed over to high-ranking Communist Party members. Since 2000, foreigners (among them Michelle Garnault, owner of the restaurant M on the Bund) have been trickling back, painstakingly renovating select suites.
Earlier in the day, I’d walked the diagonal wings of the Peace Hotel, verifying that they meet in a point at the Bund. Now, as I paced out the sinuous upper floor of Embankment House, walking through corridors hung with dripping clothes and redolent with the medicinal smell of boiling herbal tea, I was able to confirm a rumor I’d previously dismissed as wild invention. The building is indeed shaped like a stylized “S.”
Viewed from the Bund, and reading from left to right, the letters “V” and “S” are legible in the outlines of Sassoon’s two signature buildings. (The 110th floor of the Jin Jiang Hotel in the Shanghai Tower, when it opens next year, will offer the perfect bird’s-eye view.)
Which is why Sir Victor Sassoon needs no official monument in Shanghai. He made sure his initials were permanently monogrammed into the fabric of its streets.
In an additional sign that relations between China and North Korea are not what they used to be, Pyongyang has not formally invited the Chinese government to attend the commemoration of Kim Jong-il’s third death anniversary. According to a report in South Korea’sYonhap News based on a source with knowledge of the matter, no Chinese representative will be in attendance at this year’s ceremony, signaling growing distance between the two countries. “According to my knowledge, North Korea has not formally invited China to attend the third anniversary of the death of Kim Jong-il in Pyongyang,” notes Yonhap‘s diplomatic source. ”So, the Chinese government has not considered sending a delegation to the Dec. 17 ceremony in Pyongyang,” the source adds.
This report comes as the U.N. Security Council looks to add the issue of human rights abuses in North Korea to its agenda. Following a vote by the United Nations General Assembly’s human rights committee (HRC) in late November calling for North Korea’s leadership to be referred to the International Criminal Court for prosecution, North Korea has embarked on a “charm offensive.” The HRC’s vote is based on a February 2014 report by a U.N. Commission of Inquiry detailing a series of atrocities and human rights abuses in the country. North Korea’s continued efforts to alienate Beijing seem particularly odd given that China is a permanent member of the U.N. Security Council and would likely be willing to veto any referral of the North Korean case to the International Criminal Court (Russia would do the same).
As I wrote yesterday inThe Diplomat, a growing diplomatic split between Beijing and Pyongyang started becoming evident following North Korean leader Kim Jong-un’s decision in December 2013 to purge and execute his uncle and regime number two Jang Song-thaek. Jang was widely known as North Korea’s most experienced interlocutor with Beijing and his death signaled a broader move away from China. Earlier this year, reports emerged that North Korea was including anti-China slogans as part of its state propaganda. Additionally, as its relations with China became worse, Pyongyang expanded its diplomacy with a range of other countries including Japan, Russia, Indonesia, and even the United States.
Chinese state media have started condemning North Korea more overtly in recent months. In fact, just this week, a subsidiary publication of China’s state-run People’s Daily ran an editorial criticizing the state of human welfare in North Korea, noting that the country exclusively serves the interest of a small privileged elite at the expense of the masses. By the same token, some voices in the Chinese media caution outside observers not too read too closely into trends signaling a growing distance between China and North Korea. For example, one commentator in the China Daily noted yesterday that despite a few blows to China-North Korea relations, “China remains committed both to maintaining its traditional relationship with the DPRK and strengthening its cooperation with the Republic of Korea.”
A litmus test for the state of China-North Korea relations will be the upcoming U.N. Security Council debate on the state of human rights in North Korea. If China is indeed looking to sideline North Korea, it may refrain from vetoing an ICC referral altogether (letting the Russians bear the burden instead). If Beijing does end up speaking strongly in Pyongyang’s favor and exercises its veto, that would indicate that China-North Korea ties might be just fine. Note that Beijing has voted in favor of U.N. resolutions imposing economic and commercial sanctions Pyongyang in the past, but that was in the case of nuclear tests.
China’s Maritime Machinations: The Good, the Bad, and the Ugly
Beijing needs to improve its image on the South China Sea. A new white paper is a positive first step.
By Mark J. Valencia
December 10, 2014
On December 7, China’s Ministry of Foreign Affairs released a white paper on the “Matter of Jurisdiction in the South China Sea Arbitration Initiated by the Republic of the Philippines.” It is an articulation of China’s legal and political position regarding the issues surrounding its maritime disputes. The paper argues that the questions of territorial sovereignty and maritime delimitation are central to the case and that thearbitral tribunal has no jurisdiction over such issues. Moreover it alleges that the Philippines is abusing the compulsory dispute settlement procedures and that it has violated agreements with China to settle their disputes through direct negotiations.
Whether or not the paper satisfies China’s legal and political critics, it is a significant document that implicitly recognizes existing international law and addresses some of the concerns and criticisms of its neighbors. As such it confounds its more severe critics and moves the argument into the arena of international law – where the issues can be debated ad infinitum. In doing so it enhances China’s political standing in the region.
China has been taking a bashing by many analysts for its policies and actions in the maritime sphere. Indeed some Asian governments and their nationalistic analysts and media seem to be on a “blame and shame” campaign that demonizes China as an arrogant and dangerous bully. But like many countries, China’s maritime policies and behavior have been a mix of good and bad.
Unlike the United States, the home of some of the China-bashing, China has joined the 164 countries in ratifying the 1982 UN Convention on the Law of the Sea (UNCLOS). China has not abided by all its provisions but neither have many other states. UNCLOS is young, having come into force only in 1994, and adherence to it, its interpretation, and state practice are still evolving. Some key terms like “freedom of navigation,” “peaceful purposes,” “abuse of rights,” “due regard,” and “marine scientific research” are ambiguous and undefined in the Convention and thus have been interpreted differently by different countries. China has also begun to fulfill its duties under the Convention by promulgating and enforcing – the latter so far mostly in its near-shore waters – pollution, environmental protection and fisheries laws and regulations.
China has also joined the anti-piracy effort off Somalia. Despite allegations by the U.S. and others, China has not interfered with freedom of commercial navigation – and in fact has publicly endorsed the concept. How it is defined and whether it includes intrusive, provocative intelligence gathering or maritime interdiction are subsidiary issues to be negotiated.
China has reached a creative boundary agreement with Vietnam in the Gulf of Tonkin that includes a joint fisheries zone and with Japan in the East China Sea on sharing of fisheries, prior notification of marine scientific research in disputed waters and, at least in principle, joint development of parts of the contested area. It has reached a similar agreement with North Korea although the details are unknown. Moreover China has agreed to an ASEAN Declaration on Conduct of the Parties in the South China Sea (DOC) and is discussing with ASEAN a more formal Code of Conduct for activities there. And when China feels it needs to enforce its jurisdiction and regulations it uses mostly civilian vessels.
These “good” policies and actions have been tarnished by alleged “bad” policies and behavior that have been trumpeted by some media. Some of this criticism may be deserved but much is exaggerated or heavily biased. For example, China has taken actions that appear to be contrary to UNCLOS and to the DOC. So have many other states involved in the South China and East China Sea imbroglios and this article could well have been written about any one or more of them. But some government supported analysts and media have by and large chosen to ignore others’ negative policies and behavior such as unilateral activities in disputed areas. China, as an emerging great power, generates great expectations – and great fears. This accounts for much of the seemingly biased treatment.
China’s most problematic behavior for other countries and for regional peace and stability is its refusal to clarify its claims in the South China Sea in a manner all can understand. Its ambiguous claim there is perceived by some to be reminiscent of China’s imperial rule over much of the region. It also blocks any possibility of negotiating boundaries. China’s declaring and publishing closing lines around the Paracel Islands in the South China Sea and the Senkaku/Daioyu Islands in the East China Sea violates UNCLOS. And its claim to the Macclesfield Bank as an island borders on the ridiculous. The submerged bank at its shallowest is covered by some 30 feet of water. Of course China may claim it as part of its extended continental shelf but it has not yet done so.
China’s actions have at times been “ugly.” First and foremost, what is perceived as its unreasonable and even intimidating public relations tone and tenor on these issues has created frightened neighbors rather than friends. This white paper should be seen as an effort to replace implied and direct warnings and threats with an emphasis on reasonable arguments. There are many that China could make and it has been a puzzle that it has not done so. The paper may mark a transition from policy and actions seemingly reflecting an imperial attitude to those based on current international law, including UNCLOS. It specifies, clarifies and rationally defends its interpretations of various UNCLOS terms and provisions. Again, whether they hold up or not in the court of international opinion is another matter. Moreover it points out other claimants’ transgressions by emphasizing its positive policies and actions and contrasting them with the “bad” behavior of others.
China’s military exercises and expeditions in the South China Sea have not sent a politically positive message, Ditto its harassment and intimidation of other states’ vessels and aircraft with both civilian and military vessels and aircraft, including its skirmishes with Japan’s coast guard vessels and surveillance aircraft in Japan’s claimed territorial sea. Yes, China is only responding to what it sees as aggressive actions by Japan but these confrontations are dangerous and have alarmed all countries concerned – not just Japan. Finally China’s blatant violations of the DOC’s call for “self restraint” and “no inhabitation of uninhabited features,” with military exercises, unilateral activities in disputed areas and reclamation on disputed features are in your face and diplomatically ugly. Yes, other claimants have taken similar actions – but China should seize and hold the diplomatic high ground. This latest white paper is a step in that direction.
Unfortunately for China, some governments, analysts and media have chosen to ignore its good, emphasize its bad, and sensationalize its ugly. This is driven by a fundamental fear that China may be challenging the international system. Again, the white paper is a step towards alleviating that notion.
In short, China needs a charm offensive in the China seas, and this is a good beginning. This doesn’t mean that giving up its national territory, rights and claims, but Beijing does need to tone down of its rhetoric and actions. If it fails to do that, it risks playing right into regional – if not global – anti-China public policy strategies. That is in turn likely to fan nationalistic sentiments in China and produce negative reactions in other countries. A dynamic of reactive nationalism will enhance the possibility of hostilities, hot or cold.
In that context, let’s hope this white paper signals the beginning of a more positive Chinese foreign policy towards the region.
Mark J. Valencia is Adjunct Senior Scholar at the National Institute for South China Sea Studies in Hainan, China.
Image Credit: Yeonmi Park at the One Young World Summit
The Strange Tale of Yeonmi Park
A high-profile North Korean defector has harrowing stories to tell. But are they true?
By Mary Ann Jolley
December 10, 2014
When 21-year-old North Korean defector, Yeonmi Park, made her debut on the world stage in October this year with harrowing tales of life under the repressive North Korean regime and her perilous escape to freedom, she left audiences, human rights heavyweights, and journalists in tears – some literally sobbing.
Wearing a pink, traditional Korean dress with its high waist and voluminous skirt, Park stood before the lecternat the One Young World Summit in Dublin and in between long pauses, wiping tears from her eyes and holding her hand to her mouth as she composed herself, she told of being brainwashed; of seeing executions; of starving; of the slither of light in her darkness when she watched the Hollywood blockbuster Titanic, and had her mind opened to the outside world where love was possible; of having to watch her mother being raped; of burying her father on her own at just 14; and of threatening to kill herself rather than allow Mongolian soldiers to send her back to North Korea. She talked about following the stars to freedom and then ended with her signature sign off, “When I was crossing the Gobi desert, scared of dying, I thought nobody cares, but you have listened to my story. You have cared.”
You’d have to have been inhuman not to be moved. But – and you’re going to hear a lot of “buts” – was the story she told of her life in North Korea accurate? The more speeches and interviews I read, watch and hear Park give, the more I become aware of serious inconsistencies in her story that suggest it wasn’t. Whether this matters is up to the reader to decide, but my concern is if someone with such a high profile twists their story to fit the narrative we have come to expect from North Korean defectors, our perspective of the country could become dangerously skewed. We need to have a full and truthful picture of life in North Korea if we are to help those living under its abysmally cruel regime and those who try to flee.
I met Yeonmi Park a few months ago when I spent two weeks filming a story about her and her family for Australia’s SBS Dateline. We called the story, “Celebrity Defector.”
Back in South Korea where she now lives, Park is one of the stars of a television program featuring a cast of North Korean women. It’s called “Now On My Way To Meet You” and it daringly satirizes the Kim Dynasty. The women tell personal anecdotes about their lives in North Korea and their journey to the south. A number of the women were introduced to us as having been homeless and starving – the reason they fled.
Buried in the shows archives are some snapshots of Park’s childhood in North Korea that explain why she’s known on the show as the Paris Hilton of North Korea. They’re in sharp contrast to the story she’s now telling her international audience.
In one episode in early 2013 she appears with her mother. Family photographs are flashed on the screen and Park jokes, “That’s my Mum there. She’s beautiful right? To be honest, I’m not the Paris Hilton. My mum is the real Paris Hilton.”
Park then goes on to point out the top and chequered pants her mother is wearing “were all imported from Japan” and adds, “My mum even carried around a Chanel bag in North Korea,” to which the host responds incredulously, “There are Chanel bags in North Korea?” Park tells him there are and he then asks another woman if she’d classify Park’s family as “rich.” The woman answers, “Yes, that’s right.”
Park told us in her interview her father was a member of the Workers’ party, as were all the men in her family, and that she expected to study medicine at university and marry a man of the same ilk or higher. She described her father to us as “a very free man” who was critical of the regime. She said when reports of Kim Jong Il’s daily activities would come on the television and the announcer would say “because of his mercy we are having a good life” her father would sometimes say, “Oh shut up, turn off the TV.” Park says her mother would chastise him for saying such things in front of her and her sister and so she learnt early on it was dangerous to criticize the regime and to speak about her father’s disloyalty to others.
Park’s mother told us of a day when her husband pointed to the portraits of Kim Il Sung and Kim Jong Il hanging on their walls and said, “Our struggles are caused by these men.” She said she was terrified he would say something outside their house, but told us she knew a few people who shared her husband’s views. Other North Korean defectors from Hyesan, the northern city that borders China where Park and her family hail from, have also told me that after the great famine in the mid nineties, there was growing dissent, albeit, quiet and kept within immediate families.
Born in 1993, Park was a baby at the height of the famine. In July this year in Seoul, at an event organized by Liberty North Korea, a NGO that helps refugees, she told the audience she had no interest in learning about the Kims as a child at school, telling the audience, “that was nothing special for me because I have so much fun playing with my friends, like to go hiking, to the riverside, swimming…”
When Park was nine, which would have been around 2002, she says she saw her best friend’s mother executed at a stadium in Hyesan. But, according to several North Korean defectors from Hyesan who didn’t want to be identified for fear of reprisal, public executions only ever took place on the outskirts of the city, mostly at the airport, never in the stadium or streets, and there were none after 2000 – the last they recall was a mass execution of ten or eleven people in 1999.
Park’s account of the mother’s crime changes constantly, depending it seems on her audience. In Europe recently she claimed the woman was executed for watching a James Bond movie and sometimes, less specifically, a Hollywood movie. But in Hong Kong a few months ago, she told an audience the woman had been caught watching South Korean DVDs. Irish Independent journalist, Nicola Anderson, in a recent online videointerview with Park seemed confused and asked her, “It was a movie from South Korea wasn’t it?” Park’s response was, “No, Hollywood movie, James Bond.”
One of the world’s leading authorities on North Korea, is Andrei Lankov, a professor at Kookmin University in Seoul. Born in the Soviet Union, he was an exchange student in North Korea during the 1980s and has interviewed hundreds of defectors as part of his research. He says, “I am very, very skeptical whether watching a Western movie would lead to an execution. An arrest for such action is possible indeed, but still not very likely.”
He says the sorts of crimes that result in public execution are, “Murder, large-scale theft, especially of the government property, sometimes involvement with large-scale smuggling operations, including human trafficking.”
A 59-year-old woman from Hyesan who escaped in 2009 laughed when asked was anyone ever executed for watching an American movie. “How can you be executed for watching an American film? It sounds ridiculous even saying it. That has never happened before. I go to church with around 350 defectors and you ask any one of them and they will say exactly the same thing,” she told us over the phone from South Korea. Other defectors confirmed this. The Hyesan woman went on to say that people who were caught watching South Korean dramas were not executed, but were sentenced to three to seven years in a correctional center where the treatment was horrendous. “You don’t know when you will die,” she said.
In 2003, when she was ten, Park tells of how her world came crashing down when her father was arrested in Pyongyang for illegal trading. According to Park’s mother he’d begun trading illegally between China and North Korea in 1999 when Kim Jong Il stopped providing rations and ceased spying on businesses. His conviction meant other family members were also criminals and their position in society plummeted. “Then our destiny was clear, I was going to be a farmer. There’s no way I can get into university,” Park told us.
Park says her father was sentenced to 17 or 18 years in prison. Her mother told us he was initially sentenced to a year, but later it was increased to ten years. The discrepancies between the lengths of sentence are neither here nor there, but the family story does become murky and rather mercurial from here on.
Park’s mother told us prosecutors interrogated her on and off for about a year – sometimes at home in Hyesan and sometimes elsewhere, because she had worked in her husband’s trading business. But, in a recent BBC radio interview, Park claimed her mother was imprisoned for six months because she went to live back in her hometown after her husband was jailed and “because in North Korea there is no freedom of movement, not freedom of speech… it was against the law for the movement and that’s why she went to prison for half a year.”
When she spoke with us, Park told of how her and her sister, at just nine and eleven, were left to fend for themselves after their parents were jailed. “We couldn’t go to school… we just go down to the riverside and we have shower and wash our clothes there and then we go to the mountain to get the grass to eat,” she said. But, in the BBC radio interview, Park claimed her sister went to live at her uncle’s house and she went to live at her aunt’s house in the countryside for three years. She told of how while she was there she ate wild food “like grass or sometimes dragonflies… just anything that I could eat at that time.” Just two days later she told the Irish Independent, as she had told us, that she and her sister survived by finding food to eat and had to learn how to cook for themselves. When asked by the reporter, “Were there any adults that knew you were alone?” Park answered, “No, people were dying there, they don’t care. I saw lots of dead bodies on the street and nobody can take care of anybody.”
But go back through the archives of the South Korean television show, Now On My Way To Meet You, in which Park stars, and in the same episode referred to previously, the host of the show says to Park’s mother, “When we talk about stories of people eating grass or people struggling to eat, Yeju (Park’s pseudonym) says, ‘Oh that never happened…’ Why is that? Did Yeju never go through these experiences?
Park’s mother replies, “We were not to that extent. We were just never in a position where we were starving.”
The next part of their exchange is equally enlightening.
Park’s mother goes on to say, “So when Yeju started working for this program, I think she became more aware of the situation in North Korea.”
The host responds, “It sounds like Yeju learnt heaps on this program.”
And Park’s mother says, “She calls me before and after a show recording, asking me, ‘Am I really North Korean?’ She says she has no idea what the other girls on the show are talking about. She says she thinks everyone is lying on the show.”
Park also co-hosts a video podcast about North Korea for a for-profit libertarian organization in Seoul called theFreedom Factory. On the August 18 show, Casey Lartigue, her American co-host, asks Park to tell him about the tough times she experienced as a child in North Korea. In response, she makes no mention of eating grass and dragonflies, just that she could only afford two meals a day and compared to the others who lived on the streets and “eat everything” her hardships were “nothing” – “It was heartbreaking to see them,” she says.
In telling of her escape from North Korea, Park often says she crossed three or even four mountains during the night to get to the border and describes the pain she endured because her shoes had holes in them. However, Hyesan where Park was living is right on the river that divides the two countries and there are no mountains to cross.
Park told us and a libertarian radio station in San Francisco earlier this year that four days after her older sister fled the country, she and her mother and father crossed to China together. Her exact words in the radio interview were, “I escaped with my mum and father – the three of us.” In her interview with us she recalled the feeling she had as she crossed the river, “I had to survive. I had to really live. And with that thought I just run, like really faster and my mum was behind and my father was there and then we all escape. And there were cars to get us because of the connections [her father’s business connections] with Chinese people and then we went to China directly.”
But at the Young One World Summit in Dublin, Park told the appalling tale of her and her mother escaping alone and her watching her mother being raped by a Chinese broker in order to protect her from the same fate.
Then there are the facts surrounding her father’s burial in China. Park told us that at just fourteen, fearing being caught by Chinese authorities, she had to dispose of her father’s body in the middle of the night. “We had to move his body, everybody’s sleeping and then I buried him, like on midnight, by myself and I was sitting there, it was cold and there was nobody,” she explained as she wept. Her mother added more detail. “We paid two people to help carry his body up the mountain. Yeonmi went with them. It was so windy that day and we were so afraid that someone would see them,” she said.
But Park has told other reporters her father was cremated and she had to dispose of the ashes on her own. And there’s another variation: According to sources in the North Korean community, a few years ago Park told them she was unable to take her father’s body to a proper crematorium and so her relatives (her father has relatives in China) helped her to cremate his body and they all went to a mountain together to bury him.
And finally, in an article in the Daily Beast Park claimed when she and her mother were detained in a detention center in Mongolia she was forced to remove all her clothes every day for months. “I was a little girl and felt so ashamed. I kept thinking, ‘Why do these people have the privilege to control me like this? I’m a human too, but I wasn’t treated like one’,” she’s quoted as saying about her experience when she was fifteen years old.
She had not mentioned this in her interview with us and according to sources who know her well, she spent one and a half months in detention in Mongolia and complained to them about having to work in the fields and clean the center, but made no mention of having been subjected to daily strippings. Professor Shi-eun Yu, who worked as a counselor at the South Korean processing center for North Korean refugees, Hanawon, for two years in the early 2000s, and Professor Kim Hyun-ah who worked there for five years in the mid 2000s both told us they had never heard of anyone being stripped naked in a detention center in Mongolia. According to Yu, “In the past, the South Korean government has sent counselors over to Mongolia to help North Korean defectors in detention… so how can defectors be stripped naked everyday? It would cause them more psychological distress. It’s not possible,” she said. Kim said that compared to other countries like Thailand and Russia, Mongolia is very supportive towards North Korean defectors and that it’s highly unlikely that defectors would have been subjected to months of stripping.
So what to make of all this? Are the inconsistencies in Park’s story merely memory lapses or lost in translation moments or is there something else at play?
Yeonmi Park is backed by the American Libertarian non-profit organization, Atlas Foundation. She’s one of itsYoung Voices and has recently started her own foundation based in New York – you can donate online through PayPal, but what exactly your money will be used for is not clear. What is clear though, is that “Yeonmi is travelling and speaking in 2014” and “is available for international speeches.”
“I want the world to know my story so they will know and remember the story of North Korea” the foundation’s website reads.
But can the world rely on the memory of a 21 year old who left North Korea when she was thirteen? And what are the consequences if her memory has failed her and the picture she’s presenting of her life in North Korea and her escape to South Korea is not accurate?
The North Korean defectors interviewed for this article didn’t want to be identified because they feared for the safety of their families still living under the dictatorship or being ostracized for criticizing one of their own, but they do want their voices heard. Their overriding concern, the detrimental impact exaggeration and fabrication could have on the North Korean refugee cause and their own future opportunities. They worry that Park’s inconsistencies and flawed accounts will make the world start to doubt their stories. They want truth to reign and believe, as Yeonmi Park said on BBC radio, “Lies cannot last forever.”
Mary Ann Jolley is an Australian broadcast journalist who has worked for the Australian Broadcasting Corporation’s international affairs program, Foreign Correspondent, and its investigative program, Four Corners, and more recently for the Special Broadcasting Services’ international affairs program, Dateline. Additional reporting and research assistance from Susan Cheong, one of the producers of SBS Dateline’s “Celebrity Defector.”
According to Chinese state media, Xi Jinping’s anti-corruption efforts are no longer a campaign but a “protracted war.” The declaration came in a Xinhua“yearender” outlining the progress made so far on weeding out corruption.
Xinhua used the recent expulsion of Zhou Yongkang from the Chinese Communist Party as proof of an intensified anti-corruption push. But the piece is quick to point out that the anti-corruption drive “has moved beyond setting warning examples to deter others.” Instead, the scale of the campaign and the new focus on legal reform to institutionalize anti-corruption efforts “indicate that the country intends to fight a protracted war.”
The Xinhua piece is not the first time we’ve heard martial metaphors used to describe the anti-corruption campaign. Back in August, Chinese media quoted unusually frank remarks by Xi Jinping, reportedly made during a closed-door Politburo meeting. “The two armies of corruption and anti-corruption are at a stalemate,” Xi was quoted as saying. He added, “In my struggle against corruption, I don’t care about life or death, or ruining my reputation.”
The comment about “ruining” his reputation through anti-corruption efforts is on point. After only two years in power, Xi has closely tied his legacy to the war on corruption. Success or failure on this front will have a huge impact on how Xi’s time in office is ultimately evaluated, by outside analysts and (more importantly) by the Chinese people.
From his heavy emphasis on the war against corruption, it’s clear that Xi truly does believe this is an existential issue for the CCP itself. As Mu Chunshan pointed out in a recent feature for The Diplomat, Xi is a scion of Party elites. Accordingly, he has a strong sense that safeguarding CCP rule is both his responsibility and his destiny – and Xi clearly feels that dealing with corruption is the key to ensuring CCP legitimacy.
As the anti-corruption campaign heats up, there are new signs that other Party elites are on board. Earlier reports said that Xi’s predecessors, Jiang Zemin and Hu Jintao, were pressuring him to scale back the campaign. In a stark contrast, the latest reports suggest both Jiang and Hu were fully on board with the high-profile takedowns of Zhou Yongkang, Xu Caihou, and Gu Junshan. However, Xinhua’s use of the phrase “protracted war” hearkens back to Xi’s comment about two “armies” at a stalemate within the Party itself. Even if top-level officials are on board, there will be immense resistance from corrupt officials themselves, particularly at the local level where edicts from on-high have been notoriously tricky to enforce.
According to Xinhua, anti-corruption efforts have resulted in 50 investigations into officials at the provincial level or above – so-called “tigers.” The “flies” have been even more numerous, with 84,000 officials disciplined for various violations in the first six months of 2014. And the campaign is far from over, particularly within the military ranks. In the past week, Chinese media outlet Caixin has reported the arrest of two senior military officials: Major General Dai Weimin and Major General Gao Xiaoyan.
Despite these efforts, many Western analysts argue that China cannot truly solve its corruption problem without instituting key political reforms that will enable public supervision of government officials – including a free press and independent courts. While there’s been no movement on the former, this year’s high-profile emphasis on the “rule of law” could help institutionalize anti-corruption procedures by strengthening the legal mechanisms required to investigate and prosecute officials.
There is no guarantee that the anti-corruption campaign will succeed. Xinhua’s description of the effort as a “protracted war” rightly suggests that it will take years before we can even begin to judge whether Xi’s drive to uproot corruption has had a lasting impact. Success or failure in the war on corruption will be a crucial question for the CCP’s continued rule – rampant corruption threatens Party legitimacy, both directly and indirectly, by hampering larger efforts at necessary economic reforms. Xi Jinping is well aware of this; the question is whether he can bring a massive, entrenched system to heel in a few short years.
There are some important parallels here to the challenges that Australia is facing in its own force structure and military posture, particularly in relation to our interaction with the United States. Britain’s key problem, as it finally comes to terms with the limits of its military capability, is determining where it can make the most difference, not only in its own right, but in support of the alliance with the United States.
The long-term implications of America’s “pivot” to the Pacific at a time when the US military machine is under increasing fiscal pressure are inescapable. Not only will Europe have to do without the levels of American military presence that it has grown accustomed to over nearly seventy years, but the United Kingdom in particular must decide where it can contribute in ways that are significant in military effects, rather than “flags in the sand.” The British armed forces have a lot of capability, but—in relative terms—much less than in previous decades, as is apparently becoming clear with the current RAF operations in the Middle East. Choices must be made and it’s logical that those be for capabilities which the remainder of Western European states lack and for deployments for which they have little inclination.
Britain has long claimed global interests and the intent to maintain global military capabilities. No British government, particularly one with the Conservatives as the major partner within the coalition, will openly depart from those ambitions in the current complex strategic environment. Indeed, as shown with East Timor in 1999, the 2013 Philippine typhoon and, most recently, the search for MH 370, the British will always try to do what they can if there are urgent needs in the Indo-Pacific. But that’s not the same as a commitment to a permanent presence, or to reinforcing a presence for indefinite periods when required.
By comparison, the UK Defense Secretary’s declaration that Britain “will now be based again in the Gulf for the long term” was unequivocal. There’s real sense in that. A UK maritime task group can swing between the Persian Gulf and the Mediterranean relatively quickly, while air and land forces have extensive experience of deploying into the Middle East. With its long term interests in the Middle East—as well as the close interconnection of events there with the situation in the Near East and Europe—Britain may well now have determined that the Persian Gulf and the north-western Indian Ocean represent the geographic limits of what can best be termed the ‘beat’ of the British armed forces. That’s likely to be particularly true for the Royal Navy, centred as it will be on the two new Queen Elizabeth class carriers with the F-35B, the Type 45 air-defense ships and the seven Astute-class nuclear submarines.
This is a logical approach for the British, one which has the potential to reduce the American burden by freeing up carrier battle groups and other forces for operations in the Indo-Pacific—and for that reason welcome to Washington. It’s also one which, although the British face their own difficult decisions in their next Strategic Defense and Security Review in 2015, has the merit of being affordable in the long term. We need to be thinking in similar ways in Australia.
James Goldrick is a fellow of the RAN’s Sea Power Centre and an adjunct professor at UNSW Canberra, Australian Defense Force Academy. This piece first appeared in ASPI’s The Strategist here.
Hidden deep in alleyways on the outskirts of Beijing is Dong Xiao Kou village, also known as China’s “scrap village”.
From plastic to metal, villagers collect many different kinds of reusable material from rubbish in all corners of the city.
The scrap trade began to flourish in Dong Xiao Kou almost two decades ago.
Most of the collectors are city scavengers carrying out their livelihood on tricycles. Those who are better-off drive big trucks to bring in their scrap,
Most villagers in Dong Xiao Kou are from Henan, China’s most populous and one of its poorest provinces. Many made good money in Beijing a few years ago but business has been bleak since then.
Some villagers expanded their yards to hold more scrap, built better houses and bought cars. Others still live in makeshift homes made of tin and clip wood.
The government started a project to vacate Dong Xiao Kou this summer to make space for cleaner streets and more properties.
Many factories processing scrap were moved but other villagers in the same trade are still waiting to hear when they will be asked to relocate.
Many still haven’t made plans to cope. Ms Liu, 43, a villager from Henan, tells us her story.
“My husband is a scrap collector. We live here in Dong Xiao Kou village because it’s much cheaper than the city. Business is not so good now, and everything is becoming more expensive.
“I have two children. The older one is 19 years old. She quit high school and came to Beijing, because she always gets car sick during the long commute. Now she works for a nearby Carrefour Supermarket in Beijing.
“I’m not happy about my family’s current situation. We are too poor. We don’t even have a furnace. It’s ice cold in the house but we don’t have any other choice. We have to be here to make a living.”
Another villager Mr Yan, 50, comes from Hebei province.
“I came to Beijing in the 90s, and my job now is to compress the metal scrap into cubes.”
“I am here to make money, but sometimes I don’t make enough to smoke cigarettes. I used to smoke three packs a day. I have two children. They are both grown up now, but I don’t want to retire yet.
“You know people from the countryside like me can’t get used to being idle, so I will keep working here.”
Mr Tang, another villager, said: “I came to Beijing more than 10 years ago, and I started my metal recycling business three years ago. The price of metal keeps falling.”
“Look, I don’t even have much going on here. The toughest thing about living here is that I know the moment I stop working, my family won’t have food on the table.
“If they decide to move this village, I will go back to my hometown and raise my children there.”
Zhang Bang Long, a villager from Shandong province, told us:
“I first came to Beijing when I was 17 and now I’m 35 years old. I run a wood business. When I first came here, it was hard to find my place in this village. Sometimes the local mafia would tear away my residence permit to stop me from stealing their business.
“If this village has to be moved, I will find another space to do my business. It’s better than farming back home.
“Working in Beijing is easier. I’ve got my own truck and my own car. I can make tens of thousands of yuan a year and that’s really not so bad.”
Henan villager Ms Wang, 55, said: “All of my grandchildren are born here in Beijing. In 2007 and 2008, we were doing very well, because the economy was strong. Now it’s pretty bad. We are all just making ends meet here.
Beijing never felt like home. Today we live in one place, and tomorrow we have to move. To get my grandchildren to school, we need this and that certificate. It’s a lot of trouble.
After a few more years, I’m going back to my hometown and raise my grandchildren there.”
Mr Wei, a 29-year-old villager from Hebei, said: “I’m a cleaner. I clean the garbage here every day.
“I didn’t go into the scrap trade because when I came here, no one showed me the ropes. It doesn’t matter whether I like my job or not, or where I live. It’s all the same.
“I’m not dating anyone here. It’s hard. I want to make some money, and meet someone back home.
“Ultimately, I need to go home as well because if I have any children, they won’t be able to go to school here. There are too many talented people here. I can’t stay here forever.”
Ms Zhou, a villager from Henan:
“I’m in the plastics trade. My children go to school in my hometown because they can’t get the permit to be educated here.
“I have to stay here, because my little business keeps us going. If I go back to my hometown, my children cannot be fed.
“The toughest part of my job is endless chores to do every day from dawn to dusk. It’s not easy.”
Now Jinshuai Model Crafts, based in Zhanjiang City, Jiashan District, isdisplaying models of putative hulls 17, 18, and 19 on its website and catalogs. These models provide clues to a vital question: what direction will China’s domestic aircraft carrier design and production take? In short, the models suggest: China will progress as quickly as possible to a large nuclear-powered design, similar to a Nimitz– or Ford-class hull with Chinese characteristics, and let deck aviation capabilities grow into the gargantuan new platform as they become able to do so.
Why take the time to analyze these depictions seriously? First, while other models have appeared, to this author’s knowledge this is the first representation of hulls 17-19. The idea of a trio is particularly interesting, because various Chinese sources have described CV16 as merely a training carrier, while stating that China needs at least three fully-functional aircraft carriers. According to People’s Liberation Army (PLA) Academy of Military Science Research Fellow Du Wenlong, this is so that “one is always available for operational missions, while the second is used for training and the third is resupplied and retrofitted.” Second, Jinshuai Model Crafts purports to be a cut above the rest. Located near the South Sea Fleet Headquarters in Zhanjiang, it produces a wide range of meticulously detailed models of PLA Navy (PLAN) vessels. The company claims to have produced models given as official gifts by PLA attachés, for fleet visits, and in conjunction with naval diplomacy in the Gulf of Aden—something that would seem to require a track record of at least somewhat passable plausibility. Finally, this company would seem to have an economic incentive to maximize sales by offering the most accurate and forward-looking items possible. It likely has access to contacts and information to help ensure that its representations of platforms are as realistic as possible, particularly in their broader parameters. Where the model builder may be “winging it” a bit with these aircraft carrier models concerns associated weapons systems, sensors, and aircraft. Here, their description is less than official and appears to be influenced by Internet speculation.
Explicit caveat up front: Unless otherwise stated, specifications for weapons and sensors listed below are not from the models themselves, but from nameplates accompanying models of CV17 and CV18. Nameplate data regarding overall carrier dimensions and performance parameters are plausible, but nameplate data regarding weapons and sensors are often inconsistent with what is depicted on the model. These nameplate data are nevertheless included here to offer grist for further discussion and analysis. That is the larger purpose of this writing: not to offer conclusions that go beyond the limited and sometimes contradictory paraphernalia marketed by Jinshuai Model Crafts thus far, but rather to stimulate deeper examination of China’s ongoing development of a highly complex, symbolic system of systems for the seas and air above them.
Like Liaoning, CV17 also has a ski jump. The nameplate accompanying the model cites a length of 315 m, width of 75 m, draft of 9 m, and cruising speed of 31 knots. CV17 is credited with a standard displacement of 65,000 tons and a full displacement of 80,000 tons. These figures seem plausible.
Rather than representing a mere Chinese copy of the Project 11437 Ul’yanovsk-class-derived carrier, however, CV17’s smokestack shape and exhaust stack arrangement suggests a transition to all gas turbines, or even a diesel/gas turbine combination, instead of nuclear reactors and steam turbines. In another sign of intended design improvements, the model boasts a hydrodynamic projected bulbous bow.
One curiosity in the CV17 model is its incorporation of both a ski-jump and two catapults. While certainly odd from a U.S. perspective, this is not completely outlandish and even makes some sense for China’s “narrow-the-gap-from-behind-” or, ideally, “catch up-” style development of carrier operations. Such a setup could offer a platform for pilots to start working on catapult launches before transitioning to a full-up flattop carrier. Additionally, the relative position of indicated catapult tracks (dark red lines) and related blast deflectors really do not make sense. This might be attributed to a lack of knowledge on the model builder’s part.
Far less clear are the associated systems. Roughly 70 carrier-based aircraft are posited: J-15 fighters, Ka-28 airborne early warning (AEW) helicopters, Z-9 anti-submarine warfare (ASW) utility helicopters, Z-8 transport helicopters, and Ka-31 early warning helicopters. The following items of weaponry are listed: 4 sets of 24 Red Flag [HQ]-16 anti-aircraft missiles, the FL12000 short-range air defense missile-artillery close-in air defense system (sea-based Red Flag [HQ]-10 and -1130), four 30 mm automatic guns, three 12-tube anti-submarine, anti-torpedo launchers, and seven chaff rocket launchers. The exact weapons fit needs to be taken with a grain of salt, but a multi-layer air defense fit is consistent with the Project 11437 design. Also, it is puzzling to see weapons with export designator names mixed in, though it is not inconceivable that China could use them with the indigenous designation being unknown.
It is with the CV18 model that things really get interesting. Advertised as an “indigenously produced nuclear-powered aircraft carrier,” the catapult-equipped flattop closely resembles the U.S. Ford class in configuration, with a similar hull layout and the island far back. Yet there are also echoes of the Nimitz class, familiar to me through my nine days delivering lectures and briefings aboard the flagship USS Nimitz (CVN 68) in April 2013. As with the CV17 model, the positions of the blast deflectors and catapult positions on CV18 can be attributed to a lack of knowledge by the model builder.
This hull is 330 m long and 76 m wide (no draft is given). Standard displacement is 88,000 tons, full displacement is 101,800 tons. All these parameters are similar to those Jane’s gives for both Nimitz and Ford. Nimitz carriers are 332.9 m long and 76.8 m wide, Ford carriers 332.8 m long and 78.0 m wide; the actual deck dimensions are similar. Broadly speaking, CV18’s listed speed, hull form, and reactors are a bit closer to Nimitz’s, while the exterior depicted in the model is a closer to that of the Ford-class. Given China’s penchant for foreign technology collection, copying, incorporation, and multi-source emulation, this may well not be coincidental.
Here is how the model shop imagines China will exploit atomic power and move from CVs to CVNs: Two pressurized water reactors will provide nuclear propulsion. Each reactor drives two sets of main turbines, for a total of four turbines, which connect with four shafts delivering 260,000 hp. One turbine per shaft is conservative, but consistent with U.S. practice.
Total power is 194 megawatts (MW)—presumably not thermal output, but power after all inefficiencies are accounted for; cruising speed 33 knots. This implies the ability to cruise as fast as Nimitz on 15MW less power. This seems optimistic, though theoretically plausible, given the model’s somewhat-lower-drag bow. Puzzlingly, however, whereas the Ford’s bow represents the latest in civilian hydrodynamics—not just bulbous and projecting, but also tipping up—CV18’s bow more closely resembles Liaoning (Project 11436)’s style than CV17’s.
There are also four sets of emergency diesel engines for a total of 8MW. China has considerable experience with low-RPM diesels through its civilian merchant ship production. Implementing this in practice would make CV18-19 the first hulls of only the second class in the world to have both a nuclear power and a conventional propulsion plant arrangement, the existing example being the Russian Kirov class.
In a sign that the model shop may be trying to fill blank space, and orders, CV18’s ~70 carrier-based aircraft are identical to CV17’s, with the following exceptions. Attack UAVs are added, while Ka-31 early warning helicopters are eliminated, presumably because more-advanced JZY-01 airborne warning and control system (AWACs) aircraft can take off from the flat deck. On the actual CV18 model itself, the relevant aircraft on the flight deck has two engines and is consistent with the JZY-01. This aircraft might in theory be outfitted with a smaller variant of the KJ-2000’s active electronically scanned array (AESA) radar.
Weaponry listed on the CV18 model’s nameplate is similar to that on CV17’s: 6 sets of 30 mm single-tube artillery, four sets of HHQ-10 point defense missiles, and—somewhat speculatively—four sets of laser anti-missile systems. However, only two sets of HHQ-10 are actually seen on the model, on the forward sponsons. The model clearly shows the same Gatling gun installation as onLiaoning with four H/PJ-14 or the Type 1130. Electronic equipment listed on the nameplate includes a “battle of chaff induced injection device” and a SLQ29 radar warning and jamming system. The last is puzzling, as it is an old U.S. Cold War era system. Perhaps the model shop’s designers needed to add one last detail in time for holiday orders?
As for the model of CV19, it appears identical to that of CV18. The goal seems to be to develop a “Ford class with Chinese characteristics,” and then build additional hull(s).
Weighing the Evidence
There are problems with these models—and particularly their nameplates, to be sure, but the models do suggest a development path. A design concept appears to be gelling that incorporates three elevators, point defenses, and moving the island aft. Jinshuai Model Crafts’ rendition of CV17 resembles a plausible embodiment of a near-term Chinese effort to surpass the Project 11436 class with indigenous effort, particularly with regard to the propulsion plant and bow shape. CV18 and 19, by contrast, appear to be aspirational: an extrapolation based on what China likely wants to do in the future. To paraphrase paramount leader Xi Jinping, this is the “Chinese carrier dream.” And in today’s China, such dreams sell both Party politics and ship models. But even Chinese possession of specific carrier plans is no guarantee of success. Depending on how CV17 actually proceeds and what Chinese naval architects and shipbuilders learn in the process, CV18 and CV19 could end up quite different in reality—different by design.
Developing a Sino-Ford class would require a great leap forward for elements of Chinese naval architecture and engineering. Bending metal and developing the characteristic hull should be well within the means of China’s shipbuilding industry, but reactors are a different story altogether. While it has made tremendous advances in recent years, and has closed the gap with Russia in key areas, China remains behind in propulsion, metallurgy, and certain specialized physical manufacturing processes. Beijing can import French and German diesels and Ukrainian gas turbines for its navy, but must build naval nuclear reactors on its own. This imposes serious limitations. Most civilian technology is not directly applicable: land-based power plant cores are far too large for confined ship spaces. Case in point: the high-temperature gas-cooled reactors (HTGCR) on which Chinese experts have conducted substantial research require far greater volume for a given power rating than water-based reactors. Additionally, highly-enriched fuel is essential for long core life.
To power such a large ship, at the listed maximum speed, with only two reactors requires an increase in power by about a factor of five or six—a non-trivial increase given that nuclear power plants on surface ships remain volume-limited. Still buying foreign designs for its civilian power sector, China has not yet developed, much less demonstrated, naval nuclear reactors of the required size, density, and overall capability.
The Way Ahead?
If the model shop’s projections are—broadly—reasonable in aggregate, how might we expect China to build and develop these carriers?
Given its status as an improved version of CV16, CV17 would likely be produced in Dalian to capitalize on local experience and production synergies accumulated over several years ofVaryag’s extensive rebuilding into Liaoning. The timetable reported by a local Liaoning Province official suggests that production of CV17 is already underway. Of course, similar words from a PLAN official or shipyard manager would be more demonstrably authoritative. If CV17 production is indeed already underway in Dalian, grand block sections could be under development surreptitiously, but something too large to cover should soon become visible to foreign satellites. As of October 2014, however, Google Earth showed only merchant vessels in Dalian’s graving docks. In addition, nothing has appeared in any of the graving docks at Shanghai’s Changxing Island Shipyard. The facility has made a prototype cross-section similar in configuration to one seen from a Queen Elizabeth-class carrier. But the prototype hull section remains standing in the storage area in front of one of the docks. No additional work appears to have been done on it. Here, the shipyard, currently-out-of-place with respect to carrier production, appears intent to prove that it is capable too. Perhaps that is yet another sign that things will soon become more interesting for foreign observers of Dalian’s naval shipyard production.
A larger question concerns where the Sino-Ford class would be constructed. Given its cutting-edge new-build facilities and ample space for dedicated military production (in contrast to old, cramped Dalian), Shanghai’s Changxing Island looks promising. But wherever future Chinese nuclear-powered carrier(s) are constructed, their production will represent the first manufacturing of nuclear-powered vessels outside the Huludao submarine production facility on the Yellow Sea. Even if engineers from Huludao are dispatched to offer their expertise as Johnny Appleseeds of Chinese naval nuclear development, this will be a challenging new endeavor for China.
What This Might Mean
Beijing’s path to indigenous carrier development appears to be narrowing and firming up. The desired destination is clearer, even as the journey remains arduous, and the timeline and milestones uncertain. In its typical pattern of emulating and drawing on foreign designs, China appears to be going for the gold standard—the U.S. standard, that is—as quickly as reasonably possible. Top-tier must-haves appear to include American-size hulls, nuclear propulsion, catapults, and advanced wire arrestor gear. Developing new hulls and nuclear propulsion is the first step, improved aircraft can be added in later. As a self-styled great sea power, Beijing is determined to be second to none, even if much work remains to be done to truly get there.
In this regard, a U.S. naval aviator and scholar sounds a note of caution. “It is fascinating that China would throw resources at such ships,” Capt. Robert Rubel (USN-Ret.), former Dean of the Center for Naval Warfare Studies, U.S. Naval War College, told the author. “I know China can build ships more cheaply than the United States can, but such ships will nevertheless be extremely expensive up front, and even more so over time. Without a global naval strategy of exercising command of the sea like the United States has had, the large nuclear aircraft carrier does not have the same meaning to China as ours do to us. These ships may have occasional operational utility in responding to disasters and maybe intimidating to regional neighbors with which China has island and maritime claims disputes, but otherwise they seem to be an attempt to create prestige by cutting metal.”
With respect to these larger questions, the models themselves obviously cannot provide conclusive answers. Chinese shipbuilders and strategists alike have much to contemplate. Only time, and more authoritative data sources, will tell what their options are, and how they choose to exercise them. In the meantime, however, there’s at least one crystal-clear take away: if you haven’t finished your holiday shopping yet, click here immediately to peruse Jinshuai Model Crafts’ many offerings. Such commercial dynamism, which the Soviet Union never enjoyed in any form, may ultimately offer greater indications of China’s ability to support and sustain the production and deployment of new aircraft carriers and other mighty ships upon the sea than any word Admiral of the Fleet of the Soviet Union Sergey Georgiyevich Gorshkov could ever put to paper.
And that is why it’s worth at least briefly pondering the latest in injection molding from a civilian shop in southern China.
Editor’s Note: The above is being republished with the author’s consent. You can read the original version with additional photos of the models here.
The yellow umbrellas are being furled and many—though not yet all—of Hong Kong’s youthful protestors are drifting home or back to school as police pressure increases and public support declines. Their two-month seizure of selected city streets, designed to inject more democracy into the politics of this affluent Chinese city, is winding down with no clear gains. Instead, supine Hong Kong officials have chosen to obey their Beijing masters rather than address concerns of the people they supposedly represent, and have refused to negotiate. This has let them outlast most of the demonstrators, who rallied with great energy, but not much strategy to bring about electoral change. Yet this has done little more than make it harder for Hong Kong to have an administration that is both effective and reasonably popular.
But if winners are hard to find, there is no shortage of losers.
The pan-democratic forces, a loose and leaderless coalition of middle-aged professionals, pro-democracy politicians and students with shifting goals, are the immediate losers; so far, there are no reliable signs that any concessions will be forthcoming. They rallied against a Beijing decision that in 2017 would give Hong Kong its first city-wide election under universal suffrage rules—but only if the central Chinese government can first decide who gets on the ballot. The demonstration was originally organized by veteran politicians under the title “Occupy Central with Love and Peace” as a limited takeover of the main business district to symbolize a public demand for greater local autonomy, as China had promised years ago. Then it was to disperse, perhaps to be revived later if no serious political talks ensued. But police soon responded unwisely with tear gas and pepper spray, causing thousands of angry students—who also have their own social and economic grievances—to flock to the site. Suddenly, the protests grew larger and lasted longer, with yellow umbrellas to protect against tear gas and pepper spray as their main symbol.
But the demonstrations have brought no political change and the general public, though largely favoring a more democratic system, has grown weary of having daily life disrupted. Polls show that most people want the students to disperse, and three key organizers of the original Occupy Central movement have told them to do just that. Some student leaders have said the same, and the remaining demonstrators may do so within days. The best-known student organizer—Joshua Wong—called off his hunger strike after five days.
On Thursday, Hong Kong police—responding to a court order—plan to clear one major site of all demonstrators so a local bus company can resume service. As many as 3,000 officers may be involved; many protesters have already evacuated the area, but a minority may resist with force.
Yet the Hong Kong government has scored no real victory. Led by anunpopular and distrusted chief executive, C.Y. Leung, it has clearly aligned itself with Communist Party officials in Beijing. For example, it called last year for public “consultation” about how Hong Kong should choose officeholders, and got numerous appeals for greater autonomy. But when it summarized these views for Beijing—a required process meant in theory to help shape the center’s policy—it played down calls for increased autonomy and instead forwarded a deliberately misleading account that helped justify China’s decision to control the nominating system. Since then, Chief Executive Leung and his seldom-seen top aides have been widely criticized for failing to exert any serious leadership during what has become Hong Kong’s greatest political crisis in years. Indeed, Leung has spent much time in Beijing and abroad, while handing off containment to the city’s overworked and stressed police force (which, to its credit, has often acted with much restraint).
All this has earned the Leung administration even greater public disdain and could bring governance problems later. It has strengthened a prior perception that the government worries less about desires of Hong Kong’s public than about demands of Beijing leaders and the wishes of local tycoons, who generally oppose free elections. (They’re afraid a more populist government would raise taxes and that supporting pro-democrats could harm their mainland investments.) In fact, Leung has stated publicly that giving poor people a greater policy voice via the ballot would be bad for business, while Chinese president Xi Jinping—soon after the protests began—summoned seventy leading Hong Kong businessmen to assure them that preserving their wealth remained a high Communist Party priority.
Hong Kong remains a place of great affluence, with one of the world’s highest per capita income levels. It’s a city of seven million people that punches far above its weight in global financial and economic circles. But it also has, by United Nations calculation, one of sharpest rich-poor divides, with 20 percent of the population living below the official (and quite low) poverty line. Over the past decade, the economy has grown 50 percent, but the median household income has risen only 10 percent. Although Hong Kong is repeatedly cited as one of the world’s best places for doing business, much of the local economy is dominated by cartels with allegations that bid-rigging, price-fixing and market-sharing are common. The property development, construction, supermarket and energy sectors are often accused of such restrictive practices, and efforts to pass effective market regulation have made little progress.
This feeds the youthful protests. Not only do students and recent graduates fear that Beijing wants to restrict the civic liberties that Hong Kong (and no mainland city) enjoys, they also believe this limits their career possibilities. Many contend that the best jobs are dominated by friends and relatives of the business establishment, or go to mainlanders who bring useful connections to the ruling party and government. According to academic researchers, this belief pushes many young people toward more radical politics and has adverse, long-term implications for social stability.
If Hong Kong’s pro-democracy politicians, youth and government haven’t won much, neither has Beijing. There’s no doubt that Chinese leaders can impose their will on Hong Kong, no matter what the locals prefer. President Xi Jinping has made abundantly clear that strengthening Communist Party rule has been his highest priority, and recalcitrant citizens—Tibetans, Uyghurs, political dissenters, whoever—will be crushed if they take their complaints public. He is determined that China will not become a nation in which the people choose their leaders, but will remain one where the leaders choose themselves.
Thus, letting Hong Kong voters select a government head who lacks prior party approval would set a negative example for the rest of China. Others might want to do the same, and already the influence of Hong Kong’s freer society seeps across the border more than Communist leaders find comfortable. But denying Hong Kong the “high degree of autonomy” promised decades ago will further increase the public’s reluctance to follow Beijing’s advice, such as on how to teach Chinese history or politicize its judiciary. Pro-Beijing politicians in Hong Kong concede most people already distrust the Communist Party and this will only increase their wariness. Having to rule a resentful Hong Kong populace, even if indirectly, cannot be the party’s desire.
But the immediate main setback concerns a territory Beijing considers much more central—Taiwan.
Hong Kong, since the 1997 handover of the former British colony to China, has been governed by something called “One Country, Two Systems.” This makes it a permanent part of China, with Beijing responsible for defense and foreign affairs, but also allows “Hong Kong people” to administer the territory with a “high degree of autonomy,” including electing local officials. But this concept was originally designed for Taiwan, which Beijing considers a wayward province that should return to the fold. The suspicious Taiwanese have never shown much interest in applying it, but in recent years—under leadership of the Kuomintang (KMT) Party—Taiwan’s relations with the mainland have grown much closer. Speculation had grown that the island province might be drifting toward some version of “One Country, Two Systems,” even if much looser than the Hong Kong model.
But that illusion has been shattered, partly due to Hong Kong. Recent local elections in Taiwan dealt the KMT a crushing defeat, causing President Ma Ying-jeou to resign as party leader. A variety of domestic economic issues were important, but worries that the KMT might let Taiwan become a mainland subsidiary were also crucial; events in Hong Kong fed that concern. It’s now possible that the opposition Democratic Progressive Party (DPP), which opposes unification on any terms, will win Taiwan’s next presidential election in 2016. From Beijing’s perspective, that would be the worst possible outcome and already has led to speculative articles in mainland newspapers about what’s needed to take Taiwan by force.
Despite all the protest, compromise in Hong Kong remains possible. There will be no retraction of Beijing’s election decree and C.Y. Leung won’t resign—two of the students’ more impossible demands. But important details about the 2017 election of the next chief executive remain to be drafted locally, then sent to Beijing for approval. A 1200-member election committee will still vet candidates as China insists, but its membership could be reconfigured to give it more “broadly representative” (as the relevant law requires) and less a group of establishment types who obey official wishes. Hong Kong could hold a primary election, with the top two vote-getters holding a runoff. Many other rule variations are at least theoretically possible, provided the Hong Kong and Beijing governments conclude the current testy atmosphere serves no purpose, and compromise is better. If some system let a pro-democracy candidate get on the ballot, most citizens would likely view that as victory enough—at least for the time being.
The irony is that Beijing would run no great political risk; a pro-democracy candidate would almost certainly lose a free election. Hong Kong’s livelihood requires ever-closer ties to mainland entities, and its pragmatic citizens would never choose a chief executive who might have testy relations with leaders in Beijing. But taking any risk is not part of the ruling party’s ethos, and allowing such a compromise would require more tolerance, self-confidence and common sense than its leaders have shown to date.
Robert Keatley is a former editor of the Asian Wall Street Journal and the South China Morning Post of Hong Kong.
After two long months, Hong Kong’s pro-democracy protesters are exhausted and divided. Their attempt last week to escalate the movement by encircling the government headquarters was foiled by police batons, pepper spray and arrests. Subsequently, the radical student leader Joshua Wong went on a hunger strike (since ended) while the co-founders of the Occupy Central Movement, which initiated the mass protests, renewed their call for the students to retreat. This internal division highlights the fact that the students have run out of viable options. Beijing may soon happily claim a hard-won victory.
Yet in reality, Beijing is losing Hong Kong.
While Beijing promises “one country, two systems,” it struggles to integrate Hong Kong economically with mainland China and to bring Hong Kongers into the fold of a common Chinese identity. The ultimate goal is to unite China and Hong Kong into one country. To this end, Beijing has given the city’s investors and businesses preferential access to the Chinese market. It promotes people-to-people exchanges by lifting tourist restrictions for mainland Chinese to travel to Hong Kong. It has also tried to introduce “patriotic education” into the curriculum of Hong Kong’s schools.
Beijing has been quite successful in bringing Hong Kong closer to China economically. Last year, a staggering 40 million mainland visitors contributed a third of the city’s total retail revenue. Today, roughly half of the city’s commerce is with China. Its goal of winning the loyalty of the people there, however, has become increasingly out of reach. Hong Kong residents complain about rising commodity and housing prices caused by a tsunami of mainland visitors and investors. Young people are increasingly fearful of losing out to mainland Chinese as they compete for top level university slots and employment opportunities. In 2012, massive resistance foiled the Central Government’s “patriotic education” plan.
The city’s bubbling resentment towards China is reflected in the polls. The percentage of Hong Kongers who identify themselves as primarily Chinese is steadily declining and was only 31 percent in the most recent poll. Even more significant, the number of young people between the ages of 18-29 who claim an exclusively Chinese identity has dropped from 20-30 percent a decade ago to a mere 4-8 percent today. Unlike their parents and grandparents, most of whom migrated to Hong Kong from China, the majority of young people were born and raised in the city and therefore have a much stronger desire for a separate local identity. It is these young people who have taken to the streets. Beijing’s uncompromising stand has led to their increasing bitterness and may irrevocably steer them towards completely rejecting China and their Chinese heritage.
What can Beijing do to reverse this trend?
First, Beijing would be wise to grant the protesters’ demand for the unfettered election of their chief executives, or at the very least, make a meaningful concession before the next election. The most pressing grievances in Hong Kong result from the failure of their pro-business government to address the harmful effects that closer economic ties have had on ordinary people. There have already been several mass rallies calling for the resignation of Leung Chun-Ying, the incumbent chief executive. Leung’s two predecessors were also unpopular: Tung Chee-Hwa resigned due to poor performance, while Tsang Yam-Kuen was blamed for increasing the gap between rich and poor. By allowing Hong Kong to truly choose its own chief executives, Beijing will foster goodwill in Hong Kong and give hope to the young generation.
More importantly, Beijing needs to promote political and legal reform at home. The primary source of Hong Kong’s alienation from China is not cultural but political. While the majority of the city’s residents may still be attached to “China,” that China is not the People’s Republic, where democracy is absent, the rule of law is limited, basic individual rights are tenuous, and corruption remains rampant. Hong Kong, with its multiparty system, independent judiciary, free press, and constitutional liberties, continues to be worlds apart. In the end, Beijing must take bold measures to reform itself so that Hong Kongers won’t feel ashamed to be Chinese.
Ling A. Shiao is an assistant professor at Southern Methodist University who specializes in cultural history, youth movements, and identity politics in modern China. She was an activist in the 1989 Democracy Movement in China.
Satellite images analyzed by defense intelligence magazine IHS Jane’s show that China is reclaiming on Fiery Cross Reef in the Spratly Islands a piece of land that bears the shape of a 3000-meter airfield and a harbor large enough to receive tankers and major warships. This is not the first, but the latest in a series of land reclamations that China is conducting both in the Spratly Islands and the Paracel Islands in the South China Sea.
What does China want with this island building? What is the ultimate objective of these projects? The usual lens we use to decipher strategic moves on the international arena is ill suited to answer these questions. It views the game nations play in term of chess, but China is playing weiqi in the South China Sea.
Weiqi, better known in the West by its Japanese name, go, is the oldest Chinese board game that bears much parallel to an influential branch of traditional Chinese strategic thinking. While chess is a game of checkmate,weiqi, as its very name tells us, is a game of encirclement. In weiqi, there are no kings, queens or pawns as there are in chess, only identical stones whose power depends on where they are in the larger arrangement of the pieces. If chess is a contest of armies, weiqi is a struggle between configurations. Whereas the competent chess player aims at the destruction of the enemy’s physical power, a proficient weiqi player strives for the control of strategic positions, from which position-based power emanates.
If the South China Sea is seen as a chessboard, China’s moves in it appear largely trivial. Advanced forward are mostly pawns, while there is little movement of the more powerful figures. Perhaps the most formidable piece on the board is an underground base for nuclear missile submarines at Yulin on the southern coast of Hainan Island. However, this base is not located in the disputed areas. The main forces involved in the South China Sea dispute are rarely the military, but predominantly fishing boats and lightly armed government vessels. And the central objects of the contest are tiny, barren, often-submerged rocks.
But in the eyes of the weiqi player, what China has done in the South China Sea is a classic example of how to play the game masterfully. The ultimate goal is to gain control of the region. The campaign to achieve this goal relies on creeping expansion, rather than major battles. This creeping expansion is a protracted undertaking that is played out in decades. In accordance with this strategy, salami slicing and small-stick diplomacy are the preferred tactics. The underlying logic is to gradually shift the propensity of things in favor of Chinese dominance by unobtrusively maneuvering the strategic configuration of the region.
This strategy requires a number of imperatives, each of which is built on top of another. The first imperative is to avoid open armed strikes as much as possible; clashes can be initiated, but only to exploit an existing favorable situation. The second imperative is to control the most strategic positions in the sea; if not already in possession, these positions must be seized stealthily if possible and in a limited conflict if necessary. The third imperative is to develop these positions into strong points of control, robust hubs of logistics and effective bases of power projection.
The history of the PRC’s involvement in the South China Sea dispute has neatly followed these imperatives.
While China was ready to engage in military confrontation, it usually avoided employing large armed battles to enlarge its sphere of control. Of the numerous attempts by Beijing to snatch new possessions during these six decades, only two involved armed conflicts. The first of the two took place in January 1974 against South Vietnam and concluded with China seizing the western half of the Paracel Islands, the Crescent Group, from the former. The second was a far smaller—but no less bloody—skirmish against unified Vietnam at Johnson South Reef in March 1988.
What’s remarkable about these two confrontations is that they both were fought at a time when a power vacuum was swelling in the region, with the United States withdrawing at the time of the first, and the Soviet Union pulling out at that of the second. In both events, China also enjoyed the acquiescence of the United States, the most powerful actor in the larger Asia-Pacific region. As a result, the military clashes caused little diplomatic repercussions.
The second imperative is well reflected in Beijing’s choice of places to occupy in the disputed areas. When China competed with Vietnam for a foothold in the Spratly Islands during 1988, it traded quantity for quality. It took six reefs as opposed to eleven by Hanoi. But five of the six are among the most strategic features in the archipelago.
China’s first choice in the Spratly Islands was Fiery Cross Reef, one of the best in the archipelago in terms of a combination of location and the potential for land reclamation. The atoll occupies an ideal spot at the western gateway into the Spratly Islands and is one of the few Spratly islands that are most exposed to the main transoceanic shipping routes passing through the South China Sea. Its location not too far from, but not too close to, the other island groups reduces its vulnerability and enlarges its sphere of influence. Adding to these advantages, Fiery Cross Reef occupies an area of 110 square kilometers, one of the largest in the Spratly Islands.
Four of the remaining five—Subi Reef, Gaven Reef, Johnson South Reef and Cuarteron Reef—lie at the edge of four different island groups, from where they can control a large maritime area and the key waterways into the Spratly Islands. The two land features that China later added to its possessions also boast immense strategic values. Mischief Reef, which China surreptitiously took from the Philippines in late 1994 or January 1995, lies at the center of the eastern wing of the Spratly Islands and close to the water highways that run along the eastern South China Sea. Scarborough Shoal, which China captured in 2012 with the help of small-stick and double-dealing diplomacy, presides over the northeastern quadrant of the South China Sea and is an ideal outpost to watch the major shipping routes through the region.
With its control of the Paracel Islands, Scarborough Shoal and several strategically located lands in the Spratly archipelago, China is far more advantaged than any other countries to command what Robert Kaplan has characterized as “the throat of global sea routes.” For example, Woody Islands (the largest feature in the Paracels), Fiery Cross Reef, Mischief Reef and Scarborough Shoal form a four-point constellation from which, with a radius of only 250 nautical miles, the entire main body of the South China Sea can be kept under intense watch.
This means that all it takes for China to become the lord of the South China Sea is to develop these assets into robust platforms that can provide both logistic support for a myriad of fishing boats, government vessels, submarines and aircraft to dominate the sky and the water of the region, and some grounds for generating large economic and security zones.
This is precisely what Beijing is doing. An uninhabited sandbank sixty years ago, Woody Island now has roughly 1,000 residents, military and civilian alike. Its dual-use facilities include a 2,700-meter airport with a runway and a parallel taxiway, which is capable of handling eight or more fourth-generation aircrafts such as SU-30MKK fighters and JH-7 bombers, and a 1,000-meter long deep-water port, which can accommodate vessels of 5,000 tons or more.
Down south in the Spratly Islands, starting in 2013, China has also been conducting massive construction projects to turn the rocks it occupies into islands. According to Taiwan’s top intelligence official Lee Hsiang-chou, Chinese president Xi Jinping has approved plans to reclaim land to build military installations on five islets here, including Cuarteron Reef, Johnson South Reef, Gaven Reef, Hughes Reef and Fiery Cross Reef.
The most consequential of these island-building projects is on Fiery Cross Reef. From a naturally submerged atoll, Fiery Cross Reef will soon be the largest island in the Spratlys. After the current land reclamation, with an expected land area of 2 square kilometers, it will be four times as large as the naturally largest island in the archipelago, the Itu Aba, which is held by Taiwan. This expanded area will enable Fiery Cross Reef to host a 3,000-meter long airfield, a deep-water seaport, radar stations, several medium- to long-range missiles and other storage and service infrastructure capable of supporting hundreds of fishing boats, patrol vessels, warships and aircrafts.
It would not be surprising if in the near-to-medium term Beijing would also build airstrips and deep-water harbors at Subi Reef, Mischief Reef and Scarborough Shoal and set up an air defense identification zone in the South China Sea.
With its enlarged and strategically located islands, China has more potential than any other major powers to gain air and naval supremacy in the South China Sea. Although Beijing still has a long way to go, it is not unimaginable to see in the next two decades a South China Sea dotted with powerful Chinese staging bases that stretch from the Paracel Islands in the northwest to Mischief Reef in the southeast, and from Scarborough Shoal in the northeast to Fiery Cross Reef in the southwest.
Is this creeping expansion unstoppable? Although the “Declaration on the Conduct of Parties in the South China Sea” (DOC), signed by China and the ASEAN states in 2002, provides little ground for a blockade of the construction sites, states that want to maintain the status quo can still send international observers to verify the constructions and mount diplomatic pressure to persuade China to suspend the work.
Another way to challenge China’s weiqi strategy is to take a page from Beijing’s own playbook. For example, in a first step, Vietnam can offer the Indian military access to naval facilities in Cam Ranh Bay and the U.S. military access to air bases in Da Nang, two of Vietnam’s most strategic locations along the South China Sea coast. If China does not heed the message, this initial countermove can be redoubled with offers to the U.S. and Japanese militaries and coast guards of access to Cam Ranh and Da Nang, from which they can patrol the South China Sea. Ultimately, if China is still determined to turn the South China Sea into a Chinese lake, a strong alliance between Vietnam, the Philippines, the United States, Japan and India is necessary to redress the imbalance of power.
China’s grand strategy in the South China Sea is a smart game plan that exploits the soft underbelly of strategies relying on large battles, two examples of which include both the Air-Sea Battle concept, the premier U.S. operational concept designed to negate China’s anti-access area-denial capabilities, and its major alternative, the Offshore Control concept. But this strategy of creeping expansion is far from perfect. It can be thwarted if the United States, Vietnam and some other regional powers play weiqi as skillfully as China.
Alexander L. Vuving is an associate professor at the Asia-Pacific Center for Security Studies, Honolulu. The views expressed in this article are his own and do not reflect those of his employer. You Can Follow him on Twitter:@Alex_Vuving.
Did China pressure the White House to fire U.S. Navy Captain James Fanell as the top intelligence officer in the Navy’s Pacific Fleet? Or did a self-censoring Pentagon simply do the deed on its own, based on trumped up charges of “revealing classified information.” Methinks Congress—and this nation—needs to get to the very bottom of a shortsighted decision that has profound, long-term implications for the Obama administration’s much-ballyhooed Asia “pivot.”
In fact, Fanell was one of the few top-ranking officers willing to blow the whistle on China’s own ongoing “Crimea moment” in the East and South China Seas. His sin was to go public last February in San Diego at one of the largest annual conferences attended by military personnel and scholars.
Ironically, this WEST 2014 meeting of the minds was sponsored by the U.S. Naval Research Institute. Its stated mission is “to provide an independent forum for those who dare to … speak… to advance …understanding of … issues critical to national defense.”
As to exactly what the good captain “dared to say” that got him fired, he quite accurately pointed out China is aggressively seeking to expand its territory and maritime rights in the East and South China Sea at the expense of virtually all its neighbors—and the U.S. military. In addition, based on his analysis of a Chinese amphibious exercise involving some 40,000 troops—one widely reported in the press—Fanell also stated China was preparing for “a short, sharp war” against Japan.
There is no question about the veracity of Fanell’s statements. Nor is anything he said “classified information,” as anyone can come to exactly the same conclusions from reports in this publication and in many others.
Indeed, the only thing Captain Fanell appears guilty of is telling a hard truth in an administration that apparently believes taking a soft line on Chinese expansionism is a better strategy. While that is debatable, firing an officer for speaking the truth at an academic conference is not just plain stupid; it also runs directly against the grain of the kind of free and open democracy the United States is supposed to be.
Here are two chillingly practical implications based on the Fanell situation. First, no military officer is ever going to tell uncomfortable truths to the American public while in uniform if he or she wants to keep adding stripes to the sleeve.
Second, no future conference putatively pledged to daring to speak the truth will ever have any credibility. Instead, such conferences will be seen, and rightly, as forums for the propaganda and spin of whoever is sitting in the White House or running the Department of Defense.
That said, here’s the far bigger implication: In firing Fanell, the Pentagon—already under the siege of sequestration—has shot itself in the budgetary head. Indeed, if American taxpayers are going to be counted on to foot the defense-budget bill, they certainly must be kept in the national-security loop. Absent candor on the growing China challenge, it will be impossible for the U.S. Navy to ever get the kind of budget support it is will need to truly pivot to Asia.
To this point, the putatively pivoting White House is doing a dandy version of “Honey, I shrunk the navy.” The U.S. fleet is down from a peak of 600 ships during the Reagan years to well below 300; and could be on its way to breaking the 200-ship barrier—unless you pad the count with hospital ships as the Pentagon has started to do.
To understand the looming problem, just work through this “pivot math”: President Obama has pledged to shift 60 percent of the fleet to Asia from an original 50 percent. However, 60 percent of a shrinking fleet will mean that by 2020 the United States will have fewer ships in the Pacific than it does now. That sounds more like a retreat than a pivot.
So how about we get to the bottom of a seemingly small story that might otherwise quickly die? There is indeed far more at stake here than one man’s career. Let the Congressional hearings begin.
Peter Navarro is a business professor at the University of California-Irvine and director of the Netflix documentary Death By China.
One of the great merits of the New Silk Road concept, which played such a major part at the APEC meeting in Beijing, is that it is wonderfully vague in terms of the area talked about while being very specific in terms of the the national sentiments it appeals to back in China. The new use of this old term, pioneered by Xi Jinping, manages to create warm feelings outside China despite few really knowing what the Silk Road actually refers to. At the same time, talks of a New Silk Road stirs up equal enthusiasm domestically because it taps into memories of former greatness and its new iterations, placing China once more at the center of the world.
That the Silk Road idea is vague is not surprising, in view of its very amorphous roots. The historian Mark Edward Lewis, in his excellent history of the Tang Dynasty (618–907 AD), goes as far as referring not to a singular silk road, but to plural ones spreading out throughout land and maritime routes around the imperial dynasty. These silk roads, plural, created a zone of influence based on trade, most of it on terms favorable to the Tang court back in Xi’an. The grand sign that greets visitors to the ancient city today, pointing the way to the start of the Silk Road, is misleading, pointing more to a myth than a proper starting point. Like many other ancient trackways, the road was more a bandwidth or a combination of different lines.
This has carried across to the concept as it is set out today. Xi’s modern Silk Road seems to push itself through some of Southeast and South Asia, some of central Asia, and up into modern Russia. It also comes through the Middle East, and even nudges up to places like Lithuania and northern Europe. One could be forgiven for asking why the term is not jettisoned and replaced by the less mellifluous description “Eastern, Central and Western Asian landmass with a large part of Eastern Europe.”
The phrase “New Silk Road,” of course, is low on specifics in terms of where it reaches and what it is for the perfectly good reason that it is mapping out an ambition, an aspiration, not a specific geographical space. It is pointing to a world of mutually beneficial trade and economic relations focused on China. It is selling the merits of dealing with and working with China as a source of dynamic growth. Here we get to the domestic power of the image — it clearly trades off a notion of a China that was anciently strong and important, which is explicitly linked to the ambitions of the modern country, creating a coherent link across centuries.
Whether non-Chinese parties being embraced by the Silk Road idea are also signed up to this notion is another matter. They might be quite surprised to think that they are being pulled into something which has undertones of a vassal relationship, where China is posited almost as a gift-giver, generously granting access and links to its market and dispensing favor and economic largesse this way. There are obligations being created here, dependencies and commitments, that many who are included in the Silk Road idea might need to seriously consider. For Central Asian states, having a counter balance to Russia might be good, of course. For Russia, having a China which reduces European energy imports in importance for it is also useful. But the ambition outlined in all the train and road building is setting out the infrastructure of a commitment for decades into the future, not just a few years.
Silk Road partners might pay the Chinese the compliment of copying them. They too should seek diversity of partnerships, and not be backed into reliance on one overwhelming relationship. Ignoring the immense ambition of China now would be to run against a long history where it is pretty clear. This is perhaps the final link between the old and the new silk road ideas. They outline a world where whatever the number of different routes and tracks, they had one common characteristic — they all ended in China. That is a pretty powerful clue as to whose best interest is really being served by this new iteration of an old idea. This doesn’t mean other countries should not engage in the idea, but it does mean they should do so in a clear headed and realistic way.
The Beijing Municipal Public Security Bureau recently revealed in a statement on its website that it cracked down on underground banks in September. Ten underground banks, run from family homes, allowed clients to purchase foreign exchange and transfer funds abroad. Funds were converted through bank accounts that purchased up to the maximum of $50,000 in foreign exchange.
In the sting, the police arrested 59 suspects and froze 264 bank accounts potentially associated with the operation. While there are various ways to transfer money out of China, such as export over-invoicing or casino laundering, this operation used registered bank account transfers overseas to appear above-board. Individuals are allowed to transfer up to $50,000 abroad annually through the banking system. In this case, however, many bank accounts were registered to one individual, allowing excessive transfer of funds abroad.
This crackdown is nothing new – underground banks are periodically uncovered and raided. The bust also follows the anti-corruption trend that has attempted to control the illegal use of funds in targeted areas, as President Xi Jinping has demanded internal discipline within the Communist Party. CCTV’s exposé on the Bank of China, revealing that the bank had allegedly transferred large amounts of cash for individuals preparing to emigrate abroad, and the baring of a list of high-status individuals with offshore accounts, have been a part of the parallel trend within the media to uncover broader misuses of funds and capital flight. In the Bank of China’s Youhui Tong program, wealthy individuals can remit large sums of money abroad. CCTV asserted that the sums sent abroad are unlimited and illegal; the Bank of China rejected CCTV’s allegations, stating that the program restricts individuals to emigrating through investments or the purchase of property abroad. Similarly, the International Consortium of Investigative Journalists uncovered a list of 22,000 individuals from mainland China and Hong Kong with offshore accounts that may be used to disguise or transfer illicit wealth.
Underground banks are used for a variety of purposes, both criminal and everyday. These banks may be used for money laundering on behalf of criminals. Proceeds from drug trafficking, tax evasion, or other criminal actions can be manipulated to appear legitimate. On the other hand, underground banks can also be used for lending to smaller enterprises, or for remitting money abroad to relatives. Smaller enterprises are constrained in borrowing from banks, and often must turn to other sources of funding, including, potentially, underground banks. Finally, money remittance, or fei ch’ien, is an untracked method of sending funds abroad, and is often used to provide funds for family and friends overseas.
While underground banks may have a positive impact on the economy, they may also mask a darker side that includes illegal activity. Sorting out the extent to which underground banks provide legitimate or illegitimate business is challenging since transaction records are almost entirely opaque. Certainly in China’s recent crackdown, the capital flight carried out through bank accounts illegally registered to one person must be curtailed if it is to maintain capital controls.
Uncovering underground banks is tricky, since they are set up to evade detection. In this case, suspicious activity by the individual with multiple bank accounts was traced back to the underground banks. The People’s Bank of China contains an Anti-Money Laundering Bureau and controls the Chinese Anti-Money Laundering Monitoring Analysis Center, while monitoring responsibilities are shared with other agencies, including the Ministry of Public Security’s Anti-Money Laundering Division and Anti-Terrorism Bureau. These bodies may not detect underground banking activity, however. In this case, suspicious activity was identified and investigated by the Beijing police.
It’s no surprise that civil rights in Central Asia stand as something of a farce. The region, nearly a quarter of a century after gaining independence, retains much of its Soviet legacy of stanched media rights and desiccated political opposition. Despite fits and starts of democratization in Kyrgyzstan – which has seen a discernible turn toward a Russian-style clampdown in recent months – the region has remained tethered to its strongman politicking and truncated civil space.
But while much of the efforts within the region to limit opposition press or quash political dissent have been relatively public, the ability of Central Asian regimes to monitor potential discord has been under-covered, especially in relation to analyses of Russia and China. A recent report from Privacy International, however, has tried to shine some light on the methods Central Asian governments are using to track their populaces – and to examine how closely they mirror Russian and Chinese examples, as well as which Western companies have supplied the necessary technology along the way.
The 96-page “Private Interests: Monitoring Central Asia” is heavy on technical detail and schematics, including mapping of surveillance nodes and jargon-laced descriptions of the specific monitoring mechanisms. However, there are a few broad takeaways worth noting, both regionally and within specific nations. First, it appears that Central Asian governments – Kazakhstan and Uzbekistan, especially – have opted to tilt their surveillance methods toward the Russian example, utilizing a model known as System of Operative Investigative Measures (SORM), which gained much notoriety during the Sochi Olympics. “Modern electronic surveillance techniques in the Central Asian republics have been primarily inﬂuenced by those of Russia,” according to the report’s authors. SORM, as the report continues, “requires Internet Service Providers (ISPs) … to keep a detailed record of their subscribers’ internet activity and, if necessary, to install the hardware necessary for doing so. Under SORM in Kazakhstan, for example, this information includes details regarding users’ identities, data regarding speciﬁc visits, and details concerning the trafﬁc being transmitted.” One program within the SORM rubric can “store more than 10 terabytes of data, roughly equivalent to the US Library of Congress.”
Email, phone conversation, even Skype conversations – all have been tapped, stored, and utilized in intelligence agencies’ efforts to monitor and crush dissent, be it through human rights or media mechanisms. Even Uzbekistan’s first family doesn’t seem immune. As the report adds, “According to correspondence seen by Privacy International, [the Uzbek president’s daughter] Gulnara Karimova claims to have become a target for electronic surveillance.”
Unfortunately, and unlike American and European legislation, there appears little legal framework for monitoring and restraining the security organs – successors to the Soviet-era KGB – that have led surveillance efforts in Kazakhstan and Uzbekistan. As the report notes, and in contradistinction to public treaties the countries have signed, “In Uzbekistan and Kazakhstan … the principal intelligence agencies – widely implicated in human rights abuses – [have] direct, unchecked access to the population’s phone and internet activity through the establishment of monitoring centres.” In Kazakhstan, the security agency’s procurement of such surveillance technology directly contravenes existing legal frameworks, which tasks others – the Ministry of Internal Affairs, the Financial Police – with the ability to “interfere with private communications.”
The report implicates a pair of Western organization surveillance organizations in aiding the regional surveillance: the U.S.-based Verint Systems, and the Israel-based NICE Systems. In Kazakhstan, both organizations have been contracted directly by the country’s intelligence agency. Verint has been aiding in monitoring centers “since the early 2000s,” and in a recent upgrade in 2012 to allow further IP access via “Deep Packet Inspection” techniques. The company also signed contracts directly with the country’s intelligence agency, meaning it is “subject to less rigorous oversight and regulation” in Kazakhstan than other contractors are. The same holds true for the work of both Verint and NICE in Uzbekistan – which also roped in an American company, Netronome, in order to “gain access to SSL-encrypted communications, such as those now offered by default” by Gmail and Facebook, among others.
The surveillance methods used thus far in Central Asia have proven so widespread – in both perception and reality – that numerous “surveillance targets” in Turkmenistan were unwilling to speak to Privacy International about their experiences, even with the promise of anonymity. As such, according to human rights advocate Natalia Anurova, “very little communication is occurring by electronic means within Turkmenistan[.]” And after the report, there seems little reason that trend will change.
The dawn of the twenty-first century has proved unsettling. It was not what we expected. Only a few years ago, the world was full with apparently justified optimism. The new century would be free of the ideological fights that plagued the twentieth. A consensus emerged that markets and democracy were the basis for healthy societies; the prospect of a war between superpowers faded into the past; a “new economy” born out of the combination of computers and telecommunications was emerging and globalization was uniting the world into a happy global village. Countries all over the world liberalized their economies and joined the ranks of democracy.
As the new century settled in, however, worrying facts are deflating all these optimistic expectations. Each and every one of the reasons for optimism has failed to deliver what it promised and many problems that we thought we had left well behind have come back to haunt us. Negative turns in the distribution of income and wealth, financial crises, terrorism, fundamentalist terrorist states trying to spring out of the Middle East and Africa, a visible turning away from democracy in many countries that had just become capitalistic or democratic, Russia expanding its territory just like the aggressive powers of yesteryear… All these things point towards one single impression: life has suddenly become chaotic as the political order that existed in the twentieth century collapsed all around us, leaving the world at the whim of fanatical Islamic groups and rogue states, authoritarian great powers, and petty tyrants in Latin America. It seems that a faraway past is coming back.
What is happening? What do we have in common with the turn of the last century to bring back a host of problems that we thought had become part of the past?
What we have in common with the people of one hundred years ago is that we, like they did, are going under the sway of a technological revolution that will change our lives as deeply as the Industrial Revolution changed theirs.
Profound technological advances, while opening the road for a better future in the long run, are terribly disruptive in the short term. They render obsolete the capital accumulated in physical assets, in human knowledge and skills, and, even more fundamentally, in the shape of the institutions linking together the fabric of society. People who thought they had their future assured suddenly find that their skills have been turned obsolete by the new technologies or by the new styles of life derived from them. Activities that had been for decades the mainstay of an economy suddenly become unprofitable, either because their product disappeared or because, to be profitable, they have to be relocated to another part of the world.
This brings about all kinds of economic and social disruptions, including unemployment, negative turns in the distribution of income, bankruptcies, frequent financial crises, and depression. Life becomes unstable, the future unbearably uncertain.
This is what was happening a hundred years ago under the influence of the last stage of the Industrial Revolution, that which introduced electricity, the telephone, the internal combustion engine, the car, and the airplane.
This is what is starting to happen in our times as well under the influence of the new revolution that was set in motion by connectivity, the power to manage complex tasks from afar in real time, an ability that the combination of computers, telecommunications, and fast means of transportation has made possible. As much as the Industrial Revolution multiplied the power of the muscle, the new revolution is multiplying the power of the mind. It promises to improve dramatically the way we live.
In the short run, however, the transition to this new connected world implies the disruption, even the destruction, of what we have today in terms of skills, investments, ways of life, and basic institutions for our social order.
Technological revolutions result in negative turns in the distribution of income, as income flows towards those who take early advantage of the new technologies. This effect is more pronounced in the case of the current revolution. Being based on the multiplication of the power of the mind, it privileges education. As a result, the educational premium in incomes has become very large in the labor markets. The 2008 population survey by the US Census Bureau showed that the median wage of someone with an undergraduate degree was 72% higher than that of someone with just a high school degree. This gap was 43% in the 1970s. That of someone with a professional degree was 213% higher. This was 72% in the 1970s. These are averages. In the enormous markets of our times, the opportunities to make staggering amounts of money out of connectivity are there for the people who know how to use them.
In a recent article, I noted that Facebook bought Instagram for a whopping $1 billion. The company, launched in 2010, happened to have 13 employees at the time it was sold. That comes to about $76 million per worker. Then in February, Facebook bought Whatsapp for $345 million per worker. The purchasing company, Facebook, created in 2004, has a market value of $22 million per employee. Apple has $14 million per worker, Google $10 million. This can be compared with Chiquita, the banana company founded in 1870, valued at $50,000 per employee. In the same article I noted how companies based on knowledge have markets values much higher than the price of their physical assets.
Eventually, we could expect that education would improve in response to the premium paid for it in the new economy, thus improving the distribution of income and wealth. However, this improvement would take a long time. In the meantime, politicians have been hard at work looking for measures that could make feel better those falling behind.
In Fault Lines: How Hidden Fractures Still Threaten the World Economy, Raghuram G. Rajan, now the Governor of the Reserve Bank of India, links the 2008 explosion of financial instability with the growing deterioration of the distribution of income.
In the 1990s politicians responded to the income and wealth distribution problem “with an attempt at a panacea: facilitating the flow of easy credit to those left behind by growth and technological progress.” That is, if those falling behind could not increase their wealth through higher incomes, they could be made to feel that they were increasing it through indebtedness.
To facilitate this operation, politicians relaxed the regulations that kept the financial system stable. Since the 1990s, credit flowed toward those left behind (the subprime and the ninjas: no income, no job and no assets) especially for the acquisition of housing.
Credit cannot substitute for income growth. People could not repay those loans. The 2008 crisis was the result of these credit flows.
The Japanese disease
Japan has not grown noticeably since its own financial crisis of two and a half decades ago. It does not grow even if its government and central bank have created money to finance fiscal deficits in navigable quantities. This is happening because the natural remedy that the market applies to insolvency—the bankruptcy of the unprofitable activities that cannot grow—has been deactivated by government intervention. The immense liquidity created by the central bank keeps the inefficient activities afloat even if they are insolvent. The new world cannot replace the old one, and the economy cannot grow.
The Japanese disease extended to the rest of the globe in the first decade of the millennium. Central banks all over the world are swamping their economies in an immense liquidity that keep financially dead governments and companies alive while the economies stagnate. The incredibly large monetary creation will come back to haunt us with more instability in the medium term.
Fundamentalism and terrorism
Fundamentalism, the extreme form of resistance to change, is the urge to force the return of society to mores and social structures of an idealized past, when things did not change and people could plan their lives within a predictable structure.
It emerges in all processes of radical transformations. It becomes strong, however, only in the last stages of dissolution of a society, when people think that they are veering into chaos. People try to escape the present by going to the past, thinking that nothing could be done with the existing society except destroying the forces that are dissolving it—which, in the old times were capitalism and democracy, and today are the western customs and mores expanded to the Middle East through all the channels of connectivity.
It is not by chance that countries in the region forbid all forms of communications with the West, including movies, television and radio, and that they want to reestablish a form of state that disappeared so long ago—the caliphate, which aimed at controlling the entire world and imposed religious authority on every aspect of life. For the fundamentalists, the enemy is change.
Disillusionment with democratic capitalism
As the problems of adjustment increase, disillusionment with democratic capitalism is spreading all over the world. Problems that are attributable to the turmoil of the changes are blamed on “the system.”
Many of the formerly communist countries (including China and Russia), which were widely expected to become democratic when they liberalized their economies, are hailing their nondemocratic systems as more effective than democracy, and many people are listening. Many Latin American countries that seemed to have become democratic have fallen back into their old populist regimes.
Calls for more control of the state over the economy to prevent changes from taking place have become more common all over the world: stop globalization, stop job exports, stop bankruptcies, stop competition from abroad, stop everything that would threaten our position of comfort. To stop all these and other things, governments have to become more authoritarian and democracy must then suffer.
The invasive great power
Russia’s annexation of parts of Georgia and Ukraine brought back another monster that we thought had disappeared between the 1930s and the 1940s—the territorially acquisitive authoritarian Great Power. Well into the twentieth first century, Putin’s Russia behaved in the same predatory way as Hitler’s Germany had done with Czechoslovakia, Austria and Poland in the late 1930s. Along with these territorial attacks, the possibility of new wars between great powers came back as well.
Russia has been aggressive against Georgia, Ukraine and the Baltic countries for ages. Its aggressiveness, however, has turned into actual aggressions depending on the strength of its potential enemies. The collapse of the global order that prevailed since the fall of the Soviet Union as a result of the world’s economic woes and the rise of fundamentalism, which in turn owe a lot to the disruptions of the technological revolution, has opened a window for Russian opportunism. Others may follow.
What is to be done?
There is a curious contradiction between the people’s highly positive attitude towards the Connectivity Revolution and their highly negative disposition towards its short-term consequences. While adopting the new technologies with great enthusiasm, many of them organize a strong opposition to the changes they are introducing. The politics of today’s world are gradually moving toward resistance to change as the main means to deal with the problems caused by the transformation. People want strong governments to stop change.
Trying to keep the current shape of society unchanged, however, is the best way to fall into stagnation, destructiveness, or both. The countries that had more state intervention in the economy—like Russia and Germany one hundred years ago—were the ones that broke under the pressures of change and fell under destructive regimes. In their search for stability through authoritarian governments, these countries sold their souls to the devil and rather than the stability of older, romanticized times, they got the order of slavery and destructiveness.
Those arguing for policies that would stop change say, correctly, that the functioning of society needs an element of permanence to prevent chaos. However, the element of permanence that all societies need should be provided through the enforcement of the rights of the individual, not by protecting the economic or political status of some vociferous sectors.
This article draws liberally from Manuel Hinds, The Triumph of the Flexible Society: The Connectivity Revolution and Resistance to Change. Praeger, Westport, Connecticut, 2003.
Last week geopolitics Zen master Robert Kaplan put forth a “realist creed” for analysts and practitioners of American foreign policy. Kaplan observes that we all fancy ourselves realists. Few admit to being otherworldly thinkers, detached from the hardscrabble realities of world politics. That remains true even if, in practice, they advocate unworkable policies or policies no one could execute with the means on hand. Some rules and principles, then, are in order to ensure that would-be realists see, acknowledge, and operate within the bounds imposed by reality rather than launching into crusades or flights of whimsy. Self-discipline is good.
And most of Kaplan’s precepts are sound and unobjectionable. We should all accept that there are limits to U.S. power, for example, while acknowledging that not every problem is soluble. But one of his propositions merits expanding upon, critiquing, and perhaps revising before we fellow realists embrace it. It’s the last one: “Passion and Good Policy Often Don’t Go Together.” Kaplan alludes to the danger that hothead advisers, policy wonks, or sundry talking heads will stampede top decisionmakers into ventures that are unwise on their face, or into worthy ventures that outstrip the means our republic is prepared to dedicate to them. One imagines he has the Iraq War on his mind.
In that sense the Naval Diplomat violently agrees with his maxim. Philosophers and strategists of realist leanings, from Aristotle to Clausewitz, agree that reason should subdue passion. The greats of American foreign policy and strategy — the Washingtons and Lincolns and Roosevelts — are statesmen notable for their self-mastery. George Washington, for instance, thirsted for a decisive battlefield victory over the Redcoats — a feat of arms that would seal his reputation as a soldier. He lost set-piece battles catastrophically on Long Island and Manhattan — and mastered his desire for personal renown for the sake of the glorious cause. It’s hard to win when you lose your army. Or, Theodore Roosevelt brandished a big stick but indeed spoke softly. Self-restraint is a — if not the — crucial virtue of any leader.
So Kaplan is right — to a point. In another sense there is no good policy without passion. Reason should remain firmly in charge during the making of policy. That’s what Clausewitz means when he makes rational subordination of arms to policy a pole of his “remarkable trinity” of war, and insists that reason “mainly” resides in the political leadership. And yet. If passion takes a back seat to reason when devising policy, popular sentiment is indispensable when executing policy — particularly in martial enterprises. Clausewitz maintains that the “passions that are to be kindled in war must already be inherent in the people” to sustain the effort. Otherwise the nation risks fighting a halfhearted campaign that yields lackluster results. Lackadaisical combatants typically accomplish little.
So let’s accept Kaplan’s rule while appending a Clausewitzian asterisk to it in our minds. A century ago Woodrow Wilson beseeched Americans to wage war in Europe “without rancor” and to “conduct our operations as belligerents without passion.” A nice thought, but unsound strategy. The Vulcans of Star Trek fame — totally logical, dispassionate beings — would make a poor face for American strategy. Maybe that’s why they end up being overtaken by earthlings technologically, and joining a human-led Federation of Planets. Prosecuting your affairs without passion, through pure cost/benefit analysis, may mean you compromise or give up more easily than you should.
The exception to this sci-fi rule, perhaps, would be Mr. Spock, the half-human, half-Vulcan science officer on board the starship Enterprise. But he’s the exception that proves the rule. Bear in mind that, while Spock keeps intellect in command when devising courses of action, it’s his human side — the ardor he tries to conceal and suppress — that gives him the stick-to-itiveness to see an effort through to its conclusion. Reason and passion, it seems, constitute the yin and yang of human affairs. Of successful ones, anyway.