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What Would Chinese Hegemony Look Like? | The Diplomat
What Would Chinese Hegemony Look Like? | The Diplomat.
It is certainly not inevitable, but what form would a Sinic Monroe Doctrine take?
East Asia is becoming, in the language of international relations theory, “bipolar.” That metaphor, from magnetism, suggests two large states with overlapping spheres of influence competing for regional leadership. The Cold War was a famous global example of bipolarity. Most states in the world tilted toward the United States or the Soviet Union in a worldwide, zero-sum competition. Although analysts have hesitated for many years in applying such strong language to East Asia, this is now increasingly accepted. A lengthy twilight struggle between China and Japan, with U.S. backing, seems in the offing.
Until recently, Asia was arguably “multipolar”—there was no one state large enough to dominate and many roughly equal states competed for influence. China’s dramatic rise has unbalanced that rough equity. China is now the world’s second largest GDP. Although its growth is slowing, it is still expanding at triple the rate of the U.S. economy and six times the rate of Japan’s. By 2020 China is predicted to be the world’s largest economy. Its population, 1.35 billion, is enormous. One in seven persons on the planet is Chinese. Were China’s GDP per capita to ever reach Japanese or American levels, its total GDP would match that of entire planet today. These heady numbers almost certainly inspire images of national glory or a return to the “middle kingdom,” in Beijing. They help account for China’s increasingly tough claims in the East and South China Seas.
Until recently, China pursued a “peaceful rise” strategy, one of accommodation and mutual adjustment. This approach sought to forestall an anti-Chinese encircling coalition. China’s rapid growth unnerves many states on its perimeter, from India, east to Vietnam, Indonesia and Australia, north to Taiwan, Japan, and Russia. Were these states to align, they might contain China in the same way the Japan, China, and NATO all worked to contain the U.S.SR. The peaceful rise seemed to work, especially in southeast Asia, where Chinese generosity has successfully blocked a united ASEAN position on South China Sea issues.
Since 2009 however, China has increasingly resorted to bullying and threats. The 2008 Olympics appears to have been read in Beijing as a sign of China’s newfound might and sway. In the South China Sea it has pushed a very expansive definition of its maritime zone of control, and it recently faced down the Philippines in a dispute over the Scarborough Shoal in that sea. Indeed, one possible explanation for China’s expansion of itsair defense identification zone (ADIZ) in the East China Sea is that a hard line seems to be working in the South China Sea. But China’s northeast Asian neighbors are far stronger and more capable than its southeast Asian ones. Most observers expect Japan, South Korea and the U.S. to push back, as indeed they have. The U.S. flew bombers through the new ADIZ without warning, and both Japanese and South Korean civilian airlines have been instructed by their respective governments not to comply.
All this then sets up a bipolar contest between China and Japan, in the context of China’s rapid rise toward regional dominance.
Chinese Hegemony?
A common theme in the literature on China’s rise is its apparent inevitability. Westerners particularly tend to get carried away with book-titles such as Eclipse (of the U.S. by China), When China Rules the World, orChina’s New Empire. History is indeed filled with the rise to dominance of powerful states. China and Japan both sought in the past to dominate Asia. Various European states including the U.S.SR, Germany, and France did the same. But frequently these would-be hegemons collided with a counter-hegemonic coalition of states unwilling to be manipulated or conquered. Occasionally the hegemonic aspirant may win; Europe under Rome was “unipolar,” as was feudal Asia now-and-again under the strongest Chinese dynasties. But there is nothing inevitable about this. Hegemonic contenders as various as Napoleon or Imperial Japan have been defeated.
To be fair, it is not clear yet if indeed China seeks regional hegemony. But there is a growing consensus among American and Japanese analysts that this is indeed the case. By Chinese hegemony in Asia we broadly mean something akin to the United States’ position in Latin America. We do not mean actual conquest. Almost no one believes China intends to annex even its weakest neighbors like Cambodia or North Korea. Rather, analysts expect a zone of super-ordinate influence over neighbors.
For example, in 1823, U.S. president James Monroe proclaimed the Monroe Doctrine, which warned all non-American powers to stay out of the Western Hemisphere on pain of U.S. retaliation. This has worked reasonably well for almost 200 years. The U.S. has variously used force, aid, covert CIA assistance, trade, and so on to eject foreign powers from what Washington (condescendingly) came to call “America’s backyard.” Today, of course, such language seems disturbingly neocolonial, but many assume that the fundamental illiberalism of such spheres of influence do not worry non-democracies like China. A Sinic Monroe Doctrine would likely include some mix of the following:
– the withdrawal of U.S. forces from Japan and Korea,
– U.S. naval retrenchment from east Asia, perhaps as far back as Hawaii,
– a division of the Pacific into east/U.S. and west/China zones with a Chinese blue-water navy operating beyond the so-called second island chain running from Japan southeast to New Guinea,
– an RMB currency bloc in southeast Asia and possibly Korea,
– a regional trading zone,
– foreign policies from China’s neighbors broadly in sync with its own.
This is not going to happen soon of course. This is a project for the next several decades, just as U.S. power over Latin America came slowly through the nineteenth century. But such goals would broadly fit with what we have seen in the behavior of previous hegemons, including Imperial Japan and China, Rome, the British Empire, the U.S. in Latin America, and various German plans for Eastern Europe in the first half of the twentieth century. The era of U.S. preponderance in Asia is coming to an end.
Robert E. Kelly (@Robert_E_Kelly) is an associate professor of international relations in the Department of Political Science and Diplomacy at Pusan National University. More of his work may be found at his website,AsianSecurityBlog.wordpress.com.
Asia Times Online :: China loses control of its foreign policy
Asia Times Online :: China loses control of its foreign policy.
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Japan set to buy $240B worth of hi-tech weapons | StratRisks
Japan set to buy $240B worth of hi-tech weapons | StratRisks.
TOKYO—Japan announced on Tuesday that it would buy stealth fighters, drones and submarines as part of a splurge on military hardware that would beef up defense of far-flung islands amid a simmering territorial row with China.
The Cabinet of hawkish Prime Minister Shinzo Abe agreed to spend 24.7 trillion yen ($240 billion) between 2014 and 2019 in a strategic shift toward the south and west of the country—a 5-percent boost to the military budget over five years.
The shopping list is part of efforts by Abe to normalize the military in Japan, which has been officially pacifist since its defeat in World War II. Its well-equipped and highly professional services are limited to a narrowly defined self-defensive role.
Abe’s plan to upgrade Japan’s military capability comes with the establishment of a US-style National Security Council that is expected to concentrate greater power in the hands of a smaller number of senior politicians and bureaucrats.
Fears are growing in Japan over the rising power of China, with the two countries embroiled in a dispute over the sovereignty of a group of islands in the East China Sea, and the perennial menace posed by an unpredictable North Korea.
Joint defense force
New guidelines approved by the Cabinet on Tuesday said Tokyo would introduce a “dynamic joint defense force,” intended to help air, land and sea forces work together more effectively.
Abe said the shift would allow Japan’s military to better shoulder its responsibilities on the global stage, through what he has promoted as “proactive pacifism.”
“We hope to make further contributions to the peace and stability of the international community through proactive pacifism,” he said. “This shows with transparency our country’s diplomatic and defense policies.”
Spending will be raised to 24.7 trillion yen over five years from April 2014, up from the present 23.5 trillion yen over the five years to March 2014, but the figure could be trimmed by up to 700 billion yen if the defense ministry can find savings and efficiencies.
New hardware will include 3 drones, 52 amphibious vehicles, 17 Osprey hybrid choppers and 5 submarines—all designed to boost maritime surveillance and bolster defense of islands.
The spending will also encompass two destroyers equipped with the Aegis antimissile system and 28 new F-35 fighter jets, a stealth plane far superior to the F-15s that Japan currently has in service.
Analysts noted that much of this kit will replace obsolete equipment, but the shift in military priorities is evident.
“The guidelines underscore a clear shift of Japan’s major defense focus to the protection of its islands in the East China Sea,” said Hideshi Takesada, an expert on regional security at Takushoku University in Tokyo.
During the Cold War, Japan’s military was largely static, with the majority of resources in the north and east to guard against any invasion by Russia.
Changing dynamics
But changing dynamics and in particular the rise of China—where double-digit rises in defense spending are the annual norm—mean that Japan’s armed forces need to be located further south and to be able to deploy to the country’s many far-flung islands.
“The guidelines show Japan’s readiness for practical defense if China’s bluff turns to be real military action,” Takesada said.
Regional tensions were ratcheted up last month when China abruptly declared a new air defense identification zone over the East China Sea, including overdisputed Tokyo-controlled islands called Senkaku in Japanese and Diaoyu in Chinese.
Abe on Saturday denounced the declaration and demanded Beijing retract it immediately and unconditionally, after a summit with Southeast Asian leaders where a joint statement called for freedom of travel on the seas and in the air.
Beijing issued a sharp rebuke, singling out Abe for “slanderous remarks.”
The guidelines also call for Japan to boost its missile defense system to counter “a grave and imminent threat” from North Korea.
China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure” | Zero Hedge
China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure” | Zero Hedge.
Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.
I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.
Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.
Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.
Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).
First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.
Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.
The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one.Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese control of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.
If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).
So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.
Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).
Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal.Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.
Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.
As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.
A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.
China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure” | Zero Hedge
China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure” | Zero Hedge.
Overnight rhetoric in Asia became increasingly heated when China’s Ministry of Foreign Affairs expressed “strong dissastisfaction” at the slanderous actions of Abe’s Japanese government over the Air Defense Identification Zone (ADIZ) and the “theft and embezzlement” of the Diaoyu Islands. “Japan’s attempt is doomed to failure,” China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.
The ‘triangle’ of doom in the East China Sea…
Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China’s air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?
A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.
Diaoyu Islands are China’s inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.
East China’s air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan’s attempt is doomed to failure.
“Rationalist Explanations For War” In The East China Sea
Submitted by Ankit Panda of The Diplomat,
Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.
I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.
Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.
Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.
Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).
First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.
Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.
The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one. Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese control of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.
If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).
So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.
Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).
Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal. Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.
Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.
As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.
A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.
US, Chinese Warships “Nearly Collide” In South China Sea | Zero Hedge
US, Chinese Warships “Nearly Collide” In South China Sea | Zero Hedge. With the recent deployment of China’s air defenze zone, and the subsequent announcement of a comparable zone by South Korea which overlaps not only with China’s own, but with that of Japan, it almost seems like a scenario designed to provoke an escalating conflict on the tiniest of provocations is actively being produced. A scenario such as the one US defense officials revealed today, when a guided missile cruiser operating in international waters in the South China Sea was forced to take evasive action last week to avoid a collision with a Chinese navy ship maneuvering nearby. Hold on: how can two massive ships, visible to the naked eye and certainly to radar from hundreds of miles away, “nearly collide”? Reuters reports that the incident took place on December 5 and involved the USS Cowpens. The Pacific Fleet statement did not offer details about what led to the near-collision. But it did say the incident underscored the need for the “highest standards of professional seamanship, including communications between vessels, to mitigate the risk of an unintended incident or mishap.” The rest of the story is widely known:
Beijing declared the air defense zone over the East China Sea late last month and demanded that aircraft flying through the area provide it with flight plans and other information. The United States and its allies rejected the Chinese demand and have continued to fly military aircraft into the zone, which includes air space over a small group of islands claimed by China but currently administered by Tokyo. In the midst of the tensions over the air defense zone, China deployed its only aircraft carrier, the Liaoning, to the South China Sea for maneuvers. Beijing claims most of the South China Sea and is involved in territorial disputes in the region with several of its neighbors.
And so, the waters have been tested, so to speak, with a media “warning” on just how brazen China can be when it comes to its “aggressive” tactics in what we are confident the Chinese media will describe as its own maritime territory, begging the question of just who was provoking whom, especially since the response to a Chinese missile cruiser sailing idly by New York or San Francisco, even if in “international waters”, would hardly see the same controlled reaction by the US. Then again, it has been only two weeks since China’s most recent “escalation.” We are confident that given time, this will be the least of the close shipping encounters that involve Chinese, US, Japanese and/or Korean navies in the East China Sea. After all, one must think of all that, GDP that as WWII taught us, can be easiest gained through some modest, or not so modest, international conflict.
Some Stunning Perspective: China Money Creation Blows US And Japan Out Of The Water | Zero Hedge
Some Stunning Perspective: China Money Creation Blows US And Japan Out Of The Water | Zero Hedge.
With private sector loan creation in the US and Japan virtually unchanged since Lehman levels (and the US in danger of posting a negative comp in a very months) and Europe loan creation contracting at a record pace, it falls upon the Fed and Bank of Japan (and possibly the ECB soon) to inject the much needed credit-money liquidity into the system. And, as everyone knows, month after month the Fed and the BOJ diligently create $85 billion and $75 billion in new outside money out of thin air (that this “credit” ends up in the stock market is a different topic).
So to help readers get a sense of perspective how the US and Japan compare when matched to China, below we present a chart showing the fixed monthly “money” creation by the Fed and the BOJ compared to the most comprehensive money supply aggregate available in China – the Total Social Financing – for the month of November. The chart speaks for itself.
Basically, while everyone focuses on the breakneck money creation by the Fed and the BOJ, what happened in the past month is that China quietly created some 20% more money. Perhaps most impotantly, between these three entities, nearly $400 billion in liquidity was created de novo in one month! Because when the entire world is a credit-fueled ponzi scheme, these are the kind of numbers that matter.
For those curious, here is a more detailed breakdown of the Chinese numbers from Bank of America.
New bank loans and TSF rebounded notably in November
Despite higher and volatile interbank rates and rising bond yields, credit growth remained quite robust towards year-end. Two most watched data points, new bank loans and Total Social Financing (TSF), rebounded notably to RMB625bn and RMB1230bn respectively in November from RMB506bn and RMB856bn in October. YoY bank loan growth remained unchanged at 14.2%, while yoy outstanding TSF growth moderated to 19.5% from 19.7%. Today’s money & credit data should be positive for markets which have been worried that the PBoC could tighten credit supply to reduce leverage by citing rising bond yields and interbank rates.
Details of TSF: All financing activities accelerated
- New entrusted loans rebounded notably to RMB270bn in November from RMB183bn in October, while new trust loans increased to RMB102bn from RMB40bn.
- New corporate bond rose to RMB138bn in November from RMB107bn in October. We note that government and coporates delayed their bond issuance or scaled down the size after bond yield soared, but the net corporate bond issuance in TSF still rebounded due to a smaller amount of expiry in November from October.
- New FX loan edged up to RMB12bn in November from RMB5bn in October.
- Non-discounted bankers acceptance (BA) increased by RMB6bn in November after falling RMB40bn in October. We think the monthly numbers are particularly volatile, and there is no need to overly-interpret it (This is also the reason why we exclude it from calculating our revised TSF growth.)
Loan details: demand for working capital remained decent
- New MLT corporate loans fell to RMB86bn in November from RMB144bn in October. Concerning seasonality, the number is not low. Note that it dropped to –RMB3bn in November 2012 from RMB169bn in October 2012 despite supportive policies and recovering growth momentum then. We believe policies would remain relative neutral in coming months and there could be no sudden reversal of policies.
- New short-term corporate loans rose to RMB241bn in November from RMB215bn in October. Meanwhile, discounted bills also increased by RMB19bn after falling RMB71bn. It suggests loan demand for working capital remained decent.
- New MLT loans to household (mainly mortgage loans) rebounded to RMB182bn in November from RMB154bn in October, supported by strong home sales momentum in previous months. New short-term loans to households rose to RMB80bn in November from RMB51bn in October, reflecting that SME loans could remain supported.
* * *
So how long before the developed and developing world “have” to create $1 trillion or more in money supply each month to keep the house of cards from toppling?
Japan Press: “China-Japan War To Break Out In January” | Zero Hedge
Japan Press: “China-Japan War To Break Out In January” | Zero Hedge.
Following China’s unveiling of its air defense identification zone (ADIZ) in the East China Sea, overlapping a large expanse of territory also claimed by Japan, the Japanese media has, as The Japan Times reports, had a dramatically visceral reaction on the various scenarios of a shooting war. From Sunday Mainichi’s “Sino-Japanese war to break out in January,” to Flash’s “Simulated breakout of war over the Senkakus,” the nationalism (that Kyle Bass so notably commented on) is rising. Which side, wonders Shukan Gendai ominously, will respond to a provocation by pulling the trigger?The game of chicken between two great superpowers is about to begin has begun.
Five out of nine weekly magazines that went on sale last Monday and Tuesday contained scenarios that raised the possibility of a shooting war.
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First, let’s take Flash (Dec. 17), which ran a “Simulated breakout of war over the Senkakus,” with Mamoru Sato, a former Air Self-Defense Force general, providing editorial supervision.Flash’s scenario has the same tense tone as a Clancy novel, including dialog. On a day in August 2014, a radar operator instructs patrolling F-15J pilots to “scramble north” at an altitude of 65,000 feet to intercept a suspected intruder and proceeds from there.
Sunday Mainichi (Dec. 15) ran an article headlined “Sino-Japanese war to break out in January.” Political reporter Takao Toshikawa tells the magazine that the key to what happens next will depend on China’s economy.
“The economic situation in China is pretty rough right now, and from the start of next year it’s expected to worsen,” says Toshikawa. “The real-estate boom is headed for a total collapse and the economic disparities between the costal regions and the interior continue to widen. I see no signs that the party’s Central Committee is getting matters sorted out.”
An unnamed diplomatic source offered the prediction that the Chinese might very well set off an incident “accidentally on purpose”: “I worry about the possibility they might force down a civilian airliner and hold the passengers hostage,” he suggested.
In an article described as a “worst-case simulation,” author Osamu Eya expressed concerns in Shukan Asahi Geino (Dec. 12) that oil supertankers bound for Japan might be targeted.
“Japan depends on sea transport for oil and other material resources,” said Eya. “If China were to target them, nothing could be worse to contemplate.”
In an air battle over the Senkakus, the Geino article continues, superiority of radar communications would be a key factor in determining the outcome. Japanese forces have five fixed radar stations in Kyushu and four in Okinawa. China would certainly target these, which would mean surrounding communities would also be vulnerable.
One question that seems to be on almost everybody’s mind is, will the U.S. military become involved?
Shukan Gendai (Dec. 14) speculated that Chinese leader Xi Jinping might issue an order for a Japanese civilian airliner to be shot down. As a result of this, a U.S. Navy aircraft carrier would come to Japan’s aid and send up fighters to contend with the Chinese.
“Unlike Japan, the U.S. military would immediately respond to a radar lock-on threat by shooting down the Chinese planes,” asserts military analyst Mitsuhiro Sera. “It would naturally regard an aircraft flying overhead as hostile. They would shoot at it even if that were to risk discrediting the Obama administration.”
“With the creation of Japan’s National Security Council on Dec. 4, Japan-U.S. solidarity meets a new era,” an unnamed diplomatic source told Shukan Gendai. “If a clash were to occur between the U.S. and China, it would be natural for the Self-Defense Forces to provide backup assistance. This was confirmed at the ‘two-plus-two’ meeting on Oct. 3.”
“China is bent on wresting the Senkakus away from Japan, and if Japan dispatches its Self-Defense Forces, China will respond with naval and air forces,” Saburo Takai predicts in Flash. “In the case of an incursion by irregular forces, that would make it more difficult for the U.S. to become involved. Japan’s Ministry of Foreign Affairs would protest through diplomatic channels, but China would attempt to present its takeover as a fait accompli.
“China fears a direct military confrontation with the U.S.,” Takai adds. “A few days ago, two U.S. B-52s transited the ADIZ claimed by China, but the flights were not for any vague purpose. I suppose the Chinese tracked the flights on their radar, but the B-52s have electronic detection functions that can identify radar frequencies, wavelength and source of the signals. These flights are able to lay bare China’s air defense systems. It really hits home to the Chinese that they can’t project their military power.”
Which side, wonders Shukan Gendai, will respond to a provocation by pulling the trigger? The game of chicken between two great superpowers is about to begin.
Japan Dispatches F-15s, E-767s And P-3 Into China’s Air Defense Zone, China Scrambles Su-30 In Response | Zero Hedge
China’s escalation and re-escalation described in detail yesterday, has just been met with a corresponding re-re-escalation by Japan.
- China’s Ministry of Defense reports that the nation identified Japanese military planes that entered into Chinese air defense identification zone today.
- 7 batches of 10 Japanese planes consisting of E-767, P-3 and F-15 entered into the zone: statement
- China has also identified 2 batches of 2 U.S. surveillance planes consisting of P-3 and EP-3, without specifying whether the planes entered into the zone: statement
- China scrambled Su-30, J-11 and other aircraft in response.
And now it’s China’s turn to, once again, respond. And then Japan and the US again, and so on, until someone gets hurt.
China Declares “Willing To Engage In A Protracted Confrontation” With Japan As “Prime Target” | Zero Hedge
Following the to-ing and fro-ing of the last 2 days with US and Japan “testing” China’s new Air Defense Zone (ADIZ), China has not only escalated (as we noted earlier) but as the day begins in Asia is stepping up the rhetoric significantly. Official media said that Japan is the “prime target” and it is an “urgent task for China to further train its air force to make full preparation for potential conflicts.” Japanese lawmakers, meanwhile, are pushing for a bill “demanding an immediate withdrawal of China’s ADIZ.” While the Western world goes on its merry way buying S&P futures, China’s concluding message rings its most defint so far, “We are willing to engage in a protracted confrontation with Japan. Our ultimate goal is to beat its willpower and ambition to instigate strategic confrontation against China.”
The Chinese just stepped up the rhetoric notably,
China’s official media pointedly said Friday that Japan is the “prime target” of Beijing’s newly declared air control zone over the East China Sea, warning that China is willing to engage in “a protracted confrontation with Japan.”
China’s declaration of its Air Defense Identification Zone (ADIZ), announced last week, has sparked strong resistance from Japan, the United States, South Korea and other neighboring Asian nations. The new zone partly overlaps those of South Korea and Japan.
The U.S. flew two B-52 bombers through the Chinese zone without informing China this week. South Korea and Japan followed suit. In response, China sent several fighter jets and an early warning aircraft on patrol Thursday into the disputed air space.
In an editorial titled “Japan prime target of ADIZ tussle,” the official Global Times newspaper said, “We should carry out timely countermeasures without hesitation against Japan when it challenges China’s newly declared ADIZ.”
“If Tokyo flies its aircraft over the zone, we will be bound to send our planes to its ADIZ,” the editorial said.
“If the trend continues, there will likely be friction and confrontations and even tension in the air like in the Cold War era between the U.S. and the Soviet Union,” it said.
“It is therefore an urgent task for China to further train its air force to make full preparation for potential conflicts,” the editorial said.
“We are willing to engage in a protracted confrontation with Japan. Our ultimate goal is to beat its willpower and ambition to instigate strategic confrontation against China,” it said.
Analysts said the Chinese declaration of air control zone is mainly aimed at bolstering its claims to a group of islets in the East China Sea at the center of a bitter territorial dispute with Japan, which are known as Diaoyu in China and Senkaku in Japan.
The Japanese are not backing down…
Via Kyodo News,
An official of Japan’s ruling Liberal Democratic Party is considering asking lawmakers to adopt a bill demanding an immediate withdrawal of China’s air defense zone in East China Sea