By China a world ensnarled

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See the Sol Sanders Archive By Sol Sanders SPECIAL TO WORLD TRIBUNE.COM

No matter the preoccupation with the drama of Iraq, “China” is rapidly assuming a larger and larger frame on Washington’s world screen. Concerns are both economic and political and unfathomable combinations of both:

Beijing’s attempts, largely by fiat, to trim incipient hyperinflation, or an incredibly rickety economy’s built-in restraints, or both, have begun to impact. As China’s maw for raw materials – and components for multinational assembly operations – narrows, commodity prices fall, including oil. That could benefit the U.S. and the EU, but would threaten Russia’s twisted oil-based prosperity, harry Australia and the Southeast Asians. If China’s component imports declined precipitously, it would threaten export-driven economies of Japan [just exiting a decade’s stagnation] and South Korea [threatening a similar meltdown], Taiwan, and, again, to a lesser extent, Southeast Asia.

The growing American payments deficit – China’s $165 billion was a quarter of the total last year – is reflected in the weakened [now temporarily strengthened] U.S. dollar. That plus the loss of jobs has brought Congressional threats against Chinese imports. The Administration has responded with calls on Beijing to revalue and begin convertibility. But only a massive reevaluation would produce a demonstrable effect, given China’s extraordinary low labor costs, main ingredient of China’s export success.

Beijing, whose Communists came to power as a result of the Nationalists’ post-World War II monetary collapse, fear financial overhaul however necessary. Government banks, seeking reform through openings to foreign investment, are riddled with corruption and non-performing loans. Export success has created huge government dollar reserves – incidentally helping to fund the U.S. government debt and to keep American interest rates and inflation low. But China finds increasing difficulty steming inflation by “sterilizing” their renminbi counterpart to dollar sales. And only a token higher price for the yuan would set off a new round of speculation. Already despite nonconvertibility massive “hot money” has poured into the system.

Demise of the international textile cartel yearsend has loosed a Chinese garments avalanche. The U.S. has invoked import restraints. The EU is calling on Beijing to block the deluge. [Japan-U.S. 1980s redux: demand a market economy but contradictorily ask for export regulation.] French industry is threatened with more unemployment. This at a moment when President Chirac has been trying to sell – with dubious success in a referendum – to both French right and left the new EU constitution as protection against “Anglo-Saxon neo-liberalism”. The French vote and the future of the EU at the mercy of Chinese garment imports!

Another dramatic elision of economics and politics is growing friction between China and Japan. A government-initiated anti-Japanese campaign was ostensibly based on old unabsolved World War II war crimes, Prime Minister Koizumi’s visits to a war memorial, school texts rationalizing atrocities, and Tokyo’s race for UN Security Council membership. Behind propaganda are terms of Japan’s participation in the Chinese economy as major investor, technology supplier [some acknowledgement of wartime culpability], and trader. China has replaced the U.S. as Japan’s largest market; but most exports are components for Japanese and other multinationals’ reexport; China’s bilateral surplus with Japan has disappeared. Stop and go switches in the campaign indicate typical Chinese intra-Party feuding. Wu Li, Chinese Communism’s “steel lady” and No. 1 negotiator [she called for a free trade pact] on a kiss and make-up Japan visit suddenly canceled an appointment with Koizumi, flew home without explanation.

Hanging over all is China’s rapidly accelerating military buildup. Beijing refuses to forswear violence over Taiwan sovereignty [despite the Island’s $100 billion investment and half million managers resident on the Mainland]. Washington is pledged to block a military takeover and Tokyo recently adhered to that concept. Beijing has replaced ham-handed threats with seduction of Taiwan’s democratic opposition. But it’s unlikely to persuade Taiwan’s voters life would be better under Beijing.

This all sets the stage for Washington’s immediate East Asian preoccupation: North Korea’s nuclear weapons ambitions. As international renegade and with advanced missiles technology, the threat builds against the U.S. as well as Japan and South Korea. Hoping Chinese leadership does not want a regional nuclear arms race, Washington has pleaded with Beijing to put the screws to Pyongyang. China supplies most of its energy, has intimate relations with its military, centuries of relatively friendly relations. But Beijing has waffled on forcing Pyongyang’s hand and publicly blames the U.S.

That ambiguity, of course, like so many questions leads to the principle problem: lack of transparency in Chinese decision-making [and, indeed, on any set of Chinese facts including statistics]. True, Western politicians’ antics are not always apparent. But China’s top team’s inexperience, Marxist-Leninist gobbledygook despite its moves toward market economics, growing xenophobia – and perhaps hubris arising from the Coastal provinces spectacular boom – makes divining where “China” wants to go virtually impossible. [Never mind guessing where its 1.3 billion will, indeed, “go”.]

One certainty: the outside world is caught in this Chinese cat’s paw and that snap which would untangle its skeins is nowhere in sight.