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Meltdown gives rise to worrisome Asian contagions

Monday, December 22, 2008 Free Headline Alerts

Sol Sanders also writes the "Asia Investor" column weekly for EAST-ASIA-INTEL.com.

The dynamics of East Asia geopolitics have shifted startlingly in only the few weeks since the crash of international credit markets and the onset of a severe worldwide recession. Pieces are moving on the board with a speed that defies the traditional Asian mode.

Initial braggadocio [and not a little Schadenfreude] from East Asian leadership that their massive foreign exchange reserves would limit their exposure to the world catastrophe and that they would and could help bail out the U.S., Japanese and Western economies is now lost in the wispy memory of Mao’s East Wind.

President Hu Jintao, instead of celebrating the 30th anniversary of Deng Xiao-ping’s “any colored cat which catches mice” modernization, warned a Communist Party meeting that stability not growth or reform was the new key word for a regime increasingly besieged with explosive social unrest, often directed at the “security” forces.

Pyongyang’s threat of famine grows, again, as Chinese ore railway wagons don’t get returned to mills which are cutting back on North Korean deliveries to a retracting Chinese steel industry.

Singapore’s thrust to redress its nanny state into a new pleasure dome with casinos [and gambling] as well as financial services couldn’t have chosen a worse moment to debut with or without new ageing and ill Lee Kwan Yu’s “Asian values” — with even legendary Macao, the gambling capital of China and Asia, shuttering new Vegas-style palaces.

Beijing came through with currency swaps with both South Korea — whose financial infrastructure is increasingly shaky — and the Japan central banks because it fears a double-edged sword of flight of capital, currency instability despite its draconian controls, and the collapse of growth with imports and exports with two major trading partners dipping at unanticipated rates. But there is political movement, too.

Hu not only talked to the Party faithful about how they had to prepare for the rapid growth of internal dissension, publicly expressed, and all that meant as a threat to the state. But he went into the Dragon’s mouth into the headquarters of the traditionally volatile northeastern military region at Shenyang to tell the People’s Liberation Army [PLA] it should prepare itself for another kind of war, one if truth be told, against its own people.

It is not remarkable that the Party would call on the PLA. For it is not as though this is the first time that the People’s Liberation Army would, were it to become necessary, rescue the Chinese Communist Party regime. The leadership has used the PLA for mouth to mouth resuscitation repeatedly rescuing it from its own follies. It happened in the Great Leap Forward, in the mid 50s, in the Great Cultural Revolution in the 80s, and in Tien An Mien as late as 1989 when a reforming group within the Party sided with the students and workers in the center of Beijing. But in the last episode when young soldiers had to be brought in from afar — because the capital’s garrison did not move — must lend some additional anxiety to a new situation where much of the military has, we hear, been “professionalized”.

It is also the first time that the call comes from a civilian leadership — everyone at the head of the Maoist Party was called a general whatever his boot camp training. There are more than the usual pro forma calls for the PLA to remain loyal to the Party dictate. That’s why the pleas for following the lead of the Party ring louder these days. The fact that the call has come to be ready to rescue before an onslaught of public antagonism and disorder begins on a nationwide basis, presumably before the actual events have got out of hand, is significant. And, again, that may be because of the Peoples Armed Police, organized and reinforced after Tien An Mien have failed when dispatched to the Korean border to halt a breakdown of smuggling and border crossing there, and, again, during the earthquake earlier this year.

In fact, the greatest thing the hackneyed CCP leadership has going for it now is the almost genetically ingrained fear of disorder and chaos – engraved by the events of horror in the 20th century, during the Japanese war of aggression and the Civil War and Maoist Era which followed. Certainly that is true of the small but gold-plated elite who now constitute the urban Party fellowtravelers among China’s 1.3 million people.

The world can do without cheap Chinese exports [at least for a while] and spiked world commodity prices from amateur and corrupt procurement officers in China. But it might not be able to stand idly by while Chinese authorities dealt with nationwide “disorders” with the mowing down of students and workers as happened by the hundreds in the heart of the empire in 1989.

China events are, as always, influencing the domestic scene in Japan. Tokyo’s long perceived need to realign its domestic political party structure may be pushed by its diving into another recession with its new number one trading partner, China, in deep trouble. The tipping point could be Prime Minister Taro Aso’s continued hoof in mouth disease and an approaching election next year that could decimate his faction-ridden Liberal Democrat Party from within. That could pit what Prof. Robert Angel calls Japan’s “populists” going after voters in the Anglo-American way against the “factionalists” representing old, pre-Koizumi Revolution conservatives, corruption-laden Japanese intra-party feudal loyalties. Such a split could occur in both major parties, the “government” Liberal-Democratic Party which has ruled almost all the last 50 years, and the ragbag Democratic Party which includes everything from conservatives Koizumi froze out and socialists reputedly once on the North Korean payroll.

It was widely noted that Prime Minister Wen Jiabao pleaded with his South Korean and Japanese colleagues to go ahead with this first East Asia summit. It didn’t accomplish all that much. But it achieved the diplomatic “frank exchange of views”, claimed credit for the currency swaps, and agreed to make it an annual habit. That was despite Aso taking Wen to the woodshed over Chinese “survey” ships incursion into the contested Senkaku Islands. [These small outcroppings are a part of the post-World War II empire clearly defined in the U.S. peace treaty and the Okinawa reversion]. Such Japanese “selfdefense” would not have happened even months ago.

Ironically, the meeting had been postponed three times — each time precisely just over minor territorial arguments, islands in the Japan Sea [the Chinese and Koreans call it Eastern] and the possibility of offshore gas and oil. Someone should go and dig up all those U.S. AID, World Bank and UN officials who unsuccessfully through more than four decades tried to get something moving in intra-Asian economic policy coordination modeled on the Marshal Plan and the European economic community. It apparently took a world economic blowout to do it.

Yet the outlook remains bleak.

American abandonment of Tokyo on the issue of getting further accounting for the unknown numbers and remaining ghosts of kidnapped Japanese citizens by the North Koreans did not result in an agreement for the Bush Administration on deweaponzing North Korea’s nuclear effort. It has awakened some still subdued anti-American sentiments in Japan, on the right as well as on the left. The internet is awash in revelations about the infiltration and influence of Communists in Gen Douglas MacArthur’s Supreme Allied Heaquarters. There is no real indication the Chinese did more than talk about pressuring the North Koreans; the risk of a destabilized North Korean regime with a model capitalist democracy which would produce most likely a reunited democratic Korea on its border isn’t appetizing for Beijing. Only a U.S. Foreign Service Officer of vintage such as Christopher Hill, the U.S. chief negotiator, could claim — and then only on National People’s Radio — that it had been worth the risk to make an unenforceable deal with Pyongyang while abandoning the economic pressures which had at least led to a promised walking back on the nuclear bomb process. The fact that there is now confirmation on all sides that during the midst of these negotiations Pyongyang was delivering a twin nuclear reactor to Syria until Washington finally gave the Israelis permission to knock it out is something out of Alice in Wonderland.

The truth is that North Korea would be a forgotten, small, bankrupt, abandoned, starving corner of north Asia were it not for its weapons program and its sale of technology to pariah states around the world. Why would anyone as shrewd and ruthless as the Kims, father and son, utterly inured to the suffering of their own people, abandon these weapons of mass destruction? Regime change is the only way to deweaponize North Korea. And for those grasping at straws at Foggy Bottom, a part of their DNA, the present illness and possible disappearance of Kim Jr. with no strong heir, might at least lead to another ruthless military dictatorship with whom the world could deal.

There can be no celebration in Japan at what is increasingly looking like a Chinese meltdown. China now its number Tokyo’s one trading partner and a detour to selling competitively viable consumer products enroute to the American and European markets through cheap Chinese labor. Ditto for Taiwan which now with a KMT Nationalist Party government has at least momentarily cast a cloak of denial over the hundreds of missiles aimed at it on the Mainland. Taipeh, too, has okayed a major lifting of restrictions on direct contact and continue heavy investment on the Mainland to hold its export makets.

The Obama Administration will find none of these problems easy to deal with. In the end, they — for all the talk of “change” and “new initiatives” along the campaign trail and for the hungry bureaucrat-wannabees in the Washington think tanks. The fact that Obama has loaded his cabinet and other early appointments with much of the same old Washington Democratic insiders is proof that the permanent government lives on in the District of Columbia. There may be a tweak here and there. But events, rather than inspired ideology or new administrative techniques, are likely to dictate U.S. policy, especially in an east Asia which is suddenly and rapidly changing.

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