Friday, November 7, 2008

CHINA: SIGNIFICANCE OF TIBET

AN ARTICLE BY GEORGE FREIDMAN - STRATFOR. www.stratfor.com

China is an island. We do not mean it is surrounded by water; we mean China is surrounded by territory that is difficult to traverse. Therefore, China is hard to invade; given its size and population, it is even harder to occupy. This also makes it hard for the Chinese to invade others; not utterly impossible, but quite difficult. Containing a fifth of the world’s population, China can wall itself off from the world, as it did prior to the United Kingdom’s forced entry in the 19th century and under Mao Zedong. All of this means China is a great power, but one that has to behave very differently than other great powers.

Analyzing Chinese Geography


Let’s begin simply by analyzing Chinese geography, looking at two maps. The first represents the physical geography of China.



The second shows the population density not only of China, but also of the surrounding countries.
China’s geography is roughly divided into two parts: a mountainous, arid western part and a coastal plain that becomes hilly at its westward end. The overwhelming majority of China’s population is concentrated in that coastal plain. The majority of China’s territory — the area west of this coastal plain — is lightly inhabited, however. This eastern region is the Chinese heartland that must be defended at all cost.

China as island is surrounded by impassable barriers — barriers that are difficult to pass or areas that essentially are wastelands with minimal population. To the east is the Pacific Ocean. To the north and northwest are the Siberian and Mongolian regions, sparsely populated and difficult to move through. To the south, there are the hills, mountains and jungles that separate China from Southeast Asia; to visualize this terrain, just remember the incredible effort that went into building the Burma Road during World war II. To the southwest lie the Himalayas. In the northwest are Kazakhstan and the vast steppes of Central Asia. Only in the far northeast, with the Russian maritime provinces and the Yalu River separating China from Korea, are there traversable points of contacts. But the balance of military power is heavily in China’s favor at these points.


Strategically, China has two problems, both pivoting around the question of defending the coastal region. First, China must prevent attacks from the sea. This is what the Japanese did in the 1930s, first invading Manchuria in the northeast and then moving south into the heart of China. It is also what the British and other European powers did on a lesser scale in the 19th century. China’s defense against such attacks is size and population. It draws invaders in and then wears them out, with China suffering massive casualties and economic losses in the process.

The second threat to China comes from powers moving in through the underpopulated portion of the west, establishing bases and moving east, or coming out of the underpopulated regions around China and invading. This is what happened during the Mongol invasion from the northwest. But that invasion was aided by tremendous Chinese disunity, as were the European and Japanese incursions.

Beijing’s Three Imperatives

Beijing therefore has three geopolitical imperatives:

Maintain internal unity so that far powers can’t weaken the ability of the central government to defend China.

Maintain a strong coastal defense to prevent an incursion from the Pacific.

Secure China’s periphery by anchoring the country’s frontiers on impassable geographical features; in other words, hold its current borders.

In short, China’s strategy is to establish an island, defend its frontiers efficiently using its geographical isolation as a force multiplier, and, above all, maintain the power of the central government over the country, preventing regionalism and factionalism.

We see Beijing struggling to maintain control over China. Its vast security apparatus and interlocking economic system are intended to achieve that. We see Beijing building coastal defenses in the Pacific, including missiles that can reach deep into the Pacific, in the long run trying to force the U.S. Navy on the defensive. And we see Beijing working to retain control over two key regions: Xinjiang and Tibet.

Xinjiang is Muslim. This means at one point it was invaded by Islamic forces. It also means that it can be invaded and become a highway into the Chinese heartland. Defense of the Chinese heartland therefore begins in Xinjiang. So long as Xinjiang is Chinese, Beijing will enjoy a 1,500-mile, inhospitable buffer between Lanzhou — the westernmost major Chinese city and its oil center — and the border of Kazakhstan. The Chinese thus will hold Xinjiang regardless of Muslim secessionists.

The Importance of Tibet to China

Now look at Tibet on the population density and terrain maps. On the terrain map one sees the high mountain passes of the Himalayas. Running from the Hindu Kush on the border with Pakistan to the Myanmar border, small groups can traverse this terrain, but no major army is going to thrust across this border in either direction. Supplying a major force through these mountains is impossible. From a military point of view, it is a solid wall.

Note that running along the frontier directly south of this border is one of the largest population concentrations in the world. If China were to withdraw from Tibet, and there were no military hindrance to population movement, Beijing fears this population could migrate into Tibet. If there were such a migration, Tibet could turn into an extension of India and, over time, become a potential beachhead for Indian power. If that were to happen, India’s strategic frontier would directly abut Sichuan and Yunnan — the Chinese heartland.

The Chinese have a fundamental national interest in retaining Tibet, because Tibet is the Chinese anchor in the Himalayas. If that were open, or if Xinjiang became independent, the vast buffers between China and the rest of Eurasia would break down. The Chinese can’t predict the evolution of Indian, Islamic or Russian power in such a circumstance, and they certainly don’t intend to find out. They will hold both of these provinces, particularly Tibet.

The Chinese note that the Dalai Lama has been in India ever since China invaded Tibet. The Chinese regard him as an Indian puppet. They see the latest unrest in Tibet as instigated by the Indian government, which uses the Dalai Lama to try to destabilize the Chinese hold on Tibet and open the door to Indian expansion. To put it differently, their view is that the Indians could shut the Dalai Lama down if they wanted to, and that they don’t signals Indian complicity.

It should be added that the Chinese see the American hand behind this as well. Apart from public statements of support, the Americans and Indians have formed a strategic partnership since 2001. The Chinese view the United States — which is primarily focused on the Islamic world — as encouraging India and the Dalai Lama to probe the Chinese, partly to embarrass them over the Olympics and partly to increase the stress on the central government. The central government is stretched in maintaining Chinese security as the Olympics approach. The Chinese are distracted. Beijing also notes the similarities between what is happening in Tibet and the “color” revolutions the United States supported and helped stimulate in the former Soviet Union.

It is critical to understand that whatever the issues might be to the West, the Chinese see Tibet as a matter of fundamental national security, and they view pro-Tibetan agitation in the West as an attempt to strike at the heart of Chinese national security. The Chinese are therefore trapped. They are staging the Olympics in order to demonstrate Chinese cohesion and progress. But they must hold on to Tibet for national security reasons, and therefore their public relations strategy is collapsing. Neither India nor the United States is particularly upset that the Europeans are thinking about canceling attendance at various ceremonies.

A Lack of Countermoves

China has few countermoves to this pressure over Tibet. There is always talk of a Chinese invasion of Taiwan. That is not going to happen — not because China doesn’t want to, but because it does not have the naval capability of seizing control of the Taiwan Straits or seizing air superiority, certainly not if the United States doesn’t want it (and we note that the United States has two carrier battle groups in the Taiwan region at the moment). Beijing thus could bombard Taiwan, but not without enormous cost to itself and its own defensive capabilities. It does not have the capability to surge forces across the strait, much less to sustain operations there in anything short of a completely permissive threat environment. The Chinese could fire missiles at Taiwan, but that risks counterstrikes from American missiles. And, of course, Beijing could go nuclear, but that is not likely given the stakes. The most likely Chinese counter here would be trying to isolate Taiwan from shipping by firing missiles. But that again assumes the United States would not respond — something Beijing can’t count on.

While China thus lacks politico-military options to counter the Tibet pressure, it also lacks economic options. It is highly dependent for its economic well-being on exports to the United States and other countries; drawing money out of U.S. financial markets would require Beijing to put it somewhere else. If the Chinese invested in Europe, European interest rates would go down and U.S. rates would go up, and European money would pour into the United States. The long-held fear of the Chinese withdrawing their money from U.S. markets is therefore illusory: The Chinese are trapped economically. Far more than the United States, they can’t afford a confrontation.

That leaves the pressure on Tibet, and China struggling to contain it. Note that Beijing’s first imperative is to maintain China’s internal coherence. China’s great danger is always a weakening of the central government and the development of regionalism. Beijing is far from losing control, but recently we have observed a set of interesting breakdowns. The inability to control events in Tibet is one. Significant shortages of diesel fuel is a second. Shortages of rice and other grains is a third. These are small things, but they are things that should not be happening in a country as well-heeled in terms of cash as China is, and as accustomed as it is to managing security threats.

China must hold Tibet, and it will. The really interesting question is whether the stresses building up on China’s central administration are beginning to degrade its ability to control and manage events. It is easy to understand China’s obsession with Tibet. The next step is to watch China trying to pick up the pieces on a series of administrative miscues. That will give us a sense of the state of Chinese affairs.

Tuesday, November 4, 2008

SEVEN WAYS CHINA MIGHT SURPRISE US IN 2009


This crystal gazing article is written by GORDON ORR, DIRECTOR - Shanghai office, McKinsey&Co.




How will China surprise us next? Shocks, tipping points, and revelations have become basic staples of the world’s daily news diet. But with so many eyes now on this emerging Asian giant, what happens there continues to have an exceptional ability to draw attention and to shift perceptions drastically and suddenly.

Will the surprise be planned, like the magnificent Beijing Olympics Games, whose nearly flawless execution set a counterpoint to China’s image as an economic laggard buoyed mainly by cheap labor? Will it repel, like the tainted-milk scandal? Or will it send a message, as Lenovo’s takeover of IBM’s personal-computer business did in serving notice that Chinese companies were ready to enter the global fray?

Here’s a list of some realistic possibilities for the next year. Will all of them come to pass? I doubt it. But any one of them could, and each might make us see China and its future in a new light. What do you think?

1. China announces that by 2020, half of the cars in the country will be electric. It invests tens of billions of dollars in R&D toward achieving that goal.

Such a move could make China the leader in the automotive technology of the future, with other countries struggling to keep pace. Shanghai Automotive Industry Corporation (SAIC) or newcomer BYD Auto could become the Ford Motor of the 21st century, propelled by a new technology—much as Ford capitalized on the internal-combustion engine at the start of the 20th century.

2. The Chinese government buys a 50-year lease on an entire geographic region of Mexico, enabling Chinese companies to build factories there to supply the North American market more easily.

Chinese companies would then become the undisputed leaders in outsourced production. No longer constrained by geography, they could bring their expertise in low-cost manufacturing to Mexico (or Poland or Turkey), greatly expanding their reach and overcoming obstacles—such as maintaining supply chains across the Pacific—that still hinder their growth.

3. A major office block collapses in Chaoyang, Beijing’s central business district.

Although officials would scramble to rewrite construction regulations, a disaster in the capital or another large city would change the relationship between the country’s growing middle class and the government and might threaten its ability to keep social unrest in check. True, construction standards came under fire after the May 2008 Sichuan earthquake felled many school buildings. But the reaction to that tragedy would pale beside the response to a similar one in a rich urban area with immediate media access.

4. A leading Chinese company tries to buy an iconic US technology firm (or two).

A major deal could be worth 10 or 100 times Lenovo’s $1.35 billion purchase of IBM’s PC division. If the US government blocked the sale, the acquisition’s failure could herald an era of renewed corporate nationalism in China, just as its companies were becoming more global. You could expect an aggressive increase in domestic R&D spending as the country focused on homegrown technology, as well as a chillier climate for multinationals with research operations in China.

A successful deal, by contrast, could create a truly global company, unlike anything seen before, with a multinational culture superseding any sense of national origins.

5. A restructuring of China’s telecommunications industry turns into a complete consolidation.

Regulatory failure and competitive imbalances have already reduced competition down to three major players, from four, and telecom companies are now being encouraged to share infrastructure. If stock prices continue their freefall and these imbalances remain, the inability of the second- and third-ranked players to chart a path to success could bring a full reconsolidation of the domestic industry.

6. The English Premier League football association buys its Chinese counterpart, the Chinese Super League.

What better way to signal a coming of age for China’s urban middle class? The takeover would be a major bet that this growing socioeconomic group is ready to spend heavily on sports and entertainment—a bet that could open the floodgates for investment in other consumer sectors. Wallets are already opening up: witness the Olympics and the US National Basketball Association’s exploration of franchise and stadium deals in China. Such a purchase would also show that the country is willing to bring outside expertise and professionalism into a challenged domestic industry.

7. Warming cross-strait relationships lead to a merger between the mainland’s Industrial and Commercial Bank of China and Taiwan’s Chinatrust Commercial Bank.

The reaction in Taiwan would probably be ambivalent—just another large business deal. But in China, a cross-strait merger of powerhouses like these, in banking or some other sector, would be applauded as an affirmation of its One China worldview.