Archive for the ‘China’ Category

Currency Manipulation in China

February 4, 2010

China has rebuffed American calls for the government to revaluate its currency, known as the renminbi or the yuan.  The Chinese manipulate their currency by keeping it artificially low vis-a-vis the dollar.  The consequence of this policy is that Chinese exports remain relatively cheap and American goods coming into China are more expensive than they would otherwise be.  Asia’s rising economic power is pursuing an export-led growth model to fuel its booming economy, which grew by more than 8 percent last year despite the global recession.  Leaders in Beijing know that if they let the renminbi appreciate it would almost certainly have adverse consequences in terms of the country’s trade balance; however, there are rumors that later this year China will let the yuan appreciate slightly in order to control inflation, which has been on the rise since a $585 billion stimulus package was introduced to mitigate the effects of the worldwide economic downturn that has plagued other countries.

There is little the US or other nations can do to compel the Chinese to let their currency float more.  China has helped stabilize the global economy through its continued economic expansion and facilitation of other nations’ stimulus programs, and America is dependent on its Asian partner to bankroll fiscal deficits by buying US treasurey bonds and maintaining large foreign currency reserves.  The only moves that Congress or the administration could make to punish China would be to embrace protectionism or weaken the dollar through inflationary measures such as printing more money or issuing more bonds, all of which would ultimately be counterproductive.

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Instability in North Korea

February 3, 2010

Efforts by the North Korean government to revaluate the country’s currency and undermine black market trading have led to runaway inflation.  In November of last year, North Koreans were compelled to exchange their old currency for the new one at a rate of 100 to 1.  State-owned stores in one of the few remaining communist nations failed to stock enough goods to compensate for the decrease in purchases from illicit sources, and as a result the price of food has skyrocketed, which in turn has exacerbated levels of malnourishment  and starvation.  There have been reports of protests and turmoil in the isolated communist nation, and government officials are reportedly taking measures to avert an uprising.  The extent of the unrest is difficult to determine because of the limited amount of information that leaks out of the totalitarian state.

Another potential source of instability in North Korea is the upcoming transfer of authority from dictator Kim Jong-il to his son Kim Jong-un, which is anticipated to take place in 2012.  Kim Jong-il has reportedly been in ill health for some time; a fact that may explain why he will soon stepdown.  It is unknown how competent Kim Jong-un will be as a leader, nor is it clear if other top officials in the Communist Party or the military will initiate a power struggle while the change in leadership is occurring.

The international community should have a well-developed contingency plan to deal with the collapse of the North Korean government, especially China, South Korea and the US, which are in the best position to handle the issue.  The odds of such a situation developing in the near-to-medium-term may be low (as noted above, the outside world has a dearth of information about the DPRK), but the event would be disastrous if other powers are unprepared because an immense humanitarian crisis would almost certainly erupt.  The problem could entail massive refugee flows, widespread starvation and illness, large-scale violence and unsecured nuclear weapons.

It is inherently difficult to predict when a revolution will occur.  Few anticipated that the communist regimes in Eastern Europe would disintegrate in the late 1980s, and history provides many other examples of sudden political upheaval.  North Korea’s neighbors and other regional powers may not have much warning before the North Korean government falls, so they must prepare for that eventuality even if it appears that the ruling elites in the DPRK  have firm control over the country; if other nations are caught unprepared, they, and the North Korean people, will suffer the consequences.

Walter Russell Mead Classifies Obama

January 27, 2010

In a cover article for Foreign Policy magazine, international affairs analyst Walter Russell Mead discusses President Obama’s strategic worldview and warns that the president may suffer the same fate as Jimmy Carter, whose presidency was brought down largely by foreign policy mishaps. 

Mr. Mead says that there are essentially four philosophical archetypes that US presidents can embody when it comes to determining America’s role in international affairs: Hamiltonian, Jeffersonian, Wilsonian and Jacksonian.

1. Hamiltonians are foreign policy realists who believe the a strong US government should actively pursue its strategic and economic interests at home and abroad.

2.  Jeffersonians want to limit America’s foreign policy commitments and focus on improving living conditions in the US.

3. Wilsonians are idealists who believe America should actively promote democratic values and human rights at home and abroad even if it means acting against its narrower strategic interests.

4. Jacksonians are conservative populists who distrust political/economic/social elites but tend to strongly support confrontation and the use of force when it comes to security policy.

Mr. Mead argues that the president is a schizophrenic Jeffersonian-Wilsonian.  However, an examination of his polices indicates that he is more of a Hamiltonian.  It is difficult to see how someone who bailed out the banks, enacted a huge economic stimulus package, tripled the US troop commitment in Afghanistan, ramped up the drone airstrike campaign in Pakistan, increased the military budget, downplayed China’s human rights violations and tried to diplomatically engage hostile authoritatian states like Iran and North Korea can be considered a Jeffersonian-Wilsonian.  I am not suggesting that all of the aforementioned policies are misguided (some of them are wise); I am merely disagreeing with Mr. Mead’s categorization.

Vietnam and the Chinese Model

January 20, 2010

Earlier today, four Vietnamese  political dissidents were convicted of trying to overthrow the government in Hanoi.  The men were calling for the creation of a multi-party democracy in a country governed solely by the Communist Party.  The most prominent activist on trial was Le Cong Dinh, a US-educated human rights lawyer, who received a five year prison sentence.  The harshest punishment was meted out to Tran Huynh duy Thuc, an Internet entrepreneur and blogger, who was sentenced to a 16 years behind bars.  In the past three months, 14 high profile dissidents have been tried and convicted of similar crimes.

Vietnamese leaders are essentially following the Chinese political-economic model.  Like China, Vietnam has a self-described “socialist market economy” in which free market reforms have been introduced but the government still exerts a considerable amount of control over certain sectors of the economy such as banking and heavy industry.  Efforts to increase exports and encourage foreign investment have been key aspects of the new economic strategy, and both countries joined the World Trade Organization in the past decade as means of attaining their goals.

But economic liberalization has not been combined with political liberalization in either nation.  The Communists continue to rule autocratically in a one-party system where civil liberties are highly curtained and censorship is widespread.  Examples of these practices occured earlier this month when theVietnamese government restricted access to Facebook and the Chinese government clashed with Google over the company’s refusal to continue to prevent Chinese users from viewing banned Internet sites.

It is understandable why political leaders in Vietnam have followed China’s lead.  Since 1978, when China began implementing free market reforms, the Chinese economy has grown ten-fold while averaging double-digit annual growth rates in GDP.  At the same time, the ruling elite have managed to stay in power in the post-Cold War era when democracy has become much more pervasive around the world; a feat which has been accomplished by crushing dissent and locking up those who call demand more civil liberties and greater respect for human rights.  Thus far, Vietnamese leaders have been successful in promoting economic growth (in 2006, Vietnam’s economy grew by more than 8 percent) and retaining political control since the 1990s when the free market movement started.

Chinese leaders believe that raising living standards enable them to continue their reign.  But many analysts argue that as China’s middle class expands its members will demand a greater say in their nation’s affairs and push for political liberalization, and therefore the Communist Party may have planted the seeds of its own destruction by promoting economic growth.  There is a high probability that party bosses in Vietnam will meet the same fate as their Chinese neighbors, whatever that fate may be.

China Accused of Launching Cyberattacks

January 15, 2010

Today, the New York Times published an article by David Sanger and John Markoff in which they discuss cyberattacks against Google that were allegedly launched by Chinese hackers who were probably supported by the Chinese government if the allegations are true.  The reporters speculate that the intruders were trying to do one of the following things:

1. Gain commercial advantage.

2. Insert spyware.

3. Break into the email accounts of Chinese dissidents and American experts on China who frequently exchange email messages with administration officials.

Other technology companies might also have been targets, including Yahoo, Symantec, Adobe, Juniper, Northrop and a prominent research organization with ties to the White House. 

Aside from the commercial implications of the attacks, there are also national security aspects to cyber threats.  Two years ago, a computer system in the Office of the Secretary of Defense was penetrated, and US officials believe the Chinese government was behind the effort, although there was no definitive proof that China was culpable.  The difficulty of pinpointing the exact source of an attack complicates the task of defending against them and taking retaliatory measures. 

There is a high probability that cyberwarfare would be part of any Chinese attempt to invade Taiwan or take away its de facto independence through coercion, and American military forces could be vulnerable in the event of a conflagration because they rely heavily on computer systems for things like communication and targeting.  China has already successfully tested anti-satellite missiles that could take out military hardware in space and seriously disrupt US naval and air operations if America intervened in the conflict, and there is strong reason to believe that the Chinese would use non-kinetic means for similar ends.

Naturally, American defense personnel are waging defensive cyberwarfare against hackers from China and elsewhere.  After the aforementioned incident at the Department of Defense, the US reportedly warned Chinese officials that further attacks against America’s national security apparatus would not be tolerated, which suggests that America maintains offensive cyberwarfare capabilities that could be used to retaliate against attackers or preemptively in the early stages of a conflict.