U.S. v Red China, Version 3.0

By Mark Alexander · Thursday, January 20, 2011

"As a very important source of strength and security, cherish public credit…avoiding likewise the accumulation of debt…by shunning occasions of expense…not ungenerously throwing upon posterity the burthen which we ourselves ought to bear." George Washington

Hu Jintao, president of the People's Republic of China (as designated by the central politburo of the Chinese Communist Party, not the Chinese people), arrived in Washington this week for a lavish state soiree with Barack Hussein Obama and company. Hu and Obama will meet eight times, culminating with an extravagant state dinner underwritten by a loan from China.

After China's Olympic coming out party in 2008, Obama kow-towed to Red China with a visit in November 2009. Obama expected Hu to reciprocate in 2010, but the Chinese dictator did not -- a clear signal that Jintao would come here on his own terms in his own time.

It was no small irony that Hu arrived in Washington on a China Air Boeing 747-400, a very large affirmation of U.S. trade relations with China.

Hu's primary objective on this visit is to promote the establishment of a "G-2" partnership, conferring the honor of the new world order upon the two most powerful economies in the world (assuming Europe is not considered one economy, which would demote China to the number three position).

Obama will chatter about human rights, particularly the oppression in Tibet and the imprisonment of dissident Liu Xiaobo, who was awarded the 2010 Nobel Peace Prize in absentia because he was "otherwise detained." Expect to hear about the incarceration of human-rights attorney Gao Zhisheng, among countless others. But these concerns are tantamount to watching a few snowflakes in a blizzard. Complaining to Communists about human rights violations is a waste of air.

There will also be talk about the impending environmental catastrophes created by China's economic expansion, and, of course, China's impact on global climate change.

However, U.S. negotiators are rightly more concerned about bilateral trade, the valuation of U.S. and Chinese currencies, Chinese restrictions on export of its natural resources, re-establishment of military-to-military communications, China's substantial military buildup and Beijing's influence in North Korea, where the Chinese plan an economic consortium, undermining U.S. efforts to isolate Pyongyang's dictator, Kim Jong Il.

Hu, however, is more concerned about China's substantial investment in the U.S., a two-edged sword, which is the trillion-dollar gorilla hovering over every other discussions or negotiations between the two nations. The size and strength of that gorilla is a game-changer.

"We have an enormous stake in each other's success," Obama proclaimed in his press conference with Hu. "Nations, including our own, will be more prosperous and more secure when we work together," he said.

Hu concurred, saying, "We both stand to gain from a sound China-U.S. relationship, and lose from confrontation."

The evolution of U.S./China relations over the last 60 years can be characterized by three distinct eras.

In 1949, a Soviet-inspired Marxist/Stalinist revolution subordinated the Chinese people to the will of a Communist tyrant, Mao Tse-tung. Mao's 25-year reign of terror resulted in the deaths of some 30 million Chinese during his "Great Leap Forward" to centralize China's agricultural production. He also supervised the near-complete eradication of China's cultural and intellectual advances during the "Cultural Revolution" of the 1960s, when his Red Guard murdered more than a million Chinese academic and cultural leaders and exiled the rest to communal farms for "re-education." (Indeed, the Red on the Chinese flags flying in our nation's capital this week is symbolic of horrendous bloodshed.)

During this infamous era of tyranny, the U.S. and Red Chinese governments were Cold War adversaries of the first order.

A second era of U.S.-Sino relations began in 1972, when President Richard Nixon traveled to the People's Republic of China as a first step toward opening diplomatic channels and normalizing relations. This rapprochement was codified over the next three decades with accelerated trade agreements. The strategic aim of these trade arrangements in world markets was to create economic bonds that would deter China from expansionist mischief.

That strategy worked reasonably well until 2008, when Leftist economic policies helped bring about a crisis of confidence in the U.S. economy and a politically fortuitous collapse of the U.S. securities markets. Obama and his socialist bourgeoisie rode that crisis into office.

Subsequently, Red China has underwritten the largest share of Obama's socialist plan for economic recovery, and now holds more than $1 trillion in Treasury debt (about 7 percent of our total outstanding debt). Of course, Obama's plan has accomplished little other than saddling future generations with enormous amounts of debt.

China's U.S. debt holdings have, however, given rise to a new era of relations with China, replacing the Cold War's mutually assured destruction (MAD) nuclear standoff doctrine with a new version of MAD based on an economic standoff doctrine.

Hu says, "We should abandon the zero-sum Cold War mentality," but the growth of its military capabilities certainly does not support that suggestion.

The Chinese had no means of attacking North America with nuclear weapons during the Cold War, and they relied on the protective umbrella of the Soviet Union's offensive capabilities. But in this new era, the Chinese have the ability to manipulate their massive U.S. debt holdings; should they cut off their U.S. credit line and/or dump their U.S. securities, it could propel our economy into a tailspin.

The power of China's economic leverage can't be understated, and history provides no record of a Communist nation holding such leverage over a Capitalist nation. Red China is well aware of the cards they hold in this latest era.

Both parties know, however, that should China take any action that is detrimental to the U.S. economy, the result would have dire implications for the welfare of their own economy, given that Chinese exports depend on a healthy U.S. economy.

There are 1.3 billion Chinese, 800 million of whom are, in effect, slave-laborers in Chinese factories, and receive an economic benefit of about $2,400 per year. Consequently, about one billion Chinese live in abject poverty. The potential for civil unrest is substantial.

If the Chinese Communists want to forestall a national revolution, they must make every effort to improve the standard of living of those laborers or risk widespread civil unrest. Such an improvement will require economic expansion in the range of 10 percent annually -- a daunting task that includes other risks, including runaway inflation. (In 2010, China's GDP grew 10.3 percent.)

However, recall if you will that Red China is still under the oppressive thumb of Hu's Communist regime, and they do not answer to "the People." Mao may be dead, but his iconic image is ubiquitous in both urban and rural China, even appearing on the face of every denomination of Chinese currency. The Russian people tore down statues of V.I. Lenin soon after the collapse of the Soviet empire. The prevalence of Mao's image is a good indication that the Red Chinese government is still alive and well, despite reports of its imminent demise.

Moreover, the Red Chinese government, like all tyrannical regimes, does not handle civil unrest politely, as aptly demonstrated at Tiananmen Square 22 years ago. A likely response to civil discord would be the absorption of unemployed Chinese into the Red Army and service corps, bolstered by a resurgence of Communist nationalism. Predictably, that would be followed by some "creative activity" in the region to take the minds of the Chinese people off their empty stomachs.

Thus, China's rapid military expansion in the Pacific is a looming threat for Australia, Japan, Taiwan, South Korea, Indonesia and, of course, the U.S. and our critical national interests in the region.

It has been said that "as goes the U.S. economy, there goes the world." The same can now be said of China, and this demands the full and undivided attention of every Western nation.

In the end, however, amid all of the posturing and pretense, the most valuable natural resource that the United States has in limitless quantity is Essential Liberty. Though Obama and his Leftist cadres are doing all they can to constrain that resource, it is the export of Liberty to China that will best protect our own national interests.

Comments

Dona Hinson

Whoever is consulting with our Pres. and coming up with the nations to visit should be fired. Internationally for at least 100 yrs. the U.S.A. has known China is our enemy. Let's get back to what we know and not omit the knowledge we have derived thru what our other leaders have accomplished. Pres. Truman was a wise and honest person.

Posted January 20, 2011 at 12:41:08 PM

Joe

The one item Mr. Alexander neglects to discuss is the Chinese economy's reliance on exports, primarily to the USA, that severely limits their options. Should they choose to "Dump" their T-bonds and crash the dollar they will crash their own economy right along with it. Hu Jintao is playing poker against the joker.

Posted January 20, 2011 at 1:09:21 PM

Penny

This is an excellent article and I am glad Mark added that the Chinese would suffer, too, if they tried to take any action. I have read a recent article in John Mauldin's Outside the Box written by Neil Howe and Richard Jackson called, Global Aging and the Crisis of the 2020's. It ends up saying China will be older then the USA quicker. I guess what I am trying to say, is I don't trust Hu and that I think he is in a way trying to bluff the United States.

Unfortunately, we have Obama in the White House and I think the Chinese figure they have an easy target with him.

Posted January 20, 2011 at 1:29:30 PM

Ray Mims

In response to Joe's comment (1/20/11 at 1:09pm), Mr. Alexander does indeed imply this with his statement "Both parties know, however, that should China take any action that is detrimental to the U.S. economy, the result would have dire implications for the welfare of their own economy."

Posted January 20, 2011 at 1:30:37 PM

ek sprau

I agree. I'm little fuzzy as to how we borrowed from them but there's no dispute that we did. I hear 7% of our debt is held by them. I think the number is undervalued.

We have no options. We can do what some in Congress has floated, walk away from our obligations like some home owners has done, default...

It will be us against a world. We go down, so does everyone. This is our only card we can play.

The question is, do we want to play it, should we play it? what is will mean for us is a depression.

For the both houses, they will not want to take the blame. Now both houses are part of the problem, let's raise the debt ceiling.

there is a economic formula, to complex to go into here. what it boils down to is when we reach 40% of GNP, depression will be the end result. What Oboma did with his stimulus, what Bush did with his only forestalled what they knew would happen. It's the time homered game of pass the buck and we will pay.

Given the current state of affairs, depression usually leads to unrest and in this political climate, maybe a civil war.

I am not for cuts in social programs (deep ones), however even I can see what has to be done. it galls me to say this, Bill O'Reilly has a dueable plan that may work when it comes to cutting the deficient. Ask him to explain his plan and you will see he has a workable plan. The key is will both sides of the house build upon it?

Posted January 20, 2011 at 2:05:56 PM

Richard Arena

China is playing a waiting game. As their economy grows, soon or later Chinese domestic consumption of their productive output will far exceed sales to the US consumer. As that happens China will need the American consumer less and less to sustain its economy. When they're ready they'll decouple the Juan from the dollar and we Americans will no longer find Chinese goods affordable.

There is still time to turn it around but it will take courage and decisive leadership. Through our tax policy we are deliberately undermining the engine of our economic power stability - domestic manufacturing The United States has the forth highest corporate tax rate (40.0%) in the world behind Japan (42.0%), Italy (40.3%) and Belgium (40.2%). Remove US Corporate taxes and suddenly "Made in the USA" would be extremely price competitive. Manufacturers would rush to set up shop in the US. Instead of having millions of unemployed to worry about, we'd be looking for labor.

The average Chinese worker makes $2,400 a year, but much of their production is highly labor intensive - our more automated manufacturing systems are more productive so we can compete when taxes are factored out.

So, why don't our elected representatives remove the tax burden on corporations and allow our economy to boom? Because that would require an overhaul of the entire tax system. 60,000 pages of indecipherable tax code is the tall grass where advantages for the privileged are hidden in plain view.

Posted January 20, 2011 at 2:17:55 PM

Bob McBride

Everyone should keep in mind that the debt we have to China is in the form of Treasury notes. They are not "demand" notes or loans, so the Chinese cannot simply say we are calling your loan, pay it back now. They must either sell on the open market (probably at a loss of some portion of the principle as the market would be flooded if they sell) or wait until maturity to get their money in US dollars (which will probably be devalued by then.) Of course, they do not have to buy any more Treasuries, so they can hurt us by being out of that market, driving up the interest rate. Our best strategy is to follow the rule of holes. When in a hole, stop digging. While many feel failing to raise the debt limit could cause a lot of disruption, there is a way to stop digging by using the debt limit as a tool. Instead of passing a new single debt limit that will "cover us" for months or years as we have done in the past, Congress could pass a debt limit that eased up over time. So if we think we need $100 billion of additional debt a month, we say the debt limit is raised by $100 billion dollars in the first month, and start working that down. So the debt limit, now at 14.2 trillion, goes to 14.3 trillion in the next month, then 14.38 trillion, then 14.45, then 14.5 trillion, etc., with each monthly increase being less than the previous monthly increase, until we reach a zero increase, and we stop adding to the debt. This avoids the "crisis" of not meeting obligation, and starts a rather quick process of finding things to cut in order to stay under the limit.

Posted January 20, 2011 at 2:20:03 PM

John

Dona Hinsen, Make 1 mistake China has not been our enemy for more than 100 yr's. They were our alie in WWII and the covernment that was in place at that time is very similar to the one that fled to the main land and was set up as Taiwan and is still our alie.

Posted January 20, 2011 at 2:33:47 PM

NeoConVet

Red China is becoming more outwardly agressive with it's internal hungar to support the expanding industrial complex and expectations of it's growing population. China has a problem in meeting these needs, namely a lack of Natural Resources (other than people) to support their growth efforts.

There-in lies the challenge to the rest of the world. This ravenous hunger for these resources will likely outweigh the fiscal concern of the US debt held by the Chinese. If nothing else the debt will be used as a club to limit our (US) responces almost like a replay of Hitlers seizure of the Sudatenland prior to WWII.

This new Chinese agression is reflected in the recent convinent announcement of their new "Stealth Fighter J-20", the newly announced "Ship Killer" long range missle and the near completion of the reworked 55,000 ton aircraft carrier. These and the overall rapid increase in military spending reveal an intention (at best a capabilty) to go after these resources. The Red Chinese will take what they need ... soon ... if needed by Cohersion, Threats and/or FORCE.

The intial flash points may be the Spratly Islands oil fields of the South China Sea, and possibly a larger chunk of S/E Asia qwith it's minerals, tin, rubber etc.

The US with it's crippling debt, reckless social spending and shrinking military will be hard pressed to counter the move of the Chinese to take what it needs. Our Navy as an example is down to about 285 ships of all classes from a 450 ship Navy a decade ago. Our aircraft are rapidly aging, the F-16 is 20 years old, our B-52 bombers are nearly 60, the air refueling tankers are over 30 years old.

In short we are losing the capacity to "project power" and inviting agressive enemies of freedom to step into the opening...and they surely will.

Posted January 20, 2011 at 2:56:07 PM

Mike McGinn

@Joe

What you fail to see in this game of "chicken" between the US and China are two very important facts:

1) The Chinese government has already demonstrated a propensity to not give a s#%@ about their people. They've eradicated 30 million in the past. Why would they be concerned about a temporarily crushing blow to their economy and their people if they can win their long term goal...the downfall, defeat, and eradication of the United States of America?

2) Unlike the US, which hardly has the attention span to remember yesterday's news or to plan much further than the next quarterly financial report or election cycle, the Chinese have demontrated an ability to set and obtain goals that are decades in the making.

If the Chinese felt confident that in 50 years they could become the dominate world force for centuries to come by crushing us with a dumping of our T-bills, even at the expense of a relatively brief decade or two of economic difficulty at home, what do you see stopping them? We have a hard time feeling confident about anything even 50 days in the future.

The ultimate question is who's right about the future. Are Richard Arena's comments above correct, in that China is just biding its time as it grows a self-sustaining economy, or is China waiting for the opportune moment, where it sees the greatest weakness in us vs the greatest strength in themselves, to deliver a crushing blow to our economy, regardless of the cost to themselves?

Either way, forget about learning Spanish to survive in America's future. You might want to start learning Mandarin. The smart people that I know are.

Posted January 20, 2011 at 3:30:38 PM

Rick_in_VA

Obama's welcoming of president Hu sure is a far cry from the "welcome" Benjamin Netanyahu received on his arrival in Washington. Is this a case of loving our enemies and hating our friends?

Posted January 20, 2011 at 3:46:51 PM

S.S.McDonald

Hu is not here to listen; he is here to dictate. Hu is in the financial driver's seat and he knows it. Window dressing for the 5th column media will be human rights and how forceful Obama appears. But it is totally smoke and mirrors. Obama will listen, take notes, and make changes directed by Hu

Posted January 20, 2011 at 5:43:31 PM

Frank E.

01/20/11

Barack Hussien OBAMA gets friendly with,President

Hu,The COMMUNIST Repulic of China's Leader and the

political enemy of UNITED STATES of AMERICA.

Posted January 20, 2011 at 7:06:59 PM

Jane

Just a small comment here after reading the above re China's willingness to set long-term goals which can take years to achieve: I've been reading how, due to her strictly-enforced "one child" limit, and, due to the preference for boys, there is now something of a shortage of young women for China's young men. This will cause all sorts of social problems. I thought the Chinese were smart--couldn't they see this coming down the road?

Posted January 20, 2011 at 8:40:38 PM

Jeff

I've only been in China for four months now, but I don't see the country described in the article and in the comments.

I won't defend the Chinese central government and agree that more freedoms are in order, but

slave laborers? Hardly, no more so than most Americans are slaves to the banks that own their homes and the federal government that confiscates their wages. Is the standard of living lower here? Yes, but most workers are happy and content.

Posted January 20, 2011 at 8:46:53 PM

jim coville

In U.S.v Red China you again display a your unique ability to make the complex understandable. My congratualtions and sincere thanks.

Jim

Posted January 20, 2011 at 9:22:57 PM

Gary B Hulsey

Mark, your succinct review of US-China history and description of today's status was informative. Your magnificent and unexpected conclusion was what sets you apart from the typical pundit. Exporting liberty - a beautiful concept.

Posted January 20, 2011 at 11:13:54 PM

Howard Last

MAD was championed by the RINO's and CFR members. Does the name Kissinger come to mind? And remember who pushed the Start Treaty? Is Start two in the works?

Posted January 20, 2011 at 11:32:31 PM

Kevin

Joe,

Read the entire article; he does address the damage to the chinese economy if the American economy goes down the tubes.

Unfortunately, a totalitarian regime that has no reluctance to wholesale murder of its own people has several options to weather such an economic downturn.

Posted January 21, 2011 at 12:08:42 AM

Mike McGinn

@ Jeff

"Yes, but most workers are happy and content"...

...And so are most hogs and cattle before they are sent to slauter.

I'm not sure what you are doing in China, or how much you've studied about that country before you went over, but 4 months is hardly enough time to get to know the place.

People who visited Russia in the 20's and 30's raved about the place...model of efficiency...lots of happy, smiling faces. I think we all know better today.

So, are you actually getting the Patriot Post in China? I'm surprised that the censors permit access!

Posted January 21, 2011 at 12:24:35 AM

Jeff

@Mike McGinn

I have no illusions of being some kind of expert on China; I'm simply saying there is not quite the level of repressive some think there is. You might be surprised at the level of freedom here and the booming middle class which is I think the key to unlocking even more essential liberty within China.

Posted January 21, 2011 at 3:19:59 AM

FrankRizzo

I'm sitting here in China. Doing a Steel Rolling Mill installation. The difference between the haves and the have nots is huge. $400,000 bentlies and bmws vs, bicycles and living in company apartments. Even under stairwells there are apartments. 4 people per room.

In 2 generations the population will be cut in half. Should be interesting.

They cut corners where ever they can. According to John's 800 million poor, they are dumber than a box of rocks. They must not use them in averaging education stats.

Driving is organized chaos.

Why isn't the US reinvesting in our manufacturing? Did we give up?

Posted January 21, 2011 at 7:58:27 AM

JLG

@Jeff -- you hint at the crux of the matter.

If freedom is the goal, then a "booming middle class" is certainly not a bad thing, but it's not the main thing. If you want to find the main thing, go to China and visit an (illegal) house church on any given Sunday. Those folks have discovered the true value of the Truth that sets men free. When folks find that freedom, it doesn't matter whether they ride a bike or a Bentley, they are free indeed. And that kind of freedom trickles up. That kind of freedom founded the U.S.A., collapsed the U.S.S.R., and, Lord willing, it will bring change to China.

So, don't stop working...but remember to "pray without ceasing."

Posted January 22, 2011 at 11:54:16 AM

James

The Chinese take over of America will be as subtle as the Mexican "invasion" or Chinese water torture, One drop at a time, until they can decide which politician will be our elected "leader". Then we will dance their tune and have a minority interest in our government. Haven't we seen enough reaching across he aisle?

Posted January 23, 2011 at 4:49:43 AM

Mainerinexile

This asnwers the question: "Hu are you, Hu, Hu, Hu Hu? We really wanna know..."

Posted January 24, 2011 at 11:26:44 AM

Jon

Jeff,

"...slaves to the banks that own their homes"? C'mon, man. Many Americans asked banks for money so they could buy bigger homes or nicer toys, with the promise they'd give the money back with an amount for the bank's profit and risk added. They secured the loan with the home. Then, some Americans said, "Never mind; my greed blinded me and I made stupid financial decisions. So, I won't give you your money back and you're evil if you take the house I promised." Then, they cried out about predatory loans and evil banks. Plus, they asked for some of my money so they wouldn't feel uncomfortable. Slavery? They're not slaves; they're liars, frauds and thiefs. Their avarice found them out. The working man who honors his contracts, obeys the laws, carries his weight and pays his taxes is the slave of a people without virtue.

Posted January 24, 2011 at 12:52:26 PM

IowaFlag

Hu has a delicate balancing game to play. He must continue to grow China's economy at breakneck pace to pacify the masses, but eventually the middle class will grow to the point of waking up and taking over. The Party's remedy to that (and the surplus of military-age males) will be nationalism and expansionism.

Mr. Alexander is right that exporting Essential Liberty to China should be a major policy focus - but it's a long-term proposition.

Unfortunately, even if China's future government goes so far as to adopt a copy of our Constitution, China's interests and ours will remain diametrically opposed in many issues and areas of the world.

We must do what we can to promote Liberty in general, but the real answer is in the house churches. Only when Jesus Christ is the chief influencer in both China and the US will our friendship be true.

Posted January 24, 2011 at 1:51:22 PM

Craig

Jon,

I love the last line! Simply pure truth.

Posted January 25, 2011 at 12:44:02 AM

Not a prophet

13 "The sixth angel sounded his trumpet, and I heard a voice coming from the horns of the golden altar that is before God.

14 It said to the sixth angel who had the trumpet, " Release the four angels who are bound at the great river Euphrates. "

15 And the four angels who had been kept ready for this very hour and day and month and year were released to kill a third of mankind.

16 The number of the mounted troops was two hundred million. I heard their number." - Revelation 9:13-16

"12 The sixth angel poured out his bowl on the great river Euphrates, and its water was dried up to prepare the way for the kings from the East." - Revelation 16:12

Back to Jerusalem!

Posted January 25, 2011 at 8:23:06 PM

Abu Nudnik

Hu's on first?

Posted January 27, 2011 at 1:48:22 PM

Sir George

Mark; right on the money, as usual. 'Tis a pity that the unenlightened,(us), see clearer than those enlightened souls,(them), of the Inteligensia!

S/F gw

Posted January 31, 2011 at 8:02:05 PM

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