July 26, 2023: Despite the Russian invasion of Ukraine last year, the United States does not consider the Russians a major military threat. China is another matter. China has, since the 1990s modernized and expanded its armed forces to the point where, on paper and not knowing how bad Chinese military corruption is, China has stronger ground, air and naval forces than Russia. Chinese forces have not been in combat since the 1970s and back then found the less numerous but more experienced and motivated Vietnamese surprisingly effective. Russia encountered a similar situation in Ukraine, just as they did in Chechnya in the 1990s and Afghanistan a decade before that.

A major difference between China and Russia is that the Chinese study and learn from their mistakes and the mistakes of others. Russia did not pay attention, especially to what was going on in Ukraine between 2014 and 2022. China has paid attention to how Ukraine prepared and how the West responded. This is important for China because of their plans and efforts to take possession of Taiwan and the South China Sea. Taiwan was also paying attention, especially since 2014 and somewhat increased its preparations to defeat a Chinese attack. Massive sanctions on China would be another matter because China is now the largest trading nation in the world, followed by the U.S. and Germany. These three nations are the only ones with trade exceeding a trillion dollars. Russia was 19th before the sanctions and, with the current sanctions, will be fortunate to remain in the top 30 nations in GDP size. If China did face the degree of sanctions Russia received, the results would be catastrophic because, while the Chinese economy is much larger than Russia’s, it is much more sensitive to major disruptions. While China is still a communist police state, there is greater risk of major internal unrest if the economy is mismanaged. Incurring heavy sanctions is seen as mismanagement.

The war in Ukraine has confirmed the inferiority of Russian weapons compared to Western models. For years some countries, like Pakistan, received most of its weapons from China or Russia. The Chinese gear is superior to what the Russians produce but still inferior to Western systems. Pakistan is China’s largest export customer for weapons and Pakistani military leaders now want to repair relations with the Americans, who withdrew all military aid after decades of being lied to by the Pakistani military about their support for Islamic terrorism. That support backfired with the new Afghan government, installed with much help from the Pakistani government, threatening war with Pakistan over border disputes and growing anger inside Afghanistan against Pakistan because of the even greater economic collapse in Afghanistan.

The Ukrainian conflict had other impacts on China. In 2022 Taiwan sent a 28-page booklet to all households on how to behave if China attacks. The advice was similar to pamphlets in Sweden, Finland and the Baltic States that were distributed before the invasion of Ukraine. The Taiwanese now plan to resist, even if some or all of Taiwan Island is occupied and need the cooperation of the civilian population to do that.

The booklet for all households is but the latest effort to defeat a Chinese attack. Taiwan has been rearming for over a decade and even managed to secretly procure all the components it needed to build its own submarines, something the Chinese were shocked to discover. Now Taiwan has distributed the pamphlet on how to keep fighting if the Chinese get ashore.

China was surprised at the failure of Russian forces to quickly conquer Ukraine and the fierce resistance that tore apart the invasion force. The Taiwanese have been particularly encouraged by the success of the Ukrainians in developing a defense that worked against a delusional and overconfident invader. Not quite Finland in 1940 but close, and Ukraine is an updated version of the 1940 example. Taiwan wants to be the East Asian model for derailing invasions by larger neighbors.

Taiwan has good trading and diplomatic relations with many of the smaller nations near Russia that pioneered the concept of preparing for the worst and winning, not just surviving. This has become a common and successful strategy among small European states. Small East Asian nations like Taiwan, Singapore and South Korea have the same problem and are all studying the Ukrainian war intently for lessons they can use.

Trade Wars

Chinese exports to the United States were $582 billion in 2022 and continued declining in 2023. This trend is expected to continue downward because of economic and political problems inside China and the growing number of foreign countries, especially the United States, moving production from China. This work often goes to other countries in the region. Even India is benefitting from this exodus. China is also seen as an unreliable customer and supplier of electronic components. Reliability is important and the main reason for reducing economic ties with China. An example of this is the American decision to cut exports of key microchip manufacturing to China and spend a lot of money to do more microchip manufacturing in the United States or Mexico. This is more expensive but much more reliable, and will have the welcome effect of reducing potential Chinese competition and military tech enhancement. Now China faces the prospect of having to import increasingly scarce vital foreign items if it invades Taiwan. China’s four largest trading partners are America, South Korea, Japan and Taiwan. All four have grown wary of China as a trading partner.

Chinese GDP growth has been declining, often faster than government predictions, for nearly a decade. Before the covid19 appeared in 2019 China expected GDP to reach at least six percent GDP growth in 2020. Despite the economic problems the 2020 defense budget increased 6.5 percent, to $179 billion. In 2019 the increase was 7.5 percent. For 2023 the defense budget is $224 billion. This is 7.2 percent more than in 2022.

Economic Damage

While the military gets more money, it is at the expense of repairing the economic damage done by months of covid19 related quarantines. The previous three decades of rapid economic growth was accompanied by a lot of corrupt activity. Before the covid19 crisis China hoped to maintain GDP growth of at least six percent while at the same time continuing to safely reduce (“deleverage”) the huge number of bad loans local governments and corrupt banks have taken on since the 1990s. That plan proved very difficult to implement.

The economic decline began in 2018 and could be measured in many aspects of economic activity, like production, orders for raw materials, finished goods or construction and so on. Another important factor was the sentiments of people running the economy as well as consumers. Chinese stock markets were down over 30 percent by the end of 2018 and for the first time in three years profits of industrial firms took a dive. These trends continued into 2019, made worse by trade war with the United States and economic fears over the fate of Hong Kong. The Chinese consumer grew more cautious. Retail sales were down overall, despite increased use of online sales via Alibaba (the Chinese Amazon). Chinese have been hearing the rumors or witnessing the realities of economic problems, such as corruption, bad loans, foreign firms leaving, labor unrest, unreliable economic statistics and so on and have noted the government has no quick fix, or maybe no fix at all. Then came covid19 at the end of 2019. One reason local (in Wuhan) officials tried to conceal and downplay the unexpected covid19 virus threat was the proliferation of bad news since 2018 and the national government was demanding that local officials do better or else.

Things did not get better and after three years of covid19 the damage to the economy was much worse than expected. Before the virus hit thousands of Chinese firms were faced with bankruptcy and there was insufficient lending capacity by Chinese banks to prevent the bankruptcies and loss of jobs. So far, the government has not risked widespread bank failures by ordering new loans anyway. In part that is because the government has also decided to risk losing the financial benefits of Hong Kong by canceling its special status. It was that special status and lack of corruption that brought many foreign banks, and other businesses to Hong Kong. With Hong Kong operating like the rest of China there is much less reason for foreign firms to remain in Hong Kong.

The trade-war with the United States was not an isolated incident because many other trading partners had growing problems with Chinese exports and were unable to obtain much help from the Chinese government. This backfired on China when they tried to evade the American decision to cut exports of key microchip manufacturing to China, and spend a lot of money to do more microchip manufacturing in the United States or Mexico. This is more expensive but much more reliable, and will have the welcome effect of reducing potential Chinese competition and military tech enhancement. China tried to get around the microchip manufacturing restrictions but was unable to do so. The few countries that were key to the American ban were equally angry at Chinese trade practices and fears that Chinese control of microchip manufacturing would be used to develop and manufacture microchips designed for use in weapons. China is still seeking ways to evade these restrictions but there aren’t many options. All the nations that design and manufacture (or want to manufacture) microchips side with the Americans and also fear being threatened by China. This includes South Korea, Taiwan and Japan as well as other Asian nations that host foreign microchip-related industries or have developed their own.

The Chinese microchip industry is still an important source of many microchips and many users, including those in the United States, fear disruption of their access to Chinese microchips more than they do any future plans China might have for microchips. China retaliated by reducing its exports of gallium and germanium, two minerals essential in the manufacture of microchips. China is a major producer of these minerals, mainly because it sells them at an artificially low price. This is fine with their customers. By reducing gallium and germanium exports, China makes it more attractive for their export customers to obtain gallium and germanium locally or from one of the nations that still exports gallium and germanium. In effect, China has expanded its microchip trade war. This sort of thing has been costing China a growing number of export customers and leading many foreign companies operating inside China to relocate to other nations, usually in East or Southeast Asia. China was once a prime location for foreign companies seeking to move some of their manufacturing operations offshore. Now those offshore operations in China are being reshored to other countries.

July 25, 2023: China granted Pakistan some debt relief by deferring repayment of $2.1 billion in loans from China for two years. This included suspending interest payments. Pakistan is the largest export customer for Chinese weapons and the destination for billions in Chinese construction investments. Foreign lenders and investors, especially the IMF (international monetary fund), China and Saudi Arabia, have lost patience with Pakistan and are unwilling to take further financial risks there. One financial risk is the $77 billion debt to China and Saudi Arabia. This money is supposed to be repaid between 2023 and 2026. Pakistan doesn’t have the money to make the payments and is trying to negotiate an extension. Until this issue is resolved there will be no more loans or investments from China or Saudi Arabia. A side-effect of all this financial turmoil is high (47 percent) inflation which is felt by all Pakistanis. The primary cause of all this financial distress is the Pakistan military, which is currently controlling the government in Pakistan. The excessive military influence on Pakistani politics has been an issue since Pakistan was created after World War II. China and India did not have that problem, for different reasons. The Indian politicians insisted from the beginning that the military remain subservient to the elected government. The Chinese communists took control of the Chinese government after World War II and continually reminded the military leaders that their main job was to keep the CCP (Chinese Communist Party) in power. In Pakistan the parliament could not control the generals, who periodically took control of the government for a few years and then let the politicians return to power. During those periods when the generals were in charge they often made poor economic decisions. One was to purchase more weapons from China than Pakistan could afford or pay for. Now Pakistan has more debt than it can handle and related economic mistakes have put Pakistan in a debt crisis that requires an expensive and politically difficult solution. The major lenders will have to take losses and Pakistan will have to change and reduce what it spends, especially on the military. Unless the Pakistani economy is put right there is increasing risk of popular violence and a civil war.

July 23, 2023: China continues to escalate its military exports to Russia. Early in 2022 China said it would not send weapons to China but could supply supplies like helmets, protective vests and battlefield medical equipment and supplies. By the end of 2022 China was selling Russia more dangerous military items. These included dual-use electronic equipment and some decidedly more dangerous items like electronic signal jammers and replacement parts for combat aircraft. China is ignoring any criticism of its military exports because China wants to see Russia at least survive its poor decision to invade Ukraine. China openly criticized Russia for this but wants to minimize the damage. China has long maintained trade relations with Ukraine.

July 20, 2023: A year before Russia invaded Ukraine, senior American military commanders admitted that the U.S. was woefully vulnerable to enemy (Chinese and Russian) electronic warfare weapons during wartime. Recent wargames, accurately representing these enemy capabilities, finally got enough attention from senior commanders to make a serious effort to deal with the problem. These wargame exercises showed that China could shut down most American satellite and ground-based electronic communications and make American forces much more vulnerable than expected. This was not a new problem. For over two decades similar realistic wargames demonstrated this growing vulnerability but the senior military leadership did not respond effectively, or even admit there was a problem. There was, and it’s been around for over half a century. In the 21st century satellite surveillance and communications are crucial. China has taken the lead in developing methods for disrupting enemy access to these satellite resources and minimizing the damage done to Chinese satellite capabilities. The Chinese are also emulating the Cold War Russian forces and training to continue operating under conditions where communications and aerial/satellite surveillance is diminished or absent.

July 17, 2023: China’s ongoing border dispute continues. Both sides have sought to keep this dispute from escalating into a major war. That doesn’t mean Indian and Chinese troops have not been fighting each other, they have just kept non-lethal, not non-violent. Both sides now use clubs, shields and occasionally rocks when they clash. There have been a few deaths, but these have been accidental. Rather medieval and a lot less lethal than the alternative. Some disputed border areas have come under Chinese control. Nothing extensive and all of it high in the generally uninhabitable mountains the border runs through.

July 14, 2023: The Russian 2022 invasion of Ukraine alarmed other countries that were created when the Soviet Union was dismantled in 1991. The Stans of Central Asia have another option; China. The Stans have been very receptive to Chinese diplomatic and economic cooperation. This bothers Russia, but not to the extent that threats are being made, as was the case with the former imperial provinces to the west. The five “Stans” of Central Asia; Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) have welcomed Chinese economic activity and welcomed that because it would help with their economies and discourage the Russians from trying to dominate the region like they have done since the 19th century. The invasion of Ukraine was accompanied by some Russian officials speaking openly about who was next. The Stans were usually at the top of the list.

The Stans also have a problem with never having been democracies. When the Russians conquered them in the 19th century, the local governments were monarchies or tribes. When the Soviet Union collapsed in 1991, their formerly Soviet leaders held elections and manipulated the vote to get themselves elected "president for life." But many people in the Stans want clean government and democracy, as well as continued independence from Russia. China is no help with that because the Chinese prefer dictators.

July 11, 2023: Suddenly, China is facing an economic threat from neighboring India. Here, the local GDP nearly doubled in the last decade; from $1.7 trillion in current dollars to over $3.5 trillion now. This made India the fifth largest economy, surpassing Britain ($3.2 trillion) and France ($3.2 trillion). The rest of the top five are the U.S ($21 trillion), China, Germany ($4.1 trillion) and Japan ($4 trillion). Chinese GDP growth is slowing although in the last decade it more than doubled from $6.1 trillion to $18.3 trillion. Over three decades of spectacular economic growth in China resulted in the Chinese GDP becoming over fourteen times larger than it was in 1989. In that same period the U.S. GDP doubled. After World War II India had a larger GDP than China and never felt the same urgency as China to modernize and expand its economy until the 1990s, when the government changed its socialist economic policies and switched to a free market economy. This is what China had done more than a decade earlier, with spectacular economic results. This included a sharp increase in the number of Chinese entering the middle class for the first time.

July 9, 2023: India has abandoned its former neutrality on the Chinese claims on the South China Sea. India now openly sides with the Philippines and other nations in the region opposing the Chinese claims.

July 8, 2023: China is building its first large icebreaker, a ship type it had never built or operated before. The Chinese ship will be similar to the new Russian Lider class ships but without the nuclear power. The Chinese heavy icebreaker will be a 90,000 ton ship built in China for China to use in assisting other ships to navigate the Arctic waters off northern Russia. The route is 6,400 kilometers shorter than the conventional route via the Suez Canal. The Suez route also has to deal with the ship size restrictions for using the canal. There are also transit tolls, which can be as much as half a million dollars for a very large ship.

China already has two smaller (21,000-ton) research vessels with limited icebreaking capabilities. The first one was built in Ukraine during the 1990s while the second one was built in China in 2018. Russia has only launched one of the nuclear-powered Liders, in 2019, and it has not entered service yet for the usual Russian reasons of limited money, design defects, poor construction standards and corruption.

July 7, 2023: The Myanmar (Burma) military government is sustained by China, which provides all the fuel, bombs, shells and other munitions needed to keep the fight going. Burmese troops are reluctant to fight when they encounter armed resistance, which continues in the tribal areas. The urban rebels are slowly arming but still depend on a lot of demonstrations by unarmed protestors. So far the army and police have killed over 2,000 people and imprisoned over 15,000. Aside from China, most nations in the region want the military government to free the elected and appointed officials of the overthrown government. Without Chinese support the Burmese generals could not have sustained their coup and might not even have attempted it without assurances of Chinese support. India and other nations bordering China see the Burma coup as a threat.

July 5, 2023: During 2022 China increased its nuclear warhead inventory by 15 percent to 410 warheads, China has the third largest nuclear arsenal in the world, behind Russia’s 4,489 warheads (including 12 added in 2022) and America's 3,708. The remaining nuclear powers have smaller warhead inventories. France has 290, Britain 225, Pakistan 170 (five added in 2022), India 164 (four added in 2022) Israel 90 and North Korea 30 (five added in 2022).

July 2, 2023: Relations with neighbor Russia are complicated by the fact that, for the first time in modern history, China has a larger and more powerful military. One of many reasons for this is because China took a different approach to recruiting, training and organizing their forces. For example, there is the difference in how each country manages their forces. For example, in the 1940s, the Chinese used the old Soviet (communist era) rank system but still kept some lower NCO ranks and a tradition of career NCOs. As a result, China never lost its old school tradition of sergeants while Russia did after World War II. In 2009 China switched over to the Western system with nine enlisted soldier ranks. Six of those ranks were for NCOs with the top one being sergeant major. China has been successful with this system and Russia has not. Russia has made several efforts to revive NCOs in its army and all have failed.

June 26, 2023: Aggressive Chinese behavior against all its neighbors continues, with the Philippines most frequently the target. For over a decade China has aggressively sought to take control of the South China Sea, a policy opposed by most nations worldwide. The resistance is most tangible with the military alliance that has formed to support the Philippines from Chinese threats and physical attacks. This alliance now includes major local military powers like South Korea, Japan, Taiwan, Australia and Vietnam. More distant nations like the United States and Britain also back this alliance. Officially, China is not intimidated by this alliance and still undertakes aggressive activity in the South China Sea while never physically attacking anyone, which is passive-aggressive diplomacy at its most obvious.

South Korea has become a major military power in the region. You can see this in terms of how much nations operating in the region spend on defense. In 2021 the United States spent 3.7 percent of GDP on defense while North Korea spent about a quarter of GDP on the military but has a GDP that is only about five percent the size of South Korea’s. South Korea spent 2.8 percent of GDP on defense while Britain spent 2.2 percent, France 2.1 percent and Russia 4.3 percent. Elsewhere in the world Saudi Arabia spent 8.4 percent, Israel 5.6 percent, India 2.9 percent, Australia 2.1 percent and China somewhere between two and three percent. Global defense spending is about two trillion dollars and 2.4 percent of global GDP. U.S. spending accounts for 39 percent of that, which is equal to the next fourteen nations combined.

June 25, 2023: Several nations, especially China, Russia and Iran are very interested in simply putting the Telegram Internet messaging app out of business. China tried using DDOS attacks to shut Telegram down but that did not work. Nor have efforts to hack into Telegram networks. As long as Telegram exists it is a very visible threat to dictatorships, especially China, Russia and Iran. These three nations have been trying to shut down, or at least shut out, Telegram for several years now. In 2018 Iranians by the thousands protested the government ban on the using Telegram in Iran. At the time it was believed that about half of all Iranian Internet users regularly employed Telegram to communicate. Telegram refused to provide any government with a way to read encrypted Telegram messages. The government issued the ban order in April and within a week most Iranian Telegram users had found ways to get around the ban and continue using Telegram. User resourcefulness makes it difficult, but not impossible, for government actions to make a temporary difference. Telegram had been temporarily blocked in Iran during late 2017 and early 2018 to help suppress nationwide protests against the government. But the temporary ban brought forth complaints from many senior government officials while the permanent ban has a lot of opposition among them too. These officials, like their Arab counterparts throughout the region, recognize that Iranians are very resourceful and those talents can be used against Iranians as well as non-Iranians.

Around the same time, Russia ordered hundreds of IP addresses blocked, believing that would prevent Russians from using Telegram. It did, but not for everyone. An unexpected side effect of this censorship campaign was to disrupt a lot of vital (for many Russian users) Google services. Iran and Russia are not the only nations seeking to control Telegram and, in some cases, those two nations are after Telegram for the same reason the rest of the world is; to shut down Islamic terrorist use of it.

China was more discreet in its operations against Telegram but equally ineffective. Now it appears the major threat to Telegram are financial regulators in America and Europe proposing to block Telegram’s new cryptocurrency operation. That threat puts American and European intelligence and law enforcement agencies in a stronger bargaining position. For Telegram, the problem is not making a deal that would risk putting them out of business or making a deal but still going out of business if customers no longer trust Telegram.