November 1, 2022: A National Congress of the Chinese Communist Party was held between October 16th and 22nd. These meetings are held every five years to select a new Chairman of the party, who is also the supreme leader. For the third congress in a row Xi Jinping was selected. Selecting the same man for more than two five-year terms is a break with a tradition. This switch from limits on Chinese leaders back to the more traditional dynastic “ruler for life” model was something of a surprise. Supreme leader Xi Jinping got another five-year term in late 2017, allowing him ten years in office. His predecessor. Hu Jintao, had served for two terms and did not approve of a third term for Xi, who had Hu removed from the podium during the closing ceremony, where Hu was seated next to Xi. This was another demonstration that Xi would not tolerate any opposition to his staying in power as long has he wanted. To emphasize that need for compliance, Xi added the heads of national intelligence and the national police to the two dozen member Politburo while removing or replace members with banking experience or reputations as economists. This was significant because it confirmed that Xi was preparing to use force against any popular resistance to his rule while reducing the influence of economic and banking experts. The Politburo votes every five years to select a new leader and had already been purged of any anti-Xi officials. This further confirmed Xi’s intention of becoming leader for life and surviving any popular resistance to his rule.

Supreme leaders serving for no more than ten years had been the custom since 1982 when it was decided that a “collective leadership” was a good idea and supreme leaders should serve for only two five-year terms (or just one if there were problems.) Since 1982 this has worked but Xi Jinping wanted more and is getting it. This time he put ineligible (too old and more loyal to Xi than able to take his place) men in the Politburo Standing Committee from which the next leader is selected. Xi did not designate a preferred successor. And as “ruler for life” he no longer has any legitimate opposition to his power to do whatever he wants. There is one source of criticism that Xi cannot control, and that is Chinese stock and bond markets. When his third term was announced, Chinese stock markets reacted with a record six percent decline. Xi has not been able to reverse the steady decline of the stock and bond market, nor a growing exodus of educated Chinese as well as frustrated entrepreneurs.

Another pattern noticed by foreigners (working from public records) is that “tigers” accused of corruption tend to be disproportionately people who had not supported Xi Jinping in the past. Those who did support Xi Jinping for a long time before being caught at corruption still tend to get punished, but in the form of quiet retirement and are often allowed to keep much, if not all, of the wealth they stole. One area where this “friends of Xi Jinping” angle does not work so well is the military. The senior officers accused of corruption had fewer opportunities to support (or not) Xi Jinping, who came up through the civilian and CCP (Chinese Communist Party) bureaucracy. Corruption in the military has been an ancient tradition and there’s a lot more opportunities to steal now. Xi Jinping has made it his personal goal to break that tradition, or at least greatly erode the extent of corruption in the military and that means a lot of the accused “tigers” tend to be generals and admirals.

Xi Jinping has a solution that does not involve democracy but will succeed or fail depending on how effectively it imposes accountability and honesty on a CCP bureaucracy that is more concerned about getting rich any way they can. Xi Jinping, like Deng Xiaoping, is willing to tolerate some bad behavior if it produces a net benefit for China and its rulers. So far that has led to the prosecution of the many more inept and corrupt officials and at least encouraged local officials to do something about practices that lead to pollution, waste and abuse of power. Despite enormous efforts to censor the Internet, bad news (of CCP misbehavior) still gets out and causes unrest.

Xi Jinping gained followers in the bureaucracy by demonstrating his appreciation of how important the loyalty (and effectiveness) of the military and national police was. Xi Jinping also pushed for greater emphasis on seeking new ways to use the Internet rather than just fear and seek to control it. Many Chinese admire the way the government has used Cyber Warfare and Internet based espionage to gain information (commercial, military and so on) that would otherwise be unavailable. To many Chinese, especially CCP members, this is admirable, not criminal behavior.

Internet based crime is one thing, managing the economy is another matter. Many Chinese are aware that Japan was poised, in the popular imagination, to become a great power in the 1980s because its economic growth seemed unstoppable, until suddenly in the early 1990s it wasn’t. China is showing some of the same symptoms (falling birth rate, corruption and poor economic management) that ended the Japanese threat. The Japanese are still affluent but they have still not found a cure for their demographic problems. South Korea is suffering from a similar affliction as is Western Europe. The Chinese situation is worse because the CCP caused a lot of ecological and economic damage that would get fixed a lot sooner in a democracy. Xi Jinping is ignoring all that for the moment, but those problems, in the long run, will not ignore Xi.

GDP growth has been declining and not just because of covid19 shutdowns. China’s GDP growth rate continues to slide and bank failures are increasing. The government has stopped announcing annual GDP growth rates and is now announcing it will make its best effort to keep economic growth going. Those efforts are concentrating on preventing a collapse of the financial system. Unofficially, the government expected 5.5 percent growth in 2022. Foreign economists estimate a more realistic 3.5 percent growth. A growing number of Chinese and foreign economists are questioning the reported size of the Chinese economy.

China’s economy was already slowing down when the current covid19 government shutdowns began in Shanghai and a growing number of cities. There seems to be no end to this. There is also an unresolved real-estate bubble and more Chinese banks are suffering liquidity (cannot meet demands for withdrawals) problems. The economic damage done by all this led to a $5 trillion dollar stimulus program to alleviate suffering among workers and provide businesses with cash needed to keep operating. The actual decline in GDP growth is a state secret but is believed to be bad enough to create persistent GDP shrinkage and an official end to the decades of high GDP growth. China’s economy is, at $18 trillion (or less) a year, the second largest in the world. The Americans have economic problems but not to the extent China suffers from.

This is mainly because of the size of China’s $117 trillion (before the new stimulus) government debt, which is nearly four times the size of the U.S. debt. China’s debt is 6.5 times GDP while America’s debt of $29 trillion is 1.26 times GDP. It’s worse when you take population size into account. China has about four times the population of the U.S., meaning the average Chinese has about 16 percent of the income of an American while carrying far more government debt per capita. Much of that debt comes from millions of housing units built by local governments that not enough Chinese can afford, or will not consider, because many of these “Ghost Cities” are too far from where the jobs are. “Work at Home” has not caught on in China, at least not yet. China’s bond market is the second largest in the world after the United States. With this kind of debt, quality (the ability of debtors to repay) is a major factor. The quality of Chinese debt is much lower than in the U.S. or the West in general and the extent of this problem was deliberately hidden by debtors, especially local governments, for decades. Some of that bad debt is related to BRI (Belt And Road Initiative) projects, which is currently about $60 billion. Poor management, covid19 and local violence and corruption turned most of that debt into a liability, or worse because default either means China assumes ownership of the project or the local government interferes and creates a diplomatic as well as economic problem. All this makes China’s real estate bubble far more dangerous than previous ones encountered in major economies.

Military Malaise

Xi Jinping and his senior military Chinese leaders are watching the Russian and Ukrainian military performance during the current war with great interest and growing alarm. That’s because current Chinese armed forces are closer to what Russia is using than to the Ukraine’s, which China would like to emulate. That would be difficult because of China’s politics and endemic corruption.

For most of this new century China's leaders have complained about the state of their armed forces. The critics include many irate generals and admirals. Increasingly the complaints are published, so that everyone knows the problem is still seeking solutions. Initially these complaints were confined to private meetings, but so many people attend these meetings that details eventually get out to the general public. Since these leaks do not represent official policy, they do not get repeated in the Chinese media, and foreign media tends to ignore it as well. It's more profitable for the foreign media to portray the Chinese military as scary.

The truth, as Chinese leaders describe it, is more depressing. It's all about corruption among the military leadership and low standards for training and discipline. In short, Chinese military power is more fraud than fact and three decades of trying to change that have not produced as much change as befits the most technologically advanced and well-equipped military China has ever produced. Corruption has been reduced, mainly through the use of unannounced audits by anti-corruption organizations that have so far “apparently” been kept clean. These audits continue to find a lot of theft and other misbehavior.

Some improvements come from ordering ships to stay at sea for long periods, which is the customary way to develop effective crews. Same with modern aircraft, which are built to be used a lot in peacetime so the pilots can develop flying skills. While China’s pilots enjoy all this extra time in the air, their sailors are not happy about spending weeks or months at sea per voyage. The ground forces are the focus of most criticism because commanders can appear capable just by training the troops to look good during basic drills and paying attention to keeping the new equipment clean and presentable.

Government investigators continue to find ground units that report they are well trained to operate all their modern equipment, while the reality is that commanders don’t employ realistic training, especially the kind that might injure troops or result in damaged equipment. History shows the more you sweat in peace the less you bleed in war. History also shows that peacetime commanders have to be pushed to practice this because peacetime soldiering has always been more about appearance than wartime reality.

It’s not for want of trying to improve. Since the 1990s China has been undergoing a major military buildup and frequent equipment, organizational and training upgrades. There have been several generations of this since the 1960s. All have failed. Why should the current efforts be any different? The earlier efforts failed because of growing corruption and loss of military spirit.

Most people can understand the role of corruption. Military spirit is another matter, but as successful generals and military historians have noted for centuries, the warlike attitudes of an army make more difference than the quality of their weapons. It wasn't always this way. The People's Liberation Army (PLA), as China's armed forces are known, was forced to win or die from the 1920s to 1949, as it fought a civil war with the Nationalists while also resisting a Japanese invasion. The PLA was basically an infantry army which developed innovative tactics and leadership methods that defeated the Western supported Nationalists and fought the American army to a bloody standstill in the 1950-53 Korean War. The original PLA was forged in an atmosphere where failure was not an option. Currently getting rich, or simply looking good to get promoted, is more important than fighting skills because there's no one to fight and much wealth to be had.

After the Korean War the traditional PLA values began to fade. The senior members of the PLA had been campaigning for twenty to thirty years and they were tired. China was in ruins and had to be rebuilt. To make matters worse the communists then spent the next twenty years indulging in disastrous economic and political experiments. In the mid-1970s, the Chinese communists finally got down to business and introduced economic reforms that are still underway. But reforms in the military were not so easily implemented.

Then there’s the political angle. The PLA was always seen as the basic enforcer of communist rule in China. The Communist Party wanted one thing above all from the PLA: loyalty. Everything else was secondary. This included military capability and fiscal responsibility. Until the 1990s the government was also short of cash most of the time. There was not much money for the military. What cash was on hand for defense went into things like nuclear weapons, ballistic missiles, and warplanes. Generals were allowed to fend for themselves. Military units had their own farmland and grew their own food. Other soldiers worked in factories to produce weapons and equipment. This didn't leave much time for training, and a lot of the spare time available went to political indoctrination. Above all, the troops had to be kept loyal to the Chinese Communist party. The results of all of this were predictable. For example, when China fought a short war with the combat-experienced Vietnamese in 1979, Chinese losses were enormous and the performance of the troops obviously poor. The Chinese soldiers were brave. They rushed forward and died by the thousands. The soldiers were not trained and their leaders knew little of battlefield management. The military still needed reform going into the 1980s but did not get it.

China went through an enormous economic boom starting in the 1980s. The communists held on to political power but allowed great economic freedom. It was now OK to get rich and the head of the Communist Party (and thus the country) said so, repeatedly and in public. The military took advantage of this. The military factories that had previously supplied military needs now began producing consumer goods and weapons for a booming export market. It wasn't until the late 1990s that the government forced the military to pay more attention to their primary job. Officers were ordered to get rid of their business interests. There was a lot of grumbling but by and large everyone complied.

More money was allocated to new weapons, including the latest warplanes and missiles from Russia and building new things like aircraft carriers. But this did not mean that the PLA was going to become more effective. There had been several attempts to introduce new weapons and new ideas since the 1970s. All had failed to improve combat abilities because of corruption. Money disappeared and little was spent on actually training the troops to use the new high-tech stuff or providing funds to maintain it.

Going into the 21st century China was still a paper dragon. They have an impressive arsenal of weapons, which are often long on quantity and short on quality. The troops are still spending a lot of time doing non-military tasks. Moreover, the economic boom in China rendered a military career a less attractive choice for talented young men.

Despite that, things were changing this time. The lessons of the past finally caught up with the military leadership. The most obvious evidence of this is the change in pilot training. For decades pilots got little air time. This reduced wear and tear on the aircraft, making it cheaper to maintain a large number of warplanes. What this produced was a large number of ill-trained pilots flying second rate aircraft. Such a force is usually cut to pieces by a better trained opponent. That happened time and again to everyone from 1941 on. China then tried the other approach favored by Western air forces. PLA pilots were officially required to fly over a hundred hours per year. There was such enthusiasm for developing competent pilots that most squadrons scrounge up the money to fly their pilots more than the new minimum. Front line units, like those on the Taiwan strait, get even more and some have pilots in the air for over 200 hours a year. This is more than Taiwanese pilots fly and explains why the Taiwanese are so eager to upgrade their air defenses. Yet, at the same time some squadrons do not fly all that much, and the reason is usually that senior officers steal the flight money.

The paper dragon is trying to sharpen its claws, putting on some muscle and learning how to fight. China now has thousands of modern warplanes, a growing fleet of modern warships, and modern equipment for many of its ground troops. But there are still a lot of corrupt or incompetent officers at all levels. It's not just the stealing, it's also the many officers who don't make the extra effort. There's also a lack of recent combat experience, which eliminates the possibility of getting the best officers promoted and the worst ones killed off or pushed to the side. While this mess is recognized by the senior political leadership, the public image the state-controlled media puts out there is that China’s armed forces are ready for anything and capable of handling any foe. You can get away with that kind of propaganda in peacetime but once these troops go into combat it all falls apart. Keep that in mind the next time China rattles its saber because China’s leaders do.

This is especially true when it comes to taking Taiwan by force. The Ukraine War demonstrated the importance of motivation and morale. The Taiwanese identify with the Ukrainians while the Chinese note that they, like Russia, are basically police state dictatorships while Ukraine and Taiwan are democracies that are highly motivated to innovate and fight to preserve their way of life. China would also suffer more from any economic problems an attack on Taiwan would lead to.

Taiwanese leaders are also watching the Ukraine War intently and have already made it clear they identify with the Ukrainians. That meant Taiwan again sought to establish diplomatic relations with Ukraine. Since the end of the Cold War Taiwan had been seeking to establish diplomatic and other relations with Ukraine. Until recently Ukraine tried to work with China. That did not work out and when Russian invaded, China sided with Russia while Taiwan sent more and more economic and medical aid to Ukraine. Taiwan also obeyed economic sanctions against Russia, and sold Ukraine nearly a thousand specialized UAVs via a trade contact in Poland. Taiwan additionally offers aid to Ukraine for reconstruction once the war is over, including establishment of hospitals and much more.

By August Ukrainian officials were visiting Taiwan to discuss improved diplomatic, military and economic relationships. The Ukrainians were also shown Taiwan’s preparations to resist an attack by China. Most Western nations, including NATO members, recognize only China diplomatically (as part of the One China policy) but a growing number of them defy Chinese threats and do business with China and Taiwan. Most Ukrainians would prefer to recognize Taiwan diplomatically and assist them in improving their defenses against a Chinese invasion.

China is concentrating on improving the quality of their military, especially reserves. While the United States has the second largest armed forces in the world, with 1.3 million active-duty troops and 800,000 paid and trained reserves, China has two million active-duty and about 500,000 trained reserves. The “paid and trained” reserves are an important element because these are troops who received the same initial training as the active-duty personnel but are on active duty only 30 days a year, mainly to keep their training current.

Most nations have “reserves” that count former military personnel who have been in the military recently, often as conscripts, as members of the reserve. These reserve forces are little more than a list of those who served in the last five or ten years and their last known address. These reserves are useful if there is a major war and you need men with some military experience who are easier to train and serve in an active-duty unit.

Many nations with large active-duty forces claim huge “reserves” of men who have been in the military but are not comparable to the more expensive and effective reserves some nations maintain. A few countries, like Switzerland and Israel, rely more on their large paid and trained reserves than their small active-duty force. The Swiss reservists not only have their uniforms at home, but an assault rifle and ammunition as well. The Swiss reserves are organized into local groups who can get into uniform, grab their rifles and report to prepared fighting positions within hours. In many major wars the Swiss stayed out of, this reserve system discouraged other nations from invading. Swiss and Israeli reservists are also conscripts, with active and reserve service a mandatory obligation.

The only major military threat Russia has is China but Russia rarely mentions this because China has become an economic and diplomatic asset for Russia. Nevertheless, China is and remains the major potential threat to Russia. The Chinese Army is three times larger and has 15 tank and mechanized infantry divisions it could place on the Russian border. China is also reorganizing its ground forces into one based on brigades rather than divisions. China believes brigades will be proportionally more effective than divisions and they may be right. Officially Russia ceased to consider Chinese ground forces a threat, as Russian nuclear weapons are supposed to stop a Chinese ground assault. This is what kept the Russian brigade reorganization efforts alive, because brigades are more effective in dealing with insurrections and low-level unrest. Traditionalists in the Defense Ministry pointed out that nuclear war would destroy both nations and that the current situation allows China to quickly grab the Russian Far East, which China has long claimed, and then call for a peace conference. This is the sort of tactic China has used in the past and the Chinese are big fans of their imperial past. But senior Russian leaders believed they could use diplomacy and new, faster-moving conventional forces to prevent any Chinese use of “grab and declare peace” tactics.

China appears to be preparing for this “grab and declare peace” approach in the South China Sea, where China has been adding more weapons and sensors (to detect aircraft and submarines) and a growing number of artificial islands created by dredging up sand around reefs. To China, possession of Taiwan is part of its effort to control the South China Sea.

Ukraine, Russia and Taiwan

Russia’s self-destructive invasion of Ukraine meant China has lost a major economic and military partner. Russia was unique to China because the two countries have unresolved disputes over ownership of Russian territory near the Pacific coast. China found Russia a good source of petroleum and natural gas as well as many other raw materials. The Ukraine related sanctions included the loss of export sales in Europe. The best alternative customer is China, which makes China the major customer for these natural resources. This has led many existing Chinese trading partners in Europe and other parts of the world to reconsider their economic ties with China.

Gaining control of Taiwan has long been a Chinese goal but Taiwan was and is a nightmare for anyone staging an amphibious operation to quickly seize the island and then call for negotiations. Taiwan is only 394 kilometers long and 144 kilometers wide at its widest point. The terrain is rugged with 258 mountains over 3,000 meters (10,000 feet) high. Many key highways are built in the many valleys and that creates a lot of narrow choke points that can be easily defended, often with the help of tunnels dug into nearby hills and mountains. This makes it very difficult for an invading force to get off the beach.

Taiwan has few (about a dozen) useful invasion beaches and lots of high ground behind those beaches. Since World War II the population quadrupled to 24 million. Most live in built up urban areas and this is a nightmare for any invader because all those structures favor the defender. Taiwan has built several air and naval bases that make use of tunnels built into nearby mountains. Many urban areas have built tunnels to protect the population during major storms, and soldiers during an attempt to invade and conquer the island. Taiwan is also surrounded by about a hundred small islands, most of them uninhabited but large enough to support some troops armed with artillery and anti-ship missiles.

The unique geography of Taiwan is one reason why post-World War II Taiwan emphasized manufacturing and a highly educated population. That led to Taiwan becoming a major provider of electronic and other high-tech items that most industrialized nations, especially China and the United States, depend on. To make matters worse Taiwan and the other nations are reducing their economic activities in China and reducing imports from China. Seeking to conquer Taiwan means China must avoid destroying the many areas containing manufacturing operations that China’s economy, among many others, depends on. China’s leaders are increasingly concerned about apparent Taiwanese invasion plans to destroy their high-tech manufacturing if it appears China might win.

Currently, Taiwan can confront any invasion with nearly half a million troops. While the active-duty force is only 190,000, Taiwan has two million men with military experience in the reserves and 10-15 ten percent of these are kept at a higher state of readiness to quickly join the active-duty forces in the event of an invasion. Most of the men in the reserves are former conscripts who serve four months of active duty when they turn 18 and then continue serving in the reserves until they are 36. As the Chinese invasion threat increased over the last two decades, reserve duty has been regarded as more essential to the survival of an independent and more prosperous (than China) Taiwanese democracy. This means that more reservists are willing to continue serving after 36 and this increases the number of experienced men in the reserves. Taiwanese see themselves as an island version of Switzerland, Israel or Sweden, all of them dependent on a large, well trained, reserve force to deal with any invasion. These three Western nations have used this mobilization system very successfully, for centuries in the case of Switzerland. China noted how rapidly mobilized Ukrainian forces defeated a 2022 Russian invasion. Ukraine is largely flat terrain with some rivers to provide defensive barriers. But nothing beats an island with few invasion beaches and lots of mountains defended by a well-armed and determined population.

As a democracy, Taiwan gets a new government periodically and some of those governments are more supportive of defenses against Chinese invasion than others. Since the 1990s the Chinese economy has grown enormously and that was done with the help of existing Taiwanese firms looking to expand into China. That gave China an opportunity to influence Taiwanese politics and elections. The influence is currently less effective for China because most Taiwanese realize that China is determined to make Taiwan part of China once more. Most Taiwanese agree that this is not desirable and as long as the Chinese insist on submission, Taiwan will have to maintain its defenses and reduce its economic activity in mainland China.

Covid Complications

There is growing evidence the covid19 was created in a lab. More medical researchers are convinced that covid19 did not occur naturally but was a Chinese laboratory “gain of function” experiment that escaped into Wuhan City, where there is such a facility. Someone in the lab was infected by what came to be known as covid19, left the lab after work and like most people who get covid19, felt no symptoms but was still able to spread the disease.

Then there is China’s on-going effort to suppress news of how many Chinese were and are still getting infected. Foreign medical experts estimate that China actually suffered two million dead from covid19 while neighboring North Korea suffered nearly 40,000, if not more because of severe shortages of medical care and food. Most East Asian nations kept their covid19 infection rate low. Democracies like Taiwan, Singapore, Japan and South Korea produced verified results that showed how a disciplined response can keep covid19 infections and deaths at very low levels. While most Western nations reported covid19 death rates of 800 to 1,600 per million, South Korea reported 31, North Korea falsely reported only 3 per million, while Japan provided a verified report of 59, as did Singapore with five and Taiwan 0.4 per million. China claimed it suffered only three deaths per million population and much less economic disruption than other industrialized nations. The lower economic disruption is obvious. South Korea suffered much less than other industrialized nations, seeing its GDP shrink only one percent. The only nations with better performance were Norway, which suffered 0.8 percent contraction and China claimed 2.3 percent GDP growth. China admits it has a problem with the accuracy of economic and other data.

It will take a few years before economists and other researchers can discover what really happened in China during 2020. Unofficial reports from China indicate that Chinese covid19 deaths were much higher than reported. Even with that most Chinese were confident enough to go back to work and to large public gatherings like mass transit or movie theaters. To maintain this covid19 advantage China still sharply restricts Chinese from traveling outside the country and quickly quarantines any areas where more covid19 appears. The lower infection and death rates are the result of populations accustomed to acting in a unified and precise manner when confronting an emergency. North Korea has a long border with a populous and industrialized region of China and what happens in northeast China gets into North Korea and the rest of the world via cell phones and the Internet. Reports of local covid19 outbreak lockdowns in northeast and other parts of China continue to happen and that’s why covid19 is still active in North Korea. This has created a reservoir of covid cases on their border. North Korea only admits to 74 deaths from covid19. They do admit to many more unexpected deaths from “fevers.”

Trade Wars

A growing number of foreign firms are moving their product assembly operations to other low-cost Asia countries. This “reshoring” is the movement of offshore production out of China because of growing diplomatic and economic problems with China. China is seen as an unreliable customer and supplier. 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 more increasingly scarce vital foreign items if it invades Taiwan. Russian military manufacturing has been crippled by Western sanctions over its invasion of Ukraine, and China might have the same disastrous problem if it invades Taiwan.

October 21, 2022: Both Russia and China are seeking ways to disrupt or shut down the U.S. based Starlink communications satellite system over Ukraine. Yet for some reason the U.S. government refuses to make Starlink service part of its multi-billion-dollar military aid effort for Ukraine. There have been some slowdowns and disruptions in Starlink service lately. Starlink management attributed this to heavy use rather than efforts by Russia or China. Elon Musk, the owner of Starlink, ultimately supplied Ukraine with nearly 2,000 terminals and managed to persuade countries supplying military aid for Ukraine to include Ukrainian requests for more Starlink terminals, especially the more expensive, and capable commercial models. In this way Ukraine was able to obtain over 25,000 terminals so far. Most of these are used to keep the economy going and the ones used by the military are subject to combat losses. Civilian users face a similar but lesser risk and about 500 terminals a month are lost to Russian attacks. These have to be replaced and most, if not all, of the replacements are paid for by military aid for Ukraine. The Starlink replacement terminals cost about a million dollars a month and that fact that is a private, not a government effort means that obvious Russian or Chinese attacks on it is a cause for war. Russia and China want to avoid that but can continue working on possible techniques to weaken or destroy Starlink service.

October 11, 2022: The three major credit rating companies, S&P Global Ratings Moody and Fitch, have ceased to offer a rating for the real estate developer China Evergrande Group because the firm no longer supplied reliable financial information. Evergrande is the largest real estate firm in China and is sitting on over $300 billion of bonds and other forms of debt. By the end of 2021 Western credit rating agencies declared that Evergrande was now officially in default and unable to repay its debts. Evergrande debt is as toxic as it comes and in a normal world that can trigger the long-feared financial crisis in China. The Chinese solution was not normal. The government declared the situation was under control and that apparently means priority will be given to the many individual Chinese who are at risk of losing large down payments on apartments Evergrande has not completed or in some cases not even begun construction on. The fewer individual Chinese hurt by the Evergrande default and less damage is done to the reputation of other major Chinese real estate developers and supreme leader Xi. Chinese banks and institutional investors are next in line and they are expected to write off (forgive) as much of the debt as they can. The government insists on this. Foreign bond holders, who have between ten and fifteen percent of this debt are last in line and the government is ordering Evergrande, and other Chinese real estate firms with a lot of foreign debt holders, to handle this as best they can, even though this “screw the foreigners” approach will make it more difficult for Chinese firms to get foreign investors in the future. In the two months before being declared in default, Evergrande bonds went from “high yield” (junk bond) status to default. The junk bond segment is the first to fail when a national economy suffers from too much bad (unlikely to be repaid) debt. China can avoid the bankruptcy of one real estate firm, but only for so long because several other similar firms are also close to default. This is mainly about too much debt and how much of that debt is uncollectible (“bad” debt). To make matters worse Chinese banks are suspected of using the same deceptive banking methods (trying to repackage bad debt as good debt) that brought on the 2008 financial crises in the United States.

October 5, 2022: When the Taliban IEA (Islamic Emirate of Afghanistan) government took over in 2021, they found China was demanding that the IEA confirm that ETIM (East Turkestan Islamic Movement) was gone from Afghanistan before China would consider investing in Afghanistan. ETIM was composed of Turkic Uyghur Moslems fighting Chinese efforts to turn them into obedient Chinese citizens, even if they lost their Islamic faith in the process. EITM has been around since the 1990s and had a hard time finding a sanctuary in the region. At the same time Chinese efforts in northeast China, where most of the Uyghurs lived, cut off links with the outside world. In 2009 ETIM survivors in Afghanistan and Pakistan renamed their group as the TIP (Turkistan Islamic Party or Movement) and survived by working for al Qaeda or the Pakistani-supported Taliban. TIP also got involved with the Afghan drug cartels. These Uyghurs often married into the Pushtun tribes that provide most of the manpower for the drug cartels and the Taliban. These new family links took more of the remaining Uyghurs away from TIP itself. China pressured the IRA (Islamic Republic of Afghanistan) that ruled Afghanistan from 2002 to 2021 to eliminate any remaining Uyghurs in Afghanistan. China also had a lot of influence in Pakistan and pressured Pakistan to do the same. The Uyghurs who had married Pushtun women were either caught and deported back to China or allowed themselves to be absorbed into Pushtun culture and cease to be identified as Uyghur. Some of the Uyghurs were working for, and protected by, the Afghan drug cartels. These Uyghurs stopped identifying themselves as Uyghurs and learned local languages, often by marrying inti a Pushtun tribe. This is how many Uygur Islamic terrorists managed to disappear. When the IEA took over in 2021, China demanded that any remaining Uyghurs be found, identified and China notified. The United States put ETIM on their Islamic terrorist list in 2002 and removed ETIM/TIP from the list in 2020 because the ERA government and American counter-terrorism forces in Afghan agreed that ETIM/TIP was gone. China requested that the new IEA government double check on the status of ETIM/TIP and were told that no trace of these Uyghurs could be found. Chinese efforts had eliminated the Uyghur Islamic terrorists and the Chinese continue to monitor Islamic terrorist groups worldwide that accept foreign veterans as members. Some are thought to have been Uyghurs but none could be taken alive to verify that.

China went after these Islamic terrorist Uyghurs with such persistence and intensity that other Islamic terror groups have been discouraged from trying to operate against Chinese economic operations around the world. That has made overseas Chinese safer but not immune to attack. In southwest Pakistan Baluchi tribal separatists still attack Chinese workers and Pakistan has to devote a lot of resources to limit and eventually try to eliminate these attacks. In other parts of the world there are similar problems and China has been resourceful in coming up with solutions.

September 21, 2022: China continues to have problems in the South China Sea. In the last two months the newly elected Philippine president made 52 diplomatic protests about illegal Chinese operations in the South China Sea. His predecessor also made similar protests but at the rate of ten or eleven every two months. Chinese intrusions have increased over the last six years. The first Filipino offshore oil discovery began producing off Palawan Island in 1976. There were indications that a lot more oil and natural gas was present off the coasts of various islands, including some in the South China Sea but within the Filipino EEC (Exclusive Economic Zone). By 2000 China was on its way to becoming the largest importer of oil in the world and that led to more Chinese threats against any oil field development in the South China Sea that was not controlled by China. This violates international law but China simply ignores that and threatens to use force against any other offshore oil production development efforts.

Despite the Chinese threats, the South China Sea situation is becoming more difficult for China because the Philippines came up with several ways to reduce that threat. One effort was aimed at reducing corrupt Chinese influence in the Philippines. That is the main reason why the new Filipino government canceled three Chinese-financed railroad construction projects worth nine billion dollars. This was part of a $24 billion Chinese proposal for projects that improved Filipino ports and transportation networks. Cancelation of these projects has been under consideration for over a year because of vague loan terms and Chinese failure to perform. The Chinese are believed to be using the loan program as a weapon to coerce the Philippines into making concessions in the South China Sea, especially when it comes to offshore oil and natural gas.

September 18, 2022: China openly boasts that India will never be able to match Chinese forces on their border because of the Indian inability to match Chinese economic growth and a much larger military budget. A recent example of this was the Indian Army presenting Indian defense firms with a list of weapons and equipment it wants to obtain within India, not from foreign supporters. While this was welcomed by some Indian firms, others saw it as another empty gesture in the government’s effort to create an Indian defense manufacturing industry as effective as those found in the West and especially in China. Since 2014 the government has been obsessed with making India less dependent on imported military technology. Increased efforts to develop a domestic weapons development and production capability have failed. In response to this the government made it more difficult to import needed weapons that Indian firms were unable to develop and build. Indian military procurement over the next five years is estimated to be about $130 billion and the government is trying to address the structural problems that have prevented commercial firms from developing military equipment. India is also trying to reduce the power of government weapons development and production operations that have never been able to compete with foreign defense manufacturers.

Meanwhile more Indians ask why China developed a world-class weapons development and production capability in the last few decades while India has not? Mainly it’s about corruption and decades of India making it difficult for Indians to start and operate profitable firms that could produce consumer goods as well as military equipment. The United States became the largest economy in the world over a century ago by encouraging this entrepreneurship. Many other nations, including those in Europe and East Asia (Japan, South Korea and China) followed that example.