February 27, 2014: The head of intelligence for the U.S. Pacific Fleet caused a stir when he openly talked about Chinese objectives and options in the Western Pacific. The scariest one had China seeking to obtain some bit of disputed territory with “grab and negotiate” tactics. The way this works the Chinese would quickly mobilize forces and seize some territory from South Korea, the Philippines or Japan or whoever and then offer to make peace. This can work, but is highly risky if you are facing a foe, like the Japanese, who are better trained, very determined and more experienced in naval operations. China denounced such talk, but did not dwell on the fact that China has used such tactics in the past and Chinese openly discuss using it again in the growing number of offshore disputes with neighbors. In response, Japanese publish discussions of how they are going to cope and the U.S. announces that it will help. Meanwhile China continues to boost its defense budget. In 2014 China will spend nearly $150 billion, more than Britain, France and Germany combines. This is the result of a trend that began when the Cold War ended in 1991. Europeans began reducing defense spending while China began preparing to heat things up on the other end of Eurasia.

In response to growing concern in the Philippines U.S. Navy officials announced that, if China occupied disputed islands in South China Sea the United States would help, as it is obliged to do because of a mutual defense treaty with the Philippines. The U.S. refused to say exactly how it would help. The U.S. did point out that it is shifting naval forces from other parts of the world to the Pacific and currently has fifty warships in the Western Pacific and will increase that by 20 percent over the next six years.

In Burma China is not claiming territory but is taking control of natural resources and quietly interfering in internal disputes. For example, China is helping some of the rebellious northern tribes. One example is the Wa rebels (UWSA or United Wa State Army) who live near the Chinese border. The Wa are establishing an air force. This consists of some Mi-17 helicopters from China. Some 30 Wa tribesmen are in China training to operate and maintain the helicopters. In Shan state the UWSA is a major factor and the Burmese army tends to respect UWSA military capabilities. Half the tribal militiamen in the far north belong to the UWSA, which has about 30,000 armed men operating along the Chinese border. The Wa are ethnic Chinese, and many other Wa live across the border in China. The Chinese have made it clear to the Burmese government that any attack on the Wa would not be appreciated and have pressured the Burmese on behalf of the Wa. Burmese troops continue interfering with truck traffic entering Wa territory. The Wa can get what they need from China, but some Burmese Wa live closer to roads coming from the south, rather than those coming from China. Many Wa believe that the Burmese would like to push all the Wa into China, but that is not likely to happen because of UWSA resistance and Chinese support. This sort of Chinese interference in Burmese affairs is causing many Burmese to talk of joining the anti-Chinese coalition that currently consists of most of the nations China has territorial claims on.

Another China neighbor that is getting more coalition minded is Malaysia. That’s because twice in the last year Chinese warships have exercised off Malaysia’s Sarawak Island near James Shoal. Although 1,800 kilometers from the Chinese coast, James Shoal is within the Malaysian EEZ (the exclusive economic zone extending 380 kilometers from the coast of nations like Malaysia and China that have signed international agreements about this). But China claims the South China Sea as its own, including shoals, reefs and small islands within the EEZ of other nations.

China, the United States and South Korea are finally in agreement that North Korea’s nuclear weapons program must be stopped. This means that China will use its extensive economic ties to pressure North Korea to drop its nukes. China was unclear about just how far it would go. China has becomes the vital economic lifeline that keeps the North Korean government in power. In addition to being North Korea’s biggest (60 percent of exports, even more of imports) trading partner, China is the main source of food and fuel. Most of this is paid for, but some is free. If China were to cut off North Korea completely (merely by shutting down the few rail lines into North Korea) the government there would probably collapse in chaos and mass starvation. China does not want that, because it would mean millions of desperate North Korean’s fleeing into China and the need for Chinese troops to enter North Korea and sort things out. This would be expensive, embarrassing and risk armed conflict with South Korea. So China has to apply enough pressure to persuade but not so much that it would trigger collapse.

China also has its own list of problems with North Korea. The new leader Kim Jong Un is decidedly more anti-China than his two predecessors (his father and grandfather). Because of this North Korean officials feel free to demand more bribes and generally make life harder for Chinese trying to do business in North Korea. This is counterproductive as a growing number of Chinese businessmen are simply refusing to invest in North Korea or abandoning existing projects. Frustrated that the Chinese government is no longer able to intervene as it had in the past, the Chinese investors are voting with their money and not putting any into North Korea. This is hurting North Korea because Chinese businesses are the main source of foreign currency. Despite that Kim Jong Un appears to fear growing Chinese influence more than economic collapse. Kim also suspects that China has a “Plan B” to replace the Kim dynasty with a Chinese controlled North Korean ruler. China long ago developed a network of informants, supporters and generally pro-China contacts inside North Korea. Kim Jong Un has been trying to dismantle this network and get these pro-China people out of the senior bureaucracy. The growing number of wealthy entrepreneurs are also seen as a danger to the Kim family and failed attempts to curb their economic activity have failed. Kim sees the merchant class as a growing threat because these businesspeople are generally pro-Chinese and don’t care who runs North Korea as long as the entrepreneurs can do business.

The Chinese government continues to proclaim its aggressive effort against corruption. In 2013 the government said that it investigated 150,000 corruption cases and recovered over $8 billion. Most Chinese still encounter corruption daily and don’t really get the impression that the government is making a serious dent in the corruption. The bigger crooks still seem to get away with it while the little guys get punished. The anti-corruption effort is not the only government program that is underperforming. The Internet censors have failed to keep out all the bad news about the Chinese economy that the government would rather not be publicized. This is mainly about the faltering growth rate (down from ten percent or more to seven percent a year or less since 2008). The other item the government wants kept out of the news is the problem in the banking system and how decades of corruption there is catching up with the government ability to keep the plundering and manipulation from crippling the economy. The fact of the matter is that there are a lot of zombie banks operating, that are essentially bankrupted by uncollectable debts (the corruption angle) that the government cannot cover for. There is also the property bubble, caused by all the building loans banks issued for stuff that is still unsold. This has caused growing downward pressure on property prices, which is lowering the net worth of a lot of Chinese. More and more Chinese (especially business owners and executives) are asking important questions about all this but the government would rather not discuss the issues.

February 24, 2014: India and China agreed to be nice to each other. This includes holding joint military drills this year so their military forces could learn how to work together in disaster relief or peace keeping missions. All this feel-good stuff was a win for India because China is reducing its military and diplomatic pressure on India to surrender Indian territory China has claims on. The basic problem is that India and China have never agreed on where their mutual border is. Because of that the border is called the LAC (Line of Actual Control) and is also known as the MacCartney-MacDonald Line. It is the unofficial border between India and China and gives rise to a lot of disputes over who owns what. Most of this is about Chinese claims on territory India controls.. The LAC is 4,057 kilometers long and borders the Indian States of Ladakh, Kashmir, Uttarakhand, Himachal, and Arunachal. On the Chinese side it is mostly Tibet. China has become less vocal about its claims on Indian territory recently but has not abandoned these assertions. Cooling down these tensions is a big relief to India, which has a defense budget one third that of China’s.

February 21, 2014: A navy admiral (Zhang Zhaozhong), who frequently appears on TV as a pundit, was asked about a recent news items about an American military cargo ship being equipped with a laser to shoot down missiles and UAVs. The admiral went into a detailed description about how such lasers worked, or didn’t. He pointed out that lasers cannot penetrate mist, fog or smog. The admiral joked that the smog found in so many Chinese cities is also a good defense against the use of laser guided bombs. That set off a firestorm of criticism and rage on the Chinese Internet, overwhelming the censors. The admiral appeared to have ignored what happened two months earlier. A December 7^th American satellite photo of the extensive (and deadly) smog covering northeast China caused an uproar of popular anger in China. Although the Chinese Internet censors try to keep this sort of thing out of the news, the satellite picture got around anyway and put more pressure on the government to do something about the bad air. In response one editor did something really stupid, but so very typical. A state owned newspaper published an article playing up the positive side of all the smog. This included a list of positive aspects of smog as in; it unifies the Chinese people to deal with the problem. It makes China more equal because smog is common in the strong economies around the world. It raises citizen awareness of the cost of China’s economic development, and this it has done too well. It makes people funnier because of all the jokes made about smog to ease the pain and discomfort of bad air. Finally, the news story made much of how people are now more knowledgeable about air pollution and (this was not mentioned in the story) the extent the government will go to censor smog stories and counter the unpopularity of the nasty air quality. That news story caused another massive uproar on the heavily censored Chinese Internet, with angry comments and anti-government rants overwhelming the censorship system. The admiral was quickly reminded of the December disaster and went back on the air to explain how his comments were misinterpreted. That just made it worse and that will no doubt result in another memo to all government sponsored pundits and talking heads about things that must never be discussed while on the air.

February 15, 2014: The government announced that the 2013 crackdown on misuse of military housing and license plates resulted in illegal (non-military) tenants being expelled from 27,000 military controlled apartments and houses (that corrupt officers were renting out instead of providing them to military personnel) and seized 29,000 military license plates given out (or sold) by corrupt officers to people who use the plates to avoid inspection by police at checkpoints and police attention in general. No word on how many officers (if any) were punished and to what extent. The government did announce that it is developing a new evaluation system for military officers. The new system must stress political reliability, competence, incorruptibility and trustworthiness. It’s still undecided what weight would be given to each of those items. The government has recently called for officers to be reminded that their first loyalty is to the CCP (Chinese Communist Party) and not the nation. That’s always been the case since the communists took control of China in 1949. Party officials have been alarmed about recent reports from the secret police and Internet monitors that young officers frequently refer to their duty to China, which is incorrect thinking that the party wants taken care of.

February 10, 2014:  China and India began their 17^th round of negotiations (since 2003) on border disputes. The border disputes have existed since the 1960s and flared up again every decade since then, and each time there were more discussions but so far no resolution.