January 25, 2022: The most successful Chinese diplomatic and foreign trade efforts are the ones they want to keep out of the media spotlight. To do that China is using a lot of cash and ingenuity to make it happen. For example, in the last two decades the number of jobs in the West for journalists in the traditional print media (newspapers and magazines) declined by about half. The news business, including most of its advertising revenue, moved to the Internet, where there were fewer traditional journalism jobs and the pay was much lower. Chinese propagandists, media experts and intelligence officials are skilled and well paid, and quick to take advantage of this major change in Western news media.

Success was evident early on when China offered jobs to Western journalists in Chinese foreign news bureaus. There were always many more qualified applicants than there were jobs and Chinese propaganda officials used the applicant screening process to determine who would be most loyal and effective with working for China. As the Russians discovered during the Cold War “cash for compliance” can be very effective. For example, the most important skill for Western journalists reporting Chinese activities inside China and overseas is to do it convincingly. Keep it legal but as convincing as possible. The propaganda and censorship organizations in China have acquired and honed their skills working on controlling and censoring news within China, including the Internet. Adapting these skills to deal with foreigners, especially Westerners is sometimes difficult but over time very effective.

The impact of all this is considerable and most foreign media users don’t notice the disconnect between what China wants to be reported and what is actually happening. The propaganda is obvious to those who experienced something that Chinese propagandists decided should not be reported on accurately or at all. This often turns into some bad news in the West because a lot of people believe (usually for economic reasons) the Chinese version, make public comments that contradict what most of the audience believes to be true. China persecution of their ethnic and religious minorities, as well as illegal trade practices, are two items the Chinese media manipulation efforts seek to conceal. When the contradictory public statements are criticized and ridiculed by local media the Chinese know they can’t make the problem unhappen but they advise, or order, the offender to just shut up and let memories of their mistake fade.

All this is nothing new. Ninety years ago, Nazi Germany was in a similar position to China, as an economically powerful country that was able to use similar coercions against foreign media. The best is an example of how the Nazis and Chinese have both been successful in getting American movies and TV shows censored to eliminate anything that makes China look bad. Both Chinese and Nazis wanted such “adjustments” carried out convincingly and discreetly. This approach didn’t work for the Russians because they had little economic influence due to their inefficient state-controlled economy. Until the 1990s China had the same problem, but in the 1980s Chinese communists decided they needed a free (market) economy to compete with the West and made it happen while maintaining the old communist police state. They had the example of the Soviet Union and other communist states that collapsed between 1989 and 1991 because a command (state-managed) economy did not work.

Chinese efforts to buy journalists and other influencers in the West also became visible as Western counterintelligence efforts began to uncover the details of how China was stealing huge quantities of IP (intellectual property), as in new methods protected by patents or as trade secrets. The most obvious corruption was in academia, where much basic research was done. Academics violated a lot of laws against such IP theft and often expressed surprise when prosecuted for this because they treated the fees from Chinese sources as legitimate.

While some Western countries can resist these efforts, in many less developed countries people bought will bought as long as you keep the payments high enough to cause substantial economic and psychological pain if halted.

The Chinese media campaign in the West is one of their rare victories but they cannot boast about it because that would be admitting to violating numerous laws in Western nations.

Naughty Younger Brother

Some things have not changed. In 2019 North Korea admitted the obvious; it never had any intention of surrendering its nuclear weapons. The reality was that North Korea was using its traditional negotiating tactic of offering to behave, but only if they received some economic aid first as a show of good faith. That tactic no longer works and now North Korea is back to making threats. The North Korean nukes and military threats remain. North Korea continues falling apart economically and politically and that has led North Koreans to do the unthinkable, which includes openly criticizing the government, putting anti-government graffiti in public places and even attacking corrupt government officials, including police. North Korea is bankrupt and not getting better. Covid19 made matters much worse because North Korea was totally unprepared to handle it and responded by shutting its borders and restricting movement within North Korea. This crippled an already weak economy and efforts to deal with the threat of another fatal famine. Even the security forces were getting less food and the emergency military food reserve was used up.

Big Brother China is openly losing patience with its unruly neighbor. China is, literally, North Korea’s economic lifeline. China is the primary or only source for essentials like petroleum, food and all sorts of smuggled goods, past a long list of international sanctions. China will tolerate a lot of bad behavior in return for obedience and maintaining order along the Chinese border. North Korea is failing in both categories.

Everyone looks to China because Korea has traditionally been a Chinese responsibility and, most of the time, a difficult one. North Korean leader Kim Jong Un has obediently gone to China several times since 2018 to receive advice. Kim also met with the leaders of South Korea and the United States. So far lots of the right words but little action. China and everyone else fears that North Korea is going to try and scam its way out of another tight situation and risk the very real wrath of China while doing it. Inside North Korea the official word is that nuclear weapons are essential and not negotiable. Unofficially, more North Koreans want a change of government or a way to get out. Meanwhile, South Korea continues to visibly prosper, with GDP per capita that is more than 20 times larger than North Korea. Being caught viewing videos of life in South Korea or South Korean video entertainment, is now a capital (death penalty) offense in North Korea.

Naughty Trade Partners

Chinese efforts to punish uncooperative trade partners are getting more expensive. The offenders range from tiny Lithuania to Australia, South Korea, Japan and the United States. All of these nations have criticized Chinese manipulation and refused to back down when China threatened retaliation. For Australia it’s about some essential Chinese imports (natural gas and iron ore) where alternative suppliers are hard to find. For South Korea and Japan, it’s mainly trade in general but for Japan there were a lot of economic investments inside China which have been quietly moving to other countries, often at a loss. China seeks to retaliate against any trading partner who resists Chinese demands. Two recent examples are tiny Lithuania and much more formidable Australia, which is a major trading partner that China cannot afford to lose completely. China has been putting more pressure on Australia for years and that has forced China to accept that they will have to pay more for iron ore and natural gas, two major imports from Australia.

China is not only losing current trading partners but is having problems finding new ones. For example, China is called out by the African government for corrupt acts and being forced to find other sources for raw materials they thought they had a lock on.

There are different problems with Lithuania, which incurred Chinese wrath by refusing to comply with demands that Lithuania stop trading with Taiwan. Lithuania further angered China by quickly withdrawing its diplomats before China could change their status and remove diplomatic immunity. China cut trade activity with Lithuania but that was so small it was not a problem for the target. China is really angry now and is trying to impose a secondary boycott against Lithuania by threatening EU (European Union) nations to suspend trade with Lithuania. That is not having the desired effect as many EU trading partners are pushing, noting how successful this has been for the United States, which began doing it five years ago. Opposition politicians in America criticized this but were wrong and now the West largely accepts that fact that China needs them more than the other way around. The only trading partners China can still successfully bully are Russia, Pakistan, North Korea, and several even smaller volume trading partners.

Naughty Economic Realities

Propaganda and a police state cannot make China’s fundamental economic problems go away. This is mainly about the size of their $117 trillion government debt, which is nearly four times the size of the U.S. debt. China has the second largest economy in the world, at $18 trillion. That means their debt is six times GDP while the American 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 far from where the jobs are.

Another source of bad debt is foreign nations China loaned billions to for its belt and road projects. More of them than expected are defaulting on these debts. All of these defaulted properties still have to be maintained, or they will become unusable ruins. China may have to cut maintenance on a lot of these high-rise apartments and townhouses because the government is trying to avoid the bankruptcy of many large property companies and associated firms, by making Chinese as individuals pay it. China is raising “taxes”, which are fees and other contributions it can compel citizens with money to pay. Most of the debt is internal because foreign lenders were aware of the problem, and least acted on the Chinese debt bubble before the Chinese government did. China wants to maintain its international credit rating, otherwise, exports will be less profitable and imports will cost more. Internally institutional bond holders will have to eat (absorb) a portion of bad debt in order to spare the millions of individual Chinese from suffering major losses. This is preferable because the Chinese economy depends on consumer spending. While this approach maintains popular faith in the financial system, Chinese institutional investors (banks, insurance companies, investment funds and endowment funds) will struggle to survive and if any of these institutions fail, many individual Chinese will see the value of their insurance and stock market holdings shrink. The government insists it has this debt disaster under control but they don’t. China is attempting to use a high-risk solution to the problem. Despite being a dictatorship, they are learning that there are many financial realities they cannot just impose a solution on.

China had studied what happened in Russia in the late 1980s as the Soviet economy fell apart because senior leaders did not really understand what they were dealing with. China learned from that but failed to take into account that organized corruption, at the provincial level, was worse in China than in Russia. Over the last decade the central government has become aware of this and the extent of it. Many provincial, and central government officials responsible have lost their jobs and a growing number are being executed or sent to prison. Chinese leaders believe that they can deal with the current mess, mainly because there is no alternative. They note that Western democracies also pile up huge government debt for political reasons. The American government debt has more than doubled in the last decade because of that. Democracies are better able to deal with these crises while a market government ruled by a dictatorship is not.

The Chinese bond market is the second largest in the world, after the United States. With debt, quality (the ability of debtors to repay) is a major factor. The quality of Chinese debt is much lower than the U.S. or the West in general and the extent of this problem was deliberately hidden by debtors, especially local governments, for decades. This makes a Chinese real estate bubble far more dangerous than previous ones encountered in major economies.

The government has other problems, because covid19 caused more unemployment and bankruptcy of Chinese firms dependent on export sales. Transportation firms have taken major losses because, s ince covid19 first appeared in late 2019, China has taken extraordinary measures to reduce overseas travel by Chinese and visits by foreigners. By mid- 2021 air passenger traffic in and out of China had declined 98 percent compared to the same period in 2019. Some airlines have been able to get more air freight work but not enough to make up for the lost passenger traffic. This foreign travel ban continues because the various mutations of covid19 get back into China via foreign travel. Some must be allowed, but 98 percent of it has been declared expendable. The keeps a lot of Chinese consumer spending, that normally goes to tourism, at home where is more desperately needed,

Another embargo has been placed on information. In late 2021 new laws were introduced that punished those who report information the government disagrees with. That means it takes longer for the details of high-level corruption of government approved financial misbehavior to reach foreigners and most Chinese.

A financial system collapse would be impossible to hide, which is the main reason a major government debt management official was executed a year ago as the government declared the debt-crisis a matter of national security. That explains the emphasis on maintaining Chinese morale and faith in their government while trying to make foreigners absorb a larger portion of the debt. In this case the national security threats are both internal and external. The foreign bond holders can fight back and that is why a lot of foreign firms are pulling manufacturing operations out of China. For the international community, China is not considered a reliable trading partner.

January 21, 2022: China is currently negotiating with the West African nation of Equatorial Guinea to build, maintain and use a naval base for Chinese warships operating in West Africa and the Atlantic. The Chinese offer includes large loans and large bribes for local officials. Similar deals are being made with Myanmar (Burma). China already has bases in northeastern Africa (Djibouti) and Pakistan.

January 24, 2022: Down south in Cambodia commercial satellite photos show Chinese dredging ships at work in a Cambodian port that is apparently going to be a naval base for China. In November 2021 Chinese leader Xi Jinping clashed with several other national leaders at a special virtual (teleconference) China-ASEAN (Association of Southeast Asian Nations) meeting. This event was to commemorate three decades of Chinese relationships with the association members. The Philippines accused China of using intimidation to conquer and take control of the South China Sea. Specifically, the Filipino leader accused Chinese coast guard vessels of using water cannons to prevent Filipino ships from resupplying the small military garrison on a grounded LST at Second Thomas Reef. Xi responded that the coast guard vessels were protecting Chinese territory. Xi ignored international treaties and a 2016 ruling by an international tribunal that the Chinese claims were false.

Most ASEAN members agree with the Philippines and the 2016 court ruling but China responded by demanding that outsiders (like the United States) do not interfere with a local issue. China has put a lot of economic and diplomatic pressure on ASEAN members to either back China or not openly oppose Chinese efforts to take possession of the South China Sea.

Founded in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand, ASEAN has since then expanded to include Brunei, Burma, Cambodia, Laos, and Vietnam. Most of these nations oppose China's claims in the South China Sea. China long had a staunch (and paid for) Cambodian ally in ASEAN. Cambodia blocks attempts to unify and oppose China. XI also clashed with other ASEAN leaders over the absence of Myanmar at this meeting. That was because China and ASEAN disagree over the legitimacy of the new Myanmar military government, which forced out elected leaders in early 2021 because those officials wanted to reduce the power of the military and Chinese interests inside Myanmar. Cambodia is not as staunch ally as China would like and the failure to get ASEAN to support the new Myanmar government was a very public rebuke of China for its use of outlaw tactics.

January 23, 2022: Off Taiwan, 29 Chinese military aircraft flew into the Taiwan ADIZ (air defense identification zone) without identifying themselves. Worldwide foreign aircraft identify themselves when reminded that they have entered an ADIZ. Chinese military aircraft approach or enter the Taiwan ADIZ without warning and that often means Taiwan sends up fighters to double check. ADIZ intrusions have increased sharply in 2021, with about a thousand Chinese military aircraft taking part in dozens of ADIZ violations. The 2021 activity involved a lot of specialist models, like ASW (anti-submarine warfare) aircraft (like the American P-3) as well as a lot of EW (Electronic Warfare) and ELINT (Electronic Intelligence) aircraft. There was also an appearance by the new Chinese SEAD (suppression of enemy air defenses) aircraft, the J16D. Specialized SEAD aircraft were first developed over half a century ago by the United States and nicknamed “Wild Weasels.” The latest American SEAD aircraft is the F-18G. Most of the intrusions are carried out by fighters and a growing number of bombers.

January 22, 2022: India has seen less Chinese activity along their common border but is still dealing with China because China backs the military government in Myanmar (Burma) and India is trying to avoid becoming involved. That has proved difficult to do. India has a 1,4oo kilometers border with Burma and long had problems with tribal separatist rebels in the northeast. India finally worked out peace deals with all the rebels before the pro-India elected government in Burma was ousted in February 2021. The Burmese army war with northern tribes resumed, because the army is seen as the main reason for all the corruption and illegal Chinese economic activity in the north. Over a year later there is a lot more fighting in northern Burma and a lot of refugees fleeing to India. Many of the refugees belong to the same tribe that straddles the border. A lot of non-tribal Burmese entered as well and India sought to stop those refugees to avoid more trouble with China. This led some of the separatist Tribal gunmen in India to use force to block Indian efforts to curb the flow of refugees.

January 16, 2022: The Philippines received another gift of military equipment from China, the recent donation is for construction and transportation equipment. In the past there have some donations of weapons and ammo for defeating leftist rebels and Islamic terrorists. Most of the $21 million in donations over the last decade have been non-combat gear. China sees this as a sales tactic to generate sales of vehicles and construction equipment and that has produced more sales of Chinese equipment to the Philippines.

January 6, 2022: Lithuania was one of the first NATO countries to realize that China was a major threat to NATO and European nations in general. China is accustomed to compliance from EU (European Union) nations. China makes requests, suggestions or demands backed up by economic and diplomatic retaliation. That usually works with even the largest EU states. The Baltic States are different, as China discovered when they demanded that Lithuania bar Taiwan from opening an unofficial embassy, as a “representative office” in Lithuania. This came after Lithuania opened a similar office in Taiwan. This should have not been a surprise because Lithuania had long been critical of Chinese imperialism and tendency to use threats to silence foreign criticism or support for Taiwan. Lithuania had long been critical of Chinese mistreatment of their non-Han (ethnic Chinese) citizens; especially Turkish Moslem Uyghurs and Tibetan Buddhists. Lithuania also took the lead, among EU nations, by investigating the security implications of new Chinese communications technology, particularly what telecoms giants Xiaomi and Huawei. These two firms sold smartphones that contained hidden features that can be turned on or off from China and export user data to China or governments that request access to these features. There are also accusations of Huawei network hardware and software having similar capabilities.

China thought economic threats would work, because in the last decade Chinese trade with Lithuania has grown to nearly $2 billion, which is five percent of Lithuania foreign trade. China stands ready to advise and assist opposition political parties in Lithuania seeking to replace the current government. That may also backfire because the latest Chinese move was to downgrade the Lithuanian embassy in China to a lesser status that would include Lithuanian diplomatic personnel losing their diplomatic immunity. Before that could happen, Lithuania flew all its diplomatic personnel out of China and declared their embassy temporarily closed. China was not amused and fellow EU nations were impressed. More attention was also focused on growing Chinese misbehavior in Europe, something few of the larger EU members were willing to raise, much less call out China on these matters.

January 5, 2022: Illegal Iranian oil exports to China during 2021 were way up. This enabled Iranian oil smugglers to ship and sell 40 percent more oil than in 2020. That’s 123 million more barrels of oil sold at a discount, from the world price for legal oil, to countries like China, Syria, Russia and Venezuela. In 2021 the U.S. halted enforcement of the oil export sanctions in the Persian Gulf, which made it possible for smugglers to sell discounted Iranian oil to Arab Persian Gulf countries, mainly the UAE, where that oil could then be exported as Arab oil to distant customers. Iran has a fleet of tankers, most not owned by Iran, that handle the smuggling and American efforts to track and sanction these tankers declined as did the number of times smuggling tankers were detected but not intercepted. Because of this Iran had several hundred million dollars of oil income that was apparently used mainly to sustain Iran-sponsored violence overseas.

January 3, 2022: China has complained to the UN that American firm SpaceX has put too many of its Starlink satellites into LEO (Low Earth Orbit) and one of them recently came too close to a new Chinese space station. China wants SpaceX to do something about that and demands that the UN declare Starlink a danger to orbital traffic and regulate the number of satellites SpaceX can put into LEO for its Starlink Internet service. Starlink is but the latest irritation from SpaceX. China is trying to recreate the reusable boosters that make SpaceX launches so much cheaper without making their launch services even more unreliable that SpaceX. From a military point of view, Starlink is a major problem because China has been creating anti-satellite weapons that could cripple a conventional satellite communications and surveillance system. It would be much more expensive, time-consuming and uncertain to cripple an LEO network that is built around the concept of surviving major damage and continuing to operate. The Chinese solution is to go after SpaceX from many directions using bribes, intimidation, propaganda and litigation to take down a major, unexpected, threat.

January 1, 2022: Western neighbor Kazakhstan experienced major protests over economic issues, especially the doubling of the price for diesel and gasoline. Kazakhstan is a major producer of oil and natural gas but most of what the government makes from that is stolen by the corrupt politicians who have run the country since 1991. The first such Kazakhstan dictator was Nursultan Nazarbayev. He was a former Soviet era official who maintained the Soviet era political controls. That included keeping Kazaks from enjoying much benefit from the booming post 1991 economy. After more than a decade of poor economic performance and growing privation for most Kazaks, public protests became a common occurrence, increasing in size and frequency each year. Between 2018 and 2021 the number of protest demonstrations went from less than fifty a year to over a thousand in 2021.

In 2019 Nazarbayev resigned, and was replaced by a trusted associate (Kassym-Jomart Tokayev) who was actually a reformer and sought to change the laws and operation of the government to increase living standards for most Kazaks. This plan was disrupted by the arrival of covid19 at the end of 2019. Without covid19, and the global economic recession it produced, the Tokayev reforms might have worked. Instead, the number of protests kept increasing and by 2021 threatened to bring down the government. Nazarbayev saw this possibility early on and sought to avoid a successful popular uprising by having Kazakhstan join several economic and security agreements with Russia, and a few with China. Tokayev invoked the CSTO (Collective Security Treaty Organization) agreement. CSTO was formed in 2002 with Russia, Kazakhstan, Belarus, Tajikistan, Kyrgyzstan and Armenia agreeing to support each other in security emergencies. Within a week a CSTO peacekeeping force of 2,500 troops began arriving in Kazakhstan. Most of the CTTO forces were Russian and all of them were used to replace Kazak troops who were protecting economic and military installations.

The Kazak forces were sent to help suppress the increasingly violent protests. That appeared to work and a week after arriving the CATO forces began to leave with all of them to be gone by the 19^th. Meanwhile, more Kazak security forces confronting the demonstrators were ordered to open fire if necessary to suppress the most violent demonstrators. That apparently worked, as did Tokayev removing some Nazarbayev loyalists from senior government positions and taking control of organizations that Nazarbayev controlled via men he controlled. Nazarbayev was now completely replaced and vulnerable to being prosecuted for all the economic and political crimes committed between 1991 and 2019. One of the protestor demands was that Nazarbayev be punished. Tokayev still has to deal with the fact that over 200 protestors were killed. Nearly 3,000 are in jail and most of the protests have ceased as Kazaks wait to see what Tokayev does next.

The five new nations of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) are generally run by Soviet era officials since 1991, These men are happy to see Russia returning to its traditional police state ways. Nazarbayev played both Russia and the United States off each other for various types of support. All three countries have one thing in common and that is opposition to Islamic terrorism. Thus in 2011 Kazakhstan sent some counter-terrorism troops to Afghanistan. So far, Kazakhstan has kept Islamic radical groups under control (as in chased them out of Kazakhstan), and wants to keep it that way. Nazarbayev, like the other Central Asian dictators, expected to eventually face rebellion fueled, not by Islamic conservatism, but anger at corruption and a lack of jobs. Russia stands by to help out, in return for loyalty. Tokayev now owns that debt.

The five “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 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, locals who were former Soviet officials 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.

December 29, 2021: In Congo, China is losing some very valuable assets as Congo investigators continue to probe the so-called “China deal” which was meant to trade Congo minerals for infrastructure projects built by China. The overall deal is worth billions. Published estimates run from $6.8 to $10 billion. Former president Kabila was supposed to leave office after the 2016 elections selected a new president. He could not run again and was unable to get the constitution changed. He was forced to allow elections at the end of 2018 but was able to rig the vote to get someone willing to cooperate with the corrupt system Kabila wanted to keep going. That did not work. During 2021 the mining contracts Kabila agreed to with China were being audited and evidence of extensive wrongdoing by Kabila and China were documented. China is losing those contracts so Kabila is very much on the defensive, as are his cronies in parliament and the courts. The misdeeds of Kabila were the reason Congo was facing widespread chaos and civil war that is made worse by the ongoing ethnic divisions.

December 28, 2021: One of China’s many enemies, the Philippines, is now engaged in a regional arms race. Their navy recently ordered two 3,200-ton corvettes from South Korea. Each will cost $227 million and both will be delivered by 2026. Because of the threat from China, the Philippines has been seeking to obtain six new frigates/corvettes and so far, has ordered four of them from South Korea. The first two were ordered in 2016. These were 2,600-ton Jose Rizal class ships and both now in service with the Philippine Navy.

For the Philippines, military spending is modest, but as a percentage of GDP, it is about one percent. In contrast, the United States was spending 3.7 percent, Britain was 2.2 percent, France 2.1 percent, Russia 4.3 percent, Saudi Arabia 8.4 percent, Israel 5.6 percent, India 2.9 percent, South Korea 2.8 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.

More worrisome for China is the military buildup going on in Japan and South Korea, as well as Taiwan, Australia, Indonesia and Singapore.

December 27, 2021: Australia and their northern neighbor Papua New Guinea (the eastern half of New Guinea Island) are jointly reviving an old American World War II naval base on Manus Island, which is off the northeast coast of Papua New Guinea. This new base is to detect and block Chinese movements towards Papua and Australia.