China-US military, trade rivalries heat up

“China is now capable of controlling the South China Sea in all scenarios short of war with the United States… There is no guarantee that the United States would win a future conflict with China.”

The stunning twin statements are from Admiral Philip S. Davidson, highlighting his written remarks submitted to the United States Senate in March during his confirmation as chief of the US Indo-Pacific Command (formerly called the US Pacific Command).

Behind Davidson’s admission was the fact that in 2017, China’s Navy became the largest in the world. It had 317 warships and submarines in active service, surpassing the US Navy’s 283 total war vessels. Since the Soviet Union unravelled in 1999 and up till then, America had had no rival in the open seas.

Thus, after China became the world’s second biggest economy next to the US a few years back, it has now emerged as having the largest (although not yet the strongest) naval force.

It’s not just the absolute bigger number of war vessels that China has built over America’s that has caused the latter’s deep concern. It’s also the speed with which China has been building up and modernizing its naval capabilities to “face off against the United States,” as The New York Times put it in a recent front-page article titled, “China shifts the balance of power in the Pacific.”

“While China lags behind in projecting firepower on a global scale,” TNYT article noted, “it can now challenge American supremacy in the places that matter most to it: the waters around Taiwan and in the disputed South China Sea.” Thus a growing section of the Pacific Ocean where the US has operated unchallenged since World War II is “once again contested territory, with Chinese warships and aircraft regularly bumping up against those of the (US) and its allies.”

Citing US officials and analysts, the article pointed out that China doesn’t need a military that can outrightly defeat the US, but “merely one that can make intervention in the region too costly for Washington to contemplate.” For instance, China is rapidly expanding its naval force toward deploying a “blue-water” navy capable of defending its expanding interests beyond its coastal waters. It now has two aircraft carriers in service, and is building a third one in Shanghai. (The US has 11 nuclear-powered aircraft carriers, while no other big navy has more than one.)

And there’s concrete proof showing China has developed “asymmetrical” weaponry to neutralize the decisive edge enjoyed by US carrier strike groups. US military planners point to what they tag as an “anti-access/area denial (A2-AD)” weapons system, which China calls a counter-intervention arsenal of high-speed ballistic missiles designed to strike moving ships.

Two of such weapons flaunted as “carrier killers” – the DF-21D and DF-26 – can hit US vessels long before they get close to Chinese territory. A US Defense Department report says the DF-26 has a range capable of hitting ships and military bases in the American territory of Guam, and concedes the missiles are almost impossible to detect and intercept as they are directed by an “increasingly sophisticated network of radar and satellites.”

The US Congressional Research Service has noted that the American Navy has never faced a threat like these missiles pose, considered as “game changing” by some analysts. To neutralize the DF-26 might necessitate an attack deep inside China’s huge territory, but US military planners balk at recommending such action as it could provoke a major war escalation.

To supplement the “carrier killers” – and potentially dragging us into the conflict – China has deployed missiles in the artificial islands it has built over contested reefs and islets in the Spratlys. These weapons include an anti-ship cruise missile named YJ-12B with a range spanning the maritime areas claimed by the Philippines and Vietnam.

On the trade war that President Trump started by imposing 25% tariffs on $16 billion worth of Chinese-made goods, China retaliated with counter-tariffs on certain American products. It now affects more than $100 billion in goods traded both ways – and the latest report says that Trump plans to target $200 billion of China’s exports. The trade war has started to show negative impacts on China’s $12-trillion economy, now on a slower-growth mode (6%), as well as on certain US industries.

In another front-page report recently, TNYT dwelt on China’s efforts to prop up its economy, specifically by reversing a policy adopted just in January to bring the country’s mounting debt under control within three years. In the past years, the government had already clamped down on some bank lending to state-owned enterprises.

Now China’s officials are pushing for more aggressive lending and are again allowing heavily indebted local governments to spend more on big infrastructure projects. Infrastructure spending, which has accounted for 1/6 of the Chinese economy, sharply slowed in the first seven months of 2018.

The officials also have moved to support the Chinese renminbi (national currency), which has dipped 10% in value vis-à-vis the US dollar, and also the slumping stock market.

On Aug. 10, China’s Central Bank announced it would ensure that enough credit reached enterprises. In the ensuing weeks, the CB reiterated it wanted the state-controlled banks to provide ample credit to exporters, small and medium enterprises, and infrastructure projects. The Finance Ministry is helping heavily indebted local governments to borrow more and restart stalled infrastructure projects.

But tolerating more borrowing by heavily indebted local governments is a short-term measure that could create long-term problems, the article warned.

In a related feature article, TNYT provided some insights on how China’s middle class, “now more than 400 million strong and growing,” is adjusting to the economic slowdown. During the boom decades, when paychecks were bigger, the conversation in China was about “consumption upgrades”: “from local brands to Nikes, from cheap phones to iPhones, from tea to $5 Starbucks lattes.”

Today, in the streets and on the Chinese internet, the article said, the talk is about “consumption downgrades.” Examples: “Skip avocados [the price of this fruit seems quite steep in China]… Ride bikes instead of taxis… Drink beer instead of cocktails – and make sure that beer isn’t craft… Order a medium-size milk tea instead of a large… Give up the gym, and take up dancing in the public squares like a grandmother.”

Perhaps most worrisome for China’s leaders, the article observed, many young Chinese are increasingly reluctant to have children. Before this, a long-standing policy had limited families to only one or two children, which resulted in an aging population. Now, state planners have to figure out how to counter the negative effects of that on the economy.

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Published in Philippine Star
Sept. 8, 2018

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