Q: What is China’s economic model?

A: China’s economic model is export driven. In order to keep the world’s largest labour force – some 780 million Chinese – employed China must export $1.9 trillion worth of goods and services. China uses a variation of the old ‘Japanese model’ that revolves around value addition to raw material and the export of finished products.

Q: Who are China’s trade partners?

A: The United States is China’s largest export market (roughly 25 percent of all Chinese exports are bought by the Americans). The EU is the second largest importer buying some 17 percent of China’s exports.

Q: What are the two main weaknesses of China’s economic model?

A: First – China’s growth model is completely dependent on the US and the EU. Second – China’s exports are completely dependent on the South China Sea and the East China Sea. To be certain, all commercial sea lanes around China are completely controlled by the Seventh Fleet of the United States Navy.

Q: What about income inequalities in China?

A: China’s export-led growth model has led to an urban-rural/coastal-inland income disparity of over 300 percent in favour of China’s urban population. Currently, around 500 million rural Chinese continue to survive at under $2 a day. This income disparity has been behind 180,000 recorded ‘mass incidents’ in 2010 including strikes, demonstrations and protests (a ‘mass incident’ in China is defined as “at least 15 participants”). In 2006, there were 90,000 ‘mass incidents’ (figures on ‘mass incidents’ are maintained by Nankai University, a public research university based in Tianjin).

Q: What is China’s security model?

A: Internal security is the responsibility of 2.3 million active-duty personnel of the People’s Liberation Army (PLA) and 1.5 million personnel of the People’s Armed Police (PAP). External security is configured around “four non-Han Chinese buffer states of Manchuria, Inner Mongolia, Xinjiang and Tibet.”

Q: What is the primary responsibility of the PLA?

A: The primary responsibility of the PLA, as well as the PAP, is internal security. The PLA is the ultimate guarantor of the Chinese Communist Party’s (CCP) hold over undiluted power. The PLA, as a consequence, has little or no capability to project Chinese power into foreign lands (that’s unlike the United States Armed Forces that are almost exclusively configured to project American power into foreign lands).

Q: Why are rich Chinese leaving China?

A: According to the Bank of China, 46 percent of Chinese with assets of more than 10 million yuan ($1.6 million) were “either in the process of emigrating, or were planning to do so.” In 2007, less than 300 rich Chinese applied to emigrate to the US. Last year, a 10-fold increase was recorded when 2,969 rich Chinese applied to emigrate to the US. The three top concerns are: security of assets, fear for the future and education of their children.

Q: What about China’s demographics?

A: China is aging – 119 million Chinese are now over 65. By 2014, two years from now, China will be the only country in the world with 200 million elderly people. All this means a large, economically non-productive population – really bad news for future economic growth.

P.S. Some of the above concepts were first laid out by George Friedman of Strategic Forecasting.

Capital suggestion

An Opinion

Michael T.Clare 

If you want to know which way the global wind is blowing (or the sun shining or the coal burning), watch China. That’s the news for our energy future and for the future of great-power politics on planet Earth. Washington is already watching—with anxiety.

Because energy is tied to so many aspects of the global economy, and because doubts are growing about the future availability of oil and other vital fuels, the decisions China makes regarding its energy portfolio will have far-reaching consequences. As the leading player in the global energy market, China will significantly determine not only the prices we will be paying for critical fuels but also the type of energy systems we will come to rely on. More importantly, China’s decisions on energy preferences will largely determine whether China and the United States can avoid becoming embroiled in a global struggle over imported oil and whether the world will escape catastrophic climate change.

How to Rise to Global Pre-eminence

You can’t really appreciate the significance of China’s newfound energy prominence if you don’t first grasp the role of energy in America’s rise to global pre-eminence.

That the Northeastern region of the young United States was richly endowed with waterpower and coal deposits was critical to the country’s early industrialization as well as to the North’s eventual victory in the Civil War. It was the discovery of oil in western Pennsylvania in 1859, however, that would turn the United States into the decisive actor on the global stage. Oil extraction and exports fueled American prosperity in the early twentieth century—a time when the country was the planet’s leading producer—while nurturing the rise of its giant corporations.

It should never be forgotten that the world’s first great transnational corporation—John D. Rockefeller’s Standard Oil Company was founded on the exploitation and export of American petroleum. Anti-trust legislation would break up Standard Oil in 1911, but two of its largest descendants, Standard Oil of New York and Standard Oil of New Jersey, were later fused into what is now the world’s wealthiest publicly traded enterprise, ExxonMobil. Another descendant, Standard Oil of California, became Chevron—today, the third-richest American corporation.

Oil also played a key role in the rise of the United States as the world’s pre-eminent military power. This country supplied most of the oil consumed by Allied forces in both World War I and World War II. Among the great powers of the time, the United States alone was self-sufficient in oil, which meant it could deploy massive armies to Europe and Asia and overpower the well-equipped (but oil-starved) German and Japanese militaries. Few realize this today, but for the architects of America’s victory in the Second World War, including President Roosevelt, it was the nation’s superior endowment of petroleum, not the atom bomb, that proved decisive.

Having created an economy and military establishment based on oil, American leaders were compelled to employ ever more costly and desperate measures to ensure that both always had an adequate supply of energy. After World War II, with domestic reserves already beginning to shrink, a succession of presidents fashioned a global strategy based on ensuring American access to overseas petroleum.

As a start, Saudi Arabia and the other Persian Gulf kingdoms were chosen to serve as overseas “filling stations” for US refiners and military forces. American oil companies, especially the descendants of Standard Oil, were aided and abetted in establishing a major presence in these countries. To a considerable extent, in fact, the great postwar strategic pronouncements—the Truman Doctrine, the Eisenhower Doctrine, the Nixon Doctrine and especially theCarter Doctrine—were all tied to the protection of these “filling stations.”

Today, too, oil plays a critical role in Washington’s global plans and actions. The Department of State, for example, still maintains an elaborate, costly and deeply entrenched military capability in the Persian Gulf to ensure the “safety” and “security” of oil exports from the region. It has also extended its military reach to such key oil-producing regions as the Caspian Sea basin and western Africa. The need to retain friendly ties and military relationships with key suppliers like Kuwait, Nigeria, and Saudi Arabia continues to dominate US foreign policy. Similarly, in a globally warming world, a growing American interest in the melting Arctic is being propelled by a desire to exploit the polar region’s untapped hydrocarbon reserves.