China Just Smiles


China is watching the expanding Russian war in Eastern Europe very closely. China is not at all worried. For this conflict, the dragon can only smile.

… China has close relationships with the defense industries of both Russia and Ukraine. But the rupture between the two countries — the engines powering the remnants of the Soviet military-industrial machine — has, as Jane’s points out, put China in a very advantageous position.

… disruption of both Russian and Ukrainian supply chains will open up opportunities for Chinese manufacturers who can fill these emergent needs. To replace shortfalls from the loss of Ukrainian production, Russia needs to reboot or set up their own production lines. But will Russia bother if it finds it can get equivalent parts from China?

… the existing and potential conflict between Russia and the West makes Russian arms more politically costly for many other countries. China can offer some higher-end capabilities to nations that want to preserve compatibility with existing Soviet-heritage gear, but not endure the international hassle of annoying current or potential Western partners.This substitution could pay dividends for China’s arms trade in places like Africa. __ China Only Winner of Russian War

Russia’s descent into neo-isolationism invites significant economic hardship, and China is likely to reap the benefits.

A simple economic fact illustrates Putin’s problem: Russia, with its thin capital markets, obtains half of its capital abroad. If cut off from European, American, and Japanese capital cold turkey, Russia might be able to replace some of its losses from non-sanctioning countries, like China, but only partially and at a high price. As a rule, do not borrow when you must as Russia’s 2013 gas deal with China at possible loss-making prices illustrates.

As Russia scrambles to refinance maturing debt, stabilize the ruble, and battles to halt the collapse of investment in new plant and equipment, Russia will draw down its official reserves and rainy-day funds, capital flight will accelerate, perhaps to unsustainable levels, and economic growth will collapse, perhaps as much as during the financial crisis of 2009. The longer the sanctions stay in place, the worse the consequences. __ Russia’s Slow Self-Strangulation

China is definitely playing both sides of the fence in Ukraine. However things develop, China will be in a position to profit.

China’s economic presence in Ukraine is already growing. The Ukrainian automotive market, while still small, is seen by Chinese automakers as a possible base for eventual global expansion. Ukraine has natural resources and agricultural land and could become an important supplier to China.

Moreover, Ukraine is of crucial strategic importance. Without Ukraine, Russia has no empire, which is why Putin is doggedly fighting for it. China, which has territorial claims on eastern Siberia, would be happy to see Russia enmeshed in a draining military conflict. __ MoscowTimes

The deeper Russia descends into its neo-Nazi dreams of genocide and ethnic cleansing of Eastern Europe, the more dependent it becomes on a grinning China.

Russia’s aggressive moves in Ukraine have led to some deals that might not have otherwise happened. One of the biggest being an agreement to send Russian natural gas to China. That gives Russia a market into which to sell gas if energy relations with Europe should become even more problematic. __ Motley Fool

Unfortunately, for the next several years, Russia will remain painfully dependent upon European markets for most of its natural gas sales — and the largest part of the financing for its corrupt oligarchy, which comes from gas sales.

China does not mind that Russia is becoming an international outlaw and pariah. All the better for profits on many fronts.

China has … established a “neo-colonial economic relationship” with Russia that allows Beijing to exploit its neighbor’s gas and minerals to its cost advantage, Mr. Lo said, and has gained a “reputational dividend” in some quarters by virtue of not being an aggressor like Russia. __ New York Times Sinosphere

Russia’s bloody criminal bullying will be repaid, with dividends. Not by the wobbly kneed Obama or the limp-wristed western Europeans. But by other interested parties who are able to see the weakness behind Putin’s Potemkin facade.

“I think it’s not usually appreciated what an enormous violation of international law this [Russia’s adventures in ethnic cleansing and genocide in Ukraine] has amounted to,” says Jonathan Eyal, international director at the Royal United Services Institute, the prominent London-based military think-tank. __

Outlaw Warfare

China profits from Russia’s growing isolation, and Russia’s increasingly critical dependency upon China as both a producer and a consumer. As China becomes more and more important to Russia’s very survival, it will have much greater leverage over the Russian government’s future decision-making. Siberia already looks ripe for the taking, and will only continue to ripen as Russia unwittingly throws itself into China’s lap.

Russia’s economy is a tiny dwarf in comparison to the economies of China, the EU, or the US. While Russia expends its resources in costly and destructive wars in Eastern Europe, China is raking in the profits — and smiling.

Sometimes, the character of a nation is not revealed until it attains the ability to “fulfill its destiny.”

… the Chinese believe Chinese expansion is a natural and justified policy for China. The neighbors are very uncomfortable with China’s reemerging (and quite ancient) attitude that China is the center of the universe (the “Middle Kingdom”) and that everyone should show more respect and pay tribute. The Chinese government encourages these nationalistic attitudes, and many Chinese are eager to see China become more powerful and “get more respect.” This is dangerous stuff and a common precursor for war. But China is run by a communist police state that sees nationalism as a useful tool to keep the communists in power. This is the sort of atmosphere that triggered the two World Wars. In 1914 Germany, long the disunited and picked apart mess in Central Europe was again united (in 1870) and wanted respect to go along with its newfound economic and military power. __ China’s Urge to War

Putin’s bloody putsch into Eastern Europe is another example of the empowerment of an immature national mindset. The main difference is that China’s economic and military infrastructure may still be in its ascendancy. The continuing decline of Russia’s industrial infrastructure — and the poor quality of Russian manufactured products — has provided an additional boost for China’s economy.

China is not without its problems. Capital flight — most of China’s billionaires millionaires are either in the process of fleeing or are making plans to flee the country. And brain drain:

… more than half of the roughly 2.5 million people who went overseas to study remain abroad. In a way, this is a brain drain, with Chinese graduates contributing to the development of their host countries rather than that of China. __ KoreaTimes

China’s economy is experiencing “bubbles within bubbles,” and its internal corruption, lack of accountability, and deep shadow economic structures make it difficult to get a true assessment of China’s actual situation, financially.

Since the global financial crisis of 2008-2009, China has been hoping for a rebound in the economies of the EU and the Anglosphere, to serve once again as eager customers for China’s over-built manufacturing sector. Unfortunately, the EU is mired in an economic slowdown that seems to worsen by the day. The US economy continues to struggle against the Obama administration’s counter-productive economic and regulatory policies, and would be in recession if not for the booming shale energy sector. So China must continue to stimulate its bubble economy internally, for the most part.

Nevertheless, China is in an infinitely better position than a badly over-extended and demographically collapsing Russia.

China is hoping that Russia’s futile and self-destructive dreams of neo-empire continue to push the wounded bear ever farther out onto the cracking limb.

China will play a waiting game with Russia, hoping the country will eventually implode from a lethal combination of ethnic strife, government corruption, Islamic rebellion, fiscal mismanagement, and a commodities driven economy that lacks diversity. When a total collapse does occur and chaos ensues, China will move in a deliberate and swift fashion across its 4,000 km boarder with Russia to secure what it can of the Russian Far East and Siberia. __ China’s Manifest Destiny

For now, China just smiles, and waits. (Source)

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1 Response to China Just Smiles

  1. Centinel2012 says:

    Reblogged this on Centinel2012 and commented:
    When all is said and done China could very well come out on top as America has no leader just a wannabe golf pro!

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