Tag Archives: South China Sea

October 18, 2017

Author Gary Moreau, aka Avam Hale in fiction

Wednesday, October 18, 2017, will be an important day for the world. Its ultimate significance is likely to be even greater than the 2016 US presidential election.

On this day, the 19th Communist Party of China National Congress will convene in Beijing to review the Party’s work over the past five years, discuss and set the future direction for the country, and to elect a new central leadership.

During this Congress, it is widely expected that Chairman Xi Jinping will both secure his legacy and tighten his grip on power. It appears an almost foregone conclusion that he will come away from the Congress with a grip on power not seen since the reign of Mao Zedong himself, although no leader will ever quite achieve the historical status that Chairman Mao has.

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Assuming that comes to pass, the world can expect Chairman Xi to double down on the major initiatives of the past five years for the next five, at least. All will be aligned with achieving the Chinese Dream at the heart of Xi’s political, social, and economic agendas. It is a redemptive legacy designed, first and foremost, to assign the Chinese Century of Humiliation (roughly 1850-1950) to the historical dustbin. This task will both influence and define everything else.

That said, here are my predictions for the next five years and beyond.

1. Energy – According to China Daily, more than 2.5 million people currently work in China’s solar power sector. That’s roughly ten times the number employed by the solar industry in the US. And in January of this year China vowed to invest 365 billion USD in renewable power generation by 2020.

Starting in 2019, China’s automotive companies will be required to begin the phase out of cars powered with internal-combustion engines. Some have predicted that by 2030 they will be outlawed completely.

China will continue to take the global lead in renewable energy and climate change. It has to and it wants to. China’s environmental degradation is not sustainable and it believes that the world will ultimately face the same challenges it does as population levels continue to rise. That spells economic opportunity for those companies at the forefront of renewable and alternative energy technology.

2. SOE Reform – Following China’s “opening up”, a process that began in 1989 and ushered in an era of unparalleled economic growth, many state-owned enterprises were privatized. Much of China’s economic growth, and a significant share of its burgeoning personal wealth, flowed from this transformation.

Some of China’s most powerful and influential industries, however, such as banking and financial services, remain under government ownership. By the end of this year, however, the Party has committed to turning all SOE’s into limited liability or joint-stock companies. This may well unleash an even more powerful surge in economic growth at a time when the Western economies continue to struggle for wage and inflation growth. China’s economy, as a result, now the second largest in the world, should equal the US in the next one or two decades.

3. South China Sea – There will be no backing down by China. China will risk World War III to protect its sovereignty. In its mind, it has no option. The West will ultimately be forced to accept this reality, with or without armed conflict.

4. North Korea – In one form or another, the rogue province will ultimately become a sovereign territory of China. China cannot and will not allow South Korea and its American ally to occupy the 880-mile (1,420 km) border it shares with North Korea.

For both environmental and competitive reasons, moreover, China needs to decompress the geographic concentration of its heavy industry (e.g. steel) and find new sources of low cost labor. North Korea will provide a convenient and geographically well-positioned opportunity to address both needs while providing a security buffer to China’s all-important southern region.

5. Regulation – Despite the ownership reforms cited above, government regulation will both federalize and increase in the future. The environment will be regulated with an iron fist. The Chinese Internet will be rigorously defended as both a Chinese asset and a tool for social and economic progress, not a medium for personal political expression. American technology companies will find limited opportunity there.

6. Hong Kong and Taiwan –  Neither will be granted the kind of political independence that Western political activists would like to see. This won’t even be considered. (On the contrary, North Korea will ultimately join them.) And any resulting social unrest, which should be quite limited, will be swiftly quelled.

7. Belt & Road –  Otherwise known as China’s Silk Road Initiative, China will continue to view this as a top foreign policy initiative. China views this as its best chance to economically develop its western provinces and release some of the cultural and political pressure it currently faces there. This will have a significant impact on all of Central and South Asia, including India, Pakistan, and many of the former members of the Soviet axis.

8. Politics –  China will exhibit no desire to export its political model except in matters of national security. Nor, however, will it move to adopt any form of the US political model. To most Chinese, the American model is not an attraction. If they are to borrow any foreign political ideals they will look to the socialism of Scandinavia, with “Chinese characteristics”, of course.

Is this good or bad news for the US and the West? In the end, it doesn’t matter. It will happen. The West, for a myriad of reasons, has lost the ability to shape world events. Phase III of Western imperialism (i.e. I. colonization, II. de-colonization, III. colonial dominance—the global dominance of the former colonies) will inevitably unfold.

As a pragmatist, I accept this reality. It is what it is. And if forced to choose, I believe, on balance, that this can be a period of positive replenishment for the US and its citizens. We will achieve far more by focusing our resources and our energy on renewing the American spirit, revitalizing American infrastructure, and revitalizing opportunity for all American citizens and immigrants, than we will on continuing to pursue inevitably ineffective attempts to reshape the world in our image.

It’s not a digital choice, however. We aren’t limited to putting America or the rest of the world first. Isolation isn’t a realistic option, as China itself has learned. By being a collaborative partner and embracing the diversity of the world, and accepting the inevitable ills of unfettered free markets and their corporate champions (e.g., polarized wealth distribution), we can help to usher in an era of unparalleled global prosperity, peace, and enlightenment.

And it could all start on October 18.

You may contact the author at gary@gmoreau.com
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The Law of Unintended Consequence

The author giving a lecture to international business and Chinese culture students at North Central College in Naperville, Illinois..

Be careful what you wish for. It may come true. That’s a sage bit of conventional wisdom that is a variant of the Law of Unintended Consequence. You may get what you want, but it may come with baggage.

Americans have long debated whether or not a businessperson or a career politician would make the best president. However you come down on that question we are in the process of finding out.

Even beyond his flamboyant style, his hyper rhetoric, and his proclivity to Tweet whatever he is thinking at the moment, it would be hard to find a past American president with less political experience than Donald Trump. Even retired military generals who have gone on to the highest political office in America had to negotiate the ladder of ascension in a large and politically competitive institution.

As have most CEOs of most large public companies. Donald Trump, however, spent most of his career at the top of a family business with his name over the door. He had to negotiate some pretty big deals, and that always involves a little bit of political maneuvering, but he has never had to compete for the corner office with his political enemies.

While many Americans have already made up their mind, only time will tell if President Trump makes a good president or goes down in the annals of infamy. I offer no predictions here. This is a blog about China.

One thing we should have learned in the nascent days of Trump’s presidency, however, is that negotiating a business deal and negotiating a diplomatic deal are not one and the same. And it has to do with the Law of Unintended Consequence.

In negotiating a business deal the negotiators often posture to the same extent politicians do. But the language is often different. The volume is different. And the trade-offs are different. The desired objective is generally obvious in the business deal and there are often trade-offs negotiated under the umbrella of the overall agreement.

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And that appears to be how President Trump and his team plan to negotiate with China. Taiwan, trade, and the South China Sea are just components of one big overall deal defining the relationship of the world’s two largest economies. As Trump would say, “Everything is in play,” just as it would be if he were negotiating the merger of two corporations.

But that is not how diplomacy works much of the time. And the result is that President Trump’s very public negotiation is working very much in favor of the Chinese. They are, I suspect, in no way disappointed by the current state of affairs although, given the extensive political experience that the current Chinese administration has, they will never acknowledge that publicly.

President Trump’s harsh rhetoric on China, of course, has not gone unnoticed in the rest of Southeast Asia. Contrary to pushing China’s neighbors into the protective skirt of the US, however, that rhetoric, and the geo-political risk it suggests, may be pushing China’s neighbors further away from both China and the US, a result that will ultimately favor China and its desire to assume greater leadership in the region.

Dr. Samir Tata, a former intelligence analyst and founder of the International Political Risk Analytics, recently wrote an insightful piece for Forbes Opinion. In it he argued that President Trump’s current rhetoric, along with the US’ unilateral withdrawal from the Trans-Pacific Partnership (TPP), as well as the Obama administration’s lack of interest in supporting the Asian Infrastructure Investment Bank (AIIB) sponsored by Beijing, will likely push key member countries of the Association of South East Nations (ASEAN) toward an official policy of neutrality along the lines of Finland, Sweden, or Switzerland.

In the event of armed conflict between the two superpowers, were such neutrality come to pass, the US could be seriously thwarted in its ability to exert military strength in the region. (Nations which are officially neutral would presumably not allow any foreign military presence on their soil.)

According to Dr. Tata, China is pursuing a much more holistic strategy of trade and investment throughout the region, “having displaced both the United States and Japan as the most important trading partners of the ASEAN countries.” To what extent this strategy will undermine existing security agreements in the region is unknown.

In business, however, while risk is to be avoided, uncertainty can often be employed to your benefit, particularly in a business negotiation. In the world of diplomacy, however, uncertainty is risk. And the harsh rhetoric of the “America First” doctrine is sure to put doubts in the minds of many foreign leaders considering who to dance with.

And that may ultimately prove to be the Achilles Heel of treating diplomacy like a business.

Contact: You may reach the author at understandingchina@yahoo.com. Mr. Moreau is also available for public speaking and the provision of third-party written content on a wide variety of topics for your website or other communications material.



The Larger Context

Author Gary Moreau

This is the time of year for self-reflection. The pensiveness just oozes out of columns, blogs, and news reports across the media spectrum. I prefer to think of it, however, as a time for putting things in a larger context. That, in my experience, is the first step toward understanding and, ultimately, hope.

With the election of Donald Trump and his proven ability to stir up angst in Beijing, one would think this blog would literally write itself. And he has created an abundance of topics to write about concerning US-China relations.

I find myself, however, having the opposite problem – writer’s block. What to say? Where to begin? What will he do?

That has brought me back to a saying I employed many times when living and working in the Middle Kingdom. In China things are never as good or as bad as they first appear. It’s all just part of the circular logic of inductive reasoning.

That said, I will offer a few predictions.

First of all, Trump will get nowhere on Taiwan. That’s just not in the cards on many levels, any more than California is in play with Mexico. If anything, his attempt to push the issue will only cause China to accelerate its plans for assimilation.

Ditto for the South China Sea. China will not back down. The man-made islands are there to stay and there will be military installations on them.

And trade negotiations alone won’t move the needle on US factory employment. Some jobs may move here, but it is the Chinese that will bring them. America offers many advantages to companies in certain industries. There is easy and inexpensive access to the US market, access to the best university system in the world, and one key benefit that is seldom mentioned – very cheap energy.

There will be limits to transferal, however. There are many very large companies in China, many of them state-owned. For every one of the behemoths, however, there are literally thousands of tiny companies that are critical to their operations. Unlike the US, which employs more of an integrated supply chain, China relies on a supply chain ecosystem that would be prohibitive and impractical to move. It may happen; but it will be a slow process. A phone call from the president isn’t going to do it.

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The real lesson of 2016, however, is a lesson I learned from the Chinese themselves.

The one question that plagued me throughout 2016 was: How did the world get so messed up? How could the shining city on the hill have such a debasing and acrimonious – and embarrassing – election after 240 years of maturation? How could racism still be the ball and chain about the ankle of what might well be the most educated society in history? How could Aleppo happen in what is arguably the most religious region of the world? How could? How could?

After pondering the larger context, however, I think I have an answer.

As always, it’s personal. Our worldview defines how we interpret reality. And the way in which we interpret reality defines both our expectations and our interpretation of actual results versus those expectations. It is at the heart of both glee and sadness.

I have concluded that there are essentially two worldviews. One is defined by its reliance on inductive logic, where the result is all that matters and everything else is wasted conjecture. The other is based on deductive logic, where effect is always preceded by cause and understanding that relationship is the key to our sense of personal well being.

In the extreme, inductive logic gives us religious and political fanaticism. We don’t need to ponder our beliefs; they are what they are. We only need to project them into action.

Deductive logic, on the other hand, gives us political correctness. What is political correctness, after all, but an extreme focus on cause? The focus is on language, bigotry, racism, and homophobia, etc. And since cause is the key, the results become a taboo topic for open discussion. Such discussions almost always revert back to cause – “You are a racist, a homophobic, or a misogynist.”

Tit for tat is based on an inductive worldview. You did this; I am justified in doing that. Cause is irrelevant. You did; I do back.

Progressive ideology, on the other hand, is deductive in nature. It’s built on the never-ending quest to understand why. It is the perpetual quest for deciphering cause and effect.

Most of the world, it would seem, has adopted an inductive worldview. That’s not surprising. It is much simpler to wrap your head around. It’s clean, if you will. There is more clarity.

Many in the West, however, cling to a deductive worldview. For most of my life, I have been one of them. That’s why I don’t sleep at night. I’m always pondering why.

I’ve moved a long way toward an inductive worldview, however, as a result of living and working in China for so long. I still don’t sleep but the world makes a lot more sense to me. There is less anxiety.

And it is that migration in worldview that gives me hope for the future. I am an old dog but the Chinese taught me a new trick. As a result I am more tolerant; I listen better; I am less judgmental; and I have a far better understanding of world events, as depressing as they are on the surface.

Donald Trump is an inductivist with some extremely deductive personality traits. He is not a student of cause but believes in the power of cause. He believes that the desired result can be achieved through the raw force of personality and tough negotiation. And Twitter, of course.

My simple hope for 2017 is that the Trump team comes to recognize this contradiction. It’s a contradiction that has made Trump a success in the rough-and-tumble world of American commercial real estate. It is not, however, a worldview shared by most world leaders, who tend to fall more on either side of the inductive/deductive spectrum.

In the end, all of the tough negotiations in the world will not make China, or much of the world for that matter, become more like us. The Chinese are perhaps the toughest negotiators on the planet. When we do, they will do back. Win-win is not in their lexicon. That’s a deductive negotiating strategy. For them, there is only winning.

There is hope, nonetheless, for a peaceful and mutually beneficial relationship between the US and China. We just need to focus a little more on the way things are rather than endlessly debating our strategic interests in an effort to ‘cause’ the world to do what we want it to.

Contact: You may reach the author at understandingchina@yahoo.com. Mr. Moreau is also available for public speaking and the provision of third-party written content for your website or other communications material.

A Look in the Mirror

Gary Moreau
Gary Moreau

On Wednesday, October 5, 2016, the Pew Research Foundation released the results of a new poll gauging the Chinese perception of global threats and the US and its political process. And what do a majority of Chinese consider a greater threat to China than ISIS, Russia, climate change, cyber security, or the global economy?

You got it – the United States of America.

Fully 45% of respondents cited US power as a major threat to the interests of China, while an additional 38% labeled it a minor threat. And just over half of those surveyed view the US threat as an attempt to limit China’s rise to power, with nearly 60% citing territorial disputes, such as those involving the South China Sea (SCS), as likely or potential military flash points.

None of which is all that surprising. President Obama has staked much of his foreign policy legacy on the American ‘pivot to Asia’ and publicly warned Chinese President Xi Jinping about development of the Scarborough Shoals, which sit approximately 140 miles (230 km) from US forces stationed in the Philippines.

It was the Philippines, of course, an ally of the US, which received the favorable ruling from an international tribunal in The Hague that fueled much of the recent furor over China’s island-building in disputed waters of the SCS. While China does not recognize the tribunal’s authority on the matter, and did not make any attempt to defend itself in the deliberations, the US has publicly insisted that China must recognize and accept the ruling, even though the US has no territorial interest in the dispute.

The 2016 US presidential election, of course, hasn’t helped the US’s reputation among Chinese citizens. China has long been a whipping post for American politicians looking for a scapegoat for US economic woes.

The Chinese, however, generally understand that perspective. Well schooled and sensitive to all things financial, almost all Chinese dissent is economic in nature. Just as members of the Chinese military displaced by the current upgrade and re-purposing of the People’s Liberation Army, the largest military organization in the world, are currently protesting in Beijing, the Chinese take to the streets when they perceive their wallets have been slighted.

Part of the reason for that is that when you impact someone’s livelihood you’re impacting their family (something many American political and business leaders don’t seem to fully appreciate), and it’s difficult to overstate the Chinese commitment to family. It is the ultimate Confucian obligation.

And, of course, no one wants to be left behind. Living in the world’s second largest economy, its largest automotive market, and ground zero of the international luxury market, there is substantial face in keeping up with the Zhangs.

The trepidation toward the US exposed by the Pew poll, however, isn’t economic. I have yet to hear a single Chinese voice concern over China’s ability to compete with the US economically. Most Chinese appear confident that they can continue the economic miracle of the last 30 years so long as their efforts aren’t impeded by politics.

The projection of military and political strength, however, is a different animal than trade. What is one person’s noble enforcer can be another person’s bully. And whether fair or not, my experience is that many people in the international community view US involvement in things like the SCS dispute through the lens of the latter, not the former.

“Who asked you to be the world’s policeman?” To many Americans, of course, the answer to that question is a matter of destiny, responsibility, and/or belief in a digital and linear moral code. We can; therefore we must.

In places where the concept of right and wrong are more relative and less linear, however, that can be a specious argument. All too often, protection of international ‘rights’ looks a lot like meddling.

The current state of US politics, of course, isn’t helping America’s image abroad. Nor at home, for that matter. Most people are just hoping it ends soon. Our children are watching, after all.

The Chinese hold similar views. When asked to rate the presidential nominees of the two major American political parties, no more than 37% of those polled had even ‘some’ confidence in either candidate. More than a third voiced little or no confidence in the Democratic or Republican candidates individually.

Thankfully, the relative and inductively minded Chinese have no problem with duality. Despite concerns over the American ‘threat’, and their low opinion of our political candidates, 50% of the Chinese polled voiced a very or somewhat favorable opinion of the United States as a country. Go figure.

Americans used to be able to hold a duality of opinions. We could be wary of another country’s intent or political process but not hold it against the country or the people. Our political process, however, fueled by the incendiary nature of social media, seems to have eliminated our ability to hold impersonal opinions within a defined context.

Now you can only be for us or against us. Now it’s personal – always. That can be a very blunt instrument, indeed, when it comes to shaping the country’s foreign policy. Or, to quote my own father, “Be careful what you wish for.”

If the rest of the world starts thinking in the same digital way we may find ourselves more isolated than revered.

The commitment to family is the ultimate Confucian obligation.
The commitment to family is the ultimate Confucian obligation.

Contact: You  may reach the author at understandingchina@yahoo.com

The Top Brands in the AP (and the implications)

Annual research conducted by Nielsen and presented by Campaign Asia-Pacific on the most popular brands in the Asia-Pacific region was recently released to the public. The survey encompasses 14 major categories and 13 major markets: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

The top 10 brands for 2016 are:

  1. Samsung
  1. Apple
  1. Sony
  1. Nestle
  1. Panasonic
  1. Nike
  1. LG
  1. Canon
  1. Chanel
  1. Adidas

So, what do the tea leaves say in all of this? Overall, of course, they’re just tea leaves. But we might draw a few interesting tidbits from the results.

First of all, of the top 10 brands only two, Apple and Nike, are American. Three are European. And the rest are Japanese or Korean.

One might argue, moreover, that the Apple and Nike brands have transcended their national identity. Neither relies on its American roots to define its brand image in the same way that, say, Coca-Cola or Budweiser, do.

A few of my personal take-aways, although I again caution about reading too much into any annual survey.

The first is the question of who will really benefit from the disproportionate growth expected in AP economies relative to those of Europe and North America? This is an inherent key to the debate over global trade that has dominated much of national politics in the US and Europe of late.

Nearly every major American company has some presence in China. Few, however, have been successful there. It is, perhaps, the most competitive market in the world, and Western companies, in my experience, struggle to navigate its waters.

And if you look at what drives the American economy, financial services, media, and telecom companies dominate the list of influencers. These are the sectors that remain the most highly regulated in China and dominated by state-owned companies. And under any circumstances, I submit, are the sectors structurally inclined to provide the most home field advantage in any of the major economies. General Motors has seen a lot of success in China. But will Wells Fargo see the same success, even if the markets are de-regulated?

And although trade is a critical component of everyone’s politics, there is a political element to trade beyond the trade itself. It’s called leverage.

At the moment, China is relatively hesitant to tweak the US in the nose due to the enormous trade ties that the two countries share. As China pivots to a services economy, however, and as the natural dilution of American influence in the global economy implied by disproportionate growth in the AP economies occurs, will the US enjoy the same political leverage in the global economy of the future?

Will the US, in other words, be capable of controlling the South China Sea debate? The human rights debate? The debate over geo-political influence and independence in Asia?

Speculation, of course. But that’s where every meaningful insight starts.

It is likewise interesting to look at the survey results from 2006; 10 years ago. Again, the top ten brands, ranked from most popular down:

  1. Nokia
  1. Sony
  1. Nestle
  1. Colgate
  1. Panasonic
  1. Honda
  1. Coca-Cola
  1. Samsung
  1. Canon
  1. 7-Eleven

Of the top 10, obviously, 3 were American, 2 were European, and the rest were Japanese or Korean. And, of course, some of the change is a simple reflection of the development of the Asian-Pacific economies. Few could afford Chanel 10 years ago. Many could afford 7-11 or an occasional bottle of Coke.

Having said that, however, it would appear that after a decade of investment the West has not made any obvious progress in its penetration of the Asia Pacific economy. Japan and Korea are the only truly consistent players.

One last observation.

Whether or not the US economy became the engine of the global economy on the back of the US political system, the political system gained global leverage, in part, on the back of the US economy. Can the US pivot-to-Asia, therefore, succeed in the long-term if the US loses that economic leverage? As China pivots to services, and Asia continues to develop at above average rates, is the pivot realistic, or even desirable?

Food for thought.

Contact: You may reach the author at understandingchina@yahoo.com

Business is Business

By Western media accounts the G20 meeting that convened in Hangzhou, China on Sunday got off to a rocky start. There was no red carpet waiting for President Obama upon his arrival aboard Air Force One. In fact, there weren’t even any stairs, forcing staffers to scramble for an alternative route for the president to disembark.

And it didn’t stop there. His National Security Advisor got into a verbal tussle with one of the Chinese officials coordinating the arrival, and there was a subsequent argument about how many reporters could accompany Presidents Obama and Xi on their evening stroll.

All of which was generally portrayed as premeditated ‘snubs’ indicative of just how much friction there is between the US and China at the moment. One writer suggested that these snafus were proof positive of just how different the two countries ‘values’ are – implying, of course, that the West has noble values and China does not.

One Chinese official on the tarmac went so far as to proclaim, “This is our country,” noting that they should be allowed to establish security protocols, including where to put the press. And that does, in fact, reflect the strong current of nationalism among the Chinese still sensitive to the Century of Humiliation, when foreign powers routinely ravaged China, took its land, and generally tried to tell it what to do.

The British even went to war in 1839 to stop the Qing dynasty’s efforts to address the growing opium addiction among its people, largely fueled by British traders smuggling the opium in from India in exchange for silver. Britain, it should be noted, had already made opium illegal within its own borders. After capturing Canton, the modern day Guangzhou, and Nanjing, then called Nanking, the British forced the Chinese to cede the island of Hong Kong to British rule, and to open up four additional cities, including Shanghai, to British traders.

Now boasting the number two economy in the world and having lifted 300 million people out of poverty in one generation, the Chinese understandably believe they deserve a little respect, which the US ‘pivot to Asia’ and the harsh rhetoric of the US presidential election concerning foreign trade, would seem to be denying them.

Having said all of that, I don’t personally believe that any of this represents an orchestrated attempt by the Chinese to snub the Americans. “S_it happens,” as the old saying goes, particularly when there are so many egos involved and the Chinese want desperately to see their first G20 meeting come off without a security hitch.

But I really think Jack Ma, the founder of Alibaba, unwittingly provided the best explanation of why US/Chinese relations appear to be so strained at the moment. Speaking to a Western reporter in fluent English (Before starting Alibaba Ma worked as an interpreter to foreign visitors to Hangzhou.), Ma noted that in his 52 years he had witnessed several American presidential election cycles and without exception the negative rhetoric against China escalated during them.

Ma went on to say, however, that he thought things would return to a more civilized tone after the elections, offering the explanation that, “business is business.”

That very phrase is offered with epidemic frequency among the Chinese and perhaps says more about the Chinese worldview than any other combination of three words. And, I submit, why the US and China just don’t seem to understand each other.

It’s a powerful phrase in its simplicity, invoking the image of balance so central to the Chinese worldview. Business is business; nothing more, nothing less. It stands alone and apart. Which is why Chinese negotiators don’t seek the hallowed Western middle ground of ‘win-win’ in a negotiation. They seek to extract every last ounce of flesh they can.

The other side of that perspective is that, as the Godfather might say, “It’s business; nothing personal.” The Chinese have a decidedly more ‘devil may care’ attitude about wealth and success than Americans do. They don’t, in other words, personalize wealth and success to the same degree Westerners often do. They are more inclined to see good luck where Americans see a noble commitment to hard work and business savvy.

Which is, to say, the Chinese compartmentalize to a far greater degree than most Americans. We are prone to wrap everything up into one big ball of values, principles, and ideals.

President Xi Jinping very much wants to keep the G20 meetings focused on global trade and the world economy. He doesn’t want to see the talks sidetracked by other issues that may be more contentious and subject to individual political perspective.

When President Obama met privately with Xi before the formal start of the G20 talks, however, it was reported that the American president wanted to talk about human rights and the South China Sea, two areas where the two leaders will surely find little common ground.

Compartmentalization is the more pragmatic approach to resolving disputes. There is the chance, however, that broader ideals may be compromised, although we are hardly the shining city on the hill when it comes to human rights, and the benefit to everyday Americans of the pivot to Asia has yet to be shown.

And, of course, the Chinese official is right – it is their country.

Contact: You may reach the author at understandingchina@yahoo.com

A Paper Cat?

In the days following the ruling of an international arbitration tribunal at The Hague that supported the Philippines in its ongoing spat with China over claims of sovereignty in the South China Sea, the US has been pushing its global allies to put pressure on Beijing to act in accordance with the ruling.

Beijing, for its part, never participated in the arbitration and denounced the decision, preferring to see the issue as a matter of sovereignty over which the tribunal has no authority. Such issues, it maintains, should be worked out by direct negotiation between the two parties.

Recently, however, Australia joined Japan and the US in publicly taking Beijing to task and it drew a very sharp rebuke in language deemed quite excessive by the standards of Western diplomacy. The Global Times, a state-owned media outlet known for its strong nationalist positions, ran an editorial over the weekend in which it suggested that Australia was “an ideal target for China to warn and strike.”

The editorial then went on to insult Australia, noting that it was once an English penal colony established “with the tears of the aboriginals.” It concluded by suggesting that the Aussie nation was more of a ‘paper cat’ than a ‘paper tiger’, noting that Australia’s power “means nothing compared to the security of China.”

One Australian diplomat suggested it was the rudest piece of diplomacy he had ever encountered.

But therein lies the problem. Western diplomats continue to evaluate Chinese behavior through a Western lens. As a result we both misinterpret the Chinese and are prone to see monsters in the shadows.

Through a Chinese lens I don’t believe the editorial was all that belligerent. Now, if the Chinese were to sink an Australian ship, that would be belligerent. I find that, however, to be highly unlikely.

In Western culture we put great stock in words. If you are a public figure and use the wrong one, you will find yourself in a pot of boiling indignation. We value honesty and integrity, so we naturally take the meaning and validity of words very seriously.

Chinese culture, however, emphasizes obligation and face and thus puts far more emphasis on behavior than mere words.

Not understanding this distinction, I have found many Westerners to be challenged when negotiating with the Chinese. They try to be nice and find the elusive win-win solution when the Chinese, for their part, are looking for a win-lose victory.

As a result, Westerners often confuse the Chinese they are negotiating with because they don’t make it crystal clear what their bottom line is. The Chinese may or may not accept that bottom line but they won’t stop trying to achieve their own bottom line until they know what yours is.

That, I believe, was the primary purpose of the editorial. Now we know.

The Chinese are pragmatists. Australia and China have two of the most integrated economies in the world and the Australian navy is not the US navy.

There are many Chinese who do believe that the tribunal’s ruling was a slap in the face of Chinese sovereignty and I’m sure President Xi Jinping is under some internal pressure to take a harder line in responding to it.

As I’ve noted before, I don’t believe the US is helping its pivot to Asia in publicly tweaking the nose of Beijing. They are just making things more difficult.

But President Xi is firmly in control and I wouldn’t hesitate to travel to Australia in the future.

We do, however, have to stop evaluating China through an American lens. They aren’t ‘just like us’ and we should be okay with that.

Contact: You may reach the author at understanding china@yahoo.com

The Hague II

Last week the Permanent Court of Arbitration (PCOA), a panel of five legal scholars established by The Hague Peace Conference, ruled in favor of the Philippines in a challenge it filed in 2013 against China’s claim to sovereignty over much of the South China Sea. The ruling was immediately hailed by many Western countries, including the US, as a total repudiation of China’s Nine Dash Line (NDL), which China regards as demarcating its sovereign territory.

The Philippines’ claim was based on the United Nations’ Convention on the Law of the Sea (UNCLOS), to which China is a signatory. UNCLOS grants all countries territorial borders of 12 nautical miles extending from their shoreline to the open ocean. It further grants Exclusive Economic Zones for an additional 200 miles.

The Western media has largely reported on the challenge and the ruling as if it were so cut and dry as to deny any room for interpretation and condemning China for refusing to recognize or accept the result. The European Union threw its support behind this position at a summit over the weekend.

Very few Western media outlets, however, have even attempted to explain the logic behind China’s position. It’s actually pretty simple. China argues that the PCOA has authority over maritime economic disputes, but the issue of the NDL is an issue of sovereignty, not maritime commerce. The PCOA, as a result, has no authority in the matter and any dispute between the parties should be resolved through good faith negotiations between the two countries.

I am certainly no expert in maritime disputes or questions of national sovereignty. As a writer, however, I do know that words are imprecise at best. They are a tool for improving the efficiency of communication but always open to interpretation.

Does China have a valid point? Well, its argument seems to make some sense but I’m not the one to say who is right and who is wrong in this dispute.

I do think that the PCOA did not help establish its legitimacy by criticizing the environmental impact of China’s island building. Environmental oversight is clearly not within its charter and China is surely not the only country to reclaim shoals and reefs. (Virtually all of Holland and much of New Orleans should, if left to nature, be underwater.)

As I have noted before, most importantly, I don’t see how China’s leadership can possibly back down at this point. By insisting that this is a black and white dispute, therefore, the West is not helping to settle the dispute; it is only backing China into a corner. It’s hard for me to see how that will contribute to peace and stability in the region.

Over the weekend, in fact, China announced that it will conduct military exercises off the coast of Hainan Island, which no one disputes China’s sovereignty over, and that the area will be closed to all naval and aviation traffic from Tuesday until Thursday.

The US response is yet to be known. If the US sails warships through the area, or spy planes over it, all in the name of maintaining free navigation for the little guys who can’t stand up to China, things could escalate fast. China is no longer afraid of the US.

And nothing would change.

Of one thing I am sure. If the West believes that this ruling will cause the Chinese people to pressure their government to back down, that’s simply not going to happen. If anything the ruling may cause people to pressure the government to act more decisively in defending its claim, as it has now begun to do.

That can’t be good for global relations at a time when the world is already a mess. The West needs to bring China into the global fold, not isolate it or alienate its people.

China has already signaled its willingness to open a dialogue with the Philippines. Why not let them try?

Contact: You may contact the author at understandingchina@yahoo.com

Photo Copyright: VanderWolf-Images

Dispute in the South China Sea: Ruling Expected Soon

On July 12 the Permanent Court of Arbitration (PCOA), a panel of five legal scholars established by The Hague Peace Conference, will release its decision on a maritime dispute filed by the Philippines against China in 2013. The dispute involves China’s “Nine Dash Line” (NDL) that defines China’s territorial claims over much of the South China Sea, including areas concurrently claimed by other countries in the region, including the Philippines.

The Philippines’ claim is based on the United Nations’ Convention on the Law of the Sea (UNCLOS), to which China is a signatory. It grants all countries territorial borders of 12 nautical miles extending from their shoreline to the open ocean. It further grants Exclusive Economic Zones for an additional 200 miles, an area which the NDL penetrates in some locations.

China, for its part, refuses to recognize the authority of the PCOA in this dispute and has refused to participate in the hearings. It has also repeatedly and quite emphatically said that it will not be bound by its ruling, which many expect will be in favor of the Philippines.

The Chinese believe that such territorial disputes should be settled through dialogue between the two countries and has offered to meet face to face with the Manila government for that purpose. The US, however, has actively campaigned for acceptance of the PCOA’s ruling throughout the region and has parked two carrier groups in the region as a show of strength and resolve.

So, what will happen if the ruling goes as expected?

I am quite confident that the Chinese will not back down. I don’t see how they can. They have too much invested in the issue to back away now. China has actively been building man-made islands throughout the South China Sea to support its territorial claims and President Xi Jinping has been vocal and resolute, at home and abroad, about the depth of his resolve on the matter.

And there is one issue that trumps all others – a growing and ironclad sense of nationalism among the Chinese people. They want strong leadership and President Xi knows it.

What many Westerners don’t fully appreciate is what the Chinese call the Century of Humiliation, which began with the Opium Wars and ended when the Communists defeated the Nationalists in 1949. It was a period during which China was quite literally raped, pillaged, and carved up by aggressive foreign powers. With their newfound wealth, military might, and global standing the Chinese people have a deep emotional commitment to never let it happen again. And who can blame them?

What the Communist Party of China fears more than anything else is social instability. The Chinese people have shown throughout history that they are willing to make incredible sacrifices in the name of regime change when they don’t believe their lives are improving. And a very big part of what the Chinese find important in life is respect.

Now enter the US. The American government argues that it is the only country that can be trusted to maintain navigational freedom in the South China Sea. In addition to being more than a little arrogant – even insulting – this strikes me as disingenuous.

After all, the US is not a party to the current dispute. And would anyone seriously argue that the Philippines is in a position to uphold maritime freedom more effectively than China?

Perhaps more importantly, for anyone who has been following the US presidential election, neither presumptive candidate comes off as all that trustworthy or committed to international peace and freedom. Imagine you are sitting in China or the Philippines and watching this debacle of an election unfold. Would you be inclined to support American control of an area that borders your most populated and economically important coastal cities?

Given the current state of American politics, in fact, it’s hard to believe that President Obama could muster much support among the American people for any armed conflict with China.

Given all of these considerations, does it really matter who is right and who is wrong in this dispute? In the real world we currently live in I don’t think it does. History is a movie, not a post card. Territories have never stood still over time. Just look at the history of the US, which began as a relatively small enclave of 13 colonies, all of which were taken by force, not granted by an arbitration committee of legal experts.

I’ve never seen much sense in futility and this is no exception. The US has little to gain by muscling its way into this debate and the reality is that China has put no restrictions whatsoever on maritime trade through the region. If it did that might be a game-changer but what rationale does it have for doing so short of some foreign power with a powerful navy threatening its key coastal cities by their proximity?

That’s particularly true given what is happening in Taiwan at the moment. China considers Taiwan to be a renegade province and is committed to a ‘one China’ policy. To date, however, the new President of Taiwan, Tsai Ing-wen, has yet to endorse that policy, resulting in considerable friction between Beijing and Taipei.

The US is an ally of Taiwan, of course, and it will lose considerable good will and bargaining power to resolve any escalating dispute with Beijing if it takes China to task over a bunch of atolls in the South China Sea.

The US has enough on its plate. This is one dispute I think we should stand down on.

Contact: You may contact the author at understandingchina@yahoo.com


Quick administrative notes:

  1. I have finally put my toe in the water of Facebook. I have thousands of pictures I’ve taken in China and want to share, so I’ve started a public group called Pictures of China – Moreau. My username on Facebook is moreau.online. I own all of the publishing rights to all of the pictures I will post there and you are free to use as you wish, except in cases where you are clearly attempting to degrade me, China, or the Chinese people. Fair enough? All for free and I will post a couple of times per week.
  2. I have temporarily lowered the Kindle price for the two novels I wrote under the pen name of Avam Hale. The Bomb Shelter is currently available for $.99. The Message? is currently available for $2.99. Really, that’s pretty low risk for you. If you hate them you’re out next to nothing. Oh, and I have 49 free Kindle copies of The Message? to give out. Send your e-mail to understandingchina@yahoo.com and I’ll send you an electronic claim check. If you’re worried about security create a temporary free e-mail and then close the account. I promise to erase the e-mail as soon as I’ve sent the free gift notification.
  3. My latest (and in my humble opinion, my best) novel is now available. Now You Are Lisa is a contemporary tale set on the streets of Beijing. The Kindle version will be available next week.


On Thursday of this week Chinese Chief of the General Staff Fang Fenghui and Chairman of the U.S. Joint Chiefs of Staff Joseph Dunford participated in a video conference with the intent of working out potentially confrontational issues in the South China Sea. This, of course, followed on the heels of a U.S. destroyer’s sail-by in waters off Fiery Cross Reef that China claims as territorial sea under international maritime law.

China deployed two fighter jets, one early warning aircraft and three ships to track the American ship and ask it to leave. But there were no barrel roles or buzzing that has been reported.

There is really nothing new to report on this topic. China referred to the incident as a “provocative action” and the U.S. said the sail-bys will continue. Still, according to the Associated Press, State Department Josh Earnest said, “And we certainly do not want to see the tensions increase…”

Which, of course, leaves one to scratch his head over why the U.S. Navy seems so intent on pricking the dragon. Not a single cargo ship has been stopped or prevented from conducting its commerce.

And, as I’ve noted many times, China is as unlikely to withdraw from the South China Sea as the U.S. is to withdraw its ample military presence from Guam or Hawaii or the Philippines or South Korea.

In other non-news, the U.S. presidential election, which appears to already be driving the Americans I’ve talked to out of their collective minds, is getting zero attention from the Chinese I’ve talked to. It’s all just another reality tv show to them that has little to do with the future of Chinese/American relations. Besides, they believe the Kardashians will still run the country whoever wins the election. Don’t they?

I’ve watched dozens and dozens of experts on CNBC Asia and other outlets giving their take on the prospects for the Chinese economy. It’s a waste of time, all the pontificating. No one really knows. The Chinese economy is simply unlike any other in the world.

From where I sit everything appears to be moving along pretty smoothly. Housing prices continue to rise in key markets. The restaurants are crowded. I’ve seen more new Tesla’s on the road in the last few months than I’ve seen anywhere else in the world.

Yes, China has too much steel capacity and everyone knows that. But its strategic focus is on tech and that is taking off much faster than I could have imagined, as witnessed this past week by Apple’s one billion dollar investment in a Chinese ride-sharing startup.

To me there is one over-riding difference between the Chinese economy and the U.S. economy. By any measure, American consumers are tapped out, and since wages aren’t rising for the average American, that isn’t going to change anytime soon. The Chinese, on the other hand, are sitting on a lot of cash. They have one of the highest savings rates in the world and even the poorest Chinese find a way to put cash aside for a rainy day.

That’s about it. Unlike some media outlets I refuse to manufacture news.

Check out the pictures on my public Facebook group page. China is as stimulating visually as it is mentally.