Letter From China

My friend Tom, who manages a US corporate branch in Shanghai, sends along the following in response to this news link via Instapundit. (I have to send him the stories in full via email, as internet censorship, known by Americans inside as The Great Wall of China, forbids most linking)

The US is playing a losing hand. China will continue to talk the talk, and then do whatever it wants. There are no repercussions for not being supportive of US global policy(Iran or Darfur) or for China acting in its own self interest. And the US continues to believe that they want to be friends. They don’t want to be enemies( yet) the strategy is to use the existing system in a very strategic way. They are seeing the US become like Europe- with ever escalating social programs and an inability to pay for them, the military will gradually be cut and eventually become irrelevant. By that time, the Chinese economy will be among the top 3, and the only one willing to spend money on the military. Ergo, no force necessary. We become, or have become, like the Europeans- everything can/must be negotiated diplomatically. And to threaten force is unacceptable. It’s the only strategy left. Not a great way to play poker. Look how well the Europeans have done with Iran( this time we really mean it!).

The Chinese figure that they control 20-25% of humanity- and if they can keep it together they can lead the world. They will always be the single biggest voter on anything, and given a normal distribution of votes, they will always end up being the decider.

Look at the Korean situation. The Chinese love it. It provides them with a buffer between S.Korea( and the US), it occupies huge amounts of assets in Korea and the US which are totally unproductive, and it always comes down to everyone asking them to get the North to play nice. Their only concern is if the North implodes, what excuse can they dream up to make it a client state with a greater legitimacy than having the South take control. But I assure you, it won’t be a big deal.

In terms of economics, as the biggest holder of US debt, a currency revaluation would cost them billions from the start. Very tough for the Chinese to swallow. If they do revalue, I bet that there is a back room deal which will compensate them for top line currency losses. Once again, it will be US tax dollars at work.

Have a nice day.