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Posted: 1/19/2006 6:51:30 PM EDT
I didn' want to hijack another thread, so I'm asking it seperatly.

What do y'all think Taiwans best defense is against aggression from mainland China? Is it a large cruise missile force? Is it buying more advanced aircraft from the US/EU? A larger Navy? Ageis type systems (If we decide to sell them)? Nukes? More Diesel/Electric subs?

Or would these measures be too provacative and likely to be counter productive?

What do y'all think?


-K
Link Posted: 1/19/2006 6:52:06 PM EDT
Run.
Link Posted: 1/19/2006 6:52:31 PM EDT
I dont think there is anything they can do.
Link Posted: 1/19/2006 6:52:44 PM EDT
Nukes.
Link Posted: 1/19/2006 6:53:26 PM EDT
[Last Edit: 1/19/2006 6:54:19 PM EDT by WildBoar]
Do like everyone else does. Rely on Uncle Sugar.

FWIW I would rather see them get military aid than any single country in the middle east.
Link Posted: 1/19/2006 6:55:37 PM EDT
[Last Edit: 1/19/2006 7:01:19 PM EDT by Zippy_The_Wonderdog]
I hear Voltron has sided with Taiwan.

Link Posted: 1/19/2006 6:55:38 PM EDT
Seize their fortune cookies.

Without a fortune, they are ghosts without guidance and re-assurance wandering a vast plane...


what do you mean, "crazy"? It's worth a shot!
Link Posted: 1/19/2006 6:56:08 PM EDT
[Last Edit: 1/19/2006 6:56:33 PM EDT by LonePathfinder]
effective integrated hardened redundant air and ballisitic missile defense system

effective integrated hardened reduntant coastal defense system

nuke deterants (subs and cruise missiles plus ground launch missiles)

strong economic ties with US, Japan, ROK and Aust.

appropriate ground forces

strong humint assets for intel and assassinations
Link Posted: 1/19/2006 7:00:50 PM EDT
I would also say Uncle Sugar. I believe the USA has a treaty that it will defend Taiwan in case of attack by the PRC, also that are many Taiwan people living in the USA, or have family in Taiwan.
Link Posted: 1/19/2006 7:01:16 PM EDT
The United States.
Link Posted: 1/19/2006 7:03:57 PM EDT
they should attack china, catch'm off gaurd

Link Posted: 1/19/2006 7:08:22 PM EDT
They need nukes, China would invade before they complete them though. They need SAMs, AAA, and mobile shore guns. They must maintain thier airspace no matter what, and be able to stop massive landing forces. Think D-Day, Tarawa, Saipan, Iwo Jima, and Italy, all in one.
Link Posted: 1/19/2006 7:09:53 PM EDT
China realizes that an attack would cost them their largest market .The resulting economic distuption would topple the CPC. It ain't gonna happen guys.
Link Posted: 1/19/2006 7:10:35 PM EDT

Originally Posted By warlord:
I would also say Uncle Sugar. I believe the USA has a treaty that it will defend Taiwan in case of attack by the PRC, also that are many Taiwan people living in the USA, or have family in Taiwan.



GWB administartion has all but said they would not, Hillary sure as hell will not. Japan and S.Korea may help as it is in their best interests to not let China make land grabs.
Link Posted: 1/19/2006 7:11:31 PM EDT
Ruined Soy Sauce?
Link Posted: 1/19/2006 7:12:15 PM EDT

Originally Posted By bostonirish67:
China realizes that an attack would cost them their largest market .The resulting economic distuption would topple the CPC. It ain't gonna happen guys.



+1, they like our money too much and Wal-Mart would fold!
Link Posted: 1/19/2006 7:12:45 PM EDT
City Orange Chicken
Link Posted: 1/19/2006 7:12:54 PM EDT
That gap of water between them and China!

Oh that and our AF ready to plug some boats full o' lead.
Link Posted: 1/19/2006 7:14:42 PM EDT
The gun Al Pacino used in Heat.


Or the Death Star.
Link Posted: 1/19/2006 7:17:20 PM EDT

Originally Posted By eye_spy:
The United States.



+1 us!
Link Posted: 1/19/2006 7:20:03 PM EDT
A huge wall made of cheap toys.
Link Posted: 1/19/2006 7:21:12 PM EDT
Sneak attack. They'll have the element of surprise.
Link Posted: 1/19/2006 7:24:46 PM EDT
Arm the population.
Link Posted: 1/19/2006 7:24:47 PM EDT

Originally Posted By NonConformist:

Originally Posted By eye_spy:
The United States.



+1 us!

exactly what I was going to say.
Other than that, their fighters and the topography of their coastline.
Link Posted: 1/19/2006 7:25:01 PM EDT
Aside from the imminent threat of annihilation from Voltron and the Blazing Sword, I think this is the most likelihood scenario, which is no military confrontation. Too much wealth at stake.

Perhaps a slow mutually agreeable and peaceful assimilation, but I think a hostile attempt is quite unlikely.


Originally Posted By bostonirish67:
China realizes that an attack would cost them their largest market .The resulting economic distuption would topple the CPC. It ain't gonna happen guys.

Link Posted: 1/19/2006 7:27:45 PM EDT
Maybe they should sign co-defense pacts with S.Korea, Japan and Australia. Tack on defense from the USA and that should give China some pause.
Link Posted: 1/19/2006 8:26:05 PM EDT
Air power. Lots of it.

Whilst air power can't win a war of offense, you need ground troops to do that, you might have a shot when defending an island if you can prevent enemy ground troops from getting to your island in the first place. That means sinking transport ships and shooting down paratrooper transports. Which also means that you have to have enough stuff out there to kill off all the escort fighters that they'll throw at you, and stillbe able to shoot up the transports.

Submarines may help the sealift issue.

NTM
Link Posted: 1/19/2006 9:33:54 PM EDT
Scorched earth policy
Link Posted: 1/19/2006 9:46:35 PM EDT
If they can't get a few nukes together fast, then chem warfare (semi-persistent nerve or blistering agents). China won't worry about heavy casualties, but dead is one less invader. Popping the cork in Beijing would have a critical impact on the communist C3.
Link Posted: 1/19/2006 10:05:45 PM EDT
I'm surprised nobody else said this earlier...

Chuck Norris.
Chuck can hold off the entire PRC Army by him self.
I saw him hold off an army of ninjas so PRC army should be a piece of cake.
Link Posted: 1/19/2006 10:08:51 PM EDT
damn yobo, beat me to it.
Link Posted: 1/19/2006 10:09:50 PM EDT
Nothing. China will wait until we're engaged with Iran and are spread too thin, then they will go after Taiwan, knowing that we will not be able to help. That will take away any doubts as to whether GWB would abide by the treaty to begin with. Taiwan is at the mercy of the situation in the Middle East.
Link Posted: 1/19/2006 10:31:36 PM EDT

Originally Posted By Rakky:
Nothing. China will wait until we're engaged with Iran and are spread too thin, then they will go after Taiwan, knowing that we will not be able to help. That will take away any doubts as to whether GWB would abide by the treaty to begin with. Taiwan is at the mercy of the situation in the Middle East.



I don't think China would do something that overt - yet. They are getting stronger, we are getting less resolved as a nation. Like liberals and the ROP, they think in terms of destroying us in decades, not days
Link Posted: 1/19/2006 10:38:32 PM EDT
Diesel Electric subs armed with SLBM MIRV nuclear missles and a whole lot of them. Just think of MAD only in Asia. This and and a well equiped air force (though I doubt their ability of the F-15 to engage hi technology soviet fighters ie Su-27, 34, ect. with their advanced infra red detection) should be able to nullify any air threat. Throw in a bunch of Arrow missle systems for good measure against vital areas. Also a myriad of conventional cruise missles to take out landing craft should let the army mop up the chinese conscripts.
Link Posted: 1/19/2006 10:40:41 PM EDT

Originally Posted By StrykerDawn:

Originally Posted By Rakky:
Nothing. China will wait until we're engaged with Iran and are spread too thin, then they will go after Taiwan, knowing that we will not be able to help. That will take away any doubts as to whether GWB would abide by the treaty to begin with. Taiwan is at the mercy of the situation in the Middle East.



I don't think China would do something that overt - yet. They are getting stronger, we are getting less resolved as a nation. Like liberals and the ROP, they think in terms of destroying us in decades, not days



They have been getting stronger, and we have been losing resolve, for decades already. Remember, we've already fought them in a full out (though maybe not technically) war in Korea. Never mentioned days. Just because there is a possibility of it happening in the near future does not mean that it has not already been building up to this point. Just because it now seems feasible to us does not mean that they haven't already been waiting for this type of situation to occur. They do after all have a strong energy tie with Iran.
Link Posted: 1/19/2006 10:59:00 PM EDT
Link Posted: 1/19/2006 11:02:19 PM EDT

Originally Posted By eye_spy:
The United States.



Crimson tide.

Link Posted: 1/19/2006 11:05:09 PM EDT

Originally Posted By Rakky:

Originally Posted By StrykerDawn:

Originally Posted By Rakky:
Nothing. China will wait until we're engaged with Iran and are spread too thin, then they will go after Taiwan, knowing that we will not be able to help. That will take away any doubts as to whether GWB would abide by the treaty to begin with. Taiwan is at the mercy of the situation in the Middle East.



I don't think China would do something that overt - yet. They are getting stronger, we are getting less resolved as a nation. Like liberals and the ROP, they think in terms of destroying us in decades, not days hr


They have been getting stronger, and we have been losing resolve, for decades already. Remember, we've already fought them in a full out (though maybe not technically) war in Korea. Never mentioned days. Just because there is a possibility of it happening in the near future does not mean that it has not already been building up to this point. Just because it now seems feasible to us does not mean that they haven't already been waiting for this type of situation to occur. They do after all have a strong energy tie with Iran.



I agree to an extent, and China's has clearly viewed, prepared, and (in the case of Korea) - acted with the U.S. as their primary threat. However, with the shifting of power, and their direct or indirect ability to influence another distraction at a later date - I think they would rather sit back, modernize their sea and nuclear abilities, and then use Taiwan as an excuse to justify aggressions.

I sadly think our odds re: China are better today then tomorrow.
Link Posted: 1/20/2006 1:42:31 AM EDT

Originally Posted By Mattl:

Originally Posted By warlord:
I would also say Uncle Sugar. I believe the USA has a treaty that it will defend Taiwan in case of attack by the PRC, also that are many Taiwan people living in the USA, or have family in Taiwan.



GWB administartion has all but said they would not, Hillary sure as hell will not. Japan and S.Korea may help as it is in their best interests to not let China make land grabs.


No, GWB made it quite clear that the U.S. *would* defend Taiwan in the event that mainland China attacks.

(The Clintoons wouldn't even defend North Dakota if Canada invaded. . . . But anyway.)

The problem with China is that while the political leadership would probably be willing to maintain the status quo pretty much forever in order to continue selling microwaves and toys to the U.S., the Chinese military leadership isn't fully controlled by the politicians, and in fact has significant say in foreign policy, particularly in regard to Taiwan. You simply cannot compare them to a Western military structure like the U.S. or European nations, where the military is strictly under civilian political control. There is no telling what the PLA thug "generals" would do to further their power.

As Heinlein noted in "Between Planets", rice farmers have one sort of logic, and power-hungry leaders have a different sort.
Link Posted: 1/20/2006 1:51:17 AM EDT

Originally Posted By Special-K:
What do y'all think Taiwans best defense is against aggression from mainland China?




My family's from Taiwan. I've lived there for some time myself. You want an honest answer?

Taiwan's best defense against aggression from the Mainland is the fact that it's only worth taking if it's intact. There's no natural resources to be had. Taking the island would involve leveling the infrastructure, which China would then have to pay to rebuild.
Link Posted: 1/20/2006 7:20:45 AM EDT
Mines, SAMS, Cruise Missiles armed with Nukes, Better Fighter Aircraft, greater emphasis on ASW
Anti Ship Missiles.

Link Posted: 1/20/2006 8:36:07 AM EDT
The United States Military.

On a more serious note. I have a very good friend that is a State Rep. for Florida. He traveled to Tawain with a group of Florida Buss. owners to discuss trade & business relations between Florida & Tawain. I asked him about the whole China/Tawain situation & he told me that China already has what they need from Tawain, in the sense that it would not be an economically viable option to attack them.
Link Posted: 1/20/2006 8:37:22 AM EDT
They seem to think that the best defense is to neglect their own capabilities so that they can hide behind the skirts of the US in a crisis.
Link Posted: 1/20/2006 8:44:52 AM EDT

Originally Posted By jj01: they should attack china, catch'm off gaurd
Yep! The Taiwanese aren't stupid. They've got commie facilities mapped out. If they are under imminent or ongoing attack, they are going to launch their missiles and aircraft to hit 'em right back.
Link Posted: 1/20/2006 8:45:18 AM EDT

Originally Posted By Mall-Ninja:

Originally Posted By Special-K:
What do y'all think Taiwans best defense is against aggression from mainland China?




My family's from Taiwan. I've lived there for some time myself. You want an honest answer?

Taiwan's best defense against aggression from the Mainland is the fact that it's only worth taking if it's intact. There's no natural resources to be had. Taking the island would involve leveling the infrastructure, which China would then have to pay to rebuild.



+1 - Make it so expensive to take that it's not worth taking. That means make their armed forces pay dearly setting them back years or even decades and make sure nothing that they eventually do take is intact.


WBK
Link Posted: 1/20/2006 10:52:55 AM EDT

Originally Posted By jj01:
they should attack china, catch'm off gaurd




My answer was gonna be either:

"A good offense" or "MAD".
Link Posted: 1/20/2006 1:52:29 PM EDT
Ok here is some real background from a friend who knows the situation on China. This is an analysis on an article in STRATFOR. Remember that war is money. Follow the money and you will get it. Enjoy

Dissecting the 'Chinese Miracle' (Stratfor)
** This is a timely reminder. The PRC has made substantial economic progress over the past quarter century, but that only partially makes up for the lost century-plus preceeding it, a period in which China lost economic ground due to government incompetence, natural disasters, civil war, invasion, more civil war, more government incompetence and disasters, and increasingly brutal and oppressive efforts at centralized social and economic control. While certainly no democrat, much less a libertarian, Deng Xiao-ping and his successors have replaced the Beijing regime's centrally planned, State-owned, Party-controlled economy with a centrally directed, heavily and erratically taxed, largely privately owned, Party-/private- mixed controlled economy. Fascism is certainly more realistic than Marxist Communism as a politico-economic system, and generates better but still sub-optimal results compared to a genuinely free, market-oriented, transparent economy in a limited, federal, republic. China cannot disown its history, the parasitical drain imposed by multiple layers of Party and State bureaucrats, or the inherent difficulties imposed by demography, geology, and geography. It is also still very important to remember that the Chinese political structure has generated generations of proficient, habitual liars -- so any claims about economic growth or sociological progress must be taken with a hefty dose of salt -- the vast majority of Chinese bureaucrats know that their real power rests upon their ability to squeeze money, gifts, favors, and privileges out of their subjects, and to manipulate the flow of information and money up and down the chain to secure if not enhance their own positions. China is still more kleptocratic single-Party dictatorship than modern economy, regardless of its US-sponsored membership in the WTO.
** The problem of regional separatism, often referred to as "warlordism," has always haunted China. China is a vast piece of real estate, populated by people who while predominantly Han Chinese are divided by spoken language, regional culture, and economic interests as well as by quasi-feudal personal loyalties. Fear of separatism is compounded by the real and continuing problems of regional and local corruption and abuses that have increasingly led to popular rebellion. Beijing's answer so far has been to squeeze the wealthier, more closely supervised, more easily pressured coastal urban regions and private capitalists to obtain money to pass around in the most restive areas. "Grease" has a double meaning in the Chinese economy. But there is only so long and so hard one can squeeze the private sector before it starts putting more focus on self-protection and hiding wealth than on productivity and generating wealth and jobs. The regime needs to beware that it doesn't "strangle the goose that lays the golden eggs" in its eagerness to obtain enough money to support a still-bloated, wasteful, and incompetent double-bureaucracy and a massive state security structure.
** There is another factor implicit in what Zeihan discusses here. If the centripetal pressures in China are strong and growing, the foreign factor becomes increasingly significant. Beijing might feel pushed to seek a major conflict (over Taiwan and/or the S.China Sea, etc.) to refocus the country outward and create a justification for a top-down, recentralizing crack-down on both excessively corrupt officials and rebellious peasants and workers. Less likely, but not impossible, an increasingly isolated and desperate government in Taipei might feel it is time to form a united front and focus neither on unilateral independence or "re-" unification, but on pulling key coastal provinces out of the PRC and into the RoC. That could reinforce Beijing's sense of urgency over Taiwan ... or make Beijing feel it is better to let Taiwan go than risk a new national power struggle with the RoC government. This may seem too bizarre and fantastic to consider, but in 1984, who was able to foresee how the USSR would break itself up? The precedents in China's history are there.


Dissecting the 'Chinese Miracle'
By Peter Zeihan
GEOPOLITICAL INTELLIGENCE REPORT
Stratfor.com
1.10.2006


The "Chinese miracle" has been a leading economic story for several years now. The headlines are familiar: "China's GDP Growth Fastest in Asia." "China Overtakes United Kingdom as Fourth-Largest Economy." "China Becomes World's Second-Largest Energy Consumer." "China Revises GDP Growth Rates Upward -- Again." Everywhere, one can find news articles about China, rising like a phoenix from the economic debris of its Maoist system to change and challenge the world in every way imaginable.

But just like the phoenix, the idea of an inevitable Chinese juggernaut is a myth.

Moreover, Western markets have been at least subconsciously aware of this for a decade. More than half of the $1.1 trillion in foreign direct investment that has flowed into China since 1995 has not been foreign at all, but money recirculated through tax havens by various local businessmen and governing officials looking to avoid taxation. Of the remainder, Western investment into China has remained startlingly constant at about $7 billion annually. Only Asian investors whose systems are often plagued (like Japan's) by similar problems of profitability or (like Indonesia's) outright collapse have been increasing their exposure in China.

Once the numbers are broken down, it's clear that the reality of China does not live up to the hype. While it is true that growth rates have been extremely strong, growth does not necessarily equal health. China's core problem, the inability to allocate capital efficiently, is embedded in its development model. The goals of that model -- rapid urbanization, mass employment and maximization of capital flow -- have been met, but to the detriment of profitability and return on capital. In time, China is likely to find itself undone not only by its failures, but also by its successes.

The Chinese Model

Until very recently, China's economic system operated in this way:

State-owned banks held a monopoly on deposits in the country, allowing them to take advantage of Asians' legendary savings rate and thus ensuring a massive pool of capital. The state banks then lent to state-owned enterprises (SOEs). This served two purposes. First, it kept the money in the family and assisted Beijing in maintaining control of the broader economic and political system. Second, because loans were disbursed frequently and at subsidized rates -- and banks did not insist upon strict repayment -- the state was able to guarantee ongoing employment to the Chinese masses.

This last point was -- and remains -- of critical importance to the Chinese Politburo: they know what can happen when the proletariat rises in anger. That is, after all, how they became the Politburo in the first place.

The cost of keeping the money circulating in this way, of course, is that China's state firms are now so indebted as to make their balance sheets a joke, and the banks are swimming in bad debts -- independent estimates peg the amount at around 35-50% of the country's GDP. Yet so long as the economic system remains closed, the process can be kept up ad infinitum: After all, what does it matter if the banks are broke if they are state-backed and shielded from competition and enjoy exclusive access to all of the country's depositors?

This system, initiated under Deng Xiaoping in 1979, served China well for years. It yielded unrestricted growth and rapid urbanization, and helped China emerge as a major economic power. And so long as China kept its financial system under wraps, it would remain invulnerable.

But the dawning problem is that China is not in its own little world: It is now a World Trade Organization member, and nearly half of its GDP is locked up in international trade. Its WTO commitments dictate that by December, Beijing must allow any interested foreign companies to compete in the Chinese banking market without restriction. But without some fairly severe adjustments, this shift would swiftly suck the capital out of the Chinese banking system. After all, if you are a Chinese depositor, who would you put your money with -- a foreign bank offering 2% interest and a passbook that means something, or a local state bank that can (probably) be counted on to give your money back (without interest)?

The Chinese are well aware of their problems, and perhaps their greatest asset at this point is that -- unlike the Soviets before them -- they are hiding neither the nature nor the size of the problem. Chinese state media have been reporting on the bad loan issue for the better part of two years, and state officials regularly consult each other as well as academics and businesspeople on what precisely they should do to avert a catastrophe.

The result has been a series of stopgap measures to buy time. Among these, the most far-reaching initiative has been a partial reform of the financial sector. The government has founded a series of asset-management companies to take over the bad loans from the state banks, thus scrubbing them free of most of the nonperforming loans. The scrubbed banks are then opened up so that interested foreign investors can purchase shares.

So far as it goes, this is a win-win scenario: Foreign banks get access to assets in-country before the December jump-in date, and the state banks avoid meltdown. In addition, a measure of foreign management expertise is injected into the system that hopefully will teach the state banks how to lend appropriately and -- if all goes well -- lead to the formation of a healthy financial sector. At the same time, the deep-pocketed foreign companies come away with a vested interest in keeping their new partners -- and by extension, the Chinese government -- fully afloat.

The only downside is that central government, through its asset-management firms, assumes responsibility for financially supporting all of China's loss-making state-owned enterprises.

But this rather ingenious banking shell game addresses only the immediate problem of a looming financial catastrophe. Left completely untouched is the existence of a few hundred billion dollars in dud loans -- linked to tens of thousands of dud firms for which the central government is now directly responsible.

Which still leaves for China the unsettled question: "Now what do we do?"

Two Opposing "Solutions"

As can be expected from a country that just underwent a leadership change, there are two competing solutions.

The first solution belongs to the generation of leadership personified by Deng Xiaoping and Jiang Zemin, and could be summed up as a philosophy of "Grow faster and it will all work out." It could be said that during Jiang's presidency, while the leadership certainly perceived China's debt problem, they -- like their counterparts in Japan -- felt that attacking the problem at its source -- the banking system -- would lead to an economic collapse (not to mention infuriate political supporters who benefited greatly from the system of cheap credit).

Jiang's recommendation was that everyone should build everything imaginable in hopes that the resulting massive growth and development would help catapult China to "developed country" status -- or, at the very least, raise overall wealth levels sufficiently that the population would not turn rebellious. In the minds of Jiang and his generation of leaders, the belief was that only rapid economic growth -- defined as that in excess of 8% annually -- could contain growing unemployment and urbanization pressures and thus hold social instability at bay.

The second solution comes from the current generation of leadership, represented by President Hu Jintao. This solution calls for rationalizing both development goals and credit allocation. The leadership wants to eliminate the "growth for its own sake" philosophy, consolidate inefficient producers and upgrade everything with a liberal dose of technology. Key to this strategy is a centrally planned effort to focus economic development on the inland areas that need it most -- and this entails tighter control over credit. Hu wants loans to go only to enterprises that will use money efficiently or to projects that serve specific national development goals -- narrowing the rich-poor, urban-rural and coastal-interior gaps in particular.

There are massive drawbacks to either solution.

Regional and local governors enthusiastically seized upon Jiang's program to massively expand their own personal fiefdoms. And as corporate empires of these local leaders grew, so too did Chinese demand for every conceivable industrial commodity. One result was the massive increases in commodity prices of 2003 and 2004, but the results for the Chinese economy were negligible. China consumes 12% of global energy, 25% of aluminum, 28% of steel and 42% of cement -- but is responsible for only 4.3% of total global economic output. Ultimately, while "solution" espoused by Jiang's generation did forestall a civil breakdown, it also saddled China with thousands of new non-competitive projects, even more bad debt, and a culture of corruption so deep that cases of applied capital punishment for graft and embezzlement have soared into the thousands.

Yet the potential drawbacks of the solution offered by Hu's generation are even worse. In attempting to consolidate, modernize and rationalize Jiang's legacy, Hu's government is butting heads with nearly all of the country's local and regional leaderships. These people did quite well for themselves under Jiang and are not letting go of their wealth easily. Such resistance has forced the Hu government to reform by a thousand pinpricks, needling specific local leaders on specific projects while using control of the asset management firms as a financial hammer. After all, since the central government relieved the state banks of their bad loan burden, it now has the perfect tool to strip power from those local leaders who prove less-than-enthusiastic about the changes in government policy.

Or at least that is how it is supposed to work. Local government officials have become so entrenched in their economic and political fiefdoms that they are, at best, simply ignoring the central government or, at worst, actively impeding central government edicts.

Hu's team is indeed making progress, but with the problem mammoth and the resistance both entrenched and stubborn, they can move only so fast for fear of risking a broader collapse or rebellion. And this does not take into consideration Beijing's efforts to strengthen the Chinese interior -- where the poorest Chinese actually live. Complicating matters even more, Hu's strategy relies upon the central government's ability to wring money out of the wealthy coastal regions to pay for the reconstruction of the interior.

That has made the coastal leaders even more disgruntled. However, they have come upon a fresh source of funding, replacing the traditional sources of capital that now are drying up as a result of the personnel changes in Beijing: the underground lending system, which was spurred by the official government monopoly over banks in years past. The central government now estimates that the underground banking sector is worth 800 billion yuan, or some 28% of the value of all loans granted in country.

Dealing with Failure -- And Success

The question in our mind is which strategy will fail -- or even succeed -- first. If Jiang's system prevails, then growth will continue, along with the attendant rise in commodity prices -- but at the cost of growing income disparity and environmental degradation. The likely outcome of such "success" would be a broad rebellion by the country's interior regions as money becomes increasingly concentrated in the coastal regions long favored by Jiang. And that is assuming the financial system does not collapse first under its own weight.

Local rebellions in China's rural regions have already become common, but two of are particular note.

In March, the villagers of Huaxi in the Zhejiang region protested against a local official who had used his connections to build a chemical plant on the outskirts of town. When rumors of police brutality surfaced, some 20,000 villagers quite literally seized control of the town from 3,000 security personnel. Before all was said and done, the villagers invited regional press agencies in to chronicle events in the town that had told the Politburo to go to hell, and started burning police property and parading riot control equipment before anyone who would watch. They actually sold tickets to their rebellion. Huaxi marked the first time local officials actually lost control of a town.

Then, in December, protests erupted against a local official in Shanwei, who had similarly lined his pockets with the money that was supposed to have been made available to farmers displaced by his expanding wind-power farm. The local governor figured that since he was investing not just in an energy-generating project in energy-starved China, but a green energy project, that he would have carte blanche to run events as he saw fit. He was right. When the protests turned violent, government forces opened fire -- the first authorized use of force by government troops against protesters since the Tiananmen Square incident in 1989.

Such events are, in part, evidence of a degree of success for the strategy espoused by Jiang's generation. The grow-grow-grow policy results in massive demand for labor by tens of thousands of economically questionable -- and typically state-owned -- corporations. This, in turn, draws workers from the rural regions to the rapidly expanding urban centers by the tens of millions. The dominant sense among those who are left behind -- or those who find their urban experiences less-than-savory -- is that they have been exploited. This is particularly true in places like Shanwei, on the outskirts of urban regions, when urban governors begin confiscating agricultural land for their pet projects.

But for all the complications created by Jiang's solution to China's economic challenges, it is Hu's counter-solution that could truly shatter the system. In addition to dealing with all the corrupt flotsam and high-priced jetsam of Jiang's policies, Hu must rip down what Jiang set out to accomplish: thousands of fresh enterprises that are unencumbered by profit concerns. A steady culling of China's non-competitive industry is perhaps a good idea from the central government's point of view -- and essential for the transformation of the Chinese economy into one that would actually be viable in the long term -- but not if you happen to be one of the local officials who personally benefited from Jiang's policies.

The approach of Hu's generation is nothing less than an attempt to recast the country in a mold that is loosely based on Western economics and finance. Even in the best-case scenario, the central government not only needs to put thousands of mewling firms to the sword and deal with the massive unemployment that will result, it also needs to eliminate the businessmen and governing officials who did well under the previous system (which did not even begin to loosen its grip until 2003). And the only way Beijing can pay for its efforts to develop the interior is to tax the coast dry at the same time it is being gutted politically and economically.

The challenge is to keep this undeclared war at a tolerable level, even while ratcheting up pressure on the coastal lords in terms of both taxation and rationalization. But just as Jiang's "solution" faces the doomsday possibility of a long rural march to rebellion, Hu's strategy well might trigger a coastal revolution. As the central government gradually increases its pressure on the assets and power of China's coastal lords, there is a danger that those in the coastal regions will do what anyone would in such a situation: reach out for whatever allies -- economic and political -- might become available. And if China's history is any guide, they will not stop reaching simply because they reach the ocean.

The last time China's coastal provinces rebelled, they achieved de facto independence -- by helping foreign powers secure spheres of influence -- during the Boxer Rebellion. This resulted, among things, in a near-total breakdown of central authority.


Send questions or comments on this article to analysis@stratfor.com.



Link Posted: 1/20/2006 2:08:05 PM EDT
stop exporting their junk to the rest of the world...it will upset the economy because they send so much junk out...the rest of the world will yell and holler and boycott China so they will back off...
Link Posted: 1/20/2006 3:32:28 PM EDT
If the PRC attacked Taiwan, Taiwan would attack that damn in China (can't remember name) then the PRC would nuke Taiwan, then WWIII here we come!
Link Posted: 1/20/2006 3:35:38 PM EDT

Originally Posted By eye_spy:
The United States.


Yup,also know as US! As in US , the United States, together,US. Like you and me and everybody else.
Link Posted: 1/20/2006 3:36:37 PM EDT

Originally Posted By yobo:
I'm surprised nobody else said this earlier...

Chuck Norris.
Chuck can hold off the entire PRC Army by him self.
I saw him hold off an army of ninjas so PRC army should be a piece of cake.


Holy crap,youre right!
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