China/USA: those in the red must read the little red book

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Fareed Zakaria has written a very interesting article that tells us more about what is really happening to the USA and the rest of the world, than anything that I have read in the MSM in quite a while:

For weeks the world has eagerly awaited word from the Obama transition team about the people who will head up the next administration -- the new secretaries of state and treasury, the attorney general. But one of the more crucial positions in the Obama administration probably isn't going to be filled for months and is likely to get little attention when it is -- the post of U.S. ambassador to China.

China has become the key to America getting through the worsening economic crisis. The American ambassador in Beijing (okay, this is a metaphor for all those officials who will be managing this relationship) will need to make sure that China sees its interests as aligned with America's. Or else things could get very, very ugly.

Then it gets really interesting, but before reading more Zakaria, let us read a little Chinese:

故曰：知彼知己，百戰不殆；不知彼而知己，一勝一負；不知彼，不知己，每戰必殆。(故曰：知彼知己，百战不殆；不知彼而知己，一胜一负；不知彼，不知己，每战必殆。)
So it is said that if you know your enemies and know yourself, you will fight without danger in battles. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself. - Sun Tzu

是故百戰百勝，非善之善者也；不戰而屈人之兵，善之善者也。
Therefore one hundred victories in one hundred battles is not the most skillful. Seizing the enemy without fighting is the most skillful. Sun Tzu

圍魏救趙
Besiege Wèi to rescue Zhào (Thirty Six Strategies - 2)
When the enemy is too strong to be attacked directly, then attack something he holds dear. Know that he cannot be superior in all things. Somewhere there is a gap in the armor, a weakness that can be attacked instead.

借刀殺人
Kill with a borrowed knife (Thirty Six Strategies - 3)
Attack using the strength of another (in a situation where using one's own strength is not favourable). Trick an ally into attacking him, bribe an official to turn traitor, or use the enemy's own strength against him.

"We must not belittle the saying in the book of Sun Wu Tzu, the great military expert of ancient China, 'Know your enemy and know yourself and you can fight a thousand battles without disaster.'" - Mao Tse-Tung

"Mao was seventy-percent good and thirty-percent bad" Deng Xiaoping

"White cat, black cat, as long as it catches mice." Deng Xiaoping

Now let's read some more of Fareed Zakaria's article in the Washington PostGlobal:

In September, Beijing became America's largest foreign creditor, surpassing Japan, which no longer buys large amounts of American Treasury notes. In fact, though the Treasury Department does not keep records of American bondholders, it is virtually certain that, holding 10 percent of all U.S. public debt, the government of the People's Republic of China has become Washington's largest creditor, foreign or domestic. It is America's banker.

But will the Chinese continue to play this role? They certainly have the means to do so. China's foreign-exchange reserves stand at about $2 trillion (compared with America's at a relatively puny $73 billion). But the Chinese government is worried that its own economy is slowing down sharply, as Americans and Europeans stop buying Chinese exports. They hope to revive growth in China (to levels around 6 or 7 percent rather than last year's 12 percent) with a massive stimulus program of their own.

The spending initiatives that Beijing announced a few weeks ago would total almost $600 billion (some of which include existing projects), a staggering 15 percent of China's GDP. Given their focus on keeping people employed and minimizing strikes and protests, Beijing will not hesitate to add tens of billions more to that package if need be.

At the same time, Washington desperately needs Beijing to keep buying American bonds, so that the U.S. government can run up a deficit and launch its own fiscal stimulus. In effect, we're asking China to finance simultaneously the two largest fiscal expansions in human history -- theirs and ours. They will probably try to accommodate us, because it's in their interest to jump-start the American economy. But naturally their priority is likely to be their own growth.

"People often say that China and America are equally dependent on each other," says Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics. "But that's no longer true. China has two ways to keep its economy growing. One way is to finance the American consumer. But another way is to finance its own citizens, who are increasingly able to consume in large enough quantities to stimulate economic growth in China. They have options, we don't. There isn't really any other country that could finance the American deficit."

Quoting oneself at length is not really considered good form, but I wrote this almost exactly a year ago and I think that it's more relevant now than when I wrote it, so here it is again:

Friday, November 30, 2007
China : on getting rich with the "little red book"
If you study modern China, its Communist Party and the Chinese people even a little, you will see that their obsession, with or without Marxism, is to maintain China's unity, sovereignty and independence.

It is not difficult to imagine the unease of the Chinese leadership at the prospect of facing the United States alone in its role as "sole superpower" at the fall of the USSR and its "really existing socialism" and the subsequent "color revolutions" instigated by the USA.

Obviously something had to be done to keep China from returning to its pre-Mao status of client and near-colony of the west and obviously... something has been done.

Reading Mao Tse-Tung's 1957 speech, "On the Correct Handling of Contradictions Among the People", when he talks about joining forces with China's middle class to defeat the Japanese will make this clearer:

"To understand these two different types of contradictions correctly, we must first be clear on what is meant by "the people" and what is meant by "the enemy". The concept of "the people" varies in content in different countries and in different periods of history in a given country. Take our own country for example. During the War of Resistance Against Japan, all those classes, strata and social groups opposing Japanese aggression came within the category of the people, while the Japanese imperialists, their Chinese collaborators and the pro-Japanese elements were all enemies of the people."

That phrase is the key. The Chinese Communists (who still control China) waited to defeat the Japanese before continuing "class struggle": for the Chinese Communist Party the "primary contradiction" was the struggle against the Japanese.

Reading what Mao wrote you will see what is happening now has a long pedigree.

You would have to go back to the "Long March" of 1934 to find the equivalent of China's entry into the global economy. A long retreat, a regrouping, a devastating counter-attack. With its entry sui generis into globalization, China has neatly turned the tables on the United States, firmly entrapping the Americans in their own free trade ideology.

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In short, with Marxism or with capitalism the Chinese obsession is to regain their full sovereignty. As Deng Xiaoping said, "White cat, black cat, as long as it catches mice." Their "primary contradiction" is to be "rule makers" and not "rule takers" and we, neither really understanding ourselves or much less understanding them, have handed it all to them on a plate and now we must be very grateful if they deign to take it. Chapeau! DS