Robert Gottliebsen: how China will soon rule our world

[jpd80]

LINK

As China's President Hu Jintao leaves Washington, it is important to go behind the specific issues that were discussed to the more important historic event we are seeing unfold.

 

It was once true that global changes of the guard took place over a long period of time – the rise and fall of the Roman and Ottoman empires, for instance. However, we saw with the British Empire a rapid decline in Britain's economic and defence superiority triggered by the Second World War.

 

In that case the Americans took over from the British and it was a smooth transition. Most importantly, the Americans were ready to take the leadership.

 

For most of the 21st Century we have been forecasting that in a couple of decades China would take the economic superpower baton from the US, though it would be a very long time before the US lost military superiority.

 

But the global financial crisis has suddenly catapulted China into global economic superiority. The Chinese military build up and America's concentration of air defence spending on the disastrous Joint Strike Fighter development, plus China's access to the superior Russian aircraft developments, means that before the decade is out China may have both global economic and defence superiority.

 

As it is, China's economic ascendency means that there can be no agreement on any major issue, whether it be climate change, nuclear arms, Iran, Korea, the value of the US dollar, and so on, without China's agreement. But this has all happened much faster than anyone planned and China faces many internal difficulties – coming to grips with global economic superiority is itself a challenge.

 

Secondly, last night I returned from South Africa where – apart from the football World Cup – the main conversation point was the rise of China in Africa. They realise the baton has passed. The American consulate general office has a very prominent place in Johannesburg, but it is a monument to a past era.

 

So, today I want to look at the global implications of this passing of the baton and tomorrow I will look further to what it means for Australia.

 

The US gave away its economic superpower status when it transferred its manufacturing capacity to China, ran huge deficits mainly funded by China and then finally decimated its banking system by concentrating its corporate strategies on short term profitability (sub-prime funding, etc) rather than making sensible long-term decisions.

 

The first repercussion of the baton change is that the US democratic/capitalistic model which we have assumed to be the best way to generate wealth and human well-being is not admired by China.

 

They have watched in amazement as under this system the US dismantled its manufacturing ability and US and European banks threatened the solvency of their nations simply to achieve executive bonuses and short-term shareholder return. They also watched Americans become more and more dependent on Chinese capital. No one can be sure how China will develop politically, but it certainly will not be the American model.

 

Accordingly, China as new economic superpower is not interested in being lectured by the US or anyone else.

 

The Grattan Institute's Saul Eslake says that right now it makes sense for China to allow its currency to float upwards because currently it too low and the current system, whereby it buys US dollars and then prints its own currency, is causing too many local distortions. But China does not want to be shown to be forced to do anything and significantly President Obama did not lecture the Chinese, realising it would be counterproductive.

 

Doubtless China is manipulating the US dollar, but the Americans have given the Chinese the power to interfere in its currency by running up enormous government deficits. The Chinese are always on the look out to use their leverage.

 

Many African dictators rose to power with Chinese support. It's now pay-back time. China is getting the inside running on many African resource developments and in some cases have been allowed to bring in their own labour (rather than just management) to undertake the development.

 

For the US it is too late, so if America tries to regain its superpower status by taking economic measures against China, the Americans will be the main sufferers and the world will be a much less prosperous place.

 

China has its own set of internal problems and is divided over whether the old export model remains the right course or whether more effort should be spent lifting living standards in Western China.

It's important for Australia that the transfer of power be smooth and that China resolve these difficulties.

 

 

So is he right, has the baton already passed to China?

 

Or is America still right in there?

 

Australia now sells huge amounts of Coal, Iron ore, Alumina and Liquified Natural Gas to China and Japan.

With 44% of the world's Uranium located in Australia, i wonder how long until Chinese interest in that

material becomes a strategic importance to Australia and the USA.......

Edited April 26, 2010 by jpd80

[silvrsvt]

So is he right, has the baton already passed to China?

 

 

 

I think we are seeing the same type of hysteria we saw in the 1980's...the US went through a very rough economic time in the early 1980's and everyone was saying that Japan would be taking the US over...now look at them.

 

No doubt that China is going to be come more powerful as time goes on, but lets see how they handle a crisis down the road.

 

 

[97svtgoin05gt]

We've already let too much go to China. America needs to figure out how to do some of this stuff ourselves again. Doing nothing for ourselves is just rediculous. If something serious happens in China, where will we get EVERYTHING we use? Since everything (practically) is made there, we'll be screwed. Recipe for disaster in my opinion.

[NickF1011]

We've already let too much go to China. America needs to figure out how to do some of this stuff ourselves again. Doing nothing for ourselves is just rediculous. If something serious happens in China, where will we get EVERYTHING we use? Since everything (practically) is made there, we'll be screwed. Recipe for disaster in my opinion.

 

Practically everything, huh? The U.S. still produces more than any other country in the world. We also produce more goods for our own consumption than any other country in the world does for us. Will it be tough on us if China collapses? Yes. But it will be tough on the entire world if that happens also, and nobody less so than China itself.

[97 F350]

I think we are seeing the same type of hysteria we saw in the 1980's...the US went through a very rough economic time in the early 1980's and everyone was saying that Japan would be taking the US over...now look at them.

 

No doubt that China is going to be come more powerful as time goes on, but lets see how they handle a crisis down the road.

 

 

BINGO!

 

First it was the Commies going to take over the world by force. (Anybody remember Red Dawn? WOLVERINES!) Then Japan Inc. going to buy the world (anybody remember when they bought Lincoln Center in NYC and Pebble Beach?)

 

Then a few years later, everything was great again and housing prices were going to go up forever, the US was unstoppable, the Dow was going to hit 36,000.

 

Now China is on the upswing. They have bought a few high profile companies. IBM's computers (never mind that it was a money losing division and IBM was glad to ditch it), Volvo - (See IBM), some natural resource companies and a lot of our IOU's. So a few guys who don't have a real job write a few hysterical books about the new end of the world as we know it and they are now the experts. Everybody reads them, panics, gets their knickers twisted up, and then in few years reality hits, China's flaws become exposed (there are plenty) and life still goes on. Meanwhile, the clowns who write this crap have already made there money, people will forget how wrong their predictions were and they will then write a sequel - Tata is taking over the World! And the hysteria will all start again.

 

 

But the global financial crisis has suddenly catapulted China into global economic superiority. The Chinese military build up and America's concentration of air defence spending on the disastrous Joint Strike Fighter development, plus China's access to the superior Russian aircraft developments, means that before the decade is out China may have both global economic and defence superiority.

 

This paragraph alone is laughable. I have spent quite a bit of time in China. It is a big country with a lot of money. But it is also a grindingly poor country with a lot of papered over problems. There is a lot of unsustainable activity going on. Just like property here in the US - everybody was denying there was a problem until it blew up. China will not crash and burn, but there will be significant realignments coming. Then China will pick up the pieces and keep on chugging. Just like Japan, Great Britain, Germany, all the other large economies do. But "economic superiority" - where did this guy get his crack that he's smoking? If you believe the official numbers put out by the Communist Party, I have some Nevada beach from property to sell you. Everything is manipulated.

 

And the "superior Russian aircraft developments" - more crack-smoking. We have both generation 4.5 and generation 5 fighters flying right now in service. No other country in the world has a higher than generation 4 fighter in service. I think Russia has a few prototype 4.5's flying - if it's more than a dozen in testing right now, I would be surprised. So for the US losing military and economic superiority to China within this decade - unless the movie 2012 happens only to North America - not a chance. And unless we as a nation do something even more stupid than the last decade of bubble-prosperity - I don't even see it happening this century. And it won't be China that overtakes us - they have way bigger demographic problems to worry about than we will ever face.

[NickF1011]

And the "superior Russian aircraft developments" - more crack-smoking. We have both generation 4.5 and generation 5 fighters flying right now in service. No other country in the world has a higher than generation 4 fighter in service. I think Russia has a few prototype 4.5's flying - if it's more than a dozen in testing right now, I would be surprised. So for the US losing military and economic superiority to China within this decade - unless the movie 2012 happens only to North America - not a chance. And unless we as a nation do something even more stupid than the last decade of bubble-prosperity - I don't even see it happening this century. And it won't be China that overtakes us - they have way bigger demographic problems to worry about than we will ever face.

 

Anyone who would even remotely call the JSF program "disastrous" doesn't know a freaking thing about it. Calls into question the rest of the story and what else he doesn't know a thing about.

[jpd80]

Thanks for your Comments Nick, 97F350, 97svtgoin05gt, and silversvt.

I enjoy hearing your comments and it's great to get all of your perspectives.

 

Just shifting a little to a Greek tragedy:

 

 

LINK

 

Global share markets have assumed that never again would there be a repeat of the Lehman Brothers disaster. But last night, as they watched Greece and Portugal crumbling and the politicians dithering, the markets were not so sure.

 

The American sharemarket fell around 2.3 per cent overnight and, as we always see during a global crisis, money flooded into the US dollar.

 

Furthermore, to compound the nervousness, traders in commodities were scared that the Goldman Sachs' revelations would cut the vast sums investment banks channel into commodity trading.

 

Last night, Berlin reminded me of New York in 2008. Back then, Americans were saying that it was those 'dreadful Wall Street gamblers that got us into this mess so why should we bail them out?' And so Lehman was left to fail and we found that the world financial system teetered on the brink because banks ceased to trust each other's solvency.

 

Now in Berlin, they're say saying that those 'lazy Greeks have been rorting the system for years and giving themselves benefits based on borrowed money. Why should we bail them out?'

 

Just like Lehman, if the world does not bail out Greece and Portugal (let alone Spain, Italy and Ireland) and these countries default on their loans, then the global banks who loaned them the money are going to suffer enormous losses.

 

And the hardest hit will be the European banks. Ironically, the people who will suffer most may not be the Greeks but rather are those who are refusing to bail out the Greeks.

 

The markets have been confident that Greece and Portugal were 'too big to fail' and the world would not put itself in danger of another Lehman.

 

I think that as we get close to a crisis, that belief will probably turn out to be correct. But as last night's events showed, we going to go right to the brink and the closer we get to the edge the more likely it is we will fall over into new territory.

 

The underlying problem is that the euro does not work. Imagine what would happen if the US or Australian states were a series of countries with one currency. The weaker states would be decimated because their currency would be too high.

 

That's what's happening to Greece, Portugal, Ireland, Italy and Spain. The currency of these countries needs to fall to reflect their economic position. Europe papered over this underlying problem because the poorer countries were able to borrow vast sums from banks. That process has now reached the end.

 

If Greece defaults, then the country will leave the eurozone and their currency will be slashed, plus the $100 billion or so that they have in debts will be lost. Greece can start the process of rebuilding. But that leaves the euro in tatters and the big banks who were stupid enough to lend to people who could not pay with enormous losses.

 

As Europe and the world look at what that means, a rescue will look more and more attractive – but it's not a certainty.

 

Edited April 28, 2010 by jpd80

[NickF1011]

No doubt, most of the nations who refused to convert to the Euro are breathing a collective sigh of relief.

[Trimdingman]

First there was the USSR. They went toe to toe with the US in arms build-up. Then the US came up with the SDI, which the lefties got all bent out of shape about and called "Star Wars". It was too costly, and couldn't possibly work. What their leaders were really worried about was what actually transpired. It was the collapse of their beloved Soviet Union.

 

Now we are in a similar struggle with China. We are seeing whose bubble is going to pop first.

[goinbroke2]

You know, with all the American "rah rah we can do it" on here, it kind of makes me feel good.

See, the States has always (for a long time anyways) been a country of "I can do anything, just get out of my way" and 99% of the time they succeed. Even with the "china is coming" in the media, (and who knows, maybe they will take over) the American attitude is still strong.

That's awesome. Personally I hope the States always retains it's #1 superpower place. For any perceived bad they do, they do 10 times as much good.

 

I guess my point is, the spirit is still alive and going strong. The never-say-die is still strong.

 

Ultimately, that is WHY the country is #1 in so many area's. Yeah you shouldn't send your jobs elsewhere and yeah abiding by standards that other countries don't have to, makes you less competetive. But damn I wouldn't want any other country in the world as a neighbor or ally.

 

 

(Canadian rant off)

[NickF1011]

You know, with all the American "rah rah we can do it" on here, it kind of makes me feel good.

See, the States has always (for a long time anyways) been a country of "I can do anything, just get out of my way" and 99% of the time they succeed. Even with the "china is coming" in the media, (and who knows, maybe they will take over) the American attitude is still strong.

That's awesome. Personally I hope the States always retains it's #1 superpower place. For any perceived bad they do, they do 10 times as much good.

 

I guess my point is, the spirit is still alive and going strong. The never-say-die is still strong.

 

Ultimately, that is WHY the country is #1 in so many area's. Yeah you shouldn't send your jobs elsewhere and yeah abiding by standards that other countries don't have to, makes you less competetive. But damn I wouldn't want any other country in the world as a neighbor or ally.

 

 

(Canadian rant off)

 

Canada really has a lot to do with America's success, so thank yourselves while you're at it. With such a peaceful neighbor who was always willing to do a lot of business with us, it freed up a lot of our resources to be put into other areas, while a lot of other larger foreign nations always had to use many of their resources just to keep close tabs on those around them.

Edited April 28, 2010 by NickF1011

[97 F350]

Canada really has a lot to do with America's success, so thank yourselves while you're at it. With such a peaceful neighbor who was always willing to do a lot of business with us, it freed up a lot of our resources to be put into other areas, while a lot of other larger foreign nations always had to use many of their resources just to keep close tabs on those around them.

 

 

Think how much it would cost to police that long-a$$ border.

 

 

Although if we did, maybe we could have kept Justin Beiber and Keanu Reeves out.

[NickF1011]

Although if we did, maybe we could have kept Justin Beiber and Keanu Reeves out.

 

Celine Dion. Don't forget Celine Dion!

[Edstock]

Celine Dion. Don't forget Celine Dion!

And Hank Snow.

[Versa-Tech]

And the "superior Russian aircraft developments" - more crack-smoking. We have both generation 4.5 and generation 5 fighters flying right now in service. No other country in the world has a higher than generation 4 fighter in service. I think Russia has a few prototype 4.5's flying - if it's more than a dozen in testing right now, I would be surprised. So for the US losing military and economic superiority to China within this decade - unless the movie 2012 happens only to North America - not a chance. And unless we as a nation do something even more stupid than the last decade of bubble-prosperity - I don't even see it happening this century. And it won't be China that overtakes us - they have way bigger demographic problems to worry about than we will ever face.

You have an excellent point regarding our current 5th generation Fighters. However, to say that Russia doesn't have 5th generation fighters is just silly. Our future superiority isn't so certain either. We certainly don't have anything currently in service that can match the Sukhoi T-50 (PAK FA). Edited April 28, 2010 by Versa-Tech

[Edstock]

We certainly don't have anything currently in service that can match the Sukhoi T-50 (PAK FA).

http://en.wikipedia.org/wiki/Sukhoi_PAK_FA

 

The PAK FA is a long way from active deployment. So, it would be accurate to say that they certainly don't have anything currently in service that can match the F-22, which is in limited service.

 

And by the time the PAK FA is in squadron strength, the USAF will be deploying the first interceptor UCAV's — that can pull 13+ gee turns until they run bingo for fuel.

[Imawhosure]

BINGO!

 

First it was the Commies going to take over the world by force. (Anybody remember Red Dawn? WOLVERINES!) Then Japan Inc. going to buy the world (anybody remember when they bought Lincoln Center in NYC and Pebble Beach?)

 

Then a few years later, everything was great again and housing prices were going to go up forever, the US was unstoppable, the Dow was going to hit 36,000.

 

Now China is on the upswing. They have bought a few high profile companies. IBM's computers (never mind that it was a money losing division and IBM was glad to ditch it), Volvo - (See IBM), some natural resource companies and a lot of our IOU's. So a few guys who don't have a real job write a few hysterical books about the new end of the world as we know it and they are now the experts. Everybody reads them, panics, gets their knickers twisted up, and then in few years reality hits, China's flaws become exposed (there are plenty) and life still goes on. Meanwhile, the clowns who write this crap have already made there money, people will forget how wrong their predictions were and they will then write a sequel - Tata is taking over the World! And the hysteria will all start again.

 

 

 

 

This paragraph alone is laughable. I have spent quite a bit of time in China. It is a big country with a lot of money. But it is also a grindingly poor country with a lot of papered over problems. There is a lot of unsustainable activity going on. Just like property here in the US - everybody was denying there was a problem until it blew up. China will not crash and burn, but there will be significant realignments coming. Then China will pick up the pieces and keep on chugging. Just like Japan, Great Britain, Germany, all the other large economies do. But "economic superiority" - where did this guy get his crack that he's smoking? If you believe the official numbers put out by the Communist Party, I have some Nevada beach from property to sell you. Everything is manipulated.

 

And the "superior Russian aircraft developments" - more crack-smoking. We have both generation 4.5 and generation 5 fighters flying right now in service. No other country in the world has a higher than generation 4 fighter in service. I think Russia has a few prototype 4.5's flying - if it's more than a dozen in testing right now, I would be surprised. So for the US losing military and economic superiority to China within this decade - unless the movie 2012 happens only to North America - not a chance. And unless we as a nation do something even more stupid than the last decade of bubble-prosperity - I don't even see it happening this century. And it won't be China that overtakes us - they have way bigger demographic problems to worry about than we will ever face.

 

 

Things have changed. It used to be the economic size, and the military might. While all of the countrys mentioned in this thread were thought to have a chance to surpass us, they lacked a large portion of 1 of the ingredients........military power, economic power. None of them had both.

 

Now, many believe a 3rd ingredient has been added to the mix. The ability to secure, and the political will to use efficient energy. In this arena, the United States is sorely lacking. While that sounds like an incredulous statement considering the US uses more energy then any other nation; it is also a true statement that the ACCORDS that the political party in power wants to use in an attempt to wean us away from the cheapest source of energy available for the forseeable future; not to mention the most readily available.........exempts China.

 

In the past, industrialized countrys whos wages were higher could take some solace that goods sent from low wage developing nations like China had the conundrum of shiping the competing goods long distances, eating into their wage advantage. With a carbon tax that these so called developing nations will be exempt from virtually eating away and then some of the transportation costs, there will be no way imaginable for manufacturers of most products to be able stay; and not set up shop in an EMERGING country exempt from the tax.

 

So, will China take over? With the liberal eco fanatics help, and Mr Obama to sign carbon tax into law; China having a sturdy 3rd leg of the stool, it could be possible. Of course, their leaders are Socialists also. They might play an Obama, and screw the pooch too.

[suv_guy_19]

Anyone who would even remotely call the JSF program "disastrous" doesn't know a freaking thing about it. Calls into question the rest of the story and what else he doesn't know a thing about.

 

Well, it isn't turning out super though. It's slow and expensive...things that, as far as I know, it wasn't supposed to be. Not that our purchase is that important at only between 65 and 100 aircraft, but we are, apparently, starting to change our minds on the JSF. We've apparently been talking to Boeing, Saab, and the Eurofighter project.

Edited April 29, 2010 by suv_guy_19

[NickF1011]

Well, it isn't turning out super though. It's slow and expensive...things that, as far as I know, it wasn't supposed to be. Not that our purchase is that important at only between 65 and 100 aircraft, but we are, apparently, starting to change our minds on the JSF. We've apparently been talking to Boeing, Saab, and the Eurofighter project.

 

The variant that's running into huge cost overruns is the VTOL, which may not have been the best idea from the start. But it is certainly going to cost less than the F-22 program in the long run on a per plane basis. Technology isn't cheap and it's pretty much impossible to compare the JSF to any previous aircraft programs due to its complexity and capabilities.

[Edstock]

Well, it isn't turning out super though. It's slow and expensive...things that, as far as I know, it wasn't supposed to be. Not that our purchase is that important at only between 65 and 100 aircraft, but we are, apparently, starting to change our minds on the JSF. We've apparently been talking to Boeing, Saab, and the Eurofighter project.

Slow? Really?

 

Why would we be talking to Boeing about fighter aircraft? They don't make any, AFAIK.

 

Maybe we should deal with Sukhoi for the PAK FA, with Canadian avionics. Maybe save some money.

[NickF1011]

Why would we be talking to Boeing about fighter aircraft? They don't make any, AFAIK.

 

FA-18 is Boeing. Of course, that's not a 5th generation fighter either.

[jpd80]

What about things other than military?

That insipid creeping flow of consumer goods to the west and cash back to China...

While their GDP is nowhere near USA, it is getting close to Japan and I wonder with all the new infrastructure and spending going on in China how that affects the flow of money and use of commodities like coal and oil. Just a while back China was stockpiling diesel for itself and drove prices up for everyone else...

 

I'm wondering about that general raft of Chinese activities, their stimulus package affects the wider circle of countries. Great for Australia exporting coal, iron ore, alumina, LPG to Asia but could that eventually bite us?

Edited April 29, 2010 by jpd80

[97 F350]

You have an excellent point regarding our current 5th generation Fighters. However, to say that Russia doesn't have 5th generation fighters is just silly. Our future superiority isn't so certain either. We certainly don't have anything currently in service that can match the Sukhoi T-50 (PAK FA).

 

Neither does Russia. I on purpose left this plane out. First flight was what - three months ago? Still a very long way till deployment - if ever.

 

Remember the Typhoon-class subs that were going to out-class everything. I think one might be in service still. Or the Buran - going to give the Soviet Union dominance in space. How's that going?

 

 

Although that might come true now that we are deciding to not fly ourselves to space - but that is an entirely different discussion.

 

http://en.wikipedia.org/wiki/Sukhoi_PAK_FA

 

The PAK FA is a long way from active deployment. So, it would be accurate to say that they certainly don't have anything currently in service that can match the F-22, which is in limited service.

 

And by the time the PAK FA is in squadron strength, the USAF will be deploying the first interceptor UCAV's — that can pull 13+ gee turns until they run bingo for fuel.

 

Exactly. I think there are what 150-200 F-22's in service NOW. And if there was a threat to their superiority - given past history - they will be upgraded. Think how many F-15 and F-16 variants there are. The first F-16 can't hold a candle to the one produced now. Why would the US decide to sit still now on development?

[97 F350]

In the past, industrialized countrys whos wages were higher could take some solace that goods sent from low wage developing nations like China had the conundrum of shiping the competing goods long distances, eating into their wage advantage. With a carbon tax that these so called developing nations will be exempt from virtually eating away and then some of the transportation costs, there will be no way imaginable for manufacturers of most products to be able stay; and not set up shop in an EMERGING country exempt from the tax.

 

So, will China take over? With the liberal eco fanatics help, and Mr Obama to sign carbon tax into law; China having a sturdy 3rd leg of the stool, it could be possible. Of course, their leaders are Socialists also. They might play an Obama, and screw the pooch too.

 

 

If we are going to be hit with a carbon tax on our industry, transportation, etc. It will drive everything overseas due to costs - we will import more gasoline (Not oil - too expensive to refine here with pollution controls, etc), chemicals, everything. So much for energy independence.

 

But, there is a simple solution to this. And due to our president's strong union influence, there might actually be a liver of hope something like this is passed. Require that any imported gasoline, diesel, chemicals, etc be produced in a facility that meets our pollution/carbon requirements. Just like cars that are imported have to meet CAFE targets or get penalized and have US pollution devices on them. Make the penalties punitive enough that it would equalize the costs and our manufacturers would stay put. Most of Europe's exporters would probably meet these requirements - but their labor costs are as expensive as ours.

 

But this 3rd leg is also a red herring. Just like the the "Chinese are coming" ranting. It's the liberal's are going to turn us into the Soviet Union rant. And when George Bush was president, it was the "we are becoming Nazi Germany" rant. It all looks good on a blog or message board or in a speech to fellow believers - but doesn't pan out when subjected to a reality check.

[97 F350]

FA-18 is Boeing. Of course, that's not a 5th generation fighter either.

 

F-15 also. Old M-D design which Boeing has owned for the last 10 years or so.