by chuck » Wed Nov 18, 2009 12:29 pm
The debt issue is much more complex than it has been portrayed in the west, and are indeed more complex than could be grasped from economic or financial perspective alone.
For one thing, China's current role as the leading creditor nation to the world's dominant military power is actually nothing new. It has happened before, between 1700-1840, and China drew a lesson from its previous occurrence to the effect that its role as a leading creditor nation does not confer security because powerful debtor nations are likely to assault China in order to cancel the debt through force of arms.
Between 1700 - 1840, China assumed exactly the same role to most of Europe as it does now to the US. During this period China imported almost nothing from the west, but exported a vast amount of very high value goods to the west, including porcelain, silk, and tea to the west. If one were to do a historic study of the flow of bullion in the world, one finds that the total supply of gold and silver in the west expanded greatly with the discovery of new silver mines in America. But much of the additional silver ended up in China by 1800 because while China exported a lot to the west, the west exported nothing to China and had to pay for Chinese export in precious metal.
Throughout the early 1800s, western powers sought a way to address this staggering trade imbalance between China and Europe. This was the origin of the Opium war, which started because the British finally found something valuable which many Chinese would be willing to pay lots of money for. The Chinese government was not pleased that this thing happen to be a narcotic and tried to ban it. The British then used force of arms to force the Chinese government to accept it.
Between 1840 and 1900, China lost a succession of wars against various European powers and Japan. If one were to add up the total indemnity that China was forced to pay in silver to the victorious powers, one finds China effectively gave back all the silver that it had collected through favorable balance of trade between 1700-1840.
SO to China, a relationship where the US is militarily overwhelmingly more powerful, but owes China a lot of money, is not a situation which in itself brings China security. To the Chinese, the situation appears to increase the temptation for the US to launch a war against China. China suspects that at some time in the future, the US would attempt to find some pretext, or set some trap for China, so as to justify an assault on China in order to rip up the ledger. Deep down, China suspects that the US is angling to use Taiwan as such a pretext because the US knows that no Chinese government can survive losing Taiwan.
So this is probably why China and the US would never see eye to eye on exactly what a level of force sufficient for China's defensive needs happen to be. US sees China as facing no grave external military threat - because we don't admit we threaten anyone in a way that deserves a reply although we do often like to brag that we can hit anyone at anytime - and is therefore spending excessively on defense. China sees the US as a very grave potential military threat that is facing increasing temptations to attack China, that must be proactively prepared against, and thinks it must spend very diligently on defense to secure itself.
The debt issue is much more complex than it has been portrayed in the west, and are indeed more complex than could be grasped from economic or financial perspective alone.
For one thing, China's current role as the leading creditor nation to the world's dominant military power is actually nothing new. It has happened before, between 1700-1840, and China drew a lesson from its previous occurrence to the effect that its role as a leading creditor nation does not confer security because powerful debtor nations are likely to assault China in order to cancel the debt through force of arms.
Between 1700 - 1840, China assumed exactly the same role to most of Europe as it does now to the US. During this period China imported almost nothing from the west, but exported a vast amount of very high value goods to the west, including porcelain, silk, and tea to the west. If one were to do a historic study of the flow of bullion in the world, one finds that the total supply of gold and silver in the west expanded greatly with the discovery of new silver mines in America. But much of the additional silver ended up in China by 1800 because while China exported a lot to the west, the west exported nothing to China and had to pay for Chinese export in precious metal.
Throughout the early 1800s, western powers sought a way to address this staggering trade imbalance between China and Europe. This was the origin of the Opium war, which started because the British finally found something valuable which many Chinese would be willing to pay lots of money for. The Chinese government was not pleased that this thing happen to be a narcotic and tried to ban it. The British then used force of arms to force the Chinese government to accept it.
Between 1840 and 1900, China lost a succession of wars against various European powers and Japan. If one were to add up the total indemnity that China was forced to pay in silver to the victorious powers, one finds China effectively gave back all the silver that it had collected through favorable balance of trade between 1700-1840.
SO to China, a relationship where the US is militarily overwhelmingly more powerful, but owes China a lot of money, is not a situation which in itself brings China security. To the Chinese, the situation appears to increase the temptation for the US to launch a war against China. China suspects that at some time in the future, the US would attempt to find some pretext, or set some trap for China, so as to justify an assault on China in order to rip up the ledger. Deep down, China suspects that the US is angling to use Taiwan as such a pretext because the US knows that no Chinese government can survive losing Taiwan.
So this is probably why China and the US would never see eye to eye on exactly what a level of force sufficient for China's defensive needs happen to be. US sees China as facing no grave external military threat - because we don't admit we threaten anyone in a way that deserves a reply although we do often like to brag that we can hit anyone at anytime - and is therefore spending excessively on defense. China sees the US as a very grave potential military threat that is facing increasing temptations to attack China, that must be proactively prepared against, and thinks it must spend very diligently on defense to secure itself.