The Trans-Pacific Express: Investing in China
New Undersea Cable to link China with the US
By blackhedd Posted in Economy — Comments (22) / Email this page » / Leave a comment »
It seems churlish to interrupt the political food fight that has recently engulfed RedState (and strongly increased our hit-counts), but there are other things going on in the world. An apparently minor story from the telecommunications industry caught my eye.
A partnership including Verizon and several Chinese companies, including China Unicom, just broke ground on a new undersea cable from Qingdao to the United States, with links on South Korea and Taiwan. There are some interesting aspects to this that make it worth your attention.
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The "Trans-Pacific Express" is expected to be completed in time for next summer's Olympic Games in Beijing, at a cost of $500 million. The timing makes a lot of sense. The Olympics will be China's global "coming out" party. The government hopes to instill around the world the perception that China has now arrived in the front rank of the world's nations.
In case you had any doubts about China, you're going to see beaming from your television set next summer a clean, energetic, well-functioning society with all the modern conveniences. Their ability to put on a world-class show will leave nothing to be desired from people who know Japan, Europe, or the US.
Quite a good deal of this will be Potemkin, of course, and China's regime is still evil, quite willing to shoot people in the head for the sin of desiring more freedom.
But a lot of what you will see will indeed be real. To the extent that success as a nation is defined in terms of material well-being and bustling activity in the economic sphere, China is the next big thing.
And they will need a lot of telecom bandwidth to beam that broad marketing story into your living room next summer along with images of the world's greatest athletes in immaculate and brightly-colored venues.
About the cable itself, there's one critical technical aspect that's worth pointing out: although it will have interconnects in South Korea and Taiwan, the cable will bypass Japan.
As you may know, internet and telecom traffic today between the US and East Asia all goes through Japan. And if you had to single out one nation that China sees as its biggest challenge to East-Asian hegemony, it would be Japan. The Trans-Pacific Express is designed to cut away Japan's critical role in the modern, information-based economy.
A final thing to note is the players on the Chinese side of the venture. The AP story I linked mentions China Telecom, China Netcom, and China Unicom, in addition to Verizon, and partners from Korea and Taiwan.
I know a little bit about China Unicom. They're a smallish company ($27 billion marcap) that competes against the far-larger China Mobile for China's domestic wireless market. As usual in Chinese business, there's not really a free market, these companies don't engage in totally free competition, and the information they publish about themselves has to be considered highly suspect. The government seems to pick clear numbers one, two and three in many industrial sectors, and keeps them in their respective lanes.
(For what it's worth, it appears to be no longer largely true that many Chinese businesses are tacitly controlled by colonels in the People's Liberation Army.)
Why does all this matter? Because it won't be long before you'll have to get knowledgeable about investing in China. And that's because China is where the growth and the opportunities are. Sticking to investments in the United States is not going to be a very good idea in the future.
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It seems to be an article of faith among Americans that if you give someone a taste of prosperity, they'll soon be agitating for political and personal freedom. Even Condoleeza Rice has been heard to say similar things since the time she became SecState. (I won't belabor the side point, which is that Americans also have a tendency to confuse periodic popular elections for both democracy and freedom.)
If the newly-prosperous Chinese people were going to be getting themselves politically free, it would have happened long ago. Tiananmen Square was the last in a long line of suppressions of the popular will.
Why do evil regimes like China, the others you mentioned, and most recently Burma (I refuse to call it by the stupid name its military rulers use) do this?
(God forgive me for saying this.) Because it works.
It keeps the freedom-loving troublemakers under control and lets totalitarian regimes concentrate on consolidating their power for a generation or so.
But here's the hell of the thing, Marcus. Out of sheer numbers and human energy alone, China will win the game called "Global Economy." For you or anyone else to say that you're not going to play along with them is to bench yourself.
Yes, it's evil. What else can I say?
Jared Diamond would agree with your pessimistic assesment. He'd probably also accept the premise that Islam was the future of Europe by 2050. Somehow I wonder it really is that simple.
“The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men."
Overall, I am a realist and know in this global economy at some juncture one will encounter China’s contribution. So it would be a misrepresentation to state I would not “play”. However, I will not contribute to situations where alternatives are clear or Chinese motivations are readily apparent (such as your article here where one off the effects is harming Japan).
Can you name one situation in world affairs where the Chinese have consistently supported us and it had nothing to do with self-interest? Their position on Iraq, support for Russian adventurism, Iranian support and supply of weapons to almost every person hostile to us is a clear sign they are not an ally, but partaking in a calculated strategy. That strategy primarily uses non-confrontational means (economic, diplomatic) as the main tactic through which power is accumulated and gained, all the while decreasing the prominence and strength of their target adversary; us. It’s not hard to see (and you alluded to it above) it is the same tactic used with their populace and throughout their history. Direct conflict is always threatened, used only deliberately and viewed as a failure in that progression. However, it is also meted out unmercifully. Will I be consumed in that progression? No, I will counter it intellectually.
The way to defeat that strategy is twofold; always push back when they probe the limits, since that is one of the keys. The other is to impact the minds and psyches of their populace to fully grasp and discover the unquenchable merits of freedom. An inspired man yearns to be free and move about unencumbered by chains such as communism. I believe a plausible argument can be made for achieving that by selective, measured engagement and building a more integrated global economy. However, that needs to be complemented with an aggressive, deliberate strategy to counter specific military threats, geopolitical influence building and actions that create potential economic or market monopolies or undue influence. That creates balance, the only true way to defeat the Chinese.
"Dulce et decorum est pro patria mori"
Contributor to The Minority Report
Eventually I succeeded, buying one made in the USA. Which was recalled because it was prone to short out and start fires.
Of course, I have some malfunctioning Chinese junk in the house as well.
It's always something!
China is returning to type- authoritarian government, commercial vigor. In the Enlightenment, this greatly impressed the West. I suspect it will again. Sigh.
"Sticking to investments in the United States is not going to be a very good idea in the future."
Sad. Too many American companies are seeing it that way.
I won't waste my vote on Duncan Hunter but I am listening very carefully to his strong warnings that we are investing in China at our own peril.
If we are ever forced to stand up to the Chinese military government, we will first need to borrow money from them to purchase weapons they manufacture based on technologies developed in a place once called America.
I won't boycott the Chinese. It's impossible. But I will be sticking with my investments in the United States. For short term profits, you may question my strategy. But it is a very good idea for our future.
It's true that the military represents a very strong and critical power center. It also appears to be true (you have to hedge every statement about China) that Hu Jintao has recently consolidated his power over the military.
And China's military is full of crazies who write (and sometimes leak) papers about how they're going to kick our butts in a conventional war, and then send a spacecraft to the moon to retrieve an American flag from up there, and display it in Beijing.
But the regime is not just the military. The smarter heads know that they do not want war with the US. They would lose a conventional war badly. And no one would win a nuclear one.
Having said that, China fears the emergence of what they consider cowboy leadership in the US. President Bush is a known cowboy. It's widely expected that President Clinton will act like a cowgirl because she'll need to prove that she actually has... (umm) ovaries, yes that's the word.
So they have to plan for the possibility that we'll pop off and start a war with them. For that reason, they're tremendously interested in blunting our conventional edge. The ongoing cyberwarfare that they appear to have recently escalated is a big part of this.
Why are we playing with scorpions?
The evil communist regime in China is our mortal enemy. Their military expansion, their theft of technology, especially computer, atomic, and ballistic missile tech (yes, I know, part of it our State Dept GAVE them) is appalling and frightening.
In recent times they have engaged in exercises -- like hacking and DOS-attacking our (presumed) super-secure military networks -- that demonstrate both (1)enough skills to be fearsome, and (2) intent to intimidate us.
They are certainly feeding technology and goodies to North Korea and to Iran. Remember that little existential war we are having with militant Islamism?
You can also tattoo this on your rear end -- in the rather near future, China WILL forcibly re-annex Taiwan.
So with this trans-pacific cable, we are building another bridge to enable them to damage us. Gee, thanks.
It's war -- so when can we start shooting back at the enemy Democrats?
We trade with China if and only if the trade profits us. It's true.
Can you point to trades where Americans were worse off before a trade, than they were after. Where people were just giving stuff away to China without getting what they wanted out of the deal, and coming away happy.
I don't think any Americans wake up in the morning and decide that they're going to make loss-making trades with Chinese people in the name of free trade. It just doesn't happen.
Either companies are investing for long-term profit extraction from China, they're getting goods at the best market price around, or some combination of the two.
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Let's nominate the Nash Equilibrium for President.
I am ignoring (intentionally) the trade aspect of it. My points, and my concerns, are about a military threat. They have already used the internet to attack our military, and one has to believe that these are merely proof-of-concept attacks, to pave the way for SERIOUS things at the moment of truth.
Imagine a pretty big DOS attack that jams up a huge portion of our military COM traffic -- just as China launches a military strike on Taiwan. Now, imagine that the exceedingly abundant bandwidth provided by the trans-pacific cable was instrumental in how successful the DOS attack was.
Big stretch? No.
It's war -- so when can we start shooting back at the enemy Democrats?
Honestly, I think any internet attacker is better off tricking gullible MS Windows users into downloading software that hijacks their systems for latter commands to be given.
As much bandwidth that cable will have, attacks using a distributed network of nodes will be far more effective.
HTML Help Central for Red Staters
Let's nominate the Nash Equilibrium for President.
You had a dangling boldface, heh.
HTML Help Central for Red Staters
Let's nominate the Nash Equilibrium for President.
unless there is a massive change in both their political and military leadership. If there is such a change and China attempts to invade Taiwan, China will fail.
China may be able to destroy Taiwan with nuclear weapons but they do not have the resources to successfully invade. As China wants Taiwan's assets and capabilities, they will threaten but they will not act.
The Chinese military, since the border war with Vietnam in the 1980's, know that their numerical strenght is an illusion. The Vietnamese proved that when their smaller force, mostly reserve units, fought the Chinese Army to a stand-still without the need to call back the Vietnamese main-force units from Cambodia.
The Taiwanese Air Force and Navy will be able to destroy the Chinese invasion fleet before it reaches the beach. Any airborne landing will be rapidly destroyed by the Taiwanese Army.
...a shot. And we won't lift a finger to stop them. The PR machine is already in motion, and you'll see it in full cry next summer. "The Taiwanese people long to heal the destruction of their family ties with their brethren on the mainland."
OK, I chose that term carefully, to include several possible tactics, including invasion, blockade, missile strikes, and so on.
I think you have alot more confidence in the Taiwanese defenses than I do.
Here's a scenario I think is quite likely. If the US forces are paralyzed into inaction (by political indecision, by internet/computer means), then it's China vs Taiwan for maybe 36 hours.
First, China will immediately establish air superiority, by destroying radar installations, shooting up airfields, and/or by their 1000 fighters in the air simply overwhelming the
100 the Taiwanese will put up (I don't know the numbers, but I'm confident China has more, MORE, and A WHOLE BUNCH MORE).
The Taiwanese Navy will be annihilated by the same air force and/or missiles and/or Chinese Navy, which is no longer a bath-tub navy, in case notice escaped you. Remember, China has for decades been stealing US radar, metallurgy, technology, and computer knowledge.
The destruction of air and naval defenses will take 90 minutes if the US is out of it.
So then maybe they invade, or maybe they just send over a delegation in an airplane, with the message "surrender or face a massive invasion"; Or maybe they parachute commandos over to blow up stuff.
Without US immediate intervention, Taiwan will last 36 hours, tops. And it won't require, most likely, an invasion fleet.
It's war -- so when can we start shooting back at the enemy Democrats?
to take Taiwan without using force. The Chinese political and military leadership are not stupid. They will use the threat of military force and/or all out warfare to try to intimidate the Taiwanese government and people. However, the Taiwanese are also Chinese and have also noted the Chinese-Vietnamese conflict. China's bluff will not work. Taiwan is not Checkoslovikia.
Taiwan's forces are modeled on our military while China's are still basically modeled on the Soviet system.
Our style of fighting (and Taiwan's) presuposes that we will be facing numerically superior forces. We rely on OODA and superior tech to give us the edge as in Gulf One and Two.
Taiwan may have inferior numbers but the Chinese forces are generations behind. The Taiwanese Air Force, armed, trained and equipped by the United States, will destroy the Chinese attackers before they even realize that thy are in range. The same for their surface and subsurface units.
Taiwan will control the airspace and the sea approaches. The more fighters the Chinese commit, the more fighters they will lose.
And I don't mean that by way of being disrespectful or of refuting your argument, in its military dimensions.
I just don't think there's any way the Taiwan situation will end up with a hot war. If it does, then everyone involved will have failed utterly.
As I said, China will try to take Taiwan through guile and PR. And they're willing to wait decades if need be till the moment is just right. Part of "just right" includes neutralizing our security guarantee.
(And note that I'm not nearly so, er, rosy about China's future in two decades)
... I add that there are two, related, powerful sore spots in the Chinese psyche: Weakness, as in, going from what they literally perceived as zhongguo to being carved up into spheres of influence; and disunity. The latter reflects, suggests, and reminds of the former. The most Westernized Chinese fellow is going to seethe at Taiwan even thinking of going its own way.
Taiwan has been, slowly, deliberately, and despite cultural and economic ties with the mainland, determinedly forging its own identity, with more and more signing on to "independence." If they ever formally state what we already know, you can time the countdown to manned landing craft in picoseconds.
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You've made an excellent point in past discussions regarding China's potential demographic weakness. For my part, I would have expected the stresses to already have appeared, given that the one-child policy appeared 27 years ago. If they have appeared and the regime is keeping them from view, then they're doing a darn good job.
On a risk-adjusted basis, I believe it makes much sense to plan for and adapt to Chinese economic ascendancy, leading to a much larger geopolitical footprint. Technically speaking, we would find ourselves facing the challenge of managing decline to our best advantage. There are ample historical precedents for doing this successfully. As they say, I could be wrong about this, but I don't think so.
Taiwan: I see nothing but downside for China if they start a war, and basic discipline calls for assuming your opposition won't be stupid. On this point, however, I'm willing to defer, given that one of history's great lessons is how easy it is for hubristic leaders to blunder into war.
You'll convince me that the overwhelming majority of Chinese companies are not wholly owned by the PLA when the sun rises in the West.
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We are all heroes, you and Boo and I. Hamsters and rangers everywhere, rejoice!
For what it's worth, it appears to be no longer largely true that many Chinese businesses are tacitly controlled by colonels in the People's Liberation Army
Tacitly is perhaps a very good choice of words. However, they are still estimated to directly control about 15,000 companies across a range of industries, especially military "dual use".
Besides that, the CMC, PLA and their underlying security apparatus is integrated into almost ever venture and company at some level. Bottom line, let's have no illusions about dealing with communist regimes. China is just like Cuba or Myanamar in that respect, only bigger and more economically successful. They sign a business deal and then go shoot someone for "anti-state" activities and have a consistently grotesque record on human rights.
I truly have mixed feelings about any dealings with China, especially at the expense of great friends such as the Japanese. For too long, we have heard rhetoric about how business dealings will bring greater freedom for her people and respect for human rights. What we have received in return is nothing of the sort and is compounded by their anti-US posturing in world affairs, obtrusive, deliberate spying and tactical motivations in almost every dealing. Surely, they are a tenuous, "fair weather friend" at best.
Frankly, I will not exchange cheaper goods at Walmart for the egregious hidden cost of human pain and suffering. While somewhat ethereal to most folks buying that less expensive blender, it is more than I am personally willing to pay.
"Dulce et decorum est pro patria mori"
Contributor to The Minority Report