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SOVEREIGN MAN

Guns and Fortune Cookies

The sight of nuclear missiles being paraded down the street in a perfectly crisp formation is simultaneously revolting and awe-inspiring.  Yet the Chinese government knew exactly what it was doing when it orchestrated its most prominent display of military hardware in the middle kingdom’s history.

This week is China’s biggest holiday week of the year, celebrating ‘National-day,’ when Mao’s communist revolutionaries took control of the country.  The government  kicked off festivities earlier this week with a military parade that was so intricate and precise it made their 2008 Olympic opening ceremony appear utterly amateurish.

Tanks, armored personnel carriers, and yes, nuclear missiles, were all on the march down Beijing’s main drag; overhead were squadrons of fighter jets and attack helicopters. They all moved in perfect symmetry like a team of gold medalist synchronized swimmers (who just happen to have nuclear annihilation capabilities).

China has been beefing up its military for years, and this week was show time. Sure there were hundreds of thousands of adoring locals beaming with pride, but Beijing was really sending a message to the rest of the world:

We are to be taken seriously.

The thing that most westerners do not realize is that China’s military is largely home grown.  While US and European defense contractors peddle their wares in this part of the world (Raytheon and General Dynamics do big business in Taiwan and South Korea), Soviet-era weaponry still dominates the inventory in this part of the world.

In fact, US intelligence analysts still cut their teeth on Soviet weapons and tactics due to wide scale use in the developing world.  Not the case in China.

The Chinese have their own advanced military weaponry, including 55 publicly traded defense contractors that are just as big and profitable as Lockheed.  If you think that China is ever going to invade Taiwan, these would be a good bet (Xi’an Aircraft International Corporation, Jiangxi Hongdu Aviation Industry Co)

Personally, though, I don’t think that’s going to happen.

For all of its military posturing of late, which includes recent joint military exercises with the Russians, the Chinese have built up their defense capabilities for, err… national defense.

(Conversely, notwithstanding the misguided Bush doctrine, I have long argued that the US should rename its own bureaucracy the Department of Offense, which is indicative of both its true military posture as well as moral aggression.)

Three key factors will likely prevent China from entering an armed conflict:

1) Its military is completely untested; despite China’s shiny new advanced weaponry, its armed forces have not participated in a single combat campaign, so there is no institutional knowledge that will improve combat effectiveness.

2) Children rule family life in Chinese society.  Parents invest heavily in their “little emperors” because children are widely viewed as the older generation’s retirement plan. Who needs social security when you have junior’s spare bedroom?

This is a direct consequence of China’s long held ‘one child’ policy, and no Chinese parent wants to see his investment crushed by unnecessary foreign folly.

To be clear, this is not to say that the US enjoys sending its children into combat; rather, armed conflict is something that American society has unfortunately become accustomed to over the years.  The United States broke the seal a long time ago.

3) China’s policymakers realize that their most effective foreign policy tool is economics, not bullets. Their beefy military is around simply to make war-mongering politicians think twice before rattling any sabers.

Consequently, I would bet on huge profits in Chinese tourism and agriculture before I’d even think about positioning my investments for war with Taiwan (or anyone else for that matter).

Because of the holiday, it’s very slow in Shanghai this week… which is good for me considering that I am in the final throes of my jet lag. Plus it affords me time to scout for an apartment.  More on that adventure later.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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  • maggie benson

    I think focus on war with Taiwan is not the issue here. China has said for decades that its aim was to conquer the world. It is slowly conquering Taiwain subtly by trade and business and by professing relelentlessly that Taiwan is really China. Having worked with young Chinese for decades, it is clear to me that they have a huge population problem….the number of young men way outbalancing the number of young women. This is in part due to the one child policy but more importantly due to the wide-scale abortion of unwanted female babies. It is no secret that China ultimately plans to use its military might.

  • Gibby

    Oh, Maggie. Pushing the Chinese-as-next-Cold-War-boogeyman scenario are we? There is absolutely no reason for the Chinese to “use it’s military might” when it’s economic might will do the dirty deed (burying the US). They aren’t fools. They know that their military is tactically & technologically 50 years behind the times and is based on rampaging hordes of foot soldiers who would be sitting ducks in a real campaign. This parade is propaganda for the masses (just like our military’s TV commercials) and nothing but a dog and pony show.

    • Mike

      15 or even 10 years ago you might have been right. China is no longer just a 1 million man army without enough trucks and transport to get anywhere or have logistics to fight once there. They have been investing heavily in their navy as well as missle tech that according to intel anylast’s (take that for what its worth) can knock out one of our carriers from 1000 miles away. Our navy is still the tops in the world but you can easily see a time when with the money their spending they could have parity especially in the south pacific.

  • http://chinaoyster.blogspot.com Gra

    The parade was just on historic party lines that a military inspection is par for the course to show the nation the Party has a complete grip on its power. The fact it was the 60th anniversary has special significance.

    The Chinese military are planning ahead for the next ten to twenty years. Sure there is no institutional knowledge of fighting modern wars with the last serious scrap in Vietnam over thirty years ago. The military growth path will be in tandem with the growth in the nation’s search for new alliances and commodity sources and alliances eg west Africa, South America. There is now a blue-water fleet. There are war games and exercises with the US Pacific fleet to build tactical nouse. Plans to build an aircraft carrier are afoot.
    IT investment within this sector is a strategic priority. A low orbiting defuct satellite was shot down by laser two years ago.

    It will be incrementalism by stealth. Future flashpoints will be the commodity supply lines whether this be an oil rig off Nigeria owned by PetroChina or an uranium deposit off the coast of Namibia owned by a SOE. Taiwan is Chinese blood and the little emperors of the PRC have much bigger fish to fry. Be watchful, the US Atlantic fleet… but then that depends on how the Chinese economy developes. China could still go the way of Japan…having the opportunity and losing it.

  • waywalker

    Give the Chinese money, and you won’t see them fire a shot.

    I have this pet theory that the next few years will show an increased presence and the rise of power by corporations. If you’ve read Neuromancer by William Gibson, you know what kind of future I’m envisioning.

    If oil gets decoupled from the dollar and reattached to the euro or renminbi, you’ll see a dramatic upshoot of demand for these two currencies. Either way, you’ll see more prosperity for the winning currency.

    The Chinese do not do things in a haphazard fashion. War is not number 1 priority. I can see control is number 1. Control the keys to money and you have their hearts and minds. :)

  • ic

    No hot war. The Chinese military owns TV stations, shopping malls, airlines, a lot of real estates. It’s the largest and most profitable outfit in China. They are damned rich, rich people don’t waste their lives. They will protect their resources in Africa, and S. America. They will protect and control the Panama Canal. The US cannot manuevre their battleships and supply chains without the Panama Canal, the Canal that Teddy Roosevelt built after instigating a revolution to secede Panama from Columbia. The Canal that Carter signed over to the Panamanians who sold the control to HK’s megabillionaire who is in China’s People Congress. The Chinese have already check-mated the US without firing a single shot.

  • Gene

    Several valid points have been raised by your various respondents. But, aside from an agreement in Argentina, Chinese forays into the world of international currency exchanges are not exactly examples of bravado. Rather, their natural hesitant nature isn’t necessarily patience and cunning.

    Having lived around Chinese in both Taiwan and Beijing one might say they are given more to copying others;thus, their behavior from a creative or innovative standpoint is in fact truly uncertain or clueless. They are reactionary in economics, national defense, culture and much more.

  • JoeJoe

    The Chinese are only a threat to their neighbors now. They are untested and ground forces have few ships or cargo planes to transport them any distance. However, with their more than 50 years of industrial/defense espionage and silly American businesses and universities to train their engineers and scientists it won’t be long before things change. Watch out world!

  • Simon Purser

    Why would China even risk losing a war, when they are so conclusively winning the peace?

    • Warren

      Short and to the point. I would much rather learn Mandarin than have governments that conclude war is a reasonable option. I just don’t see Chinese rule as a threat to my, or the worlds well-being.

  • Rabi

    I feel sorry for Gibby and a few others. Chinese do not only depend on foot soldiers. You saw what they have. Do we know what they don’t show? They smashed India in the last Indo China war when Russia was helping India. They will destroy anybody who attacks them, and they are in the process of making sure nobody does. They are the next economic powerhouse and together with other BRICs countries (Brazil, Russia,India). China will sink USA very soon. USA attacked and destroyed so many innocent countries-Japan, Vietnam, Panama, Cuba,Iraq, Phillipines, and economically destroyed the world (read ‘Confessions of A Economic Hitman’) to become powerful. Now nobody has any sympathy for USA. The USA will sink in their own debt in a couple of years. Nobody will feel sorry for them.

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