Mark My Words

Written By Brian Hicks

Posted December 2, 2005

If the US goes to war with China, it might as well drop a bomb on Los Angeles.

Recent talk about the buildup of Chinese military power has worried many in the international community who know about China’s aspirations for reunification with Taiwan and China’s dream of becoming the East Asian hegemon.

The non-partisan Congressional Research Service released a report entitled China’s Naval Modernization: Implications for US Navy Capabilities. The report contains some startling appraisals of the Chinese People’s Liberation Army (PLA) and its acquisition of advanced weapons systems, as well as an overall construction increase for potential seaborne warfare.

According to the report, the PLA Navy is expected to have twice as many submarines as the United States Navy by 2010.

By 2015, the number of Chinese ships will surpass the US Navy’s fleet size.




Why am I, the Asian investment specialist at Wealth Daily, telling you this ominous news?

Because I think there is no better reason to invest in China.

Joe Knows

Joseph Lieberman, Democratic senator from Connecticut, spoke at the Council on Foreign Relations Wednesday, saying, "These are two nations following quite similar international oil acquisition policies…If we let it go, this could end up in real military conflict, not just economic conflict."

Guess which two nations he was talking about.

Of course, China and the United States are both growing their economies with the strongest of fertilizer, China’s at over 8% annually and the US still at a steady clip just over 4%.

Each country can chalk up a huge amount of their economic vibrancy to the other, as evidenced by the record-smashing trade gap that is expected to hit 200 billion USD next year.

China enjoys exporting to the States, and though we are on the crap end of what may be the worst trade imbalance ever known, Uncle Sam relishes his Chinese imports.

The availability of hydrocarbon resources to power the Chinese manufacturing base and the American firms that they supply will be a key determining factor in the sustainability of the bilateral relationship.

The availability of oil is actually a scarcity, leading both nations to scour the earth for countries they can woo into creation of pipelines that act as arteries for our mercantile hearts.

Kazakhstan, Russia, Canada…All are favorable to direct Chinese access to their underground petroleum supplies.

The Other Timetable

We’ve gotten used to hearing about timetables. The US military presence in Iraq is wearing thin in the eyes of many Americans and of course plenty Iraqis, and everyone wants to know the rate at which the drawdown of forces will proceed.

Of course, such a declaration would present a tactical advantage to those trying to expose thinned-out forces, so many are reticent to give any certain targets.

The Shanghai Cooperation Organization, consisting of China, Russia, and four major Central Asian nations, has initiated its own call for a timetable from the US military, and this one has nothing to do with Iraq.

On July 5, the SCO, which includes the former Soviet Republics Kazakhstan, Uzbekistan, Tajikistan, and Kyrgyzstan, asked the United States to put forth a plan for removing its forces from the region.

As of July 5, there were US bases in Kyrgyzstan and Uzbekistan.

By the end of July, the Uzbek government had ordered US forces to leave its Karshi-Khanabad base. Soon afterwards, Russian military analysts reported Chinese interest in becoming the new tenants.

The Karshi-Khanabad location, a former Soviet base, has served US forces since the beginning of operations against neighboring Afghanistan in late 2001.

In a private discussion I had with an army reservist this spring, he expressed confidence that the future of the US military base array would hinge on Central Asia. The region is of strategic value both for its proximity to the Islamic states of that region, China, and the Caspian Sea’s sizable (and still largely untapped) oil reserves.

China is thinking the same way, and hopefully the tug-o-war will not turn into a real war.

Murder on the Chain Gang

When two men are shackled together, they have a sense of common goals. They may hate each other, but at the very least they will avoid killing each other because it will only increase the survivor’s burden.

China and the United States are both shackled by their reliance on oil, and they better realize that the greatest benefit will be achieved together. Joe Lieberman said as much in his speech, emphasizing that joint Sino-American exploration of renewable and other alternative energy sources should be a priority in order to avoid a war of resources.

Jeff Siegel, editor of Green Chip Stocks, briefed Wealth Daily readers extensively on his recent trip to Atlanta for the Green Build conference. In attendance were several groups of Chinese developers looking to learn from US advances in energy and cost-saving building techniques.

A parallel convention took place just around the same time, in Beijing. Reports from China highlighted the number of American developers in attendance there.

So clearly there is a cross-pollination of interests and solutions taking place. Let’s choose that road. Two countries are on the chain gang, both digging for the same thing, and the only crew boss they should fear is time. Time will lessen the supply of oil and coal, and increase the harm done by each of those.

For the United States and China to go to war would simply increase the burden for whichever survived (unless of course both are obliterated), putting the two linked economies on the skids. The supply of cheap Chinese goods and labor to American companies would disappear.

Such a war would be likely to involve the Caspian Sea states, setting back that region’s petroleum infrastructure for years. And let’s not forget the naval battles, which from the looks of current reports could make the Battle of Leyte Gulf look like the imaginary sea battles my brothers would conduct as kids in the bath tub.

– Sam Hopkins

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