3 December 2017

China and North Korea: An Abridged Love Story, and Other Chinese Military News

There were no North Korean missiles launched for nearly three months, until a new one went up on November 29 th . China and the United States see this as a threat, but for very different reasons. The many missiles launched and another nuclear test in 2017 have not made life better for North Koreans, or the North Korean government. South Korea was another matter. China quietly lifted, at the end of October, most of the economic punishments it had at on South Korea because the South Koreans insisted on installing an American made THAAD anti-missile system. While China is backing off, the Chinese have made a point. The temporary interruption of trade with South Korea did not hurt China as much as it did South Korea and it really had no significant impact on the economies of either country. Meanwhile North Korea is visibly suffering from the increased sanctions that took effect in 2017. China wants Kim Jong Un to deal with the problem and not become a victim of it. The Kim clan does not seem to be paying attention.

At the same time China and the United States have different problems with North Korea. For the Americans the primary issue is North Korea building a credible ICBM armed with a working nuke. China believes (as do many Americans) that the North Korean ICBM threat is mainly for show and not quite rational. If the North Koreans did launch an ICBM against the Americans it would have to get past the dozens of GBI (Ground Based Interceptor) anti-missile missiles based silos at Fort Greely Alaska. This is a key component of the GMD (Ground-Based Midcourse Defense) anti-missile system in Alaska that protects North America from long range ballistic missiles from North Korea, China or Russia. Testing of the 22 ton GBI began in 2006 and 55 percent of the tests so far have been successful.

While much criticized in the United States, American anti-missile systems are well-respected in places like China and Russia. Patriot has been stopping ballistic missiles since the early 1990s and in the last two years has regularly knocked down North Korean and Iranian ballistic missiles used against Saudi Arabia. Other systems like Aegis, THAAD and GBI depend on realistic testing to impress. Aegis has done best, actually destroying low-orbit space satellite at one point. China sees American qualms about the North Korean missile threat as more media theater than rational analysis. At the same time China faces a more immediate threat from North Korea. There is the growing crime (often caused by armed North Korea troops in uniform) near the North Korean border as well as a growing number of unauthorized North Korean secret police operations in China, especially the northeast. With China the North Korean threat is rather absurdist (push us North Koreans too far and we will bleed all over you) but not as spectacular as nukes. The Chinese know (as do most senior North Korean officials) that actual use of nukes by North Korea (whether successful or not) means the end of the North Korea government and possibly much of the population as well. The traditional (and still quite popular) Chinese strategy is to try and make deals with enough members of the senior North Korean leadership to carry out a coup. Even if that does not succeed the growing paranoia among the senior leadership leads to weakening of the North Korean government as more key people flee or become ineffective lest they do something that is deemed treasonous. In this situation China is more exposed to damage than South Korea or Japan. In other words, the North Korean ICBM is more of a political prop than a military threat. But a collapse of the North Korean government and a flood of refugees heading for the largely unfortified Chinese border is a very real threat and not something the Chinese want to deal with. It would make the current Chinese leadership weak, not something that head of communist police state can afford.

Meanwhile North Korea has become more active with new smuggling and other illegal schemes to raise foreign currency. China knows this because, like most police states, the police have close (if not always cordial) connections with the criminal underground. The Chinese police have made it known that useful information on new North Korean scams would earn a larger rewards (including the prized “get out of jail free” one). Working with North Korea has long been profitable for Chinese gangsters in the northeast but now a lot of the usual methods no longer work and the North Koreans have been using riskier and less profitable scams to keep the foreign currency coming. Not all the Chinese gangs are getting in on this new stuff, often because the Chinese criminals (even the ethnic Korean ones) consider it too risky.

Unlike North Korea China tolerates most of the chatter on the Internet and in the streets. Anyone can monitor this and news of Chinese middlemen that depended on (and grew rich from) this illegal trade were in big trouble became widely known. The latest North Korean nuclear and missile tests have caused Chinese public opinion towards North Korea to become even more hostile. According to opinion polls North Korea has, over the last few years, turned come to be seen by Chinese as a larger military threat to China than the U.S. or anyone else. To deal with this China has increased the number of troops and border police stationed near the North Korean border and conducted more military exercises close to the border.

Russia has also agreed to strictly enforce the latest round of sanctions on North Korea, including the ones aimed at North Korean use of Russian and Chinese banks to avoid detection by sanction investigators. But considering the degree of corruption in Russia (compared to China, which is cracking down on corruption more effectively) it is believed North Korea has found ways to continue doing business via Russia. So far Russia, and foreign observers, have been reporting failed North Korean attempts to continue doing business via Russia. The problem is the North Koreans keep trying despite getting caught. This may be due to the fact that Russia is the only neighbor where North Korea has any chance at all of rebuilding smuggling networks. The Russian government tolerates this as long as their Chinese counterparts do not openly object.

Obor Obstacles

China has a grand strategic economic plan involving Pakistan, Nepal and Burma and it’s unravelling. All three of these countries are pulling out of economic deals with China because the terms, as interpreted by China, are unacceptable. At the same time China has become the largest foreign investor in Iran (since sanctions were lifted in 2015) and most of these investment support Obor directly or indirectly. Thus in most cases Obor investments are seen as a positive (or potentially so) thing. The Iranians were long involved with running a large section of the original Silk Road and developed a reputation of being formidable negotiators. The Iranians don’t trust the Chinese and have made deals with India and Afghanistan to resurrect the ancient Iranian portion of the Silk Road and expand it a bit. This involves a new Iranian port on the Indian Ocean and a railroad and highway connection to Afghanistan and Central Asian railroads. Projects like this help keep the peace because they provide competition for projects like Obor, which are seen as an attempt to establish a cartel and then control trade and prices mainly to favor China. The Iranians deal with the Chinese as equals but many other Obor countries are deemed more exploitable by the Chinese and often, but not always, are.

For the last few years Chinese officials have been describing their economic and military expansion plan internally as Obor (One Belt, One Road). Earlier in 2017 China went public with Obor via a PR campaign that described it as a revival of the ancient “Silk Road.” That’s not accurate as the ancient Silk Road was only partially run by the Chinese. Most of it was operated by other major powers (Iranian, Indian, Turks and Arabs) and was largely put out of business after the 16th century by European innovations in ship building and management of sea routes that provided a safer and cheaper way to move goods worldwide. Moreover, until the late 20th century Chinese leaders never encouraged (and often banned) foreign trade. For most of Chinese history the leaders believed China had all it needed (largely true) and considered all non-Chinese and their products inferior. The big change now is that China needs international trade and Obor is the Chinese plan to control as much of it as possible. This is essential for a prosperous economy because without that the communists are in big trouble. Obor means China owning or otherwise controlling as many of the new roads, railways, ports, pipelines and sea routes as possible. China is investing nearly $200 billion in Obor construction. This includes land routes through Central Asia to Europe and the Middle East, another through the Himalaya Mountains to the Indian Ocean (soon to be under new management if China has its way) and new land connections into Southeast Asia. The key to China’s new sea routes is asserting ownership of the South China Sea. Pakistan, Nepal and Burma are all demanding renegotiation of terms and rejecting Chinese interpretations of some of the deals. For example China assumed that trade along the Obor would accept the Chinese yuan as an international currency similar to the dollar, yen or euro. Many nations are not ready for that and let the Chinese know that when China tried to implement its interpretation of how the yuan was to be treated.

Another feature of Obor is that it offers business relationships that are more acceptable (than Western ones) to most of the areas Obor is investing in. The Chinese can, as they like to put it, be more flexible and respectful of local customs. In other words the Chinese don’t see bribes and corruption as a defect but an opportunity. This is great for the foreign political and business leaders but less so with most of the others and this is causing problems. Africans and Asians living near many Chinese foreign operations complain that China is the major investor in illegal extraction of raw materials and keeping local gangsters and corrupt politicians in business. The Chinese also violate local labor laws with impunity and often hire their own armed security personnel who will shoot to kill if threatened by angry workers or local residents. Keeping local tyrants in power serves Chinese interests when it comes to things like establishing new military bases or preventing other nations from doing so. Corrupt locals also make it easier to carry out espionage operations (locally or in nearby areas). Helping to keep unelected leaders in power also serves to maintain the legitimacy of the current Chinese government which is basically a communist police state and the CCP (Chinese Communist Party) wants to keep it that way. All this is nothing new. For example once China got its seat in the UN back (from Taiwan) in 1971 it has been notorious for encouraging and using corrupt practices in the UN. Many nations play along and as China became wealthier they were willing and able to buy whatever they needed inside the UN. The latest example of this is how Chinese pressure has caused the UN to withdraw investigators (responding to local complaints of serious crimes) looking too closely at Chinese owned operations in Africa.

China and Pakistan are heavily publicizing the revival of this new Silk Road. In Pakistan the city of Peshawar, on the eastern end of the Khyber Pass, was a major gateway of the ancient Silk Road between China and the Middle East. But that version of the road went through the pass and into Afghanistan. The new Silk Road is not just Obor, in Pakistan it is officially called the China-Pakistan Economic Corridor (CPEC) and is a complex piece of work. In 2013 China agreed to spend $18 billion to build a road from Gwadar and into northwest China. This will require drilling long tunnels through the Himalayan Mountains on the border (in Pakistani controlled Kashmir.) The road and a natural gas pipeline are part of the $46 billion CPEC project. This will make it much easier and cheaper to move people, data (via fiber optic cables) and goods between China and Pakistan. China also gets a 40 year lease on much of the port facilities at Gwadar, which India fears will serve as a base for Chinese warships. This is how China would like all of Obor to be but the rest of the world does not always cooperate.

While Pakistan, Bangladesh and Burma regard China as an ally or, at the very least, nothing very menacing, India considers China its major military threat. The ten week stand off on the border at the Doklam plateau in mid-2017 led the Indian military to speed up the construction of new roads to the new military bases near the Chinese border in those areas where China claims large areas of India actually belong to China.

South China Sea

China appears to have succeeded in buying cooperation from the Philippines. The Filipino government is willing to accept all the legal gifts (aid, investment, loans) China offers in return for the Philippines not resisting Chinese claims in the South China Sea. Meanwhile the Chinese are openly moving more weapons to bases in the South China Sea as well as their main naval base in southern China (Hainan Island). Chinese officials admit that they are determined to get their way in the South China Sea but it is also the case that China prefers to buy what it wants rather than start a war over it. That is an ancient Chinese tradition that is currently giving a lot of popular and official support inside China.


China has been a major lender to Venezuela and has provided about $50 billion since 2007. Most of these loans are repaid with Venezuelan oil. The amount of oil owed China increases as the oil price declines, which means Venezuela has less oil to sell for current needs. But now Venezuela is officially bankrupt and that is causing losses for China, which was not unexpected. China feared that they might not see a lot of their loans repaid and demanded more oil instead. These losses mean little to China and are seen as a cost of establishing themselves in South America. Venezuela is not the only nation in South America where China is active.

November 30, 2017: China announced that they would conduct a joint anti-missile defense drill with Russia on December 11-16. The joint drill will use computer simulations and take place in China (which now leads the world in the number of supercomputers in service). The drill is to coordinate a response against a ballistic missile attack against either country from any direction.

China is also making the best of a bad situation in Burma. There Aung San Suu Kyi, who won international praise for her decades of efforts to get Burmese democracy restored in 2011 (with the removal of a military government) agrees with the Chinese pragmatism believes China is the best alternative (for investment and essential imports) if international economic sanctions are again imposed on Burma, as they were until the generals gave up some of their power and allowed the 2011 elections. Suu Kyi recently agreed to visit China for the third time to discuss economic matters. The Islamic world is demanding UN action against Burma. That is not going to happen as long as China backs Burma and China has recently made it clear that the support is still there. One obvious example was the recent agreement where China will invest over seven billion dollars in upgrading Kyauk Pyu port in Rakhine State and the Burmese government agreed to let China control (via 70 percent ownership of the new port facilities) of the upgraded port. China had wanted 85 percent but backed down because most Burmese wanted China to have much less control. Meanwhile the more the rest of the world pressures Burma on the Rohingya the more power the Burmese military gets back and the easier it is for China to make corrupt deals (which helped weaken the military before 2011) and restore ones that had been halted. It has become easier for China to establish itself as the primary source of weapons and military equipment in Burma.

No comments: