16 November 2014

Exorcise the Ghosts of 1962

14 Nov , 2014

To some, the India-China War, which started on October 20, 1962 with the Chinese Army walking across the contested and an undefined border, was not a war at all but an armed incursion across the mountains. Call it by any name, the event continues to rankle all and sundry in India; it should be but natural, therefore, for the leadership, military and civil, to analyse and study the happenings of that one fateful month of 1962, to prevent errors supposedly committed. But why is it that the errors, and errors had been made, are still considered as ‘perceived’ and the lessons learnt, if they have been learnt, never been placed in the public domain?

The Report, believed to be highly critical of India’s military and political leadership of the time, continues with the tag of “CLASSIFIED”…

If October 2012 was the 50th anniversary of the forgettable war, the Sino-Indian conflict, March 2014 was the centenary of the ‘birth’ of McMahon Line, which can be considered as the key attempt at defining and de-limiting the India-China border in the Eastern sector, and probably the genesis of the conflict. China’s response to the McMahon Line and its application to demarcate the India-China border has been one of outright rejection on grounds of ‘imperialist legacy’. Whether China’s stand on the issue defensible or not can be a definite subject of debate and perhaps, of mutual accommodation. China’s persistence in claiming the entire present-day Arunachal Pradesh, however, can be an indication to staking a claim for a swap in the Western Sector.

China, all along, wanted a route to Tibet through Aksai Chin and could not be bothered about facts from history. China had been active in that area for a decade prior to 1962, but in 1953, Nehru decided to redraw the boundary as per the Johnson Line of 1865, which included Aksai Chin in India; this was contrary to the British stand of 1899, which had kept it out of India. The Chinese have continuously argued that the Ladakh border has never been clearly delineated and, if at all, any border demarcation has to be as per the McCartney-MacDonald Line, which favours China.

Reorganising the Defence of India: The Task Ahead

14 Nov , 2014

Changes would provide a boost to defence preparedness, usher in an RMA, evolve requisite strategies and policies including for national security, response to asymmetric war, defence procurements, R&D, technology acquisition and reorganising the defence-industrial base. Development and economic progress are undoubtedly priority tasks for the new government but national defence and security issues must be given equal importance if India is to gain its rightful place in the comity of nations.

While both China and Pakistan possess advanced Sub-Conventional capability, India is lagging behind…

The security imperatives for India are multiple and dynamic with a volatile neighbourhood. The last decade has been characterised by utter neglect of the defence sector, the main features being – lack of a national security strategy and a comprehensive defence review; disjointed acquisitions in the absence of a security strategy and clear national security objectives; ignoring military modernisation, allowing the capability gap between own military and the Chinese PLA to increase exponentially; failure to establish a deterrent to proxy and asymmetric war; poor response to border violations, cross-border attacks and intrusions, showing the military and the country in poor light; inadequate border management; military-industrial complex in downward spiral with patchy windows of excellence, forcing import of over 80 per cent of defence needs; generalist bureaucrats ruling the roost in the Ministry of Defence (MoD) without accountability, one example being critical deficiencies in the Indian Navy courtesy MoD intransigence resulting in serious damage to the naval fleet with avoidable loss of lives and equipment, while the MoD failed to take any responsibility whatsoever; civil-military relations hit rock bottom with military deliberately lowered in the Warrant of Precedence; government fighting its own soldiers in Courts denying them authorised pay and allowances, even to the extent of forcing war disabled soldiers and war widows into long legal battles and paid media denigrating the military to show it in poor light.

The debate over the budget for defence and for economic growth is never-ending but recent media reports of the demand for a ten per cent increase in the defence budget just to cater for inflation (forget modernisation) indicates the grim picture. A country which is not strong militarily can hardly develop economically without a ‘safe and secure’ environment especially in a geographical and geo-political setting such as India. We also failed to grasp that conventional response and diplomacy by itself is no match to irregular threats despite having been subjected to proxy war for over two decades.

Does India's New Defense Minister Have a Plan?

November 14, 2014

India’s new defense minister, Manohar Parrikar, has set out an ambitious agenda for India’s defense. 

As we covered recently on The Pulse, the Indian government finally appointed a full-time defense minister after having Arun Jaitley split that crucial portfolio with his responsibilities as finance minister. The new defense minister, Manohar Parrikar, is a former chief minister and comes to the Indian defense ministry at a time when the country is looking to modernize its armed forces, build up indigenous weapons research and development programs, and manage increasingly complicated relations with China and Pakistan. During his first week on the job, Parrikar has highlighted a broad set of priorities for his ministry and also made some notable statements about what he views as India’s primary defense concerns.

For Parrikar, the primary priority for India’s defense ministry over the next three years will be building up the country’s capabilities. He told the Indian press in an interview on Wednesday that the country should not overly concern itself with Pakistani or Chinese provocation, but focus instead on fast-tracking defense purchases and investing in arms development. ”I have realized that if someone properly heads the defense ministry, then we need not worry about Pakistan and China. We are strong enough…we have to build our capability over the next two-three years,” Parrikar told the press. ”We need to provide the armed forces the required logistical support. Prime Minister [Modi] has given me the responsibility to provide all the support to defense forces. I am feeling more responsible because the defense deals are worth Rs one lakh crore [$16 billion],” he added.

Parrikar certainly hit all the right rhetorical points as far as India’s defense ministry is concerned. His predecessor in the last Congress-led government, A.K. Anthony, was criticized for bureaucratic mismanagement. He even drew criticism from India’s then-Army Chief General V.K. Singh. Parrikar’s emphasis on streamlining logistics, infrastructure and indigenous development and procurement is a welcome development. Additionally, in light of India’s recent move to allow greater foreign direct investment in its defense sector, Parrikar assuaged protectionist fears by stating that “except in case of sophisticated equipment, my endeavor will be to promote Indian companies in procurements.” He additionally criticized India’s defense deal-making under the Congress-led government, noting that cronyism, lobbying, and vested interests resulted in poor defense outcomes for India.

Parrikar has additionally stated that he will visit India’s northeastern border with China soon — an area of considerable interest for the current Bharatiya Janata Party-led National Democratic Alliance (NDA) government. Parrikar notably has played down the role of Chinese incursions across the Line of Actual Control. “Chinese intrusion is not a serious issue. It is a serious issue for media. The incidents of incursions by China are a small issue that is being tackled by the army chief or the concerned commander in that area,” he told reporters. ”The issue should be considered serious when they set up their camps in our territory,” he added, alluding the April 2013 Depsang incident between India and China, and the more recent stand off during Chinese President Xi Jinping’s fall 2014 trip to India.

India’s new defense minister seems to have struck all the right chords as he starts off managing a bureaucratic machine notoriously resistant to change. As a country with both great power aspirations and a long list of persistent security challenges, India needs a defense ministry that plans, operates, and executes strategically. To do so, Parrikar will have to take risks and inject bold vision into India’s defense bureaucracy. Time will tell if he’s up to the task.


Is hubris raising its head in India, again?

Is hubris raising its head in India, again? India’s economic growth rate might be edging closer to or may exceed China’s in 2016 but that is not the same as our economy matching the size of China’s 

V. Anantha Nageswaran 

Christopher Wood of CLSA is a well-known Indophile. In his recommended portfolio, his allocation to Indian stocks is thrice the recommended weight of the benchmark he follows. In the most recent edition of his weekly newsletter, Greed & Fear, he calls India the best stock market in Asia, among emerging stock markets and probably in the world. His words made me nervous. What am I afraid of? I am afraid of too much short-term portfolio capital chasing the Indian structural growth story, giving rise to hubris and complacency on the part of governments in India, the private corporate sector and investors. Exuberance will, as it has often, be its own undoing. Signs of it are beginning to emerge. 

The Indian stock market has done rather well this year. It is one of the best performing stock markets worldwide simply because India presents an irresistible bet in a world of low growth and weak leadership. Therein lies the danger, however, because Indian stock market gains far outpace the real economic turnaround. The gulf between the stock market and the economy might widen further because there is a high chance that the US does not engage in any meaningful tightening of monetary policy in the course of 2015. Further, with both Japan and the euro zone picking up the quantitative easing (QE) baton from the US, there is a constant flow of abundant liquidity looking for investment destinations. Hence, asset price bubbles everywhere might reach grotesque proportions. From such levels, it will be a spectacular burst when the crash inevitably comes. 

For all the euphoria in the stock market, cyclical indicators of the economy such as industrial production and production in core infrastructure sectors do not appear to be in any hurry to turn around. Yet, the front-page story in the Friday edition of The Economic Times is that India might be a hair’s breadth away from China by 2016. The newspaper cites the Organisation for Economic Growth and Development for this caption. It is misleading. India’s economic growth rate might be edging closer to or may even exceed China’s in 2016 but that is not the same as Indian economy matching the size of China’s.

Let us get some perspective on the numbers. As of 2013, China’s real gross domestic product (GDP) at 2005 prices was around $4.86 trillion. India’s real GDP was around $1.46 trillion. China’s nominal GDP was around $9.2 trillion and India’s was around $1.9 trillion. China’s per capita real GDP is around $3,583. India’s is around $1,167. China has had a real GDP growth of around nearly 10% for over 35 years since its economic restructuring started in 1979. India’s annual average real GDP growth since 1990—when serious economic reforms began—has been around 6.4%. China has problems with bad loans in banking and so does India. China’s air, water and soil are polluted. So are India’s. In short, India has China’s problems but not China’s economic achievements. 

Bangladesh: Asia's New Energy Superpower?

By Jack Detsch
November 14, 2014

Activists of National Committee to protect Oil, Gas, Mineral Resources, Power and Ports set fire to papers during a strike in Dhaka.

After a favorable UN settlement in June, Bangladesh stumbled upon a wealth of energy. Will investors buy in? 

Imagine you are a major energy magnate, poring over maps to find the world’s next natural gas superpower. Where would you invest?

Even though Bangladesh just hit an energy mother lode in July – winning the rights to 20,000 square kilometers of natural gas-rich waters from India in a U.N. territorial arbitration, chances are you probably wouldn’t think of it. To most, the territory still looks like a high-risk investment, given the political tenisions, pervasive poverty, and highly subsidized economy which undermines growth and limits spending on energy infrastructure. Dhaka and Chittagong, swathed in slums, are a world away from the air-conditioned shopping malls of Riyadh, Doha, and Dubai.

Yet, looking the part isn’t everything: Nigeria, Chad, and Venezuela have fared well in oil markets despite endemic poverty and violence; but Bangladesh’s troubles could help explain why investors haven’t been biting. In fact, quite the opposite; Australia’s Santos pulled the plug on Bangladesh’s only offshore gas field last year, citing poor production. With the help of KrisEnergy, a Singaporean company, Santos plans to begin drilling in shallow waters later this year. PetroBangla, the national oil company, attracted just two bidders in a 2012 auction for offshore drilling rights: India’s Oil & Natural Gas Corporation and Houston-based ConocoPhillips.

Interest in “dispute-free” offshore oil blocks, which PetroBangla opened for auction last April, has proven sparse. Companies have complained about the lack of access to onshore blocks, and the terrible terms for drilling offered by PetroBangla. Earlier this year, Conoco and Russia’s StatOil paired up to bid on three of Bangladesh’s deepwater oil blocks, 30,000 feet below sea level. Conoco later attempted to win an agreement on two more deepwater blocks. Yet outside of these handful of companies, few are betting on Bangladesh.

Maritime Silk Road: Increasing Chinese Inroads into the Maldives

13 November 2014 


Srikanth KondapalliProfessor of Chinese Studies, Jawaharlal Nehru University, New Delhi 

Chinese President Xi Jinping’s September 2014 visit to the Maldives was his first visit to South Asia, indicating to the balance of power dimension with India. Through the joint press communiqué on September 15, China secured the Maldives’ endorsement for upgrading Beijing’s links with the South Asian Association for Regional Cooperation (SAARC). Three presidential visits from Malé to Beijing have already taken place.

This was the first time a Chinese president made such a visit, indicating towards the emerging focus of this region in China’s foreign policy. He was accompanied by a 100-member business delegation, demonstrating the economic focus of the visit. Besides, Beijing mooted the October 2013 idea of a Maritime Silk Road (MSR) connectivity between China and the Maldives, indicating the strategic nature of relations. The joint statement issued during Xi’s visit suggested that Malé will be “prepared to actively participate” in the Maritime Silk Road initiative of China.

Interestingly, Maldivian President Abdulla Yameen had visited China in August, and attended the second Summer Youth Olympic Games in Nanjing. During the visit, Yameen secured a $16 million grant aid from China. This sum is expected to cover costs partly for the Malé-Hulhule Bridge, other projects. Beijing, as a part of its aid program, constructed a building to house the Maldives Ministry of Foreign Affairs, a national museum, and is involved in the 1000 Housing Units Project. Additionally, Beijing is actively involved in several renewable energy projects, tourism and telecommunication sectors. That the highest leaderships of the two countries visited each other within a month shows both their priorities.

The Vice President of the Maldives, Mohamed Jameel Ahmed, visited China in June, and met his Chinese counterpart, Wang Yang. The Maldives-China cooperation on developing special economic zones, construct harbours and bunkering facilities, and diversifing from tourism in the island nation were firmed up during Xi’s visit to the Maldives.

Today, China’s interests in the Maldives have become multidimensional in the backdrop of its dependence on energy through the Indian Ocean Region as well as to balance the Indian rise. Strategic considerations over-weigh Beijing’s postures towards Malé. For instance, China had been actively proposing its MSR idea to the Indian Ocean littorals as a part of its grand strategy to oppose the US rebalance strategy as well as to further its own influence in the region. This initiative was proposed at various venues to the Maldives and the latter had expressed interest in this initiative.

Is the US-China Climate Change Deal DOA?

November 14, 2014

Experts say the deal is not enough, and challenges from U.S. lawmakers mean even those modest goals may not be met. 

One of the highlights from the recent U.S.-China summit in Beijing was an agreement on efforts to battle climate change. China pledged to reach peak emissions by 2030, the first time the Chinese government has formally committed to an emissions cap. Beijing also set an ambitious goal of having 20 percent of China’s energy come from non-fossil fuel sources by 2030. Meanwhile, the U.S. pledged to cut U.S. emissions to 26-28 percent below 2005 levels by 2025.

The general consensus regarding the deal was summed up by Rajendra Pachauri, chair of the UN’s Intergovernmental Panel on Climate Change, in comments to Reuters. “This is a good beginning,” Pachuria said, but it is not enough to prevent catastrophic climate change. Experts speaking to the New York Timesemphasize the importance of China reaching peak emissions before 2030. Having emissions peak in 2025 would be a substantially more ambitious goal, but would be a crucial step in preventing global temperatures from rising by 2 degrees Celsius, the cut-off experts have chosen for preventing the worst effects of global warming.

While there’s certainly more that China (and the U.S., for that matter) can do, this deal signals an important shift in China’s approach to the problem of climate change. Previously, Beijing had refused to consider any concrete targets for emissions reductions because of its positions that the developed world should shoulder most of the responsibility for preventing climate change. In other words, Beijing prioritized continued growth over environmental protection (a common position, it must be said, among many governments around the world).

So what changed? Most notably, domestic factors in China are forcing Beijing to take environmental issues more seriously. Growing public concern over air, soil, and water pollution is a leading factor in protests in China, something the government is always keen to avoid. Public sentiment is helping to drive Beijing’s “war on pollution.” Environmental protection efforts at home fit in well with global calls for China, as the world’s leading emitter of greenhouse gases, to do more in the fight against climate change.

China vs. America in the Sky: A Stealth-Fighter Showdown Is Brewing

November 14, 2014 

"China’s new stealth fighters might one day be able to match their American equivalents in battle, Pentagon and industry officials fear."

China’s new stealth fighters might one day be able to match their American equivalents in battle, Pentagon and industry officials fear. Indeed, China is showing off its latest Shenyang J-31 stealth fighter at the Zhuhai air show in the Guangdong province. To meet the challenge, the Pentagon needs to continue to buy the F-35 and start developing a future fighter to counter the rising threat.

“The J-31—along with the J-20 [the other Chinese stealth fighter]—is a tangible demonstration of the efforts made by China to counter the significant advantage the U.S. has with the [Lockheed Martin] F-22 and F-35,” said one senior U.S. military official with extensive experience with so-called fifth-generation fighters. “They recognize that fourth-gen airplanes [like the F-15, F-16, F/A-18, Russian Su-27 and so on] are quickly becoming obsolete. The price of admission to a fifth-gen war is a fifth-gen airplane and they get that.”

Indeed some senior U.S. aviators believe that the J-31—which is thought by many U.S. military and industry officials to be based on stolen F-22 and F-35 technology—will eventually be the equal of the American fighters. “I think they’ll eventually be on par with our fifth-gen jets—as they should be, because industrial espionage is alive and well,” as one senior pilot familiar with the F-35 told USNI News.

Even if the J-31 doesn’t sit at 100 percent parity with the F-22 and F-35, it might not matter, because those Chinese aircraft might be able to do enough damage to the U.S. military to make it too expensive to fight. “I think we can probably keep a slight advantage for quite some time, but a slight advantage means significant losses and less of a deterrent,” said one senior Air Force official. “Lets pretend the F-22 confronts current air-to-air threats outside of a SAM [surface-to-air missile] environment and has a 30 to one kill ratio today versus a [Sukhoi] Su-30 or [Shenyang] J-11. When the J-20 and J-31 come around, even a three to one kill ratio advantage becomes costly.”

China, Coal, Climate

NOV. 13, 2014

It’s easy to be cynical about summit meetings. Often they’re just photo ops, and the photos from the latest Asia-Pacific Economic Cooperation meeting, which had world leaders looking remarkably like the cast of “Star Trek,”were especially cringe-worthy. At best — almost always — they’re just occasions to formally announce agreements already worked out by lower-level officials.

Once in a while, however, something really important emerges. And this is one of those times: The agreement between China and the United States on carbon emissions is, in fact, a big deal.

To understand why, you first have to understand the defense in depth that fossil-fuel interests and their loyal servants — nowadays including the entire Republican Party — have erected against any action to save the planet.

The first line of defense is denial: there is no climate change; it’s a hoaxconcocted by a cabal including thousands of scientists around the world. Bizarre as it is, this view has powerful adherents, including Senator James Inhofe, who will soon lead the Senate Environment and Public Works Committee. Indeed, some elected officials have done all they can to pursue witch hunts against climate scientists.

Still, as a political matter, attacking scientists has limited effectiveness. It plays well with the Tea Party, but to the broader public — even to non-Tea Party Republicans — it sounds like a crazy conspiracy theory, because it is.

The second line of defense involves economic scare tactics: any attempt to limit emissions will destroy jobs and end growth. This argument sits oddly with the right’s usual faith in markets; we’re supposed to believe that business can transcend any problem, adapt and innovate around any limits, but would shrivel up and die if policy put a price on carbon. Still, what’s bad for the Koch brothers must be bad for America, right?

Like claims of a vast conspiracy of scientists, however, the economic disaster argument has limited traction beyond the right-wing base. Republican leaders may talk of a “war on coal” as if this were self-evidently an attack on American values, but the reality is that the coal industry employs very few people. The real war on coal, or at least on coal miners, was waged by strip-mining and natural gas, and ended a long time ago. And environmental protection is quite popular with the nation at large.

Who Will Pay for China's Bust?

14 NOV 13, 2014

One reason not to worry about a Chinese credit bubble is that most of the lenders are inside the country. If there's a wave of defaults, the logic goes, it won't affect the global financial system in the same way as the U.S. subprime crisis in 2008.

Judging from data on global bank exposures to China, this argument is rapidly becoming less convincing.

Over the past several years, loans outstanding and other exposure to China have roughly quadrupled to more than $800 billion, according to the Bank for International Settlements, an international organization of central banks (see chart). Add in about $170 billion in derivatives, credit commitments and guarantees, and the total comes to about $1 trillion.

How Well Does China Control Its Military?

By Johannes Feige
November 14, 2014

Questions about coordination at the operational level have some significant implications. 

Developments in East Asia in recent years hint at the possibility that communication between the Chinese Communist Party (CCP) and the People’s Liberation Army (PLA) is not all that it might be when it comes to coordinating military activities. Incidents such as the surprise stealth fighter test during former U.S. Secretary of Defense Robert Gates’ visit in 2011, or the 2007 anti-satellite test, are prime examples of the CCP’s leadership being seemingly unaware of what its military is doing. This suggests weakness in coordination between the center and the military, and helps explain numerous episodes where the civilian apparatus seemed oblivious to the PLA’s activities and confused about officers’ statements that made the PLA appear “rogue.”

In 2009, Andrew Scobell argued for the existence of a “civil-military gap” in China’s peaceful rise. Scobell uses this expression in two ways. First, it refers to a potentially serious difference between the attitudes and perspectives of civilian and military elites based on different life experiences and career paths; second, it refers to a possible “loose civilian control of the military.” The PLA detests political intrusion by the party into its own affairs and has subsequently carved out more autonomy for itself. Thus, the claim that in recent years, “civilian CCP leaders seem to have adopted a hands-off approach to the day-to-day affairs of the PLA” seems to plausibly describe the relationship between the military and the civilian leadership.

This could have far-reaching implications. In 2012, outgoing President Hu Jintao hinted that the chain of military command “might be more fragile than commonly understood,” although the true meaning of this statement remains abstruse. Certainly, confusion in the chain of command is not a new problem for China. Past examples include the 16th Party Congress, when Jiang retired from his post as general-secretary, but retained his seat as chairman of the CMC, while Hu became the new general-secretary. This led to ambiguity as to who was China’s commander in chief and ultimately in charge of the PLA, particularly for potentially explosive issues like Taiwan, where conflict control is complicated by the involvement of the United States.

It is assumed that senior CCP leaders hold decisive authority over the main foreign and defense policy issues, but that their authority on military actions of foreign policy relevance on subordinate levels of the policy process is not as clear. Given their status as commander in chief, technocratic civilian CCP leaders possess a broad knowledge of military programs and defense priorities. However, they appear to grant the PLA considerable autonomy and latitude as to how and when programs are implemented. The result is that civil-military coordination regarding specific types of military action impinging on foreign policy is weak.


By David S. Forman

Blue crew of Ohio-class ballistic missile submarine USS Nevada prepares to moor as submarine returns home to Naval Base Kitsap-Bangor following strategic deterrent patrol (U.S. Navy/Ahron Arendes) 

The record reveals that defense planners have not been particularly successful in predicting the future. The U.S. has suffered a significant strategic surprise once a decade since 1940: Pearl Harbor, the North Korean invasion of South Korea, the Soviet H-bomb test, the Soviet reaction to the Arab-Israeli War of 1973, the fall of the Shah of Iran, the collapse of the Soviet Union and, most recently, 9/11. — Mackubin Thomas Owens

As China rises and the United States seeks to maintain its global dominance, the world is faced with a new historical phenomenon: a dramatic shift in power between two nuclear-capable nations. As the relative power of each nation nears parity, tension is inevitable and the character of the evolving Sino-U.S. relationship poses a risk of nuclear miscalculation. Nuclear use between China and the United States would be a catastrophe, but China is an independent actor, and the United States can only influence, but not control, the crossing of the nuclear threshold. If U.S. policymakers neglect this risk, miscalculation is more likely.

This article analyzes nuclear deterrence principles with China across the spectrum of peacetime, conventional crisis or conflict, and nuclear war. If the United States finds itself in a crisis or conflict with China, it would be important to know how the United States achieved deterrence in peacetime as well as how deterrence might be regained if a crisis deteriorates to the point of involving nuclear weapons. The article then makes recommendations on how to enhance nuclear deterrence. By assessing the full spectrum of potential conflict in this manner, the United States can lower the risk of miscalculation.

Nuclear weapons have helped prevent conflict between world powers on anything close to the scale of another world war,1 but nuclear deterrence toward China is different. Pivotal factors that allowed deterrence to be effective in the past do not project to the future of the Sino-U.S. relationship for two main reasons: the relative growth of China within the relationship, and the fluid maritime relationship between the United States and China, which affects how a conflict might begin and therefore how nuclear deterrence could be implemented.

Though 20th-century China developed in a world largely influenced by the United States, China is now in a position to influence the world toward its own interests.2 China’s growth from a considerably closed society in 1972 to a global near-peer to the United States today is a fundamental difference from the Soviet-U.S. relationship. The history of the nuclear age has yet to see a significantly weaker nuclear power eclipse a dominant nuclear power.

The second factor that distinguishes the Sino-U.S. relationship is its maritime nature, and military tensions at sea differ greatly from tensions on land. Naval assets are continually in motion, and there is no equivalent to trench warfare or prolonged stalemates in the air or on the sea. Also, as evidenced by North Korea’s suspected sinking of the South Korean corvette Cheonan in 2010,3 the sea sometimes offers a sense of plausible deniability that leads to aggression that would not occur on land.


When it comes to U.S.-China trade, semiconductors are a big deal. The chips that power virtually all modern electronics are one of the United States’ most valuable exports at $42 billion a year (second only to auto exports at $51 billion), and China’s biggest import at $232 billion – bigger even than oil. But so far, China’s own role in semiconductor production and chip design has remained relatively small, despite concerted but flawed efforts by previous Chinese administrations to boost it.

So it was no small matter this past June when the fresh Beijing leadership under President Xi Jinping issued a new set of “Guidelines to Promote National Integrated Circuit Industry Development.” The guidelines spell out concrete and ambitious development targets for China’s semiconductor industry, with the goal of moving from playing catch-up to forging ahead as an industry leader in integrated circuit (or IC) design and fabrication.

Now noted analyst Dieter Ernst, an economist with the East-West Center in Hawaii, has put out a new study examining the objectives, strategy and implementation policies of China’s new push in semiconductors and what they imply for the country’s prospects in this key industry.

Ernst’s study, From Catching-Up to Forging Ahead? China’s Prospects in Semiconductors, explores how China’s new strategy seeks to benefit from four global transformations in semiconductor markets and technology: the demand pull from mobile devices; new opportunities for China’s factories in trailing-node semiconductor technologies; global changes in the IC fabrication landscape; and a new interest in strategic partnerships and mergers and acquisitions.

The study analyzes two particular policy initiatives of the new Chinese strategy: the IC Industry Support Small Leading Group to enhance strategy coordination, and equity funds to improve investment allocation and enhance firm capabilities through strategic partnerships, joint ventures, and mergers and acquisitions involving both foreign firms and domestic firms.

“The implementation of both policies signals a genuine effort to experiment with a bottom-up, market-led approach to industrial policy,” Ernst says. “In the Leading Group, for instance, experts who are knowledgeable and well-connected in the highly globalized semiconductor industry play an active role in policy formulation and implementation.”

The use of professional investment fund managers, as opposed to government subsidies or investment programs, signals the emergence of a hybrid model that seeks to combine the logic of equity fund management with the objectives of China’s semiconductor development strategy, Ernst writes.

However, his study concludes that, despite movement in the right direction, the new Chinese semiconductor strategy’s capacity for flexible policy adjustments remains limited, and that multi-layered industrial dialogues among key stakeholders in the industry are still at an early stage.

“To exploit the tailwinds from the market, China needs to experiment further with new more market-driven approaches to industrial policy,” Ernst says.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue. Established by the U.S. Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.


By Bradford John Davis

In 2010, two Japanese coast guard vessels and a Chinese fishing boat collided in the disputed waters near the Senkaku/Diaoyu Islands, sparking increasingly confrontational behavior by both China and Japan.1 The pattern of escalation continued in 2012 when Japan nationalized several of the disputed islands by purchasing them from the private owner. China promptly responded by sending warships to the area in a show of force.2 Although escalation to the point of war is unlikely, these incidents underscore the destabilizing regional effects of the disputed islands and associated maritime boundaries. China’s territorial claims are rooted in historical context, nationalism, national security, and economic interests.3 By understanding China’s perspectives, motives, and approaches to resolving this dispute, the United States can anticipate the current pattern of escalation, forecast future Chinese behavior, and identify opportunities for conflict management and eventual de-escalation to improve strategic stability in the region.

Named the Senkaku Islands by Japan and the Diaoyu Islands by China, the group of eight small uninhabited islands in the southern end of the Ryukyu Island chain comprise a mere 7 square kilometers of land.4 In the context of increasingly contested sovereignty in the East China Sea, these seemingly unimportant islands have a far greater strategic significance than size and location would otherwise warrant. The Sino-Japanese friction over maritime resources has created a dangerous military competition in which both countries are applying a zero-sum-gain approach based on sovereignty.5 As the current pattern of escalation continues, the risk of destabilizing the region also increases.

Aerial Photo of Kita-Kojima (left) and Minami-Kojima of Senkaku Islands, Ishigaki City, Okinawa, Japan (Courtesy National Land Image Information)

Regional instability in the East China Sea carries several significant risks to U.S. strategic interests. First, increased militarization of the dispute generates pressure for both China and Japan to invest in weapons technologies and additional platforms.

Second, as more ships and aircraft operate in the area while China and Japan endeavor to demonstrate administrative control of the maritime boundaries, the likelihood of an incident sparking rapid escalation increases. This carries significant alliance implications for the United States vis-à-vis the 1960 Treaty of Mutual Cooperation and Security with Japan.6 Third, American corporations have economic interests in keeping the sea lines open to international shipping and ensuring access for future energy exploration. Finally, the United States needs to maintain healthy diplomatic relations with China to encourage Chinese acceptance of international norms and promote global economic stability.7 Because these are vital interests to the United States, it is important to understand China’s approach to the dispute when developing a regional strategy.


By Stephen Blank

In 1999 two Chinese officers published a study called “Unrestricted Warfare,” arguing that war itself had changed and that it had “morphed” into a phenomenon where the principles of war were no longer Clausewitzian, i.e. the use of armed force to compel the enemy to submit to one’s will.

Instead those principles now were “using all means, including armed force or non-armed force, military and non-military, and lethal and non-lethal means to compel the enemy to accept one’s interests.”[i]

Although Clausewitz may well have successfully weathered this one of many attempts to debunk him, for it is hardly clear that they debunked his definition of war as an attempt to compel the enemy to do our will, today there can be little doubt that the forms of war we see on a global basis also correspond in many particulars to these concepts or, pace Hugo Chavez, Bolivarian war.[ii]

Today we see a global series of “unrestricted” wars, orchestrated by at least three governments, (Russia, Iran, and North Korea) all of which are clearly aimed at the US, its partners, and allies on a global level.

These wars are global and bring together states, terrorists, insurgents, bankers, high and low-ranking government, judiciary, customs, police, and security officials in many countries in loose overlapping networks that target US interests, allies, partners, or the US itself on multiple simultaneous and dynamic fronts not all of which actually involve the direct use of violence.

These forms of subversion and of unrestricted war could involve drug running, money laundering, bribery and corruption of high-placed officials, shady business deals, use of banks to evade US sanctions, e.g. on Iran, various forms of gun running, also but not necessarily in conjunction with the evasion of sanctions, e.g. North Korea, and outright support for revolution, insurgency, terrorism, civil war, and the proliferation of weapons of mass destruction using any and all of these means.

Beyond these aspects, these networks are always interpenetrated by states which in many cases are the moving spirits, i.e. the principals, behind them. In all these conflicts terrorists, organized crime, intelligence activity, criminalized business, revolutionaries, and governments all wear many hats simultaneously, making it extremely difficult to trace who is doing what, where, when, how, and why, to whom.

Furthermore the waging of unrestricted warfare comprises a Janus-faced operation in which supposedly or even actually illlicit relationships and publicly listed activities between states like arms sales and business relationships possess a second, shadow side that facilitate programs of action like weapons and drug smuggling, support for insurgencies etc.
Practicing the Art of Unrestricted Warfare

On any given day transnational threats involving two or more states or would-be states collaborating against a third party force themselves to our attention. Many, though by no means all, of these cases of transnational threats clearly represent threats against either U.S. interests or those of our allies and partners.

For example, in mid-July, 2013, Panamanian authorities discovered a North Korean ship carrying a Cuban missile and airplanes to North Korea for as yet undisclosed reasons. This cooperation, whatever its purpose, exemplifies what obviously is a well-established pattern of bilateral illicit cooperation in pursuit of strategic goals against American and allied interests, as well as a flagrant breach of a UN Security Council resolution.[iii]

But it is hardly an isolated case either for North Korea, Cuba, or for other actors in world affairs. 

North Korea’s illicit activities have been well chronicled in the last few years and center on drug running, acquiring capital and technology for nuclear and conventional weapons and selling missile technology abroad for cash.[iv]

ISIS Keeps Getting Better at Dodging U.S. Spies

There’s a reason ISIS leader Abu Bakr al Baghdadi has proven so hard to take out. He and his followers have become really good at keeping their communications covert. 

On Thursday, around the same time ISIS leader Abu Bakr al Baghdadi announced that he had survived a U.S. airstrike and promised in a recorded message to “erupt volcanos of jihad,” American officials were meeting to discuss just how hard it was to track the militant group. 

Baghdadi and his followers have proven exceptionally difficult to track and kill because they’re encrypting their communications and taking steps to avoid being detected by U.S. surveillance, according to several current and former officials. Without American intelligence operatives on the ground in ISIS’s home base of Syria—and with only a limited number of surveillance planes in the air—those communications are one of the only surefire ways to keep tabs on ISIS. 

In addition to encryption that American officials say has proven very difficult to crack, ISIS is also using a commercially available service that permanently deletes messages sent via the Internet, making them nearly impossible to intercept, according to an individual who was briefed on the issue Thursday. This person didn’t name the service, but one application ISIS has been known to use is called FireChat, which allows users to send messages to each other without connecting to the Internet. 

U.S. intelligence and counterterrorism officials told The Daily Beast that ISIS has adjusted its communications patterns because it knows that the group is constantly being watched. Fighters have been taking extra precautions for months, but the length of time that it took the U.S. to target Baghdadi—six weeks after airstrikes began in Syria and more than three months after they began in Iraq—and the fact that he wasn’t killed in the attack suggests that ISIS is practicing tight controls on their communications, especially at the top of the organization. 

“These guys have a level of discipline. They will enforce through the ranks not using cellphones,” said the individual who was briefed on ISIS counter-surveillance techniques. The group has also used couriers to convey some messages in order to avoid digital communications altogether. 

Testifying before the House Armed Services Committee on Thursday, Defense Secretary Chuck Hagel acknowledged that ISIS is ducking U.S. spies, particularly now that the military is bombing the group. “ISIL fighters have been forced to alter their tactics—maneuvering in smaller groups, hiding large equipment, and changing their communications methods,” Hagel said, using the government’s preferred acronym for the militant group. 

A former U.S. official said that another factor has been complicating efforts to find ISIS members: the lack of combat troops on the ground to follow up on any leads collected by intelligence agencies or drones, which are monitoring the battlefield from the air. “When you literally have a force on the ground, you’re in a better position to take advantage of these communications,” the former official said. 

Air-Sand Battle

NOVEMBER 14, 2014 

Pentagon to rethink its plans for the future of warfare.​

The fight against the self-proclaimed Islamic State is still in its early days, but already it is challenging the Pentagon's assumptions about where and how war will be fought and what the military will need to be prepared.

The conflict in Iraq and Syria represents the type of war the Obama administration has tried to relegate to history. The days of fighting protracted ground wars in the Middle East were supposed to be over. Instead, the White House directed the Pentagon to turn its attention to the Asia-Pacific region, where it's believed by some that high-tech weapons systems belonging to the Air Force and Navy could be optimized in a more conventional fight.

But with new conflicts and pockets of violence and instability rapidly cropping up in places such as Ukraine, the Middle East, and parts of Africa, defense policymakers are being forced to revisit, if not rethink, some of the assumptions that underpin today's strategy and resource decisions.

Among the ideas under scrutiny are the relevance of ground forces and whether state actors pose the most dangerous threat to the U.S. homeland and global security.

For the military services, the debate over these assumptions will directly affect their size, budget, and the types of weapons they buy.

For senior military leaders, the issue of the Islamic State, also known as ISIS and ISIL, "is as much about where the services are headed as it is about the problem to solve," said David E. Johnson, a military analyst at Rand who from 2012 to 2014 directed the Army's Strategic Studies Group for Army Chief of Staff Gen. Ray Odierno.

The Pentagon has laid out a strategy that accepts greater risk in the ground forces so that more resources can be poured into the Air Force and Navy -- the services that play the biggest role in the Asia-Pacific region. A smaller ground force is also believed to be necessary due to escalating personnel costs at a time when the defense budget is shrinking.

As part of this plan, the Army is continuing to shrink from a wartime high of 570,000 active-duty soldiers to today's 505,000, with the goal of dropping to 490,000 by the end of 2015. And even deeper cuts are likely to come; the Army is expected to downsize to 420,000 soldiers if Congress doesn't undo the automatic budget cuts known as sequestration planned for 2016.

The assumption behind these troop reductions is that the United States won't fight large-scale, protracted ground wars like it has in Iraq and Afghanistan anytime soon. And although no one is recommending inserting large-scale U.S. ground forces into Iraq -- the current cap is 3,100 "non-combat" troops -- events there and in Ukraine are providing the Army support for its argument that it is too risky to make the Army much smaller than it already is.

"I think there is a sense by many in the Army of, 'Hey, we told you you've been engaging in some degree of wishful thinking and we think we're getting growing evidence that we're not talking about hypotheticals,'" said Maren Leed, a senior advisor to Odierno from 2011 to 2012 who is now at the Center for Strategic and International Studies. "It's ISIS, it's Ebola, it's Russia. Name your problem, ground forces matter." 

Meanwhile, the other services are arguing, "You can do it with us and with other people's boots," she said.

The Pentagon Is Officially Clueless About the ISIS War


Where’s the legal justification for the war? Will American troops fight? And who are they really battling? The answers to all those key questions appear to be: TBD. 

On this much, all of Washington can agree: The United States is at war with ISIS. But beyond that, the nation’s executive and legislative branches have got nothing. 

On the most salient questions of the day—coming ISIS strategy, the president’s legal justification for war, ISIS’s strength, the status of ISIS’s leader—congressional and administration officials are merely sitting on a pile of questions, with seemingly little unified commitment to find answers. 

For starters: No one knows what the future strategy against ISIS will look like.CNN reported Wednesday that the president had asked top national-security officials to review their ISIS strategy—especially the decision to fight the extremist group without tackling President Bashar al-Assad, too. 

Asked about this report, and whether administration policy was shifting, Secretary of Defense Chuck Hagel dodged the question by responding in the present tense. 

“There is no change in the strategy,” he told members of Congress at a House Armed Services Committee hearing. “There is no change, and there is no different direction.” 

Second: No one knows whether American troops will be deployed in combat roles to help the Iraqi army. 

Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey said Thursday that the United States is “certainly considering” that American forces could accompany Iraqi troops into combat in more “complex” operations, such as retaking Mosul, or operations in Western Iraq. 

What’s more, no one knows when a legal justification for the anti-ISIS campaignwill be passed, or what it will look like. 

In Congress’ first week back after the midterm elections, confusion reigned over the status of legislation that would authorize the president to use military force against ISIS, known as an AUMF, or Authorization for Use of Military Force. 

The ISIS Challenge Online: When Twitter Becomes Anti-Social Media

November 14, 2014 

The so-called “Islamic State” owes more to Stalin than to Muhammad.

For the millions of Arabs suffering under its rule in Syria and Iraq, IS (also known as ISIS) publicly beats women for accidentally exposing a stray strand of hair, cuts off the fingers of old men caught smoking cigarettes, marks the houses of Christians and other religious minorities so that they can be killed.

No offense seems too small for ISIS not to punish harshly. Merely uttering of the word “Da’ish” — the Arabic acronym for “Islamic State of Iraq and Syria,” a nomenclature the organization rejects — is punishable by stoning.

While the reality on the ground is harsh, the view of cyberspace is oddly attractive to too many Westerners.

ISIS has won hundreds of thousands of followers and fans on Twitter and Facebook. Its seventh-century views are promoted through a deft social-media campaign: Jihadists from all over the world now holed up in ISIS territory transmit Tweets calling for new recruits in their respective native tongues. YouTube clips of masked men beheading Western hostages give the group an outlaw allure among young people in Europe and America.

And it works. Hundreds of British subjects and French citizens have left their comfortable lands to make dangerous journeys into war-torn Syria, where more than 200,000 civilians have been killed and millions displaced since 2011.

How can a free society counter such a cyber campaign?

Part of the answer lies beyond the realm of social media itself. Governments must wage information campaigns to dissuade Westerners from joining ISIS in the first place and police and intelligence services must track down those who do join nevertheless.