TAIWAN NUMBA ONE

Reading the continual attempts to find something positive about Trump's "election" would be amusing if the man taking our nation's highest office, with a little help from his "friends," wasn't such a disaster for the future of our country.

 

Hard right wing republicans are about power and leverage. They have been asking for the power plays on China for years and finally they have got a chance.

It's not just access of the market. China's been exporting "cheaper" stuff this country likes to buy while China can do without the service stuff we do best. For example, China's been saying the banking stuff is not open to a Chinese operator here in the US either so they can do the same in China. The trade between and China is too deeply intertwined and integrated to resorting to a simple solution that one side can "punish" the other. The power stuff can work to some extent, but how well and how effective will it work? That's the big question. Also pushing China to level the playing field will force them to deal with some fundamental
flaws in their structure, which in the long run can strengthen their competitiveness against the US. China isn't the Japan in 80s. I am doubtful about Trump's tactics.

 

Trump followed up with questioning one-China policy. Either he knows what he's doing and has many next steps planned out, or is naive. I think most of us know what he is. We knew he would make statements on the world stage that could start something we (and Taiwan in this case) may pay a high price for.


Richard Bush open letter to Trump.

https://www.brookings.edu/blog/orde...tter-to-donald-trump-on-the-one-china-policy/

Spoiler

Dear President-elect Trump:

You told Chris Wallace on Fox News Sunday that you “fully understand the One-China policy.” I have no reason to doubt you. But because you may not have received a briefing from the State Department on this matter, I’d like to fill you in on a few aspects of a complicated policy that has not always been well-understood—even by experts on China—through the years. I won’t go over all the history and theology of U.S.-China relations and the Taiwan issue. Just the basics.

Author

Richard C. Bush
The Michael H. Armacost Chair
Chen-Fu and Cecilia Yen Koo Chair in Taiwan Studies
Director - Center for East Asia Policy Studies
Senior Fellow - Foreign Policy, John L. Thornton China Center
richardbushiii


First, the One-China policy is something the United States adopted and has upheld for itself. Beijing did not impose it. And it dates back decades, to before our establishment of relations with the People’s Republic of China.

Second, the core of the United States’ One-China policy is that we don’t pursue a Two-China policy. The government of the People’s Republic of China (PRC) in Beijing and the government of the Republic of China in Taiwan (ROC) each insisted during the Cold War that it was the sole, legal government of China. We would have been perfectly happy to have diplomatic relations with both, but they insisted that we had to choose sides. So, in 1972 the Nixon administration began a process to transfer recognition and diplomatic relations from the ROC (Taiwan) to the PRC, and the Carter administration completed that process in 1979 in return for statements of China’s “fundamental policy” to pursue reunification by peaceful means. In a 1982 communique with China, the Reagan administration formalized this position by saying that the United States does not pursue a policy of two Chinas, or one China-one Taiwan.

Third, because we gave up any hope of a Two-China policy, one consequence of recognizing the PRC was that we could no longer have diplomatic relations with the ROC (no country in the world has diplomatic relations with both). But the Carter administration and Congress created a mechanism to preserve the substance of our relations with Taiwan by working through a nominally unofficial organization, the American Institute in Taiwan (AIT; point of transparency: I was a senior officer of AIT from 1997 to 2002). In fact, AIT is a wholly owned subsidiary of the U.S. government. Its personnel are government personnel, and the business it conducts is government business. The United States does a lot with and for Taiwan, and as long as we do it behind the facade of unofficial relations, China does not complain.

The mechanism isn’t the equivalent of diplomatic relations: Taiwan’s president has not had face-to-face meetings with the U.S. president, but through the years numerous channels have been created to facilitate communications between the two on political, security, economic, cultural, and people-to-people issues. There are some limitations on the conduct of relations, but many of these have been relaxed over time and can probably—but quietly—be relaxed further. Would Taiwan prefer the dignity of something closer to diplomatic relations? Of course it would. But it also understands that the hand it holds is the hand it was dealt and that, at the end of the day, its substantive achievements with Washington through the unofficial relationship are much more important. When bilateral communication has deteriorated, it’s not because of mechanism defects, but because American and Taiwan leaders have adopted conflicting goals.


A Taiwan Air Force U.S.-made F-16 fighter jet at the Chiayi Air Force base, southern Taiwan, January 26, 2016. REUTERS/Pichi Chuang.
Fourth, there is the issue of the U.S.-Taiwan security relationship. Washington sells a variety of weapons systems to Taiwan. The George W. Bush and Obama administrations each sold over $12 billion in arms to Taiwan. There is robust interaction between our two defense establishments, including on the fundamentals of Taiwan’s defense strategy. The United States warns Beijing about using force against Taiwan, the unstated implication being that we would come to Taiwan’s defense. It’s ironic: We have defense cooperation with a government that we do not recognize, to help it ensure its security vis-à-vis a government that we do recognize.

The PRC military threat to Taiwan arises because it has always asserted that the island is part of the sovereign territory of China. It has stated its fundamental policy to seek to resolve its dispute with Taiwan peacefully, yet Beijing has never renounced the use of force—and the People’s Liberation Army continues to acquire capabilities that would be useful in a war against Taiwan. Hence the need for U.S.-Taiwan security cooperation to ensure Beijing does not resort to force.

One of the PRC’s stated reasons for its military build-up is to deter a movement on the island to create a Republic of Taiwan, totally separate from China. Beijing is particularly anxious, for historical reasons, that the Democratic Progressive Party—which President Tsai Ing-wen chairs and which is now in power in Taiwan—will move toward independence. But that’s highly unlikely: Taiwan’s core problems are domestic, the great majority of the island’s population and President Tsai want to preserve the status quo, and Taiwan people pragmatically understand that a move to independence would lead to an attack from China.

As part of the U.S. One-China policy, American officials have long said that the differences between Taiwan and China should be resolved by peaceful means. That should remain the cornerstone of American policy. Bill Clinton stated an important supplement to the One-China policy in May 2000 when he said: “the issues between Beijing and Taiwan must be resolved peacefully and with the assent of the people of Taiwan.”

That last phrase was a welcome recognition that during the 1990s, Taiwan had become a democracy. That meant that Washington believed that the people of Taiwan should now have a seat at the table whenever leaders in Taipei and Beijing argued about the island’s future, and that Beijing had to tailor its unification proposals to accommodate their wishes. It also meant that the people of Taiwan have a stake in any discussions between the United States and China about Taiwan. Taiwan people know that there were times in Taiwan’s history when Washington ignored their wishes when conducting its China policy, and this statement was meant to reassure them that such days had passed.

This leads to two important takeaways regarding the state of the U.S. One-China policy:

• Washington and Beijing decided to establish diplomatic relations in 1979 to facilitate cooperation between the two countries on a whole range of issues. How we interact with Taiwan was a consequence of the decision and a part of a packaged deal. Whatever the current problems in the U.S.-China relationship today, our reneging on the Taiwan part of the packaged deal would not provide leverage on trade, North Korea, the South China Sea, or any of the other issues that roil the relationship. More likely, it would rattle the entire framework of the relationship, and cause Beijing to rethink its policy of seeking reunification by peaceful means. To make matters worse, Taiwan could suffer collateral damage as a result.
• Not only would it not work as a practical matter to try to use the One-China policy to leverage U.S. objectives on other issues, it would be immoral to do so. Taiwan is not a “tradeable good.” It is an island composed of 23 million people who have created a prosperous, stable, and democratic society—a society, by the way, that China might emulate. They are good friends of the United States. They don’t deserve to be treated as a bargaining chip.

To enter into negotiations with China on the One-China policy is to create a zone of uncertainty that puts Taiwan at risk.

Yours sincerely,

Richard Bush

 

ur confused.

China did unload a boatload of US treasuries early Dec, to such an extent that Japan is now the US's largest creditor, w China being a close 2nd.

at around the same time, the Fed raised the interest rate by a 1/4 basis point, as well as forecasting 2 to 3 rate hikes in both 2017 and 2018; could be more if China unloads more-than-expected boatloads of US teasuries​

 

They're selling off some treasury reserves to shore up a weak Yuan and to prevent their economy from further cratering.

The Fed rate hikes were planned well before any talk of Trump and China, and with the stock and real estate market bubbling up beyond conventional valuations, the hikes out of a near zero interest rate policy is needed.

 

We owe most of our debt to ourselves.

 

a little more nuance is in order

The underlying reason for China's selling off large block of US treasuries, in late 2016, was to counter the
rapidly-rising capital outflow among the super rich and some of the middle class.

As for your false claim of a cratering Chinese economy, let's deal w the facts:

after ~ 3 decades of double-digit GDP growth, China's economic growth per annum has slowed down
to the 6-7% range. After recovering from the GWB-induced depression in 08/09, when its economic pie
cratered/shrunk, the US economy has been able to grow its GDP at a ~ 2+% rate.

if the Chinese economy is cratering, as per ur baseless claim, what does that make the US economy ?​

Bingo, thank you for corroborating my point, but i don't need the help.

Fed's decision is data-dependent; its database includes info on foreign ownership, by country, of US treasuries

 

China's economy's is on thin ice probably not yet cratering. As you say, China's personal wealth has been making an exodus increasingly over the last several years as China's heavy handed approach to combating the huge bubble they've created has caused nervous China investors.

China and US economic growth isn't a very apples to apples comparison as I doubt the US or any developed country will ever see the type of growth China and SE Asia have been having simply due to the fact that developing nations have a larger gap to make up.

 

how so, care to elaborate ?

all things considered, the Chinese economy is in much better shape than
the state of the US economy, when Obama first took office as the POTUS in 2009.​

 

That's an interesting comparison point... picking the point around the time of a global liquidity crisis originated in the US and spread.

China is in the midst of a bubble of historical proportions and the Chinese govt has been scrambling to keep the growth engine going. It has taken on a lot bad debt which has compounded the problem. Even as China tries to package their debt to move it, they aren't getting many buyers.

https://www.bloomberg.com/news/arti...olution-has-one-big-problem-as-banks-buy-npls

 

fyi

that Bloomberg reporter is not the first one to hammer on this point.

Gordon Chang has been hammering on this point since the late 1990s, leading to his much-ballyhooed prediction of The Coming Collapse of China, which was also the title of his Times best-seller in 2001, .

​

Since Chang's prediction, the Chinese economy has grown 8-fold​

 

Gordon Chang is a joke. There's no such thing as an economy in perfect health, every major economy have a list of very serious problems/ risk factors, yet some kind of major collapse is exceptionally rare. Further reductions in Chinese GDP growth rate? Pretty much guaranteed. China finally entering into a recession for certain time frame in the future? Very likely. China's economy collapsing? Extremely unlikely.

 

That was then, this is now. They didn't have nearly as big of a bubble in the 90s. When you have to measures to prevent capital from leaving and take measures to prop up the stock market by stopping selling then you got issues.

I dont think China is doomed but they have some very large structural issues to overcome.

 

absolutely.

likewise, when an economy has to

• bail out the financial industry, caused by the malpractice of esoteric credit-default swaps /
  Tranche financing and
• helicopter-drop QE $$$ three times to artificially inject liquidity in order to provide life-support to the stock markets and the economy,

​

it has issues

that's alot different than being "on thin ice"

is there an economy on earth that doesn't have large structural issues?

 

China has been propping it's economy with public spending for some time, it has modernized it's infrastructure and has built a lot of real estate that remains underused and/or overvalued. China has propped up and meddled in it's stock market. I've already mentioned the troubling toxic debt where China is trying to package their debt into products to sell to more risk averse investors, not getting many buyers thankfully.

It's amusing you keep bringing up the US financial crisis, since it seems China is repeating the same mistake but on a much larger scale. China has been furiously trying to outrun the major correction, but it just keeps spending more money on inefficiency (paying workers to dig holes and fill them). Check out China's steel industry as a great example.

China's economy is on thin ice. The US economy in 2016 is on solid ice.

Maybe not. But most don't have the ability to create a global recession.

 

yip.

now, China's GDP is ~ 8 times bigger; ~ the same for its surplus.

it has a lot more $$$ available to fix any momentary economic hiccups, such as stabilizing the stock market volatility.​

ur right.

so too has the US and other countries. in US's case, defense spending would be an eg.

absolutely.

as for the US, there has been lots of waste, fraud and abuse in the Defense contacting arena.

absolutely.

as for the US, QE had been propping up the market for a while.

don't give China too much credit.

it has a rudimentary financial/stock/debt market. for transactions more sophisticated, such as currency/derivatives/etc, for execution, China relies on Hong Kong, who has been pragmatic/smart enough not to allow transactions involving Credit Default Swap / Tranche financing, the financial WMDs that had cratered the US economy in 08/09​

you need to be more specific.

the US economy has recovered from the GWB-induced economic depression, and stablizing; but the financial WMDs, marketed under different names, are still being transacted by Wall Street power house such as Goldman Sachs

 

Learn to format.

​

China's debt is 250% of GDP and 'could be fatal', says government expert
https://www.theguardian.com/busines...gdp-and-could-be-fatal-says-government-expert

China is also spending on defense on top propping up its economy with large public spending.

We don't have millions of empty units and millions of sqft of commercial space empty because we overbuilt. Their citizens can't even afford the housing they built, that's an issue.

It was and now it has winded down. Meanwhile China is ramping it up try to outrun the correction.

​

Nope, I've already posted an article showing how China is trying to sell off its debt by creating these debt products, but no one wants buy them.

China's banking system is as far reaching to cause a global liquidity crisis, like in 2007, but China's economy is large to wear it would send the world into another recession.

I have been, posted an article each on it's toxic debt and debt to gdp ratio. How about an article about China meddling in it's stock market? Would you like an article about China dumping steel because it has no choice to keep workers employed in a weak global market? As I said, they are paying people to digs holes and then fill them if you are familiar with that western idiom. All of these moves and indicators are of an economy on thin ice.

And? We have stabilized while China has been throwing every type of measure to prevent an inevitable massive correction.

 

fyi, Japan's debt ratio is higher, much closer to 300%, been like that for several decades.

the one-sided article ommitted to make this point of reference.

~90% of Japan's debt are owned by its own citizens/entities; close to 100% for China. in this connection, their debts are more manageable relative to Greece, whose debts are owned mostly by other countries. Japan and China's central banks can always print more money, or sell their holding of US Treasuries, as both own > 1 trillion of US debt.

According to the World Bank, China Gross savings rate is ~2 times Japan's; this would make it easier for China, relative to Japan, to manages its debt.​

so, what is ur point ?

this warrants repeating.

China has enough trouble operating rudimentary financial/stock markets. for sophisticated financial transactions, it relies on Hong Kong for execution. Hong Kong does not allow transactions involving Default Creadit Swaps/Tranhe financing, the financial WMDs that had crater the US economy in 08/09​

so what is ur point, the same can be said for the banking systems in the US and EU, as well as the UK and Japan ?

 

And Japan already has a modern, consumer oriented economy, China does not. China is trying to transition to that but it has hit some road blocks.

I sure as hell would hope the second largest economy in the world would be able to manage their debts more than Greece.... not exactly a high bar set there.

That much toxic debt is not good and is only making the bubble worse. A major correction is due.

That China is spending a lot of public and quasi public money propping up their economy amidst a global downturn.

You can repeat it multiple times but China is trying to offload its debt. Shangai is the financial center of China in 2016.
​

My point is China is on thin ice and the others aren't currently. The Chinese govt is currently paying Chinese steel workers to overproduce in order to keep employment up. No other countries are having to flood the market in order to prop up employment, that can't be more of an indicator. No other countries you mentioned are taking measures to prevent personal wealth from leaving.