China is Kicking our Ass in CleanTech (except in solar)

from 1BOG.com

Bai Bai Google

It’s rare that I simmer on a blog post for days and then write away, but this is one of those posts. It’s also rare I go through about 5-6 iterations of a post title, but this is one of those posts. Actually, I almost named this blog post the Tang Dynasty vs. Hu Jintao’ Dynasty. A title too esoteric for most readers, but those who have lived in China probably know where I’m coming from. More on that later. Either way, the sense in the blogosphere seems to be that Google’s threat to leave China has deeper reprecussions than one firm vs. regulators. I agreed wholeheartedly.

A very brief summary for those unaware: Google has said it is no longer willing to censor of search results in China, and may end its operations in China altogether following a “sophisticated and targeted” cyber attack originating from the country. That “sophisticated and targeted” is a euphemism for “the attacks were conducted either at the behest of or at least the tacit acceptance of the Chinese government” – as direct an accusation as Chinese culture permits. What makes Google so sure is that the attacks most targeted Chinese dissidents, and thus any of Beijing’s denials wouldn’t likely pass the smell test. The government hasn’t even tried. Chinese Foreign Ministry spokespeople dodged the question of hacks originating in China instead issuing the boilerplate statement “Google will not be treated as an exception to China’s demand foreign companies obey its laws”. Google upped the ante just today by suspending the introduction of the Google Nexus one phone in China.

“Routine”

Google’s moves aren’t entirely altruistic of course, but rather economic. Google’s entire business model is built on an open web and open standards as has often taken sides in the political debate on net neutrality for instance. The firm’s entire operating model is built upon promoting users to trust their information to Google, which is precisely what is under siege for what Google calls coordinated attacks. “I believe this is the largest and most sophisticated cyberattack we have seen in years targeted at specific corporations,” McAfee Chief Technology Officer George Kurtz wrote on his blog Sunday. He continues to write ”what really makes this is a watershed moment in cybersecurity is the targeted and coordinated nature of the attack with the main goal appearing to be to steal core intellectual property.” That’s precisely the issue. The threat of lost confidence along with the cost of mitigating the risk of systemic hacks drives up Google’s operating costs and potentially reduces it revenues in China. At the risk of seeming glib and simplistic, all of this makes China a “diminishing returns asset” for an investor backing an open web like Google.

The Chinese and commentators seem to have a sense of where this is headed.  A number of Chinese Twitter users have been unsually vocal on tweets. One Twitter user writes: “It’s not Google that’s withdrawing from China, it’s China that’s withdrawing from the world.” Blogger and friend of mine Elliott Ng writes “I feel such sadness and disappointment for the Chinese people.  They deserve to have access to the same resources and information that most people in the world have.” Some in Beijing have even held candlelight vigils, and some have been seen in a traditional bow of mourning in front of Google’s Beijing headquarters:

Nothing to Discuss?

“Over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law” is the official line from Google, but I have to ask the question: what is there to discuss? Google has become increasingly vocal about censorship everywhere in the world, not just China. Public Policy Director Bob Boorstin, writing in a post in the Google Policy Blog, criticizes the Australian government’s efforts to censor the web down under.  Just below, you’ll find a December 14th post about an internal anti-censorship workshop at which Ron Diebert of the Open Net Initiative gave a presentation about the spread of Internet censorship all over the world.” In the U.S., Google has directly fired salvos against telcos in Net Neutrality debate, and has railed against the secretive and appallingly evil ACTA trade agreement. I’m not suggesting Google is Mother Teresa here, only that their business is predicated on an open network. There lies the issue: Beijing perceives its power to come from a closed network.  Siva Vaidhyanathan, author of the forthcoming book titles “The Googlization of Everything” captures this perfectly: “The Internet has enough diverse interests and players that it demands governance. No traditional state is in the position or willing to assume that role, so Google governs the Internet.” That’s why the issue plays out on a global stage: Google would prefer to have national governments cede control of the web to Google, and prickly China is an easy target. This is also why Google is taking on a statesman like role. This issue is worth more air time than I’ll give it here, but it is fleshed out in Rebecca MacKinnon’s highly recommended post.

The Fallout

Those of you who know me know I have a peculiar view of “anti-Americanism” – namely, that it stems from a feared loss of national and cultural identity in an age of globalization and ubiquitous McDonalds/CocaCola/Starbucks/etc. It’s worth noting that fear may be real or perceived, and thus I’ve felt for a long time America needs to stand for the right to information and the right to choose rather than “our way”. The prevailing wisdom is that economic openness would lead to societal openness. That’s particularly true since most Chinese with a solid sense of history will point to the Tang dynastic period (where china opened up the the world) as China’s “golden age”.

But there’s always been a nagging little voice inside my head wondering if growing economic clout doesn’t make China easier to bring into the rest of the world. Commentator Fareed Zakaria puts it this way: “We have assumed, perhaps too easily, that China’s rise would be accompanied by a process of modernization within that country that would make Beijing easier and easier to deal with. And in many ways that has proved true. But now we must confront a prospect that I have worried and written about—that China’s rise will reinforce Chinese nationalism and a sense of uniqueness and actually make the country less likely to easily integrate into the global system.” (emphasis added).

Several recent events have supported Zakaria’s fears (and mine). Take the COP 15 climate change summit for instance. Second-level Chinese officials showed up at critical meetings of heads of state and lay out open dissent. That includes one member of premier Wen Jiabao’s delegation shout and wag his finger at President Obama—suggests that Premier Wen had lost control over his own negotiating team. Now comes the spat with Google, and local competitor Baidu’s reaction to the events. In a blog post, the chief architect of Baidu said Google’s decision to quit was for financial reasons, rather than a human rights issue, as Google had failed to dominate the Chinese search market. ”What Google said makes me sick,” he said. “If you are to quit for the sake of financial interest, then just say it.”  (I must admit I laughed as I copied this over).

I’m sure in some sense Apple’s Steve Job is flipping cartwheels in Cupertino, since the threat of a Google smartphone in such a large market may now vaporize. But the concern is that China is trending towards monopolies (particularly those with ties to the government), less choice and less disparate voices. It’s not hard to see how China would be harder to incorporate into the rest of the world as it grows economically if the country’s leadership operates with a different set of “facts”.

My sense is that virtually all other asian nations not only maintained but expanded an outward facing orientation during periods of rapid economic growth, where as China appears increasingly fixated on internal dynamics. It may be the result of a divided and confused government at odds with itself, or it may be indicative of something entirely different.  Author Thomas PM Barnett‘s geopolitical model of the world divides the world into a “core” of nations which share information and conduct commerce relatively freely, and the “gap” which is comprised of nations who are walled off for various reasons. The worst case scenario is one where a rapidly aging Chinese population ends up in the gap, with noses pressed up against the glass, looking at the rest of the world as it goes about its business. Google leaving China is a firm step in that direction.

Beijing Says No More Social Media

China commemorates the 20th anniversary of the Tiananmen massacre with another crackdown.. this time on Twitter, Flickr, Bing (Microsoft’s new Google competitor), and a number of other cites no doubt deemed to carry “unharmonious” speech. Apparently some email sites, such as Hotmail have also been shut off. It seems Microsoft can’t catch a break here outside of MSN messenger, which still seems to be working as of the time this blog post was posted. By evening, residents of some cities in the southern province of Guangdong reported that television stations from neighboring Hong Kong had also been blocked.

The block was first picked up by Alice on the Danwei blog and has been carried by others. Users in Beijing reported accessing the service without difficulty earlier on Tuesday, and even successfully searching potentially sensitive words such as “Tiananmen.” My own experience suggests it may have been blocked a few hours ago, since family of mine living in China we not able to access pictures on Flickr. The large scale crackdown represents the first widespread censorship of social media outlets in China, unlike previous blocks of websites before major events like Tiananmen anniversary dates.

Warning: Flickr Image Above May Lead to Political Unrest

The takeaway here was best described by Dave Flumenbaum at the Huffingtonpost, who writes the move is..”a tacit acknowledgment of two things: Twitter’s new power in mainland China, and how valuable Twitter would be as platform to publish original news out of mainland China on the Tiananmen anniversary.” It remains to be seem whether access will be restored after the Tiananmen anniversary, but it’s a fair bet the net nannies might be playing this by ear. My own hunch is that if the locals don’t raise a stink about it, the block is likely to be permanent.

More Speed For My Buck Please

President Obama unveiled his vision to upgrade “the nation’s transportation system” earlier this month, pledging a long-term commitment at the federal and state levels to build a comprehensive high-speed intercity passenger rail network connecting the nation. It’s a National Highway act for an abandoned rail system which could (if taken seriously that is) provide an alternative to domestic airplane travel. A lower energy, lower cost alternative.

Under the American Recovery and Investment Act, high-speed rail would receive an initial investment of $8 billion, plus a requested $1 billion a year for five years in the federal budget. Here’s the Federal Railroad Administration spokesmouth’s statement:

“High-speed rail (HSR) is a family of transportation options that address longer-distance passenger transport needs in heavily populated corridors. Implementing HSR will promote economic expansion (including new manufacturing jobs), create new choices for travelers in addition to flying or driving, reduce national dependence on oil, and foster urban and rural livable communities. With the successful completion of the original phases of the Northeast Corridor (NEC) Transportation Project offering Amtrak’s 150 mph train service, known as “Acela,” between Washington, New York, and Boston, efforts have expanded beyond the NEC. A number of high-speed rail corridors are being planned by States that range from upgrades to existing rail lines to entirely new rail lines exclusively devoted to 150 to 250 mph trains.”

Envisioning 1960′s Technology

If you’ve traveled from Boston to Washington D.C. on America’s Acela Express, you know how far we need to go to make high speed rail a viable long distance alternative (not just a low budget alternative). The Acela staff provide great service, but a sustained speed of 138kph/86mph isn’t going to compete effectively with an average commercial passenger airplane speed of 800 kph/500 mph.  It’s not just Acela that’s slow. Japan’s Shinkansen high speed train network shuttles locals at 210kph/130mph, which is great only if you live on a geographically small island nation.  It’s also worth mentioning the Shinkansen opened its doors in 1964.

Then in 2003 Shanghai Maglev Train opened up for business, covering the Longyan-Pudong corridor in China, which moved the speed standard forward to a sustained 431 kph/268mph. I’ve been on it, and the experience rocks.

Shanghai Maglev Train leaving the Longyan Station. Photo Coutesy of Jian Shuo Wang

The SMT is still the only commercial Maglev train in existence, but there are others in the works. California has been on the forefront of voter ballot measures which have proposed building a high speed rail service from the San Francisco bay area to Los Angeles, and even has this really cool trip calculator on their site. Unfortunately, the project aims to build maglevs traveling at underwhelming sustained speed of 350/220.

Aim for Airspeed California

So maglev trains traveling in a frictionless, motionless tube seems to provide the best prospects for energy efficient, fast domestic travel, but how fast can they really go? Current maglev trains in use have been clocked at 501kph/311 mph in Shanghai. But that’s not the end of the story: while California dabbles in meeting last century’s speed records, the Japanese are busy designing Shinkansen’s successor, which aims for sustained speeds of 581kph/361mph. But we don’t need to go overseas to find maglev trains traveling at cutting edge speeds. San Diego-based General Atomics is testing designs which achieve the same speeds, and is hoping to tap into American Recovery and Investment Act funding.

As stated at the beginning of this blog post, the American Recovery and Investment Act provides 13 billion over 5 years for high speed rail. That’s alot of money, and it would be nice to buy an alternative to airports with all that cash. But that will only happen if California and other funded states set their sights high, rather than at easily achievable targets. It’s likely that low expectations could ironically undermine progress. Taxpayers who see little improvement for a generous outpouring of funds could vote to pull the plug on much needed investment in the future.

Edit: Noticed Christopher Beam wrote a similarly stinging piece, although he gives my home state credit more credit than I for leading the feds and other states. Rightly so – a hat tip to you sir.

Your Personalized iPhone – from the Girl Who Made It

This is one of those cute, quirky things I found at Gizmodo and figured I’d share here. It looks like the folks at the iPhone manufacturing facility get a bit bored of the routine and take their pictures with the phones they’re building. This photo turned up on a brand new UK iPhone:

Hi, I built your phone

Funny enough one of these pictures was set as the wallpaper. Aaaaaaawwwww!

Update: Looks like a couple of Chinese blogs have also picked up the story. It probably won’t be long before the young lady pictured here realizes she’s internet-famous.

World of Beijing 2008 Olympicraft

Someone remixed the “Beijing Welcomes You” soundtrack to a World of Warcraft video. Totally Nerderrific:

What Do We Want From China?

One of the most ludicrous things I’ve heard work its way into the American political discourse recently is the notion that understanding is akin to appeasement and weakness. It seems to me that the real reason behind the reluctance to engage in more diplomacy is the offspring of a national strategy bricolage of lobbyist handiwork and strawman positions offered up by politicans trying to get elected.

Nowhere is this more evident than how America deals with China. We need a clear (and dare I say strategic!) understanding of what we want from their government, citizens, and institutions as a starting point for understanding. We’re sadly not there, and there is an increasing perception in China that the west is impossible to please. In reading this post by blogger Elliott Ng and commenter CninDC at CN reviews, I’ve begun to understand this lack of focus is even taking its toll on the Olympic games. CninDC writes:

“If you watch news in China you’ve probably already noticed that the China’s domestic Olympic propaganda has been dramatically toned down from wanting a most successful Olympic to a merely safe one. The reality is there, that a most successful Olympic is already beyond our reach. The people they wanted to impress the most, the western media and the general public from the western countries, are impossible to please. So they go for the next best one, that at least it’s safe, no ugly scenes (or at least not a major one), and the Chinese can enjoy the party all by themselves.”

The larger point is that if we Americans don’t have a strong sense of what we want, the Chinese will eventually come to a collective “oh, fuck it”, and stop reaching out. Many of the Chinese already feel like the west is impossible to please.

Both sides need to bridge-build, of course. A large part of the problem is Chinese misconceptions about what “the west” is and is not. I’ve come to roll my eyes a bit when I hear the term from some of my friends, since the west doesn’t speak with one voice but instead is a chorus of many voices. Lumping so many different nationalities, objectives, ethics, religions, and languages will almost certainly make that group impossible to please. They’ll have to make the leap of understanding that we’re not a homogenous “west”, which in time I’m convinced will happen.

We in turn need to define our priorities as a nation and communicate them clearly (both to them and to ourselves). To that point, I’ll reproduce below a moment of zen courtesy of a cbc forum poet without further comment:

What do you want from us?

When we were called “sick man of Asia”, we were called peril.
When we billed to be the next superpower, we’re called the threat

When we closed our doors, you smuggled drugs to open markets.
when we embrace free trade, you blame us for taking away your jobs.

when we’re falling apart, you marched in your troops and wanted your fair share.
when we’re putting the broken pieces together, “Free Tibet” you screamed! “it was invasion.”

So we tried communism, you hated us for being communist.
So we embraced capitalism, you hate us for being capitalist,

Then we have a billion people, you said we’re destroying the planet.
Then we limit our numbers, you said it was human rights abuses.

When we were poor, you think we’re dogs,
When we loan you cash, you blamed us for your debts.

When we build our industries, you called us polluters.
When we sell you goods, you blamed us for global warming,
When we buy oil, you called that exploitation and genocide.

When we were lost in chaos and rampage, you wanted rule s of laws for us.
When we uphold law and order against violence, you called that violation of human rights.

When we were silent, you said you want us to have free speech.
When we were silent no more, you say we were brainwashed.

Why do you hate us so much? We asked. “No”. You answered, “we don’t hate you”.
We don’t hate you either Bud, do you understand us?? “of course we do”, you said, “We have CNN, BBC, and CBC”.

But why, we still feel, your western people are not happy with us.

What do you really want from us??

My friend, What do you really want from us??

Twitterquake Heard ‘Round the World

My thoughts and prayers go out to people affected by the quake. There are over 9,000 dead reported in central China and tragically hundreds of school children under a collapsed schoolhouse. Please consider joining me in donating to the Red Cross relief efforts.

After making sure our friends and family are safe, I started to reflect a bit on the earthquake. It never ceases to amaze me how Twitterquaking has become the defacto emergency broadcast system of the web. If you’re new to the term, it simply refers to using Twitter during an earthquake (or any other emergency) and using it to move around information, and find out if friends and loved ones are well. Exhibit A is this morning’s 7.8 magnitude earthquake in Chengdu, in central China. Twitter is the sole reason I know about it this morning and not the evening’s news.

Logging on this morning, my Twhirl stream was buzzing with activity among the folks I follow living in China. Apparently It was kicked off with Frank Yu’s asking “Earthquake in Beijing?” followed by a momentary comedic interruption of the news with “i twittered as the building swayed…screw running out the door, MUST TWEET !” That’s dedication Frank – or perhaps addiction. According to Marc van der Chijs, “within a few minutes the Twitter community found at least 3 active Twitterers (http://twitter.com/inwalkedbud, http://twitter.com/lyrrael and http://twitter.com/casperodj) that were reporting live from Chengdu. Quite amazing to see how quickly news spreads on Twitter, because we already had all information before the mainstream media picked it up.”

Marc is absolutely right. In fact, the USGS picked up the quake about 5 minutes after the initial Twitter reports began. Many of us had a map of the quake region before the USGS could post one. Now it’s tempting to chide the experts for showing up late to the party, but frankly Twitter is an unfair advantage for the rest of us (side note: I hope folks at the USGS are following Twitter. They aren’t doing their jobs otherwise). It seems increasingly the web is pushing mainstream news services are in the business of confirmation and analysis rather than actual news dissemination. This missive from Robert Scoble pretty much sums up the role of the mainstream media in the minds of active Twitter users:

For more updates follow the stream of news updates from Twitter users here.

Update 1: From Shanghaiist, Pictures out of Wenchuan. This brings me to the verge of tears.

Update 2: Some folks in China place the toll at 11,922. The BBC’s coverage is here. My friends Jeremiah Owyang and Elliott Ng (CN Reviews) have also donated and stepped up calls for action. Bravo fellas. Elliott’s blog post has a great list of organizations which can use your help. Thank you for the comments and continued support.

What’s Really At Stake: Hubbert, China, and the Dollar

Every once in a while, I read a blog post ties together a number of memes I’ve been thinking about. I’ve recently met Elliot Ng at a dinner in San Francisco, and found him to be an incredibly sharp guy whose recent posting me pause to tie together many of the themes I’ve spoken about here.

The World Says We Suck

But let me start at the beginning here. The BBC recently reported on the results of a regular survey of 17,000 respondents around the world, who were asked to rate the influence of countries around the world as positive or negative. Here’s a breakdown of the average:

Elliott compared the results of the U.S. and China responses, and compared the two. The results are sobering:

Which country has a more positive influence in the world, U.S. or China?

• Overall: China. 47% for China vs. 35% for U.S. (excluding subject country)
• Latin America: China. 45% for China vs 32% for U.S.
• Europe: China. 39% for China vs 31% for U.S.
• Middle East: China. 63% for China vs. 34% for U.S.
• Africa: United States. 66% for China, 70% for U.S.
• Asia (ex-China): China again. 40% for China vs 39% for U.S.

In fact, only 9 of 23 countries rated the U.S. higher than China: Portugal, Italy, Israel (just barely), Kenya, Ghana, Phillipines, South Korea, Indonesia, and Japan.

Caveat: Data was collected in December 2007 before the recent March Tibet events and the torch run. Things may have changed.

Neither country garnered a majority positive opinion, but folks in the U.S. may be surprised to note that the bastion of freedom is viewed as a more negative influence on the world than an authoritarian governed nation. How did we get into this mess? It’s misleading to dismiss this as baiting and resentment ala Faux news. The easy answer is Iraq, but more specifically Iraq has become a symbol for the perception that the US has and will in the future act capriciously. Fair warning: here’s where I turn up the ecogeek rant..

The Intersection of Peak oil, Iraq, and the Value of the Dollar.

Geoscientist M. King Hubbert saw this coming. He noted in 1956 that there’s a simple fact to oil production – the amount of hydrocarbons under the ground in any region is finite, therefore the rate of discovery which initially increases quickly must reach a maximum and decline (this is called “Peak Oil“). The U.S. stopped finding places to drill in the 1950s, and domestic oil production peaked in 1970, dropping mercilessly after that. The British were able to float our hydrocarbon dependence for a while from the North Sea oil fields while domestic supplies dried up, but eventually the North Sea production fell precipitously. Enter the complex and inscrutable U.S.-Saudi relationship of convenience. Of course it’s only a matter of time before Saudis’ own production starts falling out. Stuart Staniford believes it’s already happening.

The blue line represents drilling activity and the other graphs are oil production averages. The punchline here is that the Saudis are drilling for new holes as fast as they can, but total oil production isn’t rising. This isn’t OPEC shenanigans here – there’s nothing the Saudis can do about output drops, despite their reassurances.

There’s a double hit to the United States however, as hydrocarbon commodities are traded commonly in world markets in U.S. Dollars. Hence the continued reliance on an unsustainable fossil fuels infrastructure is reinforced by a political need to maintain a system on which the value of the U.S Dollar is predicated – the value of the U.S. Dollar partly relies on demand from countries who need Dollars to meet energy needs.

There’s a number of hydrocarbon reserves adjacent to Saudi Arabia of course, specifically northward. Saddam Hussein virtually sealed his fate in September 2000 when he announced Iraq would no longer accept dollars for oil being sold under the UN’s Oil-for-Food program, and decided to switch to the euro as Iraq’s oil export currency. The Financial Times reported that “Saddam Hussein in 2000 insisted Iraq’s oil be sold for euros, a political move, but one that improved Iraq’s recent earnings thanks to the rise in the value of the euro against the dollar”. He was playing the foreign exchange game as an insider, hoping to reap the windfall. The Bush-meister implemented the currency transition despite the adverse impact on profits from Iraqi’s export oil sales (In mid-2003 the euro was valued approx. 13% higher than the dollar, and thus significantly impacted the ability of future oil proceeds to rebuild Iraq’s infrastructure). Funny enough, none of the five U.S. major media conglomerates who control 90% of information flow in the U.S. touched this.

So the perception the U.S. is acting in a unilateral and capricious manner stems from the last few years’ activity, but there’s more to the story. The next chapter is more ominous.

Iran’s nuclear ambitions have taken center stage in the media, but there are again unspoken macroeconomic drivers underlying the second stage of petrodollar warfare. I’m talking about Iran’s upcoming oil bourse. In essence, Iran is about to commit a far greater “offense” than Saddam Hussein’s conversion to the euro for Iraq’s oil exports in the fall of 2000. Beginning in March 2006, the Tehran government has plans to begin competing with New York’s NYMEX and London’s IPE with respect to international oil trades – using a euro-based international oil-trading mechanism. Without some sort of U.S. intervention, the establishment of the Iranian trading center firmly establishes a euro based international energy trading system. That means the U.S. will no longer have the ability to effortlessly expand its debt-financing via issuance of U.S. Treasury bills, and the dollar’s international demand/liquidity value will fall.

Circling Back to China

Will Clark notes that “China’s announcement in July 2005 that it was re-valuing the yuan/RNB was not nearly as important as its decision to divorce itself from a U.S. dollar peg by moving towards a “basket of currencies” – likely to include the yen, euro, and dollar.” Interestingly, the Chinese re-valuation immediately lowered their monthly imported “oil bill” by 2%, over Dollar-denominated oil trade, but it is unclear how much longer this monopoly arrangement will last. Note that 2% is the inflation tax we’ve been passing along to them.

So the negative opinions are grounded in a rational fear of the U.S. intervention as China seeks to diversify its foreign currency reserves and has Sinopec signs a sourcing deal with Iran, which will ostensibly revolve aroudn the Iranian exchange. China’s voracious hydrocarbon appetite would allow an expanding credit-fueled Dollar valuation to continue unabated, effectively passing our inflation abroad. In short, we can float the value of the Dollar by increasing the amount of fear, uncertainty, and doubt around the world about our motivations.

Add yet another reason to move the U.S. beyond a hydrocarbon-based economy. I hope you’ll keep this in mind during our 2008 election season and vote for change.

What You Haven’t Heard About China

I’ve been hearing alot of “So.. um, what do you think of China?” lately, for obvious reasons. I don’t mind at all, but what strikes me is how much misinformation and emotional baggage there is out there. There’s the panda huggers, many of which are ethnic Chinese who understandably feel like they are being chastised for who they are when they hear critical analysis of Beijing’s policies. Then there’s the panda haters who understanably are concerned about suppression of freedom of speech and human rights and become frustrated with what they perceive to be an apathetic world. It’s virtually impossible to have a logical discussion about their place in the world and their relationship to the U.S.

Screw it, I’m going to try anyway.

One guy who gets the big picture is Thomas P.M. Barnett, a smart fellow who wrote The Pentagon’s New Map and Blueprint for Action. Having been both inside the Pentagon and leap years outside it in terms of his thinking, he has a rather rare perspective. He’s put together a list of 10 why China matters which should help readers dispel the misinformation out there. But having experienced “the panda” firsthand (and having it become part of my family), I think I’ve begun to understand their motivations. In short, China is NOT a mortal enemy. China is likewise NOT a cuddly friend nor America’s buddy.

China is an Economic Competitor.

This is actually a good thing, folks. If they’re competing to build economic wealth, why to burn up their windfall into a prolonged military conflict with the west? That means these war game scenarios the Pentagon is dreaming up against an unnamed large asian nation with an unhealthy interest in a small pacific island are overplayed. It also means the old timers in the PLA who want to build up a stockpile to hedge American influence are also way off. That doesn’t mean we should take our eye off the ball (as in, say, Africa). What this means is we need to be aware that China’s goal is to expand its influence and economic power, and that means competing with the existing U.S. Hegemony. Let me put it another way – they don’t despise us any more than the other 27 NFL Teams despite the Superbowl champions. We’ve been the economic, political, and military rock star of the 20th century, so we’re the guys to beat.

The New Cold War?

They don’t have any choice in the matter. They’re tasted the good life and want to continue doing so, despite rapidly aging as a nation-state. When the United States median age began creeping up, business and government policy shifted to scaling global economic systems and outsourcing some labor to compensate. It’s the same with the Chinese. To keep living standards afloat, they will have to scale the global production production chain faster than any country has in the past. Fortunately they have a legion of educated, entrepreneurially minded people scouring the globe for growth opportunities. We’re seeing the result dynamic expansion in the news as China trades industrial goods and infrastructure builds with Sudan for oil, signs a deal with Zimbabwe, receiving chrome in exchange for food and transport infrastructure, and trades debt relief and other diplomatic pleasantries in exchange for Eritrean granted gold exploration licences. Panic ensues as the news stories of China’s expanding activities provoke some folks call this another cold war. What follows next is obvious enough. The Pentagon starts funding AFRICOM in response out of an inscrutable sense that America might be missing out on an opportunity yet to be uncovered.

We’ve seen this game play out before. This is exactly what Europe did to America 300 years ago, and in turn is what America did to the asian tigers last century. Europe kept the bespoke tailors and farmed out the cotton production to the U.S. The U.S. spent the better part of two decades outsourcing low margin production to China while trying to keep technology and high margin services within our own borders. Now China is predictably outsourcing their low margin production activity and resource mining to Africa while building their own knowledge economy. This is history repeating itself, but hardly feels like a replay of Kennedy versus Khrushchev.

A New Operating Environment

The shared interest in a stable economic environment means we won’t see any military escalations with the PLA anytime soon, but will see trade wars from time to time. It means the U.S. will have the Chinese subsidize and support peacekeeping missions, because as much as three-fourths of China’s natural resources will have to come from politically unstable areas, funneling money towards security services. The overtures have already begun. It also means that the days of China only providing “white boxed” labor are gone, where China is now a source of local labor as well as local competitors of formidable caliber.

I also figure we’ll see bigger rise in nationalism in both China and the United States. Some of the nationalism will be unfocused and frankly ignorant, and as such it’ll be a source of friction. But looking at it on a different level, there’s likely some unease about the advance of globalization steamrolling local and national cultures. Intelligent (s opposed to brainwashed or ignorant) nationalistic feelings will probably stem from a rational fear of the loss of cultural identity. As a result, new product offerings need to be more, not less differentiated between different cultural markets. That’s not to say that entrants into their markets should be copycats – msn messenger I’m finding is considered far more “hip” by teens than the local instant messenger QQ. But cultural differentiation will almost surely become more important.

Hopefully this sparks discussion and thought around their motivations. The good news is despite human right issues and environmental concerns (which are important), there is a shared interest in making the world safe for economic growth. If we fail to manage the new operating environment to everyone’s benefit, China’s strategy will likely become to bog us down diplomatic debate while pursuing their own agenda. On the other hand, if we manage to create strategies which co-opt their own moves to support our own strategies, we’ll cooperate diplomatically and compete economically. The latter is what the British did with America, and it worked out pretty well for us both.