China is more of a paper tiger than people think, and that plays into President Trump's hand on trade

• The U.S. trade war has shown that China is not impervious to the measures being brought to bear by President Trump
• Overnight, the Shanghai composite tanked 3.7 percent on the first trading day back after being closed for a weeklong Chinese holiday.

By Matthew J. Belvedere

U.S. President Donald Trump and Chinese dictator Xi Jinping

President Donald Trump's approach to levying tariffs on China in hopes of applying enough economic pressure to get Beijing to change its ways on trade has a better chance of working than many people expect, CNBC's Jim Cramer said Monday.
"I think the president is right. I favor tariffs against the Chinese because I think they're far more of a paper tiger than people realize," Cramer said, contending the world's second-largest economy and stock market are more vulnerable than the mainstream media depicts. 

The term "paper tiger" refers to an outwardly powerful or dangerous force that's actually inwardly weak or ineffectual.
"The intelligentsia in this country [the U.S.] has decided that China is all-powerful and we're all weak. Empirically, that's not the case, particularly when you look at the Chinese stock market, which does matter," Cramer said on "Squawk on the Street."
The U.S. trade war has shown that China is not impervious to the measures being brought to bear by Trump, Cramer said. 

"They may be communist, but they have a capitalist bear market going there."
There's a school of thought that the volatile Chinese stock market is not an important indicator of the health of China's economy because households there don't have much of their wealth invested.
"We can think that that doesn't matter but that's cause we're being elitist. And I think that's a big mistake," Cramer said.
Overnight, the Shanghai composite tanked 3.7 percent on the first trading day back after being closed for a weeklong Chinese holiday. 

Following weakness last week across Asia, Europe and on Wall Street, that sharp decline was being viewed as a catch-up move. 

The Shanghai composite has dropped nearly 18 percent year-to-date.
Against a backdrop of persistent trade concerns and a sign that more stimulus is needed, China's central bank on Sunday cut for the fourth time this year the amount of cash banks need to have on hand.

Paper tiger: U.S. “innocent passages” in South China Sea

By Timothy Saviola, Nathan Swire 

The USS Hopper in November 2017 during a photo exercise in the Arabian Gulf. 

The United States drew significant criticism from China for its latest freedom of navigation operation (FONOP) in the South China Sea. 

In the days following the USS Hopper’s transit through the 12-nautical-mile zone around the Scarborough Shoal, editorials in China’s People’s Daily warned that the action was “reckless” and that “China must strengthen and speed up the building of its abilities” in the islands. 

The Global Times, another state-owned paper, noted that as China’s power grows, it is better able “to send more naval vessels as a response and can take steps like militarizing islands.” 

China’s actions have matched its words. 

It recently deployed advanced Su-35 and J-20 fighter aircraft to patrol the South China Sea and is upgrading the civil communications infrastructure on the islands it occupies. 

The Philippines-based Inquirer recently released a cache of new high resolution photos taken in late 2017 detailing the rapid addition of military infrastructure.
A U.S. official described the Hopper’s action as “innocent passage” rather than a FONOP, though “the message was the same.” 

Under the United Nations Convention on the Law of the Sea Articles 17–19, all nations have the right of “innocent passage” to continuously and expeditiously traverse other nations’ territorial seas. Though both China and the Philippines claim the Shoals, this reference to the Hopper’s activity as innocent passage seemed to implicitly accede that the shoals are entitled to a territorial sea: Warships need only declare innocent passage to traverse territorial seas, as opposed to the high seas. 

In the 2016 South China Sea arbitration, the International Tribunal for the Law of the Sea ruled that the shoals were not an island but a rock and therefore does not create a territorial sea or other maritime zones on its own.
The Philippines may be making it more difficult for other nations to protect freedom of navigation in the South China Sea by minimizing their claims to Scarborough Shoal and other features. 

The Philippine government has appeared to largely ignore China’s reclamation and militarization efforts during recent meetings: The two countries recently pledged cooperation on joint exploration for oil and gas in the region without touching on construction work or sovereignty in the South China Sea. 

However, the Philippine military recently deployed a TC-90 turboprop aircraft, donated by Japan, to monitor its exclusive economic zone and protect its maritime domain in the South China Sea.
Other major maritime powers have supported the United States’ position on freedom of navigation. 

In March, Britain plans to send a Royal Navy Type 23 frigate, the HMS Sutherland, on a transit through the South China Sea. 

British Defense Secretary Gavin Williamson

Speaking on a recent trip to Australia, British Defense Secretary Gavin Williamson noted that the United Kingdom “absolutely support(s) the U.S. approach” to FONOPS. 

The Royal Navy has left open whether the ship will sail within 12 nautical miles of any of the contested features—thus entering the contested territorial waters—or will simply pass through the sea in uncontested international waters. 

But Williamson noted that the “navy has a right” to sail through the South China Sea. 

The Global Times published an editorial dismissing the effort as an attempt by Britain to maintain its naval influence.
The U.S. Department of Defense chronicles these FONOPs in its Annual Freedom of Navigation Report for Fiscal Year 2017, describing the United States’ challenges to what it views as “Excessive Maritime Claims.” 

Activities in 2017 were similar to the scope of challenges in previous years.

The annual report identifies the geographic scope of FONOPs as well as the rights that the United States is asserting.

East China Sea
Natural gas condensate, an ultra-light oil, has spread into the waters of the East China Sea following the collision last month of the Iranian-owned tanker Sanchi with a cargo ship. 

The oil is endangering fisheries in hundreds of square miles of surrounding waters. 

China has taken the lead in dealing with the cleanup. 

Chinese firefighters attempted to extinguish the flames on the ship, but they were unable to rescue any of the 32 crew members from the oil tanker. 

Beijing has come under criticism for the slowness of its response to its disaster and for initial communications that seemed to understate the seriousness of the spill, which is now estimated at 111,000 metric tons, the largest oil spill since 1991.
The environmental effects on the surrounding waters, which include fisheries utilized by both China and Japan, could be severe and long-lasting. 

Oil slicks totaling up to 128 square miles were sighted in regions that include spawning beds for numerous sea creatures, as well as migration routes for marine mammals such as whales. 

The regions affected by the oil spills include both China’s and Japan’s exclusive economic zones. 

The Chinese government has responded by banning fishing in affected regions, while Japan has set up a special coordination unit in the prime minister’s office to deal with the oil spill, including investigating oil that has washed up on the shores of the Japanese Amami-Oshima islands. 

The type of natural gas condensate that has leaked from the Sanchi is highly toxic, but it does not coalesce into highly visible clumps like crude oil, making the extent of contamination hard to measure.
Whether the damage to the East China Sea’s marine ecosystem will have any effect on the maritime disputes in the region remains to be seen.

Robot Wars
On Feb. 10, China began construction on the Wanshan Marine Test Field in the city of Zhuhai in southern China. 

According to the government-controlled China Internet Information Center, the test field will be used as a research facility for unmanned ship technology. 

The approximately 300-square-mile facility will be the largest of its kind in the world and will be run as a joint program between the Zhuhzai government, the China Classification Society, the Wuhan University of Technology, and Oceanalpha, a company focused on developing unmanned surface vessels.
This is not China’s first foray into unmanned vessels. 

Over the past few months, the Chinese government has promoted the success of several of such vessels with military or law enforcement applications. 

These include the Tianxing-1—which China claims is the world’s fastest unmanned vessel, with a maximum speed of over 57 miles per hour—as well as the Huster-68, which successfully executed a patrol around the Songmushan Reservoir. 

The website of Shenzhen Huazhong University, which developed the Huster-68, states that the patrol vessel would aid China’s ability to manage water resources and achieve its ambitions of becoming a blue-water navy (according to a translation from the South China Morning Post). 

Wuhan University has been running a research program into the development of maritime drones since 2012.
These developments come as other navies around the world are developing their own maritime drones. 

In 2016, the British Royal Navy conducted “Unmanned Warrior” off the coast of Scotland and Wales, a mass demonstration of aerial, surface, and underwater maritime autonomous vessels. 

The U.S. Navy, meanwhile, has recently established its first Unmanned Undersea Vehicle Squadron, UUVRON 1, which will oversee existing vehicles and test new ones.

The United States
Adm. Harry Harris, commander of U.S. Pacific Command, has been nominated to be U.S. Ambassador to Australia. 

In testimony to the House Armed Services Committee, Harris took a hard line against China’s actions in the South China Sea—which he oversaw when leading Pacific Command—saying that China’s aggression in the region is “coordinated, methodical, and strategic, using their military and economic power to erode the free and open international order.”

Analysis and Commentary
In the National Interest, Gordon Chang criticizes as self-defeating the U.S. description of the transit near Scarborough Shoal as “innocent passage,” because it seems to be implying that China is the rightful sovereign of the shoal—even though the shoal itself is contested and the South China Sea arbitration found it did not confer a territorial sea.
Peter Jennings of the Australian Strategic Policy Institute applauds the pick of Harris as ambassador to Australia, saying “[t]he posting sends the clearest possible signal that the US is intent on strengthening its Asian alliances.”
In Japan Forward, Ryozo Kato, former Japanese Ambassador to the U.S., suggests that Japan should reopen the debate into whether it should pursue nuclear weapons in an age of continuous threat from North Korean missiles.

Paper Tiger

How America Is Losing the Battle for the South China Sea
Washington should step up its efforts to make Beijing pay a more serious price for such a flagrant disrespect for international law.
By Bill Bray

What a difference a year makes. 

In late summer 2016, there was some hope the July 2016 Permanent Court of Arbitration’s ruling in favor of the Philippine interpretation of the UN Convention on the Law of the Sea regarding the Spratly Islands and Scarborough Shoal would curtail Beijing’s subsequent activity in the South China Sea (despite China’s refusal to even participate in the arbitration case or recognize the court’s jurisdiction, let alone accept the ruling). 

In fact, some optimists, like Lynn Kuok from the National University of Singapore, have pointed to small developments—such as China this year permitting Filipino and Vietnamese fishing around Scarborough Shoal for the first time since 2012—as encouraging signs that the Hague’s ruling is having a positive effect. 

But most observers see it much differently, and developments this past summer seem to support a much more pessimistic forecast.
With the U.S. government and the world understandably focused on North Korea and escalating tensions in northeast Asia, China this summer has made substantial progress in further establishing de facto control over most of the South China Sea. 

Indeed, aside from Secretary Defense Mattis’ strongly-worded speech in June at the annual Shangri-La dialogue in Singapore, and an uptick in U.S. Navy freedom-of-navigation operations in the South China Sea, the administration seems uninterested in reinforcing—let alone more forcefully emphasizing—international law and the longstanding U.S. position that all claimants must take concrete steps in accordance with said law to resolve the disputes peacefully. 

As Bonnie Glaser from the Center for Strategic and International Studies noted this past July at CSIS’s seventh annual South China Sea conference, the United States seemed surprised and ill-prepared for the Permanent Court of Arbitration’s 2016 ruling, and has yet to devise a comprehensive South China Sea policy or strategy. 

Freedom-of-navigation operations is simply a policy tool, not a policy in itself.
This isn’t lost on Beijing or the ten Association for Southeast Asian Nation (ASEAN) states. 

As the diplomatic winds blow harder in China’s favor, Beijing’s next move could very well be a security power play, like declaring maritime base points and strait baselines from the islands and shoals it has occupied and militarized. 

Or perhaps it could establish an air defense identification zone (ADIZ) over the same area. Furthermore, U.S.-China relations are worsening over North Korea and trade, and, following the Nineteenth Party Congress in late October, Xi Jinping may see, from a position of greater domestic strength, both an opportunity and a need to make that very type of play.

What China Got During Its Summer Vacation
China scored two important victories this summer in the South China Sea confrontation, and this barely got any notice in mainstream Western media. 

First, after a hotly divided politburo debate in Hanoi in July, Vietnam yielded to a Chinese threat of force and suspended drilling in block 136/3, which is licensed to Vietnam’s state oil company, the Spanish firm Repsol S.A., and the Mubadala Development Company in the United Arab Emirates. China had first tried to pressure the Spanish government, as Repsol S.A. provided the drilling vessel and started the onsite project in June. 

When that didn’t work, Chinese Gen. Fan Changlong, deputy chair of China’s Central Military Commission, explicitly threatened force if Vietnam did not cease the project (block 136/3 is inside China’s South China Sea maritime rights claim, or the Nine-Dash Line) while on an annual border-exchange visit to Vietnam. 

Let’s be clear on just what exactly happened: Vietnam began a legal resource extraction operation inside its exclusive economic zone, and China, opposing it on dubious historical and legal grounds (grounds that the Hague’s PCA firmly rejected), threatened war if they didn’t cease the project. Beijing didn’t threaten to take Vietnam to court in the Hague, or raise the matter before the United Nations in another forum, or try to apply greater diplomatic and economic pressure. 

The Chinese government instead threatened military action. 

And Vietnam took the threat seriously and complied. 

And the United States and the rest of the world essentially registered no serious rebuke.
Second, China hit the trifecta at the ASEAN foreign ministerial in Manila on August 8. 

As expected, all ten ASEAN nations and China signed a framework for an eventual South China Sea code of conduct. 

For those not paying attention at home, this might sound like meaningful diplomatic progress. 

It was not. 

Instead, it was a completely vacuous exercise because it no more than restated principles all had agreed to fifteen years earlier, and China still refuses to enter into a binding code of conduct. 

Just to get to a framework for a nonbinding code took well over a year, so long one has to wonder whether the whole effort amounted to little more than a charade.
Vietnam at least lobbied hard for more forceful language in the post-ministerial joint statement, and after much wrangling it was agreed that language expressing concern about “reclamation” and “militarization” in the South China Sea be added. 

Then, in a breathtaking breach of protocol, the Philippines’ foreign secretary, Alan Peter Cayetano, told the press he agreed with China’s criticism of the joint statement, which included a bold-faced canard that China hasn’t engaged in reclamation since 2015. 

Cayetano trashed the ASEAN joint statement as if ASEAN were some nascent assembly of nations unnecessarily picking a fight with China, and not the fifty-year-old prestigious, diplomatic and economic grouping currently chaired by the Philippines. 

As one of China’s long-standing strategic goals is to divide ASEAN and deal with each SCS claimant bilaterally, this certainly saw champagne corks popping in the Chinese Foreign Ministry. 

Not quite the coup de grace, perhaps, but a powerful blow to ASEAN unity.
Finally, during and after the ASEAN ministerial in Manila, U.S. Secretary of State Rex Tillerson seemed to be focused on everything but the South China Sea, in marked contrast to not only Mattis’ June speech but also to Tillerson’s own statement on the South China Sea at the ASEAN summit in May. 

Tillerson instead praised China’s foreign minister after China joined in a unanimous UN Security Council vote to enact more sanctions on North Korea following that regime’s late July ballistic-missile test. 

This is understandable, of course, but even implicitly signaling to Beijing that the U.S. position on the South China Sea, Taiwan or any other issue is a potential bargaining chip for China’s cooperation on North Korea is a major win for China. 

China likely believes denuclearizing North Korea through economic and diplomatic pressure without causing state collapse is all but impossible, but if it can advance its interests elsewhere by giving the United States the impression that it is ready to finally take North Korea to task, all the better. 

The United States would be wise to steer clear of this quid pro quo trap. 

Instead, it should insist China meet unconditionally its international security responsibilities as a permanent member of the UN Security Council.

China’s Next South China Sea Act
Following China’s recent South China Sea victories, the table is now set for an even bolder move to further cement Beijing’s de facto control of its expansive Nine-Dash Line claim. 

This could come in many forms, such as declaring an ADIZ or maritime base points from various occupied islands and shoals, as mentioned above, or by simply beginning routine military operations from its occupied reefs. 

The U.S. Navy has increased its South China Sea patrols (on pace for nine hundred days in 2017, up from seven hundred in 2016), and its freedom-of-navigation operations near Chinese-claimed and occupied territory. 

And, Vietnam sent its defense minister to Washington in August and subsequently agreed to host a U.S. aircraft carrier on a port visit. 

But neither will deter China from pressing forward more aggressively in the South China Sea this winter and into 2018.
China is getting much more comfortable challenging the U.S. Navy. 

Each year the Chinese Navy grows in size, capability, and proficiency. U.S. freedom-of-navigation operations are simply going to become a lot more risky in the future, to the point where the potential cost to continue them may outweigh the benefit. 

As for Vietnam, China knows Hanoi remains ambivalent about getting too close to the United States and will prefer to hedge its relationship, considering its proximity to China and its close defense relationship with Russia. 

Unlike with the Philippines, the United States has no formal security relationship with Vietnam. Pulling the Philippines even partly out of the U.S. orbit is far more valuable to China than a few more U.S. Navy port visits is to Vietnam.
Threatening war with China over the South China Sea is not credible. 

But that does not mean the United States should not step up its efforts to make China pay a more serious price for such a flagrant disrespect for international law. 

As Ely Ratner so thoughtfully pointed out recently in Foreign Affairs, the United States has yet to employ many tools in this regard, and its lack of a comprehensive policy underscores how confused and inconsistent its approach has been over the past decade or so. 

In many ways, the South China Sea is no less a supreme test of U.S. leadership than the Korea crisis. Trade disputes come and go, given the ephemeral and complex nature of global economics. 

Giving up on the South China Sea will cast a much longer shadow on the viability and credibility of international law.

Grand bargain with China over North Korea would make U.S. a paper tiger

As frustrating as it may seem, our long-standing strategy of containment and deterrence toward North Korea remains our best hope.
By Michael Auslin

With North Korea’s latest test of an intercontinental ballistic missile, one apparently capable of reaching the U.S. West Coast, the American foreign policy community is struggling to find a way — short of war — to end the threat from Pyongyang. 

In the media and behind closed doors, some are suggesting that the U.S. should approach China for a grand bargain.
The idea is deceptively simple: China would intervene in North Korea, most likely by removing Kim Jong Un from power and installing a puppet in his place. 

In return, the U.S. would withdraw or significantly reduce our forces in South Korea and potentially forces farther afield in Asia.
This may sound like an effective, realpolitik means of breaking a decades-long stalemate. 

After all, American presidents have been saying for years that China is the key to solving the North Korea puzzle. 

Such a pact would force Beijing into taking action rather than offering platitudes. 

It would also end the charade of American sanctions, which are regularly watered down or undercut by China and Russia. 

Most of all, it would rid the world of Kim — a brutal, dangerous despot — and end his family’s absolute rule.
But in reality, a grand bargain with China is likely to destroy America’s global influence, making it impossible for Washington to maintain stability in strategic areas, particularly in Asia and Europe. Indeed, merely proposing an agreement of this sort would make the U.S. into a paper tiger and compromise American credibility in Asia and around the world.
A grand bargain would effectively transfer America’s dominance to China. 

No matter how the White House spun such a deal, world leaders would infer that the U.S. had gone hat in hand to China. 

Recognizing China as the true foreign power on the peninsula, South Korea and other Asian nations would tilt inevitably toward Beijing. 

It’s also possible that South Korea and Japan, among other countries, would decide that they had no choice but to develop nuclear weapons for their own national defense.
Moreover, having seen the U.S. kowtow, Beijing would likely take a more assertive posture in the South China Sea and push Washington further, demanding a more comprehensive drawdown of American military forces from East Asia. 

Even if Washington refused to buckle, Sino-U.S. relations would enter a period of heightened tension and antagonism, undoubtedly encouraging both Moscow and Tehran to double down on their destabilizing behavior.
In short, a bargain would spell serial diplomatic failure for the U.S. 

As frustrating as it may seem, our long-standing strategy of containment and deterrence toward North Korea remains our best hope.

This strategy will test our patience, but there are a few policies the White House can adopt to make its position more credible.
First, Washington ought to acknowledge openly that North Korea is a country with weapons of mass destruction that can strike not just other Asian countries, but also the continental United States. Washington also needs to end the fantasy of North Korean denuclearization, which, short of all-out war, will never happen. 

That will at least free up American diplomats from endless, meaningless negotiations. 

It is better to be feared by Pyongyang than held in contempt for our willingness to believe that it might one day give up its nuclear program.
Second, the U.S. should announce an assured destruction policy in response to any use of nuclear weapons by the North. 

If Pyongyang has no intention of using its weapons, then we have little to worry about. 

But if Kim is tempted to do so, our threat may give him pause, or create rifts within the elite that could result in Kim being neutered. 

This move would also outflank any attempts at nuclear blackmail by Kim, since Washington would make clear that the use of nuclear weapons would result in the complete destruction of his regime.
Finally, the Trump administration would be wise to commit to a comprehensive missile-defense program in order to defend against North Korea’s relatively limited, though lethal, ICBM capability. 

The cost of exploring all possible means of missile defense, including air-based and space-based directed-energy weapons, is a small investment next to the potential of a catastrophic war.
Acknowledging our diplomatic failures and taking these steps would increase our chances of containing North Korea. 

The alternative — a misguided and rushed grand bargain with China — would do little to end Pyongyang’s threat, and almost certainly would spell the end of American global primacy, leaving the world a far more uncertain and unstable place.

The amateur president: Following a fiasco, Trump now looks like a paper tiger to China

Beneath all of his posturing, Trump is quite weak
By Steve Benen

On Friday, China Xinhua News, the official news organization of the Chinese government, published a tweet asking a provocative question.

In a phone call with Xi Jinping, the message read, Donald Trump “agreed to honor” the One-China policy, “though he had publicly challenged it. What has changed his mind?”
Yes, Trump’s fiasco was so severe, he found himself being trolled by Chinese state-run media. (The message wasn’t intended for a Chinese audience – Twitter is banned in the country.)
The New York Times reported over the weekend that the rookie president managed to avert a more serious confrontation with Beijing, but Trump also made a lasting impression on China that beneath all of his posturing, the American president is quite weak.
“Trump lost his first fight with Xi and he will be looked at as a paper tiger,” said Shi Yinhong, a professor of international relations at Renmin University of China, in Beijing, and an adviser to China’s State Council. 
“This will be interpreted in China as a great success, achieved by Xi’s approach of dealing with him.”
Trump’s reversal on Taiwan is likely to reinforce the views of those in China who see him as merely the latest American president to come into office talking tough on China, only to bend eventually to economic reality and adopt more cooperative policies. 
That could mean more difficult negotiations with Beijing on trade, North Korea and other issues. […]
American leadership was damaged by Trump staking out a position and then stepping back, said Hugh White, a professor of strategic studies at the Australian National University.
White told the Times that the Chinese will now see Trump as “weak” as a result of his handling of the dispute.
The White House can take some comfort in the fact that an entirely different scandal – Michael Flynn’s controversial chats with Vladimir Putin’s Russian government – is such a dominant issue, because if more people heard about this One China disaster, it’d be even more humiliating for the amateur president.
As we discussed on Friday, Trump was only too eager to talk tough before taking office, talking openly about his willingness to abandon the One China policy – a bipartisan policy carefully crafted over the course of decades – or at least use it as a bargaining chip in future negotiations.
Confronted with some mild diplomatic pressure from Beijing, Trump folded like a cheap suit, gave China exactly what it wanted, and gained nothing but embarrassment in return.
In one cringe-worthy incident, the new American president showed he’s willing to abandon his tough-guy rhetoric at a moment’s notice, while demonstrating his deal-making skills are a joke.
The White House is very, very lucky this ignominious failure has largely been overlooked by much of the political world.

Paper Tiger Trump

Trump surrenders to China on Taiwan, gets nothing in return, looks weak
By Brooklynbadboy

China knows'Trump isn't strong. 

He's weak.
Trump decided to make a lot of noise, but in the end chose to maintain the status quo, significantly weakening himself in the eyes of the Chinese:
By backing down in a telephone call with China’s president on his promise to review the status of Taiwan, Trump may have averted a confrontation with America’s most powerful rival.
But in doing so, he handed China a victory and sullied his reputation with its leader, Xi Jinping, as a tough negotiator who ought to be feared.
“Trump lost his first fight with Xi and he will be looked at as a paper tiger,” said Shi Yinhong, a professor of international relations at Renmin University of China, in Beijing, and an adviser to China’s State Council. 

“This will be interpreted in China as a great success, achieved by Xi’s approach of dealing with him.”
There's more: China now feels they'll be able to move forward aggressively into further reaches of the Pacific because of Trump's scrapping of TPP and instead engaging in a series of bilateral negotiations. 

This strategy means the White House and State Department will be consumed with one at a time trade agreements while China gets one big comprehensive one:
Canada and China are joining a mid-March summit hosted by Chile on how to advance trade in Asia-Pacific now that Donald Trump has pulled the United States out of the Trans-Pacific Partnership and ceded leadership in the region.
It’s the first effort to move beyond the rubble of the TPP deal – dead since Washington’s exit – and offers a possible way for Beijing to take the lead on influencing how trade should deepen between the West and Asia
Chilean officials say they have invited all 12 countries that participated in the TPP talks as well as South Korea and China, which did not.
That will include Australia, Japan and Mexico among others. 

I suppose Trump could, in theory, conclude individual trade agreements with these countries simultaneously or in some order. 

But why should they? 

Nothing in it for them as the status quo is just fine. 

Besides, China has already showed them how to deal with Trump: ignore him, wait, dangle the promise of flattery, he will surrender.
American leadership was damaged by Mr. Trump staking out a position and then stepping back, said Hugh White, a professor of strategic studies at the Australian National University and the author of “The China Choice,” a book that argues that the United States should share power in the Pacific region with China.
“The Chinese will see him as weak,” Mr. White said of Mr. Trump. 

“He has reinforced the impression in Beijing that Trump is not serious about managing the U.S.-China relationship.”

Sick Carrier of Asia

China flexing aircraft carrier muscle, but so far it's a paper tiger
By KATSUJI NAKAZAWA

The Liaoning, China's first and only aircraft carrier, at sea on Dec. 24, 2016. 

TOKYO -- In an unprecedented show of force, China dispatched its first and only aircraft carrier on an extensive training mission amid rising tensions with the U.S. late last year.
The Liaoning left its home port in Qingdao, Shandong Province, on Dec. 20, a month before Donald Trump's inauguration as the new U.S. president, and entered the Western Pacific via the East China Sea.
The Liaoning then went to the South China Sea and sailed north, passing through the Taiwan Strait, before returning to Qingdao on Jan. 13. 

The carrier's long voyage made a big splash internationally as it involved transiting three flashpoints along the way.
The three flashpoints are the East China Sea, the South China Sea and the Taiwan Strait.
"The aim of the Chinese aircraft carrier's latest cruise was [to send a message to] China's own people, not Trump or Taiwanese President Tsai Ing-wen," said a Chinese researcher specializing in China's domestic politics and national security issues.
The researcher made the remarks at the end of last year, without elaborating. 

A close look at subsequent Chinese media reports gives some insight into the researcher's thinking.
Chinese media outlets gave extensive coverage to what they described as the Liaoning's "practical" training exercises, with state-run China Central Television reporting on them on its main 7:00 p.m. news program on Jan. 13.
Chinese media outlets are all under the sway of the Communist Party's Publicity Department, the ruling party's propaganda body. 

The recent flurry of media reports about the Liaoning is part of China's "public opinion warfare."
China's "three warfares" strategy consists of "public opinion warfare," "psychological warfare" and "legal warfare."
It would be safe to say that the Publicity Department tried to reassure the public about the strength of the Chinese military and dispel concerns over anticipated threats from the Trump administration.

Paper tiger
But the truth is that the Liaoning still lacks combat capabilities.
"Carrier-based aircraft are slow to take off. Even if many such planes finally took off in the event of a military contingency, most of them would have to [return and] land on the carrier before actually launching operations," said a source familiar with the Chinese military.
There are at least three reasons for the Liaoning's lack of combat capabilities.

The Chinese aircraft carrier is not equipped with catapults for aircraft launches. 

Chinese carrier-borne planes cannot carry enough fuel for long operations. 

China also lacks know-how about the combat operations of carrier battle groups, which include numerous support ships.
The Liaoning, therefore, pales before its U.S. rivals.
A U.S. aircraft carrier is equipped with multiple catapults, allowing up to 50 planes to take off in quick succession. 

The U.S. Navy has also accumulated extensive know-how about conducting combat operations of carrier battle groups over the past half-century.
The aircraft catapult is a difficult technology to master. 

The Liaoning has no such device for launching aircraft at speeds sufficient for flight. 

The carrier can carry up to 20 planes. But they cannot quickly take off from the carrier.

The Liaoning entered service a little over four years ago.
China purchased the Varyag, an incomplete ex-Soviet aircraft carrier, as scrap from Ukraine, as it did not have the ability to build a carrier on its own. 

The Varyag was refurbished in Dalian, Liaoning Province, and rechristened the Liaoning. 

The ship was commissioned in 2012.
Chinese media outlets reported on the Liaoning's training exercises with great fanfare. 

But the carrier is still at the stage of conducting takeoff and landing drills and making trial voyages.
Including a new vessel to be commissioned in the near future, the U.S. possesses a total of 11 aircraft carriers. 

Obviously, China's carrier fleet would not be able to take on a U.S. carrier battle group.
Defense officials from many countries agree that the Chinese carrier is still just just for show -- a "paper tiger," a term often used by Mao Zedong, the revolutionary leader who led China to communism.
Before China acquired its nuclear weapons capability, Mao resorted to bluster. 

He called such weapons possessed by the U.S. and other countries "a paper tiger."
But ordinary Chinese people cannot easily understand the huge gap in military capabilities between their country and the U.S. 

That is why the barrage of propaganda reports by domestic media outlets can be highly effective.
China has made strenuous efforts recently to build an aircraft carrier on its own.
A Chinese company claiming to be private also purchased the retired ex-Soviet aircraft carrier Kiev. The Chinese military studied the ship's construction, and it is now open to the public at a theme park in Tianjin, China.
China also acquired another retired ex-Soviet carrier, the Minsk, for study through a South Korean company. 

After being scrutinized, the Minsk was also opened to the public in Shenzhen, Guangdong Province.
China is now building two homegrown aircraft carriers, with one of them, China's second carrier after the Liaoning, expected to be launched in the near future.
If the second Chinese aircraft carrier forms a battle group and starts operating in the Western Pacific and the South China Sea in a few years' time, the security situation in the region could change as the gap in U.S. and Chinese military capabilities will narrow gradually.

Economic tensions
Tensions between China and the U.S. are rising on the economic front as well.
Trump has harshly condemned China for racking up trade surpluses with the U.S. through unfair practices such as manipulating its currency, the yuan. 

He has also vowed to give top priority to protecting American jobs.
In response to Trump's anti-China rhetoric and "America First" policy, Chinese private companies have started talking about expanding their investments in the U.S.
The move comes despite the Chinese government's desperate bid to resolve the problem of serious capital outflow.
Trump's "America First" policy is giving Chinese companies a convenient excuse to legally transfer funds out of their country to boost their holdings of safer dollar-denominated assets.
Chinese authorities have repeatedly conducted large-scale market interventions to stem the yuan's plunge amid the capital outflow.
As a result, the country's foreign exchange reserves shrank sharply to just over $3 trillion at the end of December 2016, compared with a record high of nearly $4 trillion registered at the end of June 2014.
At the beginning of this year, Chinese authorities imposed stricter controls on foreign currency exchanges, marking the latest in a series of steps to tackle the serious capital outflow problem.
In China, individuals are allowed to convert up to $50,000 worth of yuan into foreign currency a year.
Under the new regulation, they must effectively pledge not to use the money to purchase houses, securities, life insurance and some other products abroad when they submit applications to major banks.
The number of Chinese tourists visiting Japan has been rising in recent years. 

They will also have to comply with the new regulation. 

Some wealthy Chinese people have been on a property-purchase spree in Japan. 

But the new regulation will also likely put a damper on their spending.
Meanwhile, China's foreign direct investment is also slowing down sharply. 

Such investment tumbled about 40% in December 2016 on a year-on-year basis in terms of value, apparently as a result of Chinese authorities' guidance.

Sensitive year
With tensions running high between China and the U.S. both militarily and economically, Xi's regime needs to be vigilant against a possible surge in anti-U.S. feelings at home.
In a move that broke with long-standing U.S. diplomatic protocol and angered Beijing, President Trump spoke by telephone with Taiwanese President Tsai Ing-wen of the pro-independence Democratic Progressive Party on Dec. 2, 2016.
Beijing still regards Taiwan as a renegade province that must be reunified with the mainland, by force if necessary, and has pressured the Taiwanese leader to acknowledge the "One China" principle.
Trump has also repeatedly expressed doubts about the "One China" principle, which the U.S. has upheld for many years.
If the situation remains unchanged, a campaign to boycott American products or anti-U.S. demonstrations could take place in mainland China. 

Xi wants to prevent any such incidents that could lead to social instability as he prepares for a crucial political event.
If history is any guide, Xi has good reason to tread carefully. 

When a U.S. military plane mistakenly bombed the Chinese embassy in Yugoslavia in 1999, killing three Chinese, large-scale demonstrations were held by angry Chinese protesters in Beijing.
This year is also politically sensitive. 

The Chinese Communist Party is to hold its next five-yearly national congress this autumn. 

A tug-of-war within the ruling party is expected to further intensify over the lineup of a new leadership team to be chosen there.
The Trump administration will probably try to unsettle the Xi regime in various ways.
Under such circumstances, the Xi regime needs to reassure the public. 

That is why it has made the most use of the Liaoning. 

The first and only Chinese aircraft carrier is a treasured military asset of the Xi regime, although it is in reality just a paper tiger.

Wet Paper Tiger

"Chinese navy ships can't 'fight their way out of a wet paper bag'" -- Vice Admiral Tom Rowden

By Alex Lockie

According to US Navy Vice Admiral Tom Rowden, a US destroyer will "rock anything it comes up against." Pictured here is the USS Lassen in the South China Sea. 

China's wet paper tiger?

In a brief but illuminating interview, US Navy Vice Admiral Tom Rowden, the commander of the US Navy's Surface forces, told Defense News' Christopher P. Cavas a key difference between the ships of the US and Chinese navies.
Cavas asked Rowden about China commissioning a 4,000 ton frigate and deploying it just six weeks later, a start-to-finish speed inconceivable in the US Navy, where ships undergo many rounds of testing and often take more than one year to deploy.
When asked about the differences between the US and China's processes, Rowden explained that while a US and a Chinese ship may both appear combat-ready,"[o]ne of them couldn't fight their way out of a wet paper bag and the other one will rock anything that it comes up against."
Rowden couched his criticism well, but the meaning is clear. 

The US doesn't test its ships for fun, or to spend excess money in the budget, but "to be 100 percent confident in the ship and confident in the execution of any mission leadership may give them."
Rowden wouldn't speculate much on China's process, but he made himself clear to begin with.
Tensions between China and the US stand at a high over perceived shifts in US policy towards Taiwan, China's seizure of a US Navy drone, and years of China militarizing the South China Sea and bullying its neighbors.
Surely Rowden has sized up China's fleet and its rapidly burgeoning navy, and his assessment in this interview is telling.

Is it time to pivot away from the United States?

Paper tiger: Muted U.S. Response to China’s Seizure of Drone Worries Asian Allies.

Leaders like Rodrigo Duterte of the Philippines would feel validated by his pivot away from the United States toward China
By JANE PERLEZ

Killing the American paper tiger

BEIJING — Only a day before a small Chinese boat sidled up to a United States Navy research vessel in waters off the Philippines and audaciously seized an underwater drone from American sailors, the commander of United States military operations in the region told an audience in Australia that America had a winning military formula.
“Capability times resolve times signaling equals deterrence,” Adm. Harry B. Harris Jr., told a blue chip crowd of diplomats and analysts at the prestigious Lowy Institute in Sydney, Australia, the leading city in America’s closest ally in the region.
In the eyes of America’s friends in Asia, the brazen maneuver to launch an operation against an American Navy vessel in international waters in the South China Sea about 50 miles from the Philippines, another close American ally, has raised questions about one of the talkative admiral’s crucial words. 

It was also seen by some as a taunt to President Donald J. Trump, who has challenged the “One China” policy on Taiwan and has vowed to deal forcefully with Beijing in trade and other issues.
“The weak link is the resolve, and the Chinese are testing that, as well as baiting Trump,” said Euan Graham, director of international security at the Lowy Institute. 

“Capability, yes. Signaling, yes, with sending F-22 fighter jets to Australia. But the very muted response means the equation falls down on resolve.”

Across Asia, diplomats and analysts said they were perplexed at the inability of the Obama administration to devise a strong response to China’s challenge. 

It did not even dispatch an American destroyer to the spot near Subic Bay, a former American Navy base that is still frequented by American ships, some noted.
After discussions at the National Security Council on how to deal with the issue, the Obama administration sent a démarche to China demanding the return of the drone. 

On Saturday, China said it would comply with the request but did not indicate when or how the equipment would be sent back.
The end result, analysts said, is that China would be emboldened by having carried out an act that amounted to hybrid warfare, falling just short of provoking conflict, and suffering few noticeable consequences.
“Allies and observers will find it hard not to conclude this represents another diminishment of American authority in the region,” said Douglas H. Paal, vice president for studies at the Carnegie Endowment for International Peace.
Significantly, the Chinese grabbed the drone not only in international waters but outside even the “nine dash line” that China uses as a marker for its claims in the South China Sea. 

In so doing, analysts said, Beijing was making the point that the entire sea was its preserve, even though it is entirely legal for the United States to conduct military operations in waters within 200 miles of the Philippines, an area known as an exclusive economic zone.
In the last dozen years, China has steadily showed off its growing military prowess to the countries around the South China Sea, which carries trillions of dollars of world trade and that China values for its strategic access to the Western Pacific and to the Indian Ocean.
As China has built up its navy and its submarine fleet in the last decade, it has also emphasized what it calls its “inherent” right to dominate the regional seas, and to challenge the presence of the United States, its allies and partners in Asia.
The drone incident, which occurred Thursday, and was first broadcast by CNN despite efforts by the Obama administration to settle it quietly, was of a different nature and just as disquieting as past confrontations with China that involved bigger ships and more dangerous maneuvers, analysts said.
In 2001, soon after President George W. Bush came to office, an American spy aircraft, an EP-3, was forced to land on Hainan Island after colliding with a Chinese fighter jet. 

The Chinese stripped the plane of all its assets and returned it broken down to its parts and packed in boxes.
In 2009, two months after President Obama took office, Chinese vessels swarmed a United States Navy reconnaissance ship, the Impeccable, in what the Pentagon said were dangerous and unprofessional maneuvers.

This time, China chose a more unconventional method to challenge the United States and hastened the timetable, challenging a president-elect, rather than a newly installed president as it has in the past.
The drone itself, known as an unmanned underwater vehicle, was not a particularly important piece of equipment. 

Such drones are deployed to gather military oceanographic data and are available over the counter for about $150,000, the Pentagon said. 

Data from the drone would no doubt be used to help track China’s growing submarine fleet, naval experts said.
More important than the equipment was the principle of freedom of navigation in international waters, and whether China was in the process of imposing its own rules in the South China Sea — more than 800 miles away from its coastline, said Alexander Vuving, a specialist on Vietnam at the Asia-Pacific Center for Security Studies in Hawaii.
“This is China showing that it is in the process of setting the rules in the South China Sea, imposing its own view in the South China Sea and saying the South China Sea should be its own backyard,” Mr. Vuving said.
“If China can get away with this incident with impunity, this will send a chilling message to countries in the region,” he said.
Leaders like Rodrigo Duterte of the Philippines would feel validated by his pivot away from the United States toward China, he said.

“Others, like the Vietnamese, will have to seriously rethink their regional outlook.”
Vietnam, always fearful of China, its neighbor to the north, but also careful not to alienate Beijing, has tried in the last few years to draw closer to the United States, while still maintaining a careful distance.
In 2011, as China became more assertive in the South China Sea, Vietnam accused China of instructing three high speed patrol boats to cut the cables of a Vietnamese oil and gas survey ship.
The authoritarian Vietnamese government was so furious it allowed anti-Chinese demonstrations in Hanoi.
In 2014, China moved a billion dollar oil rig to waters close to the Paracel Islands that both Vietnam and China claim, and then blasted a flotilla of Vietnamese ships with water cannon.
Since then, China has hardened its position, sometimes referring to the South China Sea a “core interest” in which there is no room for compromise, though others in the region call it bullying by Xi Jinping.
Under that vision, China would be in control from the waters of Indonesia, to Brunei, Malaysia, the Philippines and up to Japan.
In the East China Sea, China and Japan are at odds over the Senkaku Islands.

In June, China sent a warship for the first time into the waters around the islands, further escalating tensions.

Japan has been more outspoken than other Asian countries in its support for the Obama administration’s objections to China’s construction of military facilities on seven artificial islands in the South China Sea.
But in Tokyo, the government was watching the outcome of the drone incident with some anxiety. 

So far, Washington’s restrained response has not been reassuring.

Two Chinas Policy

Donald Trump's brilliant move on Taiwan makes Asia safer

By Shaun Rein
In this Dec. 2, 2016 photo released by Taiwan Presidential Office, President Tsai Ing-wen, center, flanked by National Security Council Secretary-General Joseph Wu, left, and Foreign Minister David Lee, speaks with Donald Trump via speakerphone in Taipei.

Donald Trump's call with Taiwan President Tsai Ing-wen upended 40 years of US foreign policy. Ever since 1979, America has acknowledged a One-China policy and terminated formal diplomatic relations with Taiwan.
No American president, cautious of provoking China, has spoken with the island's president since then.
Even President Ronald Reagan, stalwart defender of democracy and opponent of communism, refused to cross any red line by speaking with the president of Taiwan.
Concerns by foreign policy experts are that the call indicates Trump is a bumbling, rank amateur when it comes to foreign policy, who hasn't consulted with the State Department prior to calls with foreign leaders, and will hurt American prestige at best, or, at worst, is a loose cannon that is leading America to war with China.
In response to critics of his call, Trump has forcefully and quickly pushed back, with a series of tweets Sunday singling out China's currency policy and military posturing in the South China Sea.

Brilliant move with little downside
The reality is that Trump's move to speak on the phone with President Tsai is brilliant and has little downside.
With a simple 10-minute phone call, rather than selling billions of arms to Taiwan, Trump shows American strength in the Asia-Pacific region and may well actually making the region safer.
Unlike Barack Obama and his Asia pivot policy, which the Chinese have generally ignored -- as evidenced by their continued reclamation of land in the South China Sea -- they are now going to pause and rethink all of their strategies to take Trump seriously.
Nothing is more sacred to Beijing than one-party rule and sovereignty over land and ocean that China considers its own. 

Everything else is open to negotiation.
By having a call now before he is sworn in, Trump will have additional leverage to negotiate with China on more core American interests than the matter of Taiwan -- for instance, open shipping lanes in the South China Sea, reduced cybersecurity risks emanating from China, and less protectionism and unfair competition for American business interests in China.

Paper tiger
China's muted response to the phone call shows Trump's strategy.
Instead of launching military maneuvers as many American foreign policy experts feared, the Chinese Foreign Ministry simply lodged a complaint with the US.
Chinese Foreign Minister Wang Yi said the US must not disrupt "the One-China policy [which] is the cornerstone of a healthy China-US relationship."
Many China watchers thought China would react militarily. 

But China does not want to risk war.
In many ways China is like a paper tiger.
It is very good at bullying and shouting to get what it wants and to see how far it can push other nations, but it is not likely to risk a full-out war.
It will react militarily only if forced.
Chinese state media downplayed the call and said that Trump is not yet president. 

Instead, state media unleashed their fury on President Tsai, whom they argue is intentionally trying to create war.
Rather than launching serious military exercises aimed at America, it is more likely that China would implement severe economic sanctions and cause trade problems with Taiwan to punish them economically.
China is currently doing the same thing with South Korea ever since it announced that it will place THAAD missile defense system on its shores.
The Chinese government is reducing the number of tour groups to South Korea; movie stars from that country have been banned from performing in China; and, recently, the giant conglomerate Lotte has had unprecedented mass audits across the country.
China previously banned Norwegian salmon after the Nobel Peace Prize was given to dissident Liu Xiaobo, and reduced trade with Mongolia after it met with the Dalai Lama.

Status quo no more?
Other countries in the region only have to see the wrath of China if they oppose its strategic interests, and see the benefits if they get closer to Beijing politically.
The recent warming of ties between China, the Philippines, and Malaysia, which are getting billions of low interest loans and infrastructure investment, show Asian nations the benefits of allying with Beijing over Washington.
Trump's call with President Tsai is a simple and cheap way to let other nations know that American power is back and that Trump will look after US interests, even if that means changing the status quo.
And frankly, the status quo has not made the world a safer place in recent decades.