U.S. Foreign Policy: Time to Plant Olive Trees in China’s Backyard


By Addelyn Rubino

This column asserts that the People’s Republic of China’s emergence as a global power is a direct threat to the United States of America’s national security, economic prosperity, and role as the world’s leader.  In defense of this view, discussion is focused on China’s human rights abuses, militarization, economic growth, and geopolitical movements.  With this in mind, the author proposes that the United States take several steps to improve strategic relations with select nations bordering China for the purpose of political leverage.

I. Introduction: The United States of America’s Global Leadership Role

Shortly after the atomic bombings of Hiroshima and Nagasaki, it became unquestionably clear that the United States of America had eluded the lion’s share of World War 2’s unprecedented damage, and emerged a superpower.  In light of the rapid technological and economic developments America had undergone during and after the post-war period, the country’s borders had transformed themselves into gates which opened into the kingdom of heaven.  The nation was not only recognized as the land of abundance and prosperity, but was also given the great responsibility of acting as the world’s sole guardian and protectorate.  Uncle Sam even established himself as the de facto policeman of the global community, orchestrating everything from the international flow of wealth, to the political affairs of any one nation.

Within the last half century, the United States has created and defended its economic and political hegemony by promoting the ideals of free market capitalism and constitutionally liberal democracy.  These healthy values diffused themselves through American led, international organizations, such as the World Bank Group, the International Monetary Fund, the World Trade Organization, the G7,i the Paris Club, the Organization for Economic Co-operation and Development, as well as, the vast array of administrative bodies within the United Nations.  As a result, national economies were integrated into a globalized network of interdependence on trade, foreign direct and financial investment, innovation of ideas and technology, as well as, the culture and human capital brought by the immigration of foreign people and firms.  These international gatherings also allowed America to lead efforts in regulating globalization so that no nation would be excluded from an equitable slice of the economic pie.

There is no question that the United States of America is still the engine of the world’s economy, exalting the globe into prosperity during a boom, and grounding it during a bust.  By wholeheartedly immersing itself into the process of globalization quicker than any other nation, America steadily developed itself into the world’s single largest trading partner (See Graph 1).  In fact, the “U.S. economy is for most economies their first trading partner and has remained so for the last 25 years.  Even for countries that do not trade so much with the U.S., they are influenced by its dominance through other partners’ trade” [1]. Because America wields such an immense influence within the world’s economy, the global community must logically cede all responsibility and directive control to the discretion of this nation.  A practical question to ask is what the United States offers, and will continue to offer by its leadership.  Lael Brainard and David Lipton, authors of “Can America Still Lead the Global Economy,” point to two fundamental international economic goals the United States has.  The first, foremost, and most obvious objective the U.S. has is to “promote prosperity for all Americans” [2].  Nevertheless, the second is to “stop globalization from transforming into a negative sum game by taking action to prevent economic, financial, climate, and security instability” [3] from wrecking the lives of all residents of the world, regardless of nationality.  Before America continues onward with its benevolent mission of global leadership, it must first prevail over a very threatening obstacle which may impede it from accomplishing its goals; this hindrance is the People’s Republic of China (PRC).

II. Why is the People’s Republic of China a Threat to the U.S.A.?

a) Brief Background: China’s Metamorphosis through Globalization

Since Communist Party leader Deng Xiaoping’s economic reforms, which were put in place from the late 1970s onwards, China has benefitted from a robust, yet unsettling rate of economic growth.  Xiaoping was a fierce critic of the ever infamous Chairman Mao Zedong, mainly because of his complete and total lack of economic pragmatism. Mao’s enforcement of a highly disorganized and isolated command economy was a clear disaster, and Xiaoping had the foresight to understand why.  Deng’s guiding philosophy was that “capitalist techniques can be put to good use in a socialist economy,” which would enable China to benefit from a “greater reliance on market forces” [4].  Under Deng Xiaoping’s vision, farmers were given partial pricing and equity incentives that allowed them to sell a fraction of their crops on the open market.  Additionally, special economic zones (SEZs) were created to attract foreign investment, boost exports, and import advanced technology, which in turn generated efficient productivity [5].  Even economic direction and control was decentralized, leaving provincial governments in charge of various enterprises for the purpose of competition through the laws of the free market. Most notably, coastal regions and cities were allowed to test free market reforms and to offer tax and trade incentives to encourage both foreign and domestic investment.  Eventually, state price controls on many goods were seen as obsolete and counterproductive, leading to their disposal [6].

Keeping in mind that China was once a floundering and globally detached failure, Deng’s reforms were a major blessing that triggered China’s economic growth and acceptance of globalization.  China has evolved into “the country that sends missions throughout the world seeking best practice.  It adapts not just foreign technology and foreign corporate management techniques but also a wide variety of foreign institutions and practices: international accounting standards; British, U.S. and Hong Kong securities laws; French military acquisition systems; a central bank structure modeled on the U.S. Federal Reserve Bank; Taiwan-style regulations for foreign portfolio investment; an economic development strategy adapted from South Korea, Singapore and Taiwan; and many others” [7].  China’s economic advances are reflected by its gross domestic product (GDP), which is comparable to the likes of the United States of America (See Graph 2).  In 2008, its GDP was calculated at over 4.4 trillion dollars, over 2,391 percent more than it was in 1979.  Even though China’s GDP is still less than a third of the United States’ GDP, its growth rate should draw more attention.  Beginning with 2001, the year of its controversial admission into the World Trade Organization, China’s GDP growth rate averaged over an astonishing 10 percent right through all of 2008.  This growth rate is truly remarkable for two reasons.  The first is because the reality of this growth is in spite of two incidents of global economic turmoil during this period; the relatively softer instance during the early 2000s, as well as the devastating global financial crisis that began in 2007.  The second reason is because during the same period, the United States of America only managed an average GDP growth rate of just 3 percent.

Although globalization has undoubtedly contributed to the diversification of wealth around the world, it has also created an opportunity for irresponsible nations to carry out their self interests at the expense of the international social interests.  Unfortunately, China has taken the path of the irresponsible nation, proving itself to be a dissident element within the global community.  Ranging anywhere from domestic social abuses to international political impudence, the list of its misdemeanors runs far past what any citizen of the world (especially American citizens) should have to tolerate.  Furthermore, China’s potential to use its military, economy, and juvenile-like diplomacy to advance its ambitions, should raise fear among each and every civilized society.  Before the United States of America begins its crusade of leading the world in solving the crisis of China, it must first acknowledge how deep this dragon’s claws impale, and the deadliness of its flames.

b) Human Rights in Today’s China

When examining China’s potential to breach world harmony, it is vital that the United States first recognizes the oppressive reality of life under the Communist Party of China.  After all, a disregard for the universal social contract of freedoms is incongruent with America’s call for liberty.  Although the topic of civil rights may appear to be a domestically isolated predicament in China, it should actually be interpreted as a precursor to how the PRC government will treat fellow nations in the future.  In fact, the issue of human rights has been a principle area of U.S. concern in its relations with the country, especially since the violent government crackdown of the Tiananmen Square demonstration in 1989 [8].Considering that the 2008 Summer Olympic Games were hosted in Beijing, a reasonable individual would conclude that China has transformed itself into a nation of freedom and liberal democracy.  However, the colorful and blissful display of the 2008 Beijing Olympics was simply a guise to shadow the malicious environment the people of China are plagued with.  According to the United States Department of State’s Human Rights Report for 2008 (will simply be referred to as the “Rights Report” hereinafter), the Chinese government continues “to monitor, harass, detain, arrest, and imprison journalists, writers, activists, and defense lawyers and their families, many of whom were seeking to exercise their rights under the law.”

The Rights Report meticulously records the Chinese government’s disrespect for the integrity of human life.  For instance, it mentions Wei Wenhua, an amateur Chinese journalist, who on January 7th of 2008 was beaten to death by urban management officials in the Hubei province for filming a protest by local residents on his cellular phone [9]. Not surprisingly, this unlawful deprivation of human life yielded unusually short prison terms for only 4 officials who had played roles in Wenhua’s murder (there were 41 officials detained for questioning).  Torture and other cruel forms of treatment are also referenced within the Rights Report, including beatings, electric shocks, and shackles.  One notable name it linked to the issue of torture was Liu Jie, a Chinese human rights defender.  Jie was arrested on October 11th of 2007 for distributing a public letter, signed by 12,150 petitioners in favor of human rights reforms in China [10]. While Jie was in prison, she was beaten so horrifically that there was a life-threatening deterioration in her health, both physically and psychologically. On August 15th of 2008, during Jie’s detention in Harbin Drug Rehabilitation Center, she was forced to sit on a dreadful torture device known as the “Tiger Bench” for seven consecutive days.  The cases of Wei Wenhua and Liu Jie are drops in an ocean of wicked acts committed by Chinese authorities.  According to the United States Congressional-Executive Commission on China, 900 people were serving prison terms for activities related to calls of reform [11]. In addition, Chinese government data documents that 742 people were arrested for “endangering state security” in 2007, a bogus charge to say the least; that figure more than doubled to 1600 unlucky souls in 2008 [12].  As if this is not ruthless enough, the Rights Report also refers to Mao Qunan, China’s Ministry of Health spokesman, who in January 2007 acknowledged that the Chinese government harvested organs from executed prisoners.

Interference with the sacred human right to privacy, family, and home, by the Chinese Communist Party are also discussed within the Rights Report as almost nonexistent.  As an example, during the preparation and construction for the Summer Olympics, there were numerous reports that people were forcibly evicted from their homes in Beijing; infrastructure and commercial projects also resulted in the forced relocation of millions of homeowners in the rural areas of China [13].  This disregard for a person’s right to privacy, family, and home also manifests itself in the Chinese government’s restrictions on childbirth.  China’s childbirth policies are so vile and sinister that government officials are “subject to rewards or penalties based on meeting the population goals set by their administrative region”[14]. More often than not, countless unspeakable crimes erupt out of this barbaric policy.  To illustrate, in March of 2008, family-planning officials in the Henan province forcibly detained a 23-year-old woman who was seven months pregnant, tied her to a bed, procured the birth, and then killed the newborn [15].  Given that Chinese government officials use “criminal prosecution, civil lawsuits, and other punishments, including violence, detention, and other forms of harassment, to intimidate authors and domestic journalists” [16], it is not hard to imagine why similar, future unthinkable crimes will not be prevented by people with no free speech or press which may not freely print.

Of course, a lashing of the Chinese government for its domestic human rights transgressions would be incomplete without mentioning their hostile relationship with the noble Dalai Lama.  The Chinese Communist Party’s hatred for the Dalai Lama is immature, senseless, and unfounded.  For instance, during the March 2008 demonstrations in Tibet, official reports from the Chinese government referred to diverse Tibetan organizations as the “Dalai clique,” suggesting that they were all under an evil spell by the Dalai Lama [17]. The comedy continues, as on March 18 of 2008, the Communist Party Secretary of Tibet maliciously labeled the Dalai Lama as “a wolf in [a] monk’s robe, [and] a devil with a human face but the heart of a beast” [18].  However, because the United States of America’s enduring commitment to justice, the 109th Congress awarded the divine figure with the Congressional Gold Medal on October 17th, 2007 [19].

c) The Growing Might of China’s Armed Forces

Given the coldblooded mind-set of the Chinese Communist Party towards its own citizens, one can only imagine the potential carnage and havoc that may arise out of the escalating power and strategic capability of China’s military.  The United States Department of Defense (DOD), in their 2009 Annual Report to Congress, entitled Military Power of the People’s Republic of China (will simply be referred to as the “Military Report” hereinafter), have determined that the China Communist Party’s enduring priorities for the People’s Liberation Army (PLA) include carrying on government rule, “sustaining economic growth and development, maintaining domestic political stability, defending China’s national sovereignty and territorial integrity, and securing China’s status as a great power.” These missions for the PLA itself should not be a source of any concern, as any rational nation with borders worth protecting would assume similar if not exact objectives.  However, what the United States should be alarmed about is how, to what extent, and at what cost the PLA will turn the world into a standoffish environment, ripe enough for the panoply of war.  Unfortunately, the PLA does not publicly circulate information on its military, security, or defense strategies to the same extent in openness of the U.S. Department of Defense.  This lack of transparency inevitably leads to a miscommunication of intentions on the part of the Chinese, not just toward the United States of America, but the entire world.  If the People’s Republic of China were sincere in maintaining their “peaceful rise” mantra, they would disclose virtually all globally requested information on the status of their armed forces.  Although the PLA is unusually secretive about its operations, the Military Report still manages to share insight on its strategies and capabilities.  The Chinese military is experiencing a rather disturbing transformation, as they have become more aggressive and advanced with their strategic concepts, as well as begun to lay the groundwork for a force capable of executing whatever the PRC’s global objectives may be.  The PLA’s adoption of an inventive doctrine for “active defense” [20] truly reflects the new landscape of China’s armed forces.  Although the policy’s phrasing may sound relatively pacifistic, the Military Report points out that the PLA’s “active defense” policy is rather tortuous in nature because it promotes offense as defense.  In other words, the policy would justify preemptive “military action at the operational and tactical level under the guise of a defensive posture at the strategic level” [21].  The hazard in this is that China may seize initiatives for armed strikes in situations where perceived enemies challenge or irritate it, solely on a political playing field.

The PLA has drawn upon U.S. led military experience, including Operations Enduring Freedom and Iraqi Freedom, as well as Russian military theory, to revolutionize outdated combat models as part of their doctrine for active defense [22].  For example, the army has disposed of their traditional strategy of warfare that focuses on attrition (i.e. using hordes of soldiers as human shields).  Instead, it has employed a model of “information-plus-firepower” [23], whereby the logistics and tactics of informatized ground forces are integrated into a joint-force stratagem that include the air-force, navy, and every resource the PLA has to take control of any given battlefield.  Furthermore, the Military Report states that the PLA has been speedily upgrading military equipment and artillery for its nearly 1.25 million ground personnel, a gang that has transitioned from having a static defense capability, into a highly mobile, offensive, and maneuver-oriented force.

With about 75 principal combatants, 55 amphibious ships, and over 60 submarines, the PLA Navy has also been entrusted with concrete strategic guidelines for conducting warfare, in spirit of the so-called active defense [24].  Most notable is their mandates for blockading ports, cutting lines of communications between vessels, as well as, maritime-land attack and obliteration of ships.  If the tasks of the PLA’s Navy hardly sound defensive in nature, the size and purpose of the PLA’s air-force are even more surprising for it seems purely offensive.  The Military Report records that the Chinese air-force has almost 500 combat aircrafts, and already has the airfield capacity to expand that number by hundreds more.  Under false pretense, this same missile-equipped horde of flying sparklers has been deemed defensive on paper, but is actually trained to annihilate adversary bases and naval forces at the operational level [25].

In addition to innovating military strategy, the Chinese government has recently been investing an immense amount of domestic monetary resources, political capital, and foreign knowledge in their pursuit to modernize their military technology.  For 2008, Beijing stated that their official military budget was valued at approximately $60 billion dollars [26].  However, this figure is clearly too minuscule to be accepted as the truth, and therefore, should be interpreted as an under-reported amount.  The Military Report presents more realistic figures for 2008, estimating China’s actual military expenditures to have been valued at between $105 and $150 billion dollars.  Given the PLA’s size and its government’s wealth, it is not difficult to envisage China’s real military expenditures to be far greater than the Department of Defense’s estimates due to the murkiness in the army’s accounting.

Considering the perpetually changing scene of modern warfare, it is apparent that the Chinese military is most likely concentrating the bulk of their resources in missile and space technology.  Regrettably, the world has allowed China to develop the most active land-based ballistic and cruise missile program on the face of this planet [27].  The PLA’s qualitative and quantitative advances in strategic missile technology are most reflected by China’s inter-continental ballistic missile (ICBM) nuclear forces.  Of the approximately 60 ICBMs the PLA has in its nuclear arsenal [28], the Dong Feng 31A (DF-31A) is by far the most threatening to U.S. national security.  While the U.S. Department of Defense records that the inventory of DF-31As total to less than 10 missiles, it should be noted that the DF-31A has a range of around 7000 miles, capable of penetrating any location within the continental United States of America.  Although the PLA has a colossal assortment of theatre ballistic missiles having respectable range and damage-toll capabilities, the DF-31A stands out most because it characterizes China’s shift away from extremely vulnerable, liquid fueled missiles that can only be fired from stationary locations, to solid-fueled missiles that are highly flexible, survivable, and road-mobile [29].  The Military Report states the DF-31A is also an indicator of China’s heavy research on nuclear capable missiles that can act as maneuvering re-entry vehicles and multiple independently targetable re-entry vehicles, technologies that can change a missile’s target while in the air, and carry multiple nuclear warheads on a single ICBM.  Along with China’s progress with their missile systems, it is also important to take note of China’s dangerously, yet rapidly growing infiltration of space.  “China views the development of space and counterspace capabilities as bolstering national prestige, and like nuclear weapons, demonstrating the attributes of a great power” [30].  According to the Military Report, many of China’s space programs are administered by the PLA.  Naturally, it is reasonable to assume the PLA will do nothing more than integrate the space technology it has acquired or developed, and use it for war related applications.  On September 25th, 2008, China became the third nation, after the United States of America and Russia, to successfully accomplish a spacewalk from a rocketship [31].  In light of this manned space program achievement, the Department of Defense is sensible in assuming that the rocket and control system capabilities required for the space shuttle used, the Shenzou-7, may in fact have uses for ballistic missile improvement.  Additionally, the Shenzou-7 deployed a small satellite for monitoring space equipment, but as the Military Report points out, it may actually be used to support counterspace activities.  This theory is not outlandish in the least given that China has already begun “deploying advanced imagery, reconnaissance, and Earth resource systems with military” (32) functions since the year 2000.  In addition to the disquieting strides of China’s manned space program, the Military Report discusses China’s ability to neutralize space-based assets of other nations.  On January 11, 2007, China successfully launched an anti-satellite (ASAT) missile against one of its own weather satellites [33], exhibiting its ability to raze foreign equipment stationed in space [34].  The Military Report points out that this event proves the “PLA’s interest in counterspace systems is more than theoretical,” clearly indicating China’s ambitions to develop laser, high-powered microwave, and particle beam weapons for ASAT missions.  Because of the PRC’s silence on the issue, the global community should be highly concerned with the security implications of this brazen militarization of space.  Situations might arise where the PLA may covertly jam or entirely destroy civilian space communication bands and GPS receivers because of political tension.

China’s missile and space programs clearly define the aspirations for its armed forces. However, China’s desperation for military supremacy is best characterized by their recent breaches of ethical and legal boundaries.  It should come as no surprise that “of all foreign intelligence organizations attempting to penetrate U.S. agencies, China’s are the most aggressive” [35].  For instance, on September 24th, 2008, Shu Quansheng, a renowned physicist, was arrested for violating the United States Arms Export Control Act by illegally providing the Chinese government with technical data and developmental designs on cryogenic fueling systems for space launch vehicles [36]. This incident is alarming because Quansheng is a Chinese born, naturalized American citizen, who was a pawn of PRC espionage from 2003 to 2008.  More shocking is the case of Chi Mak, who was an engineer for a defense contractor, sentenced to over 24 years in prison for providing the Chinese government with sensitive information on U.S. Naval ships, submarines, and high-tech weapons [37].  In sharp contrast to the 5 years Quansheng spent spying for China, the PRC planted Mak in the U.S. for an astounding 2 decades.  Given the cases of Shu Quansheng and Chi Mak, one can only imagine how many more PRC secret agents are burrowing for military secrets, yet pretending to be honorable Americans, have been lodged within the shadows of the United States of America.

d) China’s Economic Gunpowder

Of course, the People’s Republic of China’s massive military buildup would not have been possible were it not for the extraordinary size and success of its economy.  Proof of China’s disturbing growth is reflected by the expansion of its merchandise exports and inward foreign direct investment; both have in turn led to the country’s ever skyrocketing treasure chest of foreign exchange reserves (See Graph 3).  In 1979, at the onset of Deng Xiaoping’s economic reforms, China’s merchandise exports were measured to be a mere 13.614 billion U.S. dollars.ii However, the year 2008 saw China’s exports grow to over 1.428 trillion dollars in value, surpassing even those of America’s.  In fact, China currently holds the position of being the world’s second largest exporter of goods, cutting the United States down to third place.  Unfortunately, China even looks poised to usurp Germany’s title of the world’s largest exporter of goods, exporting just over 1.466 trillion dollars worth of merchandise in the year 2008.iii The rate of growth in China’s inward foreign direct investment (FDI) flows is also shocking.  In 1979, its inward FDI flows was a joke, valued at a comical 80 thousand dollars.  By 2008, China benefitted from a net FDI inflow worth 92.4 billion dollars; that would be more than a 115 million percent increase over a period of less than 30 years.  The developments in China’s export base and inward FDI inflows have been major contributing factors to its massive foreign exchange reserves, a concerning issue not just for the United States of America, but also for every nation that trades with this Asian giant.  To stress the gravity of this issue, it should be noted that China holds by far the most foreign exchange reserves.  For the first time in 2006, its foreign exchange reserves zipped past the value of 1 trillion dollars, simultaneously supplanting the mighty Japan as the world’s single largest holder of foreign exchange reserves.  The People’s Bank of China shook the world again when it reported that in April of 2009, these reserves had accumulated to a value of over 2 trillion dollars.

Although China’s economic rise should be interpreted as America’s overall decline, it is important to first distinguish what is, and what is not, threatening about this rapid growth.  The nature of the bi-lateral trade relationship between the U.S. and China is a major source of contention for many Americans.  Lyrics to their grievances often contain accusations that the PRC government artificially devalues its currency (the “Yuan”), as well as provides subsidies and dumping opportunities to domestic industries.  Supposedly, these practices have been major underlying reasons behind the unusually large current-account deficits the U.S. has with China, as well as the loss of domestic American manufacturing jobs.  Without attempting to touch, and to an even greater extent, defuse the entire debate of whether or not China employs unfair trade policies, it is best to leave the topic alone.  Nevertheless, it is historically clear that America’s dollar-valued imports from China far outstrip its dollar-valued exports to China, leading to an excessively unbalanced trade gap (See Graph 4).  This reality has both positive and negative factors attached to it.  Given the extravagant and fiscally frivolous character of the archetypical American consumer, the ongoing U.S.-China trade deficits should not be considered a problem if an undervalued Yuan, cost cutting subsidies, and dumping practices are the reasons behind it.  The rationale behind this conjecture is more obvious than not: Americans want the best products possible at the cheapest possible prices, and China has for a long-time assumed the position as the world’s Nike factory.  As a result, American consumers benefit from lower domestic inflation because of inexpensive products manufactured on the toiling backs of China’s wretched citizens.  Second, if China actually does engage in such practices it would imply that its goods-production industry’s trade advantage is most likely built on weak and uncompetitive foundations.  Thirdly, and most importantly, considering that almost 23 percent of China’s global merchandise exports found their way onto America’s shores in 2008, Americans should be proud of the trade dependence they have locked the PRC into.

On the other hand, America’s trade deficits with China are only undisruptive to the extent that China does not stray away from manufacturing products that are solely low and mid-technology type merchandise.  To explain why, it is best to envisage how a stable microcosmic society may function economically in regard to its residents.  These residents are essentially workers, each having one instrumental talent that may be efficiently capitalized on.  As a result, each and every person benefits of one another’s skills.  This is not to say that these workers do not have other useful abilities. Rather, it is rational to assume that because of certain opportunity costs and production possibilities, each individual can really only make for an efficient marketplace when there is a division of labor and specialization.  However, the soundness of this society becomes threatened when it allows multi-talented or all-knowledgeable visitors to penetrate their gates.  Soon enough, the original residents of that community will have had their positions stolen, talents invalidated, and purpose of life absolutely ruined beyond repair.  This same concept applies to national economies within the global community, in which there should be one talent, or economic comparative advantage, per country.  China’s overall economic comparative advantage lies within its labor intensive industries.  These industries export simple technology that ranges anywhere from apparel to eyeglasses, goods contributing to the great bulk of America’s trade deficit with the PRC.  As previously stated, this part of the deficit should not be considered a problem.  Conversely, it is fair to say that when China focuses its resources on exporting products to the U.S. that are derived from advanced and capital-intensive industries, this same trade deficit becomes a threat to America’s economic security.  The reason for this is because the U.S. specializes in manufacturing advanced technology products (ATP)iv for both export and domestic consumption. An argument may even be made that the advanced technology industries truly give the America its economic edge due to the immense amount of financial capital, human capital, and research capacity they nationally employ.  U.S. ATP trade related to biotechnology, aerospace, nuclear technology, information and communication systems, and a selection of sophisticated electronics, are an extremely vital element in America’s portfolio of exports.  To put this into perspective, the U.S. Census Bureau’s foreign trade data shows that from 2001 to 2008, America’s ATP exports were consistently valued at over 20 percent of its total world exports.  With this time frame in mind, it should be noted that the year 2001 is an extremely crucial starting point for discussing U.S. ATP trade in regard to China.  There are two reasons for this.  The first reason is because 2001 was the year China breached the World Trade Organization’s (WTO) gates, allowing it to benefit from lower trade barriers, as well as greater opportunities for developmental investment.  Second, 2001 is also the last year the United States of America benefitted from a trade surplus in advanced technology products.  Narrowing the time period further, from 2002 through 2008, one would be curious to catch a glimpse at how U.S. trade in advanced technology fared in light of China’s WTO membership (See Graph 5).  Not surprisingly, from 2002 through 2008 the U.S. consistently suffered an ATP trade deficit with China for each and every year.  The unbearable aspect of this unfortunate reality is that America would have actually had an ATP trade surplus with the world if it did not trade advanced technology with China from 2005 through 2008.  In other words, China’s ATP trade deficit with the U.S. from 2005 through 2008 accounted for the entire advanced technology trade deficit the U.S. had with the whole world.  This trade relationship must not continue as is, for if it does, the United States of America will not be able to sustain its advanced technology industry for much longer.  China will have stolen the essence of America’s science and technology community that allows the U.S. to perpetuate marketable innovation.

To add to the reproachable trade relationship the United States has with China, there is also the concern of the ever growing foreign exchange reserves that China holds.  As of September 2009, the People’s Bank of China reported that it was holding over 2.272 trillion dollars worth of foreign exchange reserves, obviously in a basket of currencies.  A 2009 Brookings paper by Eswar Prasad and Isaac Sorkin, entitled “Sky’s the Limit? National and Global Implications of China’s Reserve Accumulation,” outlines how China accumulated its vast foreign exchange reserves, what the direct risks are to the U.S., and what China plans to do with these assets.  Prasad and Sorkin attribute the growth of China’s foreign exchange reserves to three factors: current-account surpluses, capital account surpluses, and foreign direct investment.  However, both authors distinguish between the three causative factors by noting that “from 2004 to 2008, the current account surplus contributed 91 percent of the accumulation” [38].  As of August 2009, the U.S. Treasury reported that China held $797.1 billion, or almost 10.7 of the $7.484145 trillion in total outstanding treasury security debt held by the public.  Although the bulk of China’s U.S. dollar reserves are mostly concentrated in U.S. Treasury securities, as of March 2009 China also held $424 billion of U.S. agency debt, notably of Fannie Mae and Freddie Mac [39].  In sum, Prasad and Sorkin subscribe to widespread belief “that about 70 to 75 percent of China’s reserve assets are in fact held in dollar-denominated assets” [40].  Clearly, the U.S. government’s ability to borrow is to a great extent, tied to China’s demand for U.S. dollar related securities.  The trouble with this is that if China were to reduce its purchases of, or even dump, U.S. Treasuries and agency debt, the U.S. government would obviously face higher interest rates on its bonds.  A possibility of higher interest rates on U.S. debt implies that the American government’s illustrious blank check may not last forever.  In the long run, the U.S. government may eventually have to raise taxes to fill the gaps in spending that it would have once acquired by issuing debt securities with favorably low interest rates.  To further add to the fire, China’s loss in appetite for U.S. debt may result in a trigger effect of other nations and private entities following suit.  Consequentially, the United States would lose its seigniorage over the world’s de facto reserve currency, which is currently the U.S. dollar.

Taking into consideration all the possible repercussions that China’s economic growth has on the U.S., the most problematic is the sheer size of China’s labor force.  In 2008, China was recorded as having a labor force of over 807 million people, significantly larger than that of the U.S., with a little over 154 million people.  Still, it is important to take note that the average American is still considered much wealthier than the average Chinese citizen.  Using gross national income per capita as an indicator of wealth, Americans were measured to have a purchasing power parity of $46,970 in 2008 [41].  In sharp contrast, China’s gross national income per capita produced a purchasing power parity of a mere $6020 for its citizens in 2008 [42].  Although China’s per capita purchasing power parity figure of $6020 seems small, what is truly remarkable is that this figure is a 171 percent increase than that of the year 2000.  Given China’s rapid growth in per capita purchasing power parity over a period of just 8 years, as well as its massive workforce, the message is clear.  China will one day replace the United States of America as the consumer capital of the world.  Instead of multinational firms competing for a foothold to sell their goods and services within the saturated markets of the U.S., they will first look to the Chinese consumer.  If this should happen, the fate of America’s economy will have been sealed, marking the final chapter of its decline and fall.  The United States must recognize the only reason it commands the eyes and actions of each and every nation is because Americans are the world’s most valuable gluts.  Allowing the Chinese labor force to enjoy higher income, easily acquire consumer credit, and boost their standard of living, will amount to America’s final death blow.  Has the die already been cast?  Maybe Kevin Wale, President of General Motors China, was speaking for every globalized corporation, when he stated that “Within 10 years, [China] will be our largest market in the world” [43].

e) Beyond Borders

China’s economic rise is tightly coupled with its magnified position on the world stage.  Surprisingly, the legendary Zbigniew Brzezinski, who was the national security advisor to former President Jimmy Carter, “has advocated the development of a G-2, a group of two comprising China and the United States that could address the international financial crisis, tackle climate change, limit the proliferation of weapons” [44], and much more.  Although Brzezinski is a highly regarded statesman, his view of what American foreign policy to China should be is completely baseless.  The truth is that the United States of America is still a superpower, and therefore, any suggestion of global bipolarity should be interpreted as an assault on its throne.  Theoretically speaking, the world is a chessboard.  Any move that China decides to make outside its borders naturally effect how U.S. choices and agendas regarding foreign policy are shaped.  Because the United States is already at the pinnacle of its economic success, and China closer to its precipice, the relationship between the two nations obviously “derives from mismatched interests, values, and capabilities” [45].  Perceptibly, China’s global movements are most likely linked to its demand for natural resources and desire to access foreign markets.  However, the drawback to this is that as China asserts its influence, whether economic or political, America’s status as a global leader becomes diluted.  Although China may contend that it has no intention of establishing international supremacy, it is nevertheless a topic that deserves America’s watchful eye.

A notable illustration of how China has begun to emphasize its glorious new rank in the world is its foray into the continent of Africa.  Why would any regional power choose to establish ties with African countries except to drain their virtually endless well of natural resources?  It may sound brash, but the truth is that Africa is once again being colonized, and this time by China.   There is nothing wrong with imperialism.  However, for a country to imperialize an entire continent in today’s global economy, it needs money.  China is now extremely wealthy, and is using its fat wallet to sway the hearts and minds of Africa’s leaders with investment and trade.  For example, during the 2nd Conference for Chinese and Africa Entrepreneurs one major deal signed was “worth US$938m, for China’s state-owned CITIC conglomerate, to set up an aluminum plant in Egypt. There was also a new copper project, worth US$200m, in Zambia, along with plans to build a US$55m cement factory in Cape Verde.  A mining contract with South Africa, worth US$230m, was also announced” [46].  This is just a taste of the magnitude of China’s long term investment in Africa.  China’s insatiable appetite for natural resources, especially oil, has led to a burgeoning trade relationship with the continent.  “Eighty-five percent of Africa’s exports to China come from five oil-rich countries (Angola, Equatorial Guinea, Nigeria, the Republic of Congo, and Sudan), according to the World Bank. But Chinese interest in Africa extends beyond oil. China now ranks as the continent’s second-highest trading partner, behind the United States, and ahead of France and Britain. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion. Much of the growth was due to increased Chinese imports of oil from Sudan and other African nations, but Chinese firms also import a significant amount of non-oil commodities such as timber, copper, and diamonds” [47].

Without a doubt, African nations are ready and willing to capitalize off of the precious treasures buttered across the depths of their lands, and China is willing to pay handsomely.  However, there is a downside to Africa’s dependence on China for economic development.  China naturally sees Africa as a jar of chocolate chip cookies that it wants to eat itself without sharing the crumbs.  When discussing the imperialism of Africa from a game theoretic standpoint, foreign nations that are capable of imperialism have two pragmatic paths they can take based on each other’s choices.  Either every nation capable of imperialism guns to exploit the weak and innocent, or no nation capable of imperialism takes part in transgressing borders.  The fact is that every nation capable of imperialism does in fact imperialize frail states through trade, direct investment, financial investment, or military campaign.  For years, the United States of America and the regional powers of Europe have treated Africa as their backyard, and have effectively competed for the continent’s natural resources.  However, when a large competing player like China enters into this sport, with its large moneybags, the U.S. faces a problem.  This is especially concerning because China has already started to create a relationship with African states that is emblematic of a domineering master and his slave.

The case of Sudan serves as a perfect example of how dangerous an African country’s liaison with China truly is.  As a result of its objective to establish a secure source of oil, “China’s most successful African energy investment has been in Sudan” [48] with over 90 percent of its oil output going to China [49]. Reportedly, Sudan has 9 oil fields worth drilling, and 8 of them are majority held by Chinese state owned companies [50].  Given that oil is Sudan’s economic engine, Sudan’s financial stability is tightly bonded to China’s appetite for oil.  To add to this, China has even provided unconditional aid and loans to Sudan for infrastructure projects, totaling to over $1 billion [51].  Keep in mind that these are loans, not free money.  That means Sudan, being a poor and unstable country, would be in debt to China for over $1 billion.  One would think that Sudan is using the money it receives from its loans and oil profits to better its economy.  However, because China has made their trade and investment relationship with Sudan unconditional, it should come as no shock that a former Sudanese finance minister claimed that 70 percent or more of the oil profits translate into military expenditures that are linked to the conflict in Darfur [52].  It is obvious that small arms are probably the most proliferated and functional combat instrument for the warring militias in Darfur to carry out urban warfare.  Even so, China still found it necessary to sell 58$ million worth of small arms to Sudan from 2000 to 2006 [53].  Such a relationship is clearly beneficial to China as it has managed to turn Sudan into its personal puppet, as well as buy Sudanese oil for significantly discounted prices [54].  However, this Sino-Sudanese connection is also an emasculation of Uncle Sam because it unveils how little control the U.S. has in Africa.  To explain, China has consistently blocked the United Nations, and especially the U.S., in their efforts to impose sanctions on the Sudanese government for its role in the Darfurian genocide.  Because China is a member of the United Nations Security Council, it is obvious that China will most likely veto or water down any resolution that restricts investment and trade with Sudan.  China will probably also continue to do whatever possible to keep Western aid groups and combat troops from assuaging the situation in Darfur.  In March of 2009 the International Criminal Court issued an arrest warrant for Omar al Bashir, the infamous President of Sudan, for his direct involvement in the murder, rape, and deportation of civilians [55].  Shockingly, China requested a suspension of the arrest warrant even though Bashir was involved in the deaths and displacement of millions of people.

The case of China’s condemnable link with Sudan is not an isolated incident.  For instance, when the United States and the European Union imposed punitive sanctions on Zimbabwe’s crazed president, Robert Mugabe, for human rights and political abuses, China got involved.  Instead of supporting U.S. and E.U. calls for liberal democracy in Zimbabwe, China responded by selling $200 million worth of military aircraft and vehicle equipment to Mugabe’s government [56].  For the purpose of full discloser, it is important to mention that Zimbabwe has some of the world’s most lucrative platinum reserves, and China is probably greedily hoping to mine them.  As China continues to claw in individual African nations, the United States and the rest of the West will lose their rights to Africa all together.  There are already over 800 Chinese companies doing business in almost every African nation [57].  China seems to have even replaced the IMF, World Bank, Paris Club, and other international lending institutions as Africa’s loan shark.  To illustrate, during the November 2009’s Forum on China-Africa Co-operation, Chinese Premier Web Jiabao promised $10 billion in concessional loans to Africa, as well as an additional $1 billion for small businesses across the continent [58].  This is a serious problem for both the United States and European Union, as their brain children, the IMF and the World Bank, lose their purposes.  If the IMF and World Bank’s functions as creditors comes under threat, then America and the member states of the E.U. essentially lose their imperialistic stranglehold over weaker, economically unstable, yet resource rich nations.  China knows that in order to keep African countries on a short leash, it has to do what the IMF and World Bank do.  That is, control their balance sheets.

Aside from the West losing the continent of Africa, the United States should be significantly more concerned with China’s mushrooming ties with South America.  Since the establishment of the Monroe Doctrine in 1823, the United States has historically been the preeminent political and economic influence with Latin America.  Essentially, any foreign interference within Latin American affairs was viewed as an act of aggression that required America’s intervention.  This American policy was further amended for the better in 1904, when President Theodore Roosevelt included America’s right to involve itself in the economic affairs of South American countries.  However, these prerogatives the United States has over its southern brethren are currently being threatened by China’s own ambitions.  Like Africa, China views South America as a vital source of much needed natural resources, as well as an opportunity for its firms to expand overseas.  Although the United States does still have the upper hand over China in terms of trade with Latin America, China’s trade with the continent is flourishing at a much faster rate.  Given that Latin American countries have heavily export-reliant economies, the best measurement of the continent’s trade dependence should naturally be measured in terms of what country it exports most to (See Graph 6).  In 2008, Latin America and the Caribbean exported almost $370 billion in goods to the U.S., making it the trading group’s largest export market.  Latin America and Caribbean’s exports to China are significantly less, totaling lower than $45 billion in goods.  However, it is important to recognize that Latin America’s 2008 exports to China represent a 736.5 percent increase over 2001.  Moreover, China’s investments in Latin America are also shockingly hefty and undoubtedly politically motivated.  As The Economist writes, within 2009 “an agreement was signed under which the China Development Bank and Sinopec, a Chinese oil company, will lend Brazil’s state-controlled oil company, Petrobras, $10 billion in return for up to 200,000 barrels a day (b/d) of crude oil for ten years from the country’s new deep-sea fields.  Weeks earlier China offered Argentina a currency-swap arrangement involving use of Yuan worth $10 billion, and lent cash-strapped Jamaica $138m to enable it to stave off a debt default.  Chinese companies have bought stakes in oilfields in Ecuador and Venezuela, and are talking of building a refinery in Costa Rica” [59].  In November 2008, China went so far as to sign a free trade agreement with Peru, which was probably the most invasive move it has made within America’s jurisdiction.

Given the frosty relationship the U.S. has with Hugo Chavez, many Americans view China’s connection with Venezuela as a threat to their national security.  However, it is important to keep in mind that Venezuela’s most integral instrument for keeping economic stability is its oil.  Given that the United States is the destination for “60 percent of Venezuela’s total exports” of oil, and that Venezuela’s state owned oil company, PDVSA, has large shareholding rights in 9 U.S. based refineries [60], it is safe to say that Venezuela is still America’s minion.  What is actually dangerous is Brazil’s bubbling love affair with China.  Fortunately for Brazil, it is well endowed with vast tracts of natural resources including bauxite, gold, manganese, nickel, phosphates, platinum, tin, uranium, oil, hydropower, timber, as well as its iron ore reserves that account for 22.5 percent of world supply [61].  These resources are coupled with Brazil’s economic growth and political ambitions, and as a result, it is increasingly replacing the United States as South America’s new sheriff.  China is clearly exploiting this regional power shift at the expense of the United States.  In 2008, Brazil exported almost $16.5 billion worth of goods to China [62], or 8% of its total exports, making China an extremely important trading partner.  There are serious drawbacks for the United States as Brazil and China’s economies become ever more intertwined.  Maybe the following statement by Brazilian President Luiz Inacio Lula da Silva will put it into perspective: “Why do two important countries like China and Brazil have to use the dollar as a reference, instead of our own currencies?  It’s crazy that the dollar is the reference, and that you give a single country the power to print that currency.  We need to give greater value to the Chinese and Brazilian currencies” [63].

Although China’s geopolitical assertions in Africa and South America serve as the most prolific examples of its global movements, they only amount to but a fraction of the dragon’s international presence.  After all, China has handcuffed Australia’s economy as it drains the Pilbara region dry of its vast mineral deposits.  China has created opportunities for Europe so worthwhile, that each and every member of the European Union would slit each other’s throats for a chance to gain a more favorable relationship with it.  It is so cunning that even as the United States of America has spent nearly 7 years occupying Iraq, the state-owned China National Petroleum Corporation was the first to win an auction to develop one of Iraq’s largest oil fields [64].  It has become so arrogant that during a speech by U.S. Treasury Secretary Timothy Geithner, Chinese college students openly laughed as he told them China’s holdings of U.S. Dollar assets were safe [65].  Clearly, China has grown far too powerful for the United States of America to sit on the sidelines and watch as its authority is being challenged by East Asian muscle flexing.

IV. The Solution (Coming Soon!)


i .The G7 is not to be confused with the G8.  The G7 consists of the Japan, Germany, United Kingdom, France, Italy, Canada, and the United States.  For further information, see “The Group of Eight (G8) Industrialized Nations” by Stephanie Lee and Alexandra Silver, Council on Foreign Affairs, 2009

ii. Unless otherwise stated, “Dollar” is to be understood interchangeably as “U.S. Dollar.”

iii. Some sources state the European Union is the world’s largest exporter.  However, the European Union is not a country, rather, a membership of countries.  According to the United Nations Statistics Division, Germany is the world’s largest exporting country as of the year 2008.

iv. The general ATP definitions are on the U.S. Census Bureau, Foreign Trade Statistics.  See http://www.census.gov/foreign-trade/reference/glossary/a/atp.html

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