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Generational Dynamics Web Log for 18-Sep-2012
18-Sep-12 World View -- China declares economic war on Japan, and sends 1,000 boat flotilla

Web Log - September, 2012

18-Sep-12 World View -- China declares economic war on Japan, and sends 1,000 boat flotilla

Quote: 'There won't be a war because it's bad for business!'

This morning's key headlines from

Japan bolsters defenses as 1,000 Chinese fishing boats approach

Chinese cartoonist portrays Samurai warrior crushing Japanese enterprises as he grabs for the Senkaku Islands (China Daily)
Chinese cartoonist portrays Samurai warrior crushing Japanese enterprises as he grabs for the Senkaku Islands (China Daily)

The Japanese in Beijing has suspended passport services, and is bolstering its defenses around the Senkaku/Diaoyu islands, after media reports indicate that a flotilla of around 1,000 Chinese fishing boats was sailing towards them. Hundreds of Japanese businesses and the country's embassy suspended services in China on Tuesday, expecting further escalation in violent protests over a territorial dispute between Asia's two biggest economies. Reuters

China declares economic war on Japan

China is trying to hurt Japan economically, to gain leverage in its campaign to take control of the Senkaku/Diaoyu islands. In the 2010 confrontations, China took revenge on Japan by terminating shipments of rare earth minerals, needed for manufacturing of many of Japan's electronic products. In the current confrontation, the Beijing government is encouraging the Chinese people to demonstrate and protest against Japanese businesses in China. The government urged protesters not to use violence, but that part of the message is clearly not getting through. Protesters torched a Panasonic factory and Toyota dealership, looted and ransacked Japanese department stores and supermarkets in several cities. China's National Tourism Administration ordered travel companies last week to cancel tours to Japan over the weeklong National Day holiday in early October. AP and Bloomberg

Chinese Communist Party urges punitive sanctions against Japan

The Chinese Communist Party (CCP) is urging strong punitive sanctions against Japan, for its "well-orchestrated plan" to take control of the Senkaku/Diaoyu islands, according to the CCP's official newspaper:

"The "nationalization" of the Diaoyu Islands by Japan after "purchasing" them from a "private owner" is ridiculous and cannot change the fact that they are Chinese territory. ... China should take strong countermeasures, especially economic sanctions, to respond to Japan's provocations. Military consideration, however, should be the last choice.

The United States has frequently used Article XXI Security Exceptions of the WTO (taken from the earlier General Agreement on Tariffs and Trade) to impose economic sanctions on other countries. The security exception clause says a country cannot be stopped from taking any action it considers necessary to protect its security interests. That means a country can impose sanctions on enterprises, financial institutions, organizations and even other countries' central and local governments. Taking a cue from the US' practice, China can use the security exception clause to reduce the export of some important materials to Japan.

China didn't announce any sanctions against the Philippines in April, but it froze banana imports from that country in response to Manila's aggressive attitude in the Huangyan Island dispute. Though the economic countermeasure forced the Philippines on the back foot, it also harmed the interests of some Chinese enterprises.

So it is important for China to devise a sanction plan against Japan that would cause minimum loss to Chinese enterprises.

The US' capability to impose economic sanctions on other countries is based on its economic strength, huge share in global trade, financial institutions and global intelligence network. China, too, has the capability to impose sanctions on other countries now that it is the second largest economy, has the largest foreign reserves, and is the largest exporter and second largest importer.

An analysis of Sino-Japanese economic interdependence shows that Japan's economy will suffer severely if China were to impose sanctions on it. China's loss would be relatively less. ...

So it's clear that China can deal a heavy blow to the Japanese economy without hurting itself too much by resorting to sanctions.

Apart from its reliance on China, Japan has been suffering from other economic ills. First, Japan's massive government debt is increasing substantially. ... Third, Japan's fiscal deterioration is likely to continue. There are enough indications that Japan's economic growth in 2013 will slow down or slip into another recession. The irreversible trend of long-term economic downturn, combined with Japan's aging population, will eat into the country's household savings, and the declining purchasing power of the Japanese will increase Japan's fiscal debt. ...

But instead of blindly boycotting Japanese goods, China should work out a comprehensive plan which should include imposition of sanctions and taking precautionary measures against any Japanese retaliation. China should also have several rounds of policies ready to undermine the Japanese economy at the least cost of Chinese enterprises.

Furthermore, in case Chinese enterprises suffer because of the sanctions, the Chinese government should be prepared to compensate them. And once China imposes sanctions on Japan, the government should ensure that all enterprises in the country, domestic and foreign, obey the rules."

China Daily

Quote: 'There won't be a war because it's bad for business!'

How many times have people told me that Generational Dynamics is wrong about some geopolitical thing, saying, "There won't be a war because it's bad for business, and the business owners on both sides will make sure that there won't be a war." That whole concept is silly since, of course, if it were true then there never would be any wars.

But now you're seeing that in fact "bad for business" does not STOP war preparations, it PROPELS them. The fact that "business is good" between Japan and China does not mean there won't be a war; to the contrary, "business is good" only becomes an additional weapon to be used in the preliminaries. And as the quote above from China Daily notes, China has already used economic warfare against the Philippines of the Scarborough Shoal, some islands that are clearly the Philippines' sovereign territory. The Chinese aren't saying that a war would be bad for business. They're saying, let's use economic warfare, and if that doesn't work, then we'll use military warfare.

The Chinese always talk about how they want "harmonious relations" with everyone. What they mean by that is, "Relations will be harmonious as long as you do everything we demand, and give us everything of yours we want. Otherwise, we'll kill you."

Should we defend Japan against China?

Some web site readers of my previous article had a a heated discussion over whether we should come to Japan's defense against China, in view of the horrific atrocities that the Japanese committed during World War II. Leading the "anti" side of the debate was someone from the Silent generation who experienced some of those atrocities.

I have two points to make. The first is something I've said before: The United States has no choice. The U.S. became Policeman of the World with the Truman Doctrine, put forth by President Harry Truman in 1947. Since then, we've signed defense treaties with numerous countries, and all of them would go into total panic if we repudiated our treaty with Japan.

The second is more generational. Once upon a time, the British and the colonists committed atrocities on one another. A little later, the North and South committed atrocities on one another. In WW II, Germany and Italy joined Japan as our enemies, while Russia was our friend. Since then, new generations have replaced all of those people. In some cases, the new generations decided they like us, and in other cases the new generations decided they hate us. New American generations are barely aware of the atrocities our enemies committed, and they're equally unaware of such things as the firebombing of Dresden or the nuking of Japan.

A generational crisis war transforms a country, gives the country a new character, and makes it a different country than it was before the crisis war. World War II transformed America completely, changing it from a laissez-faire economy to a heavily regulated economy, and from an isolationist nation to the Policemen of the World. Essentially, every nation starts from "square one" in the Recovery Era that follows a crisis war.

(Comments: For reader comments, questions and discussion, see the 18-Sep-12 World View -- China declares economic war on Japan, and sends 1,000 boat flotilla thread of the Generational Dynamics forum. Comments may be posted anonymously.) (18-Sep-2012) Permanent Link
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