Sunday, September 26, 2010

Is Congress working on behalf of America's Interest?

As Congress approaches the mid-term election, China bashing has once again proven to be the convenient wool to pull over the voters’ eyes. This time around, Japan got in the act first by literally bashing a Chinese fishing vessel to roil the international waters.

The House of Representatives seems determined to label China a currency manipulator and enact a law that would force the Obama administration to impose a countervailing duty on goods from China to adjust for the perceived undervaluation of the renminbi. So far no one in the bi-partisan effort has seen fit to explain how to calculate the alleged undervaluation.

No one, not even a Nobel Prize winning economist, has presented a case as to how making imports more expensive to the American consumer would create more jobs for America. The last time the US pressured China to take the yuan off the peg, it appreciated over 20% against the dollar and to the law makers’ surprise the trade imbalance didn’t shrink but widened by about the same relative amount.

Premier Wen Jiabao in his speech in New York before attending the UN General Assembly meeting declared that the value of the yuan could not be responsible for the sub-prime mortgage scandal that led to the financial meltdown and the resulting record budget deficit and national debt. He suggested that Congress should be addressing the real root of the problems of America’s economy rather than distracting America’s attention by picking a fight with China.

About three weeks ago there was a collision between a fishing trawler from China and two Japanese naval vessels near the uninhabited but disputed islands off the coast of Taiwan. The Chinese call the islands Diaoyu while Japan called them Senkaku.

China has claimed sovereignty over these islands as part of Taiwan for centuries. Japan came into control of these islands when the US handed them over to Japan along with Okinawa and the rest of Ryukyu chain of islands in 1972.

At the time, mainland China and Taiwan were hostile adversaries not on speaking terms and were not in a position to protest America’s unilateral action. China contends to this day that the islands should have reverted to China after World War II when Taiwan was returned to China.

Since 1972, Japanese patrol boats would periodically interfere with fishing boats from the mainland and Taiwan. Noisy protest from the Chinese in China, Hong Kong, Taiwan and overseas Chinese communities would invariably follow such acts by the Japanese navy. In 1996, David Chan, a Hong Kong activist, tragically drowned while attempting to make a point by swimming to one of the islands.

Contrary to the western media’s notion that conflicting interests in these uninhabited islands stem from possible oil deposits beneath the sea, the feelings of the Chinese are rooted in nationalism based on history and full of passion.

The latest incident raised the bilateral tension to new heights when the Japanese coast guard seized the fishing boat and took the crew into custody. Japan’s action immediately caused protests with increasing stridency as the trawler and crew was held. They were released about a week after the incident but the captain remained in captivity for 17 days before he was let go.

The only explanation offered for this provocative action attributes domestic politics within Japan—an election was going on--as the cause. Beijing repeatedly called in the Japanese ambassador to lodge protest in strongest terms, but Japan insisted that they would charge the captain under Japan’s domestic laws.

Japan finally dropped charges and released the captain after China nipped the tourism bloom in Japan by discouraging travel to Japan and stopped export shipments of rare earth minerals critical to Japan’s electronic industry.

China’s options and leverage to counter US are far more complicated and difficult. Of the hard currency reserve China is holding, more than 1.5 trillion are estimated to be in dollars. Any retaliation that would materially weaken the value of the dollar would not be in China’s interest.

China is already America’s second largest export market. Obama’s recent announced intention to reform the export control process will boost high tech sales and add to the momentum. China could halt imports from the US but China’s vested interest is in a stronger US economy not a weaker one.

The Chinese embassy spokesperson in Washington, Xie Feng, has just publicly confirmed that China’s President Hu Jintao has accepted President Obama’s invitation and will visit the US in January. He added that China considers this visit to be the highest national priority.

Xie also indicated that both sides—meaning Beijing and Obama Administration--expressed confidence that all the thorny issues facing the bilateral relations can be worked out.

Given the Congressional determination to sidetrack the relations, there is always a chance that the January visit will be postponed or cancelled. Or worse, Washington could force Beijing’s hand into making a mutually destructive move in order to get America to focus on the real issues.

Wednesday, September 8, 2010

Obama Delivers on Export Control Reform

The White House recently announced its intention to fundamentally reform the US export control process. This overhaul has been long overdue and will have significant impact on the American economy particularly in Silicon Valley, strengthen US China bilateral relations and simplify the lives of ethnic Chinese professionals working in high tech industry.

As the announcement said, “The current export control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishes our ability to focus our efforts on the most critical national security priorities.” Amen. Those of us working in the high tech companies have been saying that, probably in more pungent terms, for decades.

The reform if implemented as announced will greatly simplify the licensing procedure. By strictly defining those items that are subject to control and eliminating multiple and often conflicting agencies, the new policy should render export license application transparent and take away the pain of exporting.

The White House release cited the brake pads for the M1A1 tank as one example of what ails the current export control practice. Same degree of control is applied to the export of the brake pads as it is for the entire tank. Yet the same brake pad is used in fire trucks which can be exported without control. This is the kind of regulatory contradiction the reform hopes to remove.

While the announced intent for export control reform is in general terms and not specifically addressing exports to China, it will have the greatest impact on trade with China. Heretofore, China has been placed in not outright foe and not exactly friend category--which means even export of heavy duty brake pads, in the aforementioned example, is subject to intense scrutiny as regulators examine the likely “dual use” nature of the export sale. Dual use is bureaucratic speak of items for civilian use that could have military application as well, and thus need to tie red tape around the transaction.

China is potentially America’s biggest customer for high tech export. Because of the ambiguity of prevailing export control policy, much of the potential has not been realized. Instead, China buys from Western European countries and Japan because they do share the same concern as the US.

Obama’s intention is good news for Silicon Valley—and other high tech regions—as these companies can now concentrate more on exporting and less energy on walking through the labyrinth of government approval.

This development should also be good news for Chinese Americans working in the high tech industry. Since China has become a major buyer, many of the Silicon Valley companies have wisely employed ethnic Chinese in their firm to engage in marketing and sales to China. Such occupation carried unexpected hazards.

Silicon Valley has witnessed cases where the export manager to China landed in jail for alleged sale of dual use items to China. In one case, it involved the sale of shaker tables. The government accused the ethnic Chinese export manager of selling to a missile making facility in China rather than the locomotive factory stated in the application. By the time the government dropped the charges for lack of substantiation, the ex-export manager had been out of a job for months and confronted with the reality of a ruined career.

With the new regulations, such ambiguity should not happen again and exporting to China no longer a cause for racial profiling.

The export control reform, while long overdue, will be an all around win. We can only hope that politics do not interfere.
A similar commentary was posted on New America Media.

Wednesday, September 1, 2010

Don't Miss this Documentary on WWII History, Part 2

Last month, China’s CCTV presented a fascinating 12-part documentary series on a part of WWII not particularly well known in the West--namely, the Burma Theater. The presentation was in English, very factual and professionally done, absent of any propaganda. The program gave impartial rendering of the roles of Chiang Kai-shek, General Joe Stillwell, General Sun Liren and many others. In the second half of this series, the atrocities of the Japanese soldiers were graphically described.

Episode 6, Pincer Movement – In this episode, the Chinese troops from India entered Burma and mounted a large scale offensive and scored a major victory. They over ran Japanese division command headquarters, and the Japanese incurred heavy casualties, more than twice as many as the Chinese side. This is unprecedented up to now. Chinese success can be attributed to better trained and better equipped soldiers. Just as critical was American air support. American planes provide air cover, detailed maps of the terrain via recon flights and timely drops of arms and supplies.

Episode 7, Victory at Myitkyina – While the battle in episode 6 was going on, General Stillwell conceived of a brilliant surprise attack to capture a strategic airfield at Myitkyina. The capture of the airfield would enable the Allies to fly in troops to the front line of battle. The surprise attack was successful but unfortunately the commanding General Frank Merrill (of the famed Merrill Marauders) made a terrible decision not to press on and take the town while the Allies had overwhelming numerical advantage and thus allowed the Japanese to send in reinforcements. It then took the Chinese troops another two months at great cost in casualty to finally capture the town of Myitkyina. This victory at Myitkyina marked the beginning of the end of the Japanese in Burma.

Episode 8, Stalemate at Nujiang River – While previous two episodes described the successes of forces under Stillwell’s command, this episode talked about the stalemate in southwestern Yunnan where the Japanese forces held on to the west bank while the Chinese were in the east bank. This stalemate lasted for two years. During this time, the Japanese troops committed all forms of atrocities against the local people in their territory. Besides usual gang rape of women, random killing and bayoneting, a particularly gruesome practice was described. The soldiers would bend a tall bamboo sapling and tied the entrails from the rectum of the victim and then watched in great entertainment when the bamboo snapped back and dangled the victim by the stretched out intestines. These activities were a deliberate attempt to dehumanize the Japanese soldiers so that they could become unfeeling fighting machine. Each soldier were given two coupons per week that entitled them to the services of comfort woman. The comfort women, mostly from the local villages, did not even have time to eat but must eat while servicing their clients. After the Americans re-equipped the Chinese, FDR began to push for offensive against the Japanese across the river. CKS reluctantly agreed but by then, in April of 1944, the rainy season was upon them.

Episode 9, Battle of Gaoligong Shan – Commander of the Yunnan based Chinese troops was General Wei Lihuang. He devised a pincer surprise attack on the Japanese via a small mountainous road, not used in generations. Alas his plans fell into Japanese hands and they were dug in and prepared. A bitter hard fought battle ensued. The difference that turned the tide was the minority people of those mountains. They willingly fought alongside, provided food and supplies and as porters for the supplies. The Japanese had no local support and were cut off. Afterwards, the Chinese found plenty of evidence that the Japanese resorted to eating human flesh, smoked, boiled and dried. They even found evidence of Japanese soldiers trapped in pillboxes having to eat the flesh of their fallen comrades.

Episode 10, Battle of Songshan – Having encountered heavy resistance in Gaoligong, General Wei and his staff changed their plans and moved their troops southward to attack Songshan, the highest point that looks down the Yunnan Burma Road. Again their intelligence proved faulty and the Chinese encountered heavy resistance from far more troops than anticipated. It took three months of hard fighting and a casualty of 7000 to finally secure the top of Songshan and about 1000 Japanese dead.

Episode 11, Capture of Tengchong – Capture of Tengchong was crucial to the allied plans to re-open the Burma Road and join forces with the Chinese troops from India. The capture did not come easy. The walls of Tengchong could not be breeched by regular gun fire. It took American bomber planes many runs to create openings for the Chinese soldiers. The wall was built during the Ming dynasty made from volcanic rocks.

Episode 12, Battle of Longling – Concurrent with the battles of Songshan and Tengchong, another part of the Expeditionary Forces were dispatched to capture Longling. Longling sat at the junction of the Yunnan Burma Road and the road to India and its capture would mean the reopening of the lifeline to China. The battle took 4 months and three major offensives before the Japanese troops were pounded into submission and totally annihilated. The victory was complete when the forces then moved south to Burma and joined the Chinese forces from India. January 1945 marked the end of Japan’s influence in Southeast Asia. The Chinese sent forces into Burma in 1942 and again in 1945 at great cost suffering casualty of nearly 100,000. They could not have won without the air cover provided by the American Air Force and the heavy artillery supplied by the Americans.

It was one of the highlights of US-China bilateral colloboration in WWII.