The Pieces of our Chinese Puzzle

No matter the topic, the mainstream news media derives much of its subject matter and point of view by looking over each other’s shoulders.  The result is a noticeably limited range of issues and perspectives informing and commanding the attention of the chattering classes, politicians, and public debate.  This has become increasingly apparent in regard to China, which sees coverage focus narrowly and obsessively on trade issues and human rights, with scant attention paid to other important aspects of the relationship.

The recent Quadrant article by Ted O’Brien, “The China Question: The Greatest Challenge to Our Generation” (2nd March 2021) sets forth some of these matters. The following are a further range of issues which would seem to also warrant more consideration. These include, but are by no means limited to:

1/ China’s use of Australia as a warning demonstration

2/ China’s port strategy and Daru

3/ Australia’s demonstrable underutilisation of fishery resources

4/ China’s students in the West

5/ China’s self-contained history vs. the current militarism and nationalism

6/ Some thoughts on the future of war

7/ An excessive and increasing Western economic dependence on China

8/ The immanent advent of a Digital Yuan

In dealing with disagreement and opposition it is useful to bear in mind that much of the dynamic which arises from rigid adherence to points of disagreement and self-concerns. Recognising areas of agreement and raising awareness of both benefits and self-detriment in the positions of both sides can be far more effective than the most irrefutable of arguments.

Australia as a warning demonstration

For a start, the settlement of Australia by Europeans must to some degree appear to China as the usurping of a rich trove of reserve resources from their own presumed sphere of development. Worse still, and despite the unparalleled prosperity the perceived claim-jumpers have enjoyed by selling these resources to China, they display not gratitude but only increasing suspicion and criticism.  With concern and distrust also increasing elsewhere, a prosperous Australian economy heavily dependent on China makes it a good example to show the world why it is a good idea to avoid provoking Beijing’s displeasure. Thus far, trade restrictions imposed on Australian exporters by China have been limited to commodities they can either do without or readily obtain elsewhere, and although the impact has been substantial in certain industries, the overall effect on the broader Australian economy has been offset by sales elsewhere and the relatively limited detriment from the virus pandemic in Australia compared to most other nations.

In the complex dynamic world in which we exist, a diversity of political and economic systems with considerable levels of self-sufficiency is a valuable insurance for both freedom and the capacity to find new or better approaches to whatever the future may present.  Greater recognition of the value of cooperation towards mutual tolerance and independence would be of value to all nations. A trend toward adherence to a globalised authority and narrow national specialisation entails high risks, from endemic stagnation in development to a chain-reaction collapse.

Our own future prosperity in Australia could benefit greatly from a concerted effort to broaden our trading base and revitalising our manufacturing, small business and primary production sectors by a wholesale pruning of the bureaucratic morass that is strangling them.  In dealing with China, reining in the virtue signalling that has become such a prominent feature of Western society would also be of considerable benefit to diplomacy in Asia.

China’s port strategy and Daru

In a variety of nations China has pursued a strategy of port management and development.  In developed countries this has taken the form of Chinese companies obtaining long-term contracts for port management.  In underdeveloped nations “aid” is offered in the form of large loans for port development, these funds then being paid to Chinese companies to do the construction. Such loans are also characterised by obligations to secrecy, onerous security, and arbitrary authority when repayment falls into inevitable default and management is assumed by the lender.

Port management is not only profitable, it affords a prime position for an inside view of an economy, an ongoing interface with local authorities, plus a private entrance for easily and quietly moving money, goods and persons into and out of the country.

Recent news reported that a Chinese company is proposing to build a $200 million fishing port in Daru on the PNG coast of the Torres Strait. Then the proposed plan was escalated to a $39 billion “megacity”.  The area around Daru is a malaria infested swamp with high levels of multi-drug resistant TB and HIV as well. Except for a few small islands immediately off the PNG coast, such as Daru, most of the islands of the Torres Strait are held by Australia and the PNG fishing zone in that area is very limited. However, the Law of the Sea Treaty (under which Australia claims EEZ rights to much of the Barrier Reef, the Torres Straits, the Coral Sea, and the NW Shelf) provides that such rights are subject to utilisation and other nations may petition for access if resources are not being used. It should also be noted that under this treaty full sovereign rights extend only 12 nautical miles from land.

Our fisheries, use ’em or lose ’em

Although Australia has the largest per capita fishing zone in the world and third-largest measured in terms of total area, we also have the lowest fisheries harvest rate — about 1/30^th of the global average. The management of Australian fisheries is the most expensive, restrictive, and least productive in the world.

A prime example is the Great Barrier Reef Line fishery, where catch is limited to a total annual harvest rate amounting to an average of 9 Kg/Km²/yr. In contrast, the World Resource Institute in their global survey of coral reefs states that well-managed reefs can sustain an average harvest rate of 15,000 Kg/Km²/yr. It should be noted also that this rate is not extreme. It amounts to 150 Kg/Ha, similar to livestock on moderately good grazing land.

Another example is the Coral Sea tuna fishery where the Australian catch limit is less than a thousand tonnes while the catch in the PNG fishery, sharing the same migratory resource, is around 250,000 tonnes and this has been certified as sustainable by the internationally recognised Marine Stewardship Council.  Much of this is canned in Thailand, whence we import around 80,000-90,000 tonnes annually. What all this boils down to is that it costs us   about $250 million a year for canned tuna our fishermen are not allowed to catch.

A further example involves the NW Shelf. In the 1970s and 80s a small fleet of large Taiwanese “pair trawlers” (pictured below) operated extensively in this region under license from Australia. Based on a widespread sample of over 25,000 hours of trawling using 100-metre-wide pair trawls, they estimated a sustainable annual yield of 250,000 tonnes of demersal fish for this area. All this was published in one of the world’s leading peer reviewed marine science journals, Acta Oceanographica Taiwanica. Their estimated sustainable catch is some 300 times more than the 800 tonne maximum yield imposed by current management. It is also more than the current total wild catch of all Australian fisheries. Could this be possible? Actually, the Taiwanese catch comes to about a tonne per square Km or 10 Kg. per Ha. This is not extreme.

China has aggressively protected their fishing vessels while encroaching on what it deems to be underutilised fisheries elsewhere. In the circumstances applying to Australian waters they could present strong evidence of negligible utilisation to the World Court if they choose to do so.  More likely, however, in accord with their increasingly aggressive relations to Australia, they would not bother with a tedious legalistic approach but would simply do as they have in the South China Sea and the Eastern Pacific by accompanying their fishing vessels with a warship and fishing wherever they wish.

The ongoing bureaucratic strangulation of the Australian fishing industry presents an open invitation to Asian fishing interests for access. This situation is wide open to becoming a matter of, Use it, or lose it, especially if China is serious about building a large fishing base in Daru. In such case Australia’s EEZ fishing rights could be irretrievably lost if we are not actively making a much greater use of the resource.

The universities’ ignored predicament

Over recent decades Chinese students paying extravagant tuition have become the financial addiction of most Western universities, and the disruption of this income by the virus pandemic has had a serious impact. Two obvious aspects of this trade have received scant mention.  The first is that such financial dependence has been allowed to attain such scale, and the other is the near certain limit on the continuation of such a demand.

When China decided to open their economy to advanced technology, private enterprise and global trade, the large scale tertiary education of their students in Western universities was needed.  It would be naive not to assume that the likely ideological influence was not carefully assessed and subsequently monitored.  Presumably the CCP must have found that the ideological climate to which their students would be exposed in Western educational institutions presented little conflict with their own system.

Although it should have seemed obvious the excessive fees that could be collected from large numbers of Chinese students would fade away as China developed its own university system, it appears our universities were happy to become dependent on this income while simultaneously declining to consider that the day might come when those rivers of Chinese gold would continue to flow. This change was already beginning to manifest itself before the COVID pandemic, which has served to assist the universities’ delusion that their high priced students will come swarming back as soon as the pandemic is over.

Giving serious attention to delivering more relevant and affordable tertiary educations to our own students is both sorely needed and long overdue, yet eminently practical by means of digital technology. An economic cull to rid the education herd of those who can’t or won’t adapt and adopt a new and better approach should be a priority.

China’s break with the past

Throughout history large successful nations have virtually never been able to resist expanding their influence and control beyond natural geographic and cultural boundaries. The greater this expansion, the more external events and conditions become a concern, with more resources devoted to exercise influence and control over the resulting empires.  China has been a rare, perhaps unique, exception. For over three thousand years it has maintained a rich and advanced culture without falling into the temptations of empire building.

A prerequisite for empire is a mighty military and China certainly now appears headed in that direction.  One might even wonder if such new ambition might not even have been introduced unnoticed with a widespread exposure to Western education! Regardless of what has prompted this drive, a large military inevitably brings a need for military action, both to justify the war machine’s existence and to provide combat experience for the career advancement of its professional officers. A conspicuous array of ribbons and medals sits uncomfortably on a chest never exposed to enemy action.

Greater recognition and respect for China’s long and rich history without empire building could be a valuable influence in avoiding such a mistake in the future. In respect to Western academic influence, one might also be forgiven for wondering if some of the other recent Western academic fashions might also derive from such influence. Hypersensitivity to ideas deemed to not be politically correct, Boycotts-divestment-sanctions activism, mass personal attacks via social media, and adoption of juvenile superhero imagery (e.g. Wolf Warrior) come to mind.

China and Taiwan

It has been the nature of war to engage in each one using the lessons learned in the previous one but, with increasing advances in technology this is likely to be disastrous. Current military technology, and that on the threshold of adoption is set to render obsolete much of the extraordinarily expensive equipment now existing and being planned for the foreseeable future. Examples of this new paradigm altering technology includes:

# Beam weapons capable of destroying aircraft and missiles

# EMP discharges sufficient to disrupt electronics, communications, and electrical systems

# Nuclear powered drone submarines with double the speed and depth capability of any current manned warships plus effectively unlimited range and duration

# Drone aircraft of all types with performance capabilities exceeding any manned aircraft

# Long-range hypersonic missiles and satellite tracking ability which makes all surface vessels a sitting duck with no capacity to hide or be defended

# Guided mortar, artillery and rifle munition assuring precision accuracy at long range

# Unknown but almost certain capacity for widespread and highly disruptive cyber warfare dysfunctions

# AI controlled swarm attacks too fast changing and complex for any human control

# Increasing risk of a natural, accidental or deliberate new disease epidemic which could devastate or even eradicate most unprotected populations

In view of such developments the direct battles of earlier warfare are likely to become episodes of mutually assured destruction which neither side will risk.  More likely will be the use of unclaimed and denied attacks within tacitly established or formally declared red zones and the use of proxy forces, with both sides testing boundaries without precipitating outright war, much as has been going on recently in the Middle East. This is also likely to be the unfolding approach taken by China with Taiwan.

The recent ratcheting up of aggression toward Taiwan is a case in point. For a start, Taiwan is too valuable to destroy. An independent Taiwan poses no threat to China while serving as an open side door to some of the most advanced Western technology and markets.  It also provides billions of dollars in investment in the mainland, plus invaluable knowhow.

Frank Mount: China and Taiwan, the strategic imperative

As for an invasion of Taiwan, that is last century military thinking and is totally unnecessary.  What China wants is political control and that can be gained by simply enveloping it in a South China Sea that has been turned into a Chinese lake.  When all the new bases are in operation and the geopolitical climate is suitable there need only be a few undeclared attacks on ships or aircraft. China could then declare a prohibited zone or blockade around Taiwan …. and wait. No foreign shipping or airlines would risk defying such a blockade.  With trade, fuel, food and travel to or from Taiwan cut off a “diplomatic solution” modelled on Hong Kong (and including whatever else China wants)  would soon be agreed upon. Short of risking a flotilla of capital ships and starting World War III there is little any other power(s) could do to intervene.

The rest of the world would disapprove and do nothing.  However, China’s side door to the West would be greatly impaired along with the capacity of Taiwan’s investment on the mainland.  The practical gain for China would be nil, other than enabling the leaders to proclaim claim a great patriotic victory and the generals to add fresh ribbons to their chest displays.

Addicted to China

While China has become the world epicentre of manufacturing, the industrial elsewhere has become a hollow shell of its former prominence.  The virus pandemic has served to reveal a similar development in many common pharmaceuticals and even in some instances, where India may be an alternative supplier, it turns out they depend on China for precursor chemicals. Although mutual trade can be a good thing for both sides, too much dependence must inevitably increase the house-of-cards vulnerability if subjected to stress from multiple points and directions.  All nations are better off when they can stand alone if circumstances demand it. Also, every job that goes overseas reduces overall national prosperity if it is not replaced by another and more productive one.

The Digital Yuan

After five years of development, China is beginning to introduce a digital yuan on a trial basis. This is a major financial development with the potential for fundamental impacts on world trade.  A digital currency is not just convenient; backed by a major trading economy it can also offer vastly greater security than the unassessable risk of collapse or loss of access with a cryptocurrency or difficulties of security with cash. A sponsoring economy which does not appear to be sinking ever more deeply into an impossible burden of debt is also an immediate advantage. A successful digital introduction will almost certainly soon find widespread acceptance in world trade. 

An all-digital system will also present an obvious opportunity for a simple, easy to apply transaction tax to replace the entire ever increasing nightmare morass of uncertainty, compliance, reporting, collecting, avoidance and enforcement which has metastasised around the current tax system.  Such a reform in taxation would in turn be a powerful stimulus to investment and development.  China obviously perceives the opportunity and is pursuing it.  If other nations continue to drag their heels in political and bureaucratic inertia, China will be given an uncontested head  start that could soon become an effective monopoly with which it will be very difficult to compete. The opportunity remains open but for how long?  This could also be another instance of ‘use it, or lose it’.

A further thought

Across Western culture advancing technology, urbanisation and an educational system which dismisses reason and evidence in favour of indoctrination are combining in a developing electoral majority of neo-luddite urban non-producers disengaged from, and critical of, any productive activity. The increasing productivity afforded by technology has enabled both a huge expansion in government and welfare as well as entire new industries which exist entirely to comply with an ever-expanding morass of bureaucratic requirements.

Much of this populace appears to be quantitatively challenged and to readily accept millions, billions, and trillions as interchangeable units. They have also been taught that not only should they have an opinion on every issue no matter how little they actually understand, but also what that opinion should be in accord with the dictates of political correctness. 

Although they profess a deep regard and concern for the natural world that bordered on animism, their own preferred environment is overwhelmingly the small urban fraction of the nation where nature has been virtually annihilated.  In further ideological self-contradiction, they are also vast consumers of natural resources, yet their horizons of awareness extend only from the shop to the rubbish bin, and they are highly critical of all the productive activity generated by their own consumer demands. They do not so much work for a living; rather, they vote for a living.

What all this means for the future viability of popular democracy, personal freedom and ongoing economic prosperity remains to be seen.  Unfortunately, when strongly held beliefs begin to prove unsustainable there is a human tendency to double down on maintaining them. Fortunately, there is also a countervailing tendency to eventually and abruptly abandon dysfunctional beliefs which have appeared insurmountable, especially when respected leaders finally dare to publicly acknowledge such failures. One can only hope that the current groundswell of dissatisfaction, anger and madness, so evident in and on social media, will crest and collapse as it often has when the pain of unreason begins to be widely felt.

Where to from here?

China is growing steadily more authoritarian, aggressive, militaristic and increasingly hypersensitive to any hint of criticism or disapproval.  In one respect, this should be expected in that authoritarian regimes which have come to power by revolution, and who depend upon force rather than electoral popularity to retain control, are prone to such tendencies. They also tend to default responses of lying about any news or behaviour they deem to be undesirable. Beyond that, violent suppression by any means available. That there has been a similar trend in Western academic institutions in regard to political correctness and cancel culture would only have reinforced any such tendency in the current generation of Western educated CCP leaders.

A further Western influence contributing to the current expansionist break with China’s historical self-containment might also be the Western primacy of focus on growth and dominance with a subordination of doing things better or doing more with less.  Regardless of the pros and cons of any outside influence, authoritarian leaders of all stripes share one important characteristic.  They are hypersensitive to being made to look foolish — witness China’s ban on Winnie the Pooh for the sin of bringing to mind Xi’s likeness — or simply incompetent, and the current expansionist abandonment of China’s self-containment deserves greater recognition as being more self-aggrandising for current leaders than it is beneficial to the future of a nation.

The emerging growth in unskilled unemployment, inequality, welfare dependence and homelessness could be greatly alleviated with welfare being redirected into productive activity.  The fundamental problem in not a lack of useful things to do. It is the onerous costs and obligations for employers and an educational system producing large numbers of subliterate graduates with no useful skills or self-discipline. A well-run work core managed by the military could do a great deal to address this.

Two and a half thousand years ago, Sun Tzu stated:

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle. 

One thing is certain: China will continue to spawn issues and challenges with which we must deal. Beijing has made considerable effort to study us, while we have done little to understand them.  To not see this as both a warning and a deficiency we need to correct would be very unwise.