- - Monday, March 7, 2016


America’s retreat from the world carries enormous risks, which is understood by everyone but Barack Obama. Worse, certain rivals, like China, regard such weakness as opportunity. China is growing ever more aggressive and relations between Washington and Beijing are growing ever more complicated.

Twilight is swiftly overtaking the Obama era, leaving a ruptured-duck president unable to accomplish much at home but capable of continuing to do harm where the rest of the world lives. His policy of retreating from crises sets up the danger of a clash through misperceptions on both sides.

On one hand, Washington has either ignored or encouraged an enormous trade deficit, totaling $365.7 billion in 2015, up from the previous year’s record $343 billion. Some economists argue that this is due in no small part to China’s manipulation of its currency, and it’s actually a net gain for the United States. China, with an economy short of capital and a relatively primitive civil society, is subsidizing exports to the United States. This not only costs lost manufacturing jobs, but inflicts grave social and political damage.

On the other hand, policymakers in Washington are alarmed by the penetration of the Chinese into areas of the American economy that poses security risks. The U.S. Commerce Department has just imposed new restrictions on exports of American technology to the Chinese telecommunications maker ZTE. The Chinese company makes routers and switches for telecommunications operators, mobile phones and offers telecom software services. Now an international giant, it’s the outgrowth of a company organized in the late 1980s by a group of investors with ties to China’s Ministry of Aerospace. ZTE is an example of Chinese Communist “state-owned and private-operating” entities; some of them are dinosaurs that absorb too much capital collected with their favored political access, but some, like ZTE, have become efficient and competitive.

ZTE is suspected of violating U.S. sanctions on Iran. Despite its sophistication, the company is still dependent on American-made chipsets and software. The new American ban on hardware — not yet on software — weighed heavily on the company’s sales in 2014. The ban has forced the company to temporarily delist on the Hong Kong and Shenzhen stock markets.

Beijing has been trying to break this American technology hold, if not actual dependency, by bidding for chip producers in the United States and in Taiwan. But U.S. regulatory restrictions have prevented this. Nevertheless, complex problems in dealing with the Chinese are often unacknowledged or misunderstood.

China continues to dredge shoals in the South China Sea, building military bases on them a thousand miles from its southern coast athwart one of the most important commercial and strategic seal lanes. A growing naval thrust is trying to break through East Asia’s inner islands chain, now dominated by Taiwan, ultimately threatening Japan, Korea, the Japanese home islands and American dominance in the Western Pacific.

The reduced rate of growth of Chinese military expenditures no doubt cheers policy mavens in Washington, but the figures represent only a fraction of real expenditures on men and arms. That Chinese generals are quoted in the official Communist media — all but unheard of — criticizing this “cutback” is even more disturbing. It means that the power of an expanding and ambitious Chinese military, deciding overall China policy, is growing. This is something that China-watchers were not prepared for, and poses new quandaries for American strategists in and out of government.

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