China's War Chest

[crobato]

I'm still trying to figure out where the figure of 30 years to accomplish it came from. China has an economy 12 Trillion dollars vrs. U.S. which is about 15+ Trillion and China has twice the growth rate. I'm not saying they would be as good as us but 15 years you can almost guarantee that if they decided to do this they could. I think people don't realize how much money China has and when you have Keating talking about helping them, I just find myself so disgusted with what we've done. From selling guidance systems for nuclear warheads to MIRV/Warhead construction. Now this pattern of appeasement is costing us dearly. Hutch

Around the 2020-2030, the US may probably have a GDP value over 20 trillion a year. The thing is, the dollar may be only worth half as much as it is today, and as a result we may be facing the prospect of buying fighters half a billion each. So in a sense, are you really growing or not? Real economic growth requires that the figure is ahead of both the inflation rate plus inventory replenishment rate, which alone can account to 2% of GDP reported growth figures. What's worst is that the dollar value seems to be slipping even faster, which can breed stagflation and higher inflation rates, so that we may lose half of the dollar's nominal value sooner than we think.

 

[crobato]

Thanks for the info. I have one question. How does China license produce a German diesel engine when the entire E.U. has an arms embargo on China?

Because its dual use, and the Europeans tend to have a liberal view of the embargo. Licensed German designed engines are also the source of power to China's new main battle tanks, including the 1500hp engine in the ZTZ-99. I think thats the same engine as the Leopard 2's. And its not just the French and the Germans, but the British, who even after the embargo, shipped Litton and Skymaster radars to China, and shipped Spey engines that powers China's JH-7 strike fighters. China now produces a licensed version of the Spey MK212 as the WS-9. A look deeper at other Chinese arms developments shows other uncanny resemblances to European systems, ranging from the Swedish Erieye radar to the Dutch Goalkeeper CIWS.

 

[Schumacher]

I'm still trying to figure out where the figure of 30 years to accomplish it came from. China has an economy 12 Trillion dollars vrs. U.S. which is about 15+ Trillion and China has twice the growth rate. I'm not saying they would be as good as us but 15 years you can almost guarantee that if they decided to do this they could. I think people don't realize how much money China has and when you have Keating talking about helping them, I just find myself so disgusted with what we've done. From selling guidance systems for nuclear warheads to MIRV/Warhead construction. Now this pattern of appeasement is costing us dearly. Hutch

I think your figure of GDP size of 12 trillion for China is the PPP figure which many disagree. Based on US$ term the size is abt 2 trillion vs abt 10 trillion for US.
As for Keating offering help to their carrier program, I'm always of the view that once you decide that they will develop the carrier sooner or later, one way or another & that you can't really stop them, you might as well sell them something to get some cash or gain some leverage. You're only helping out yourself.
I suspect that's the thinking behind Keating's offer & other export of high tech items to China.

 

[swerve]

Thanks for the info. I have one question. How does China license produce a German diesel engine when the entire E.U. has an arms embargo on China?

Thanks.

Same way it imported Humvees, when there's a US arms embargo. They weren't counted as weapons. GM is co-developing engines in China, with local companies.

Try to think of technologies which have absolutely no military uses. Tricky. anything to do with aviation, electronics, computing, shipbuilding, engines of any kind, explosives, fuels, precision engineering, materials technology . . . .

 

[swerve]

I think your figure of GDP size of 12 trillion for China is the PPP figure which many disagree. Based on US$ term the size is abt 2 trillion vs abt 10 trillion for US...

The World Bank estimates Chinas GDP in 2006 at $10044 bn at PPP, $2668 at the official exchange rate. USA $13202 bn.

The China PPP estimate is based on a 1986 academic bilateral comparison between the USA & China, projected forward using official growth rates. Both the growth rates & the official Chinese GDP statistics on which the estimate was based are disputed. China has revised its official statistics since then, in ways which would imply changes should be made to the PPP estimate. Some academics have published PPP estimates which take into account the Chinese statistical changes, & the disputes over the growth rate. These suggest the real PPP figure may be lower, perhaps as much as 20%.

A new PPP estimate for 2005 is being prepared, & should be published in a year or so, as part of an ongoing large-scale international comparison under the auspices of the World Bank, with the co-operation of official statistical offices around the world. This is the first time China has participated. Everyone in the field expects the estimate to be more reliable, like that produced when the USSR took part in the 1990 comparison.

 

[Incognito129]

The World Bank estimates Chinas GDP in 2006 at $10044 bn at PPP, $2668 at the official exchange rate. USA $13202 bn.

The China PPP estimate is based on a 1986 academic bilateral comparison between the USA & China, projected forward using official growth rates. Both the growth rates & the official Chinese GDP statistics on which the estimate was based are disputed. China has revised its official statistics since then, in ways which would imply changes should be made to the PPP estimate. Some academics have published PPP estimates which take into account the Chinese statistical changes, & the disputes over the growth rate. These suggest the real PPP figure may be lower, perhaps as much as 20%.

A new PPP estimate for 2005 is being prepared, & should be published in a year or so, as part of an ongoing large-scale international comparison under the auspices of the World Bank, with the co-operation of official statistical offices around the world. This is the first time China has participated. Everyone in the field expects the estimate to be more reliable, like that produced when the USSR took part in the 1990 comparison.

All PPP estimates are current and change yearly. Global PPP estimates are based on OECD packages not the world bank. China's PPP estimates are not based on 1986.

The World Bank is not responsible at all for PPP estimates. They do however alter certain sectors such as energy for their own use. That figure of 10 or so billion is using OECD.

What you are talking about is the ICP which is meant for developing countries. You cannot compare PPP of developing countries with OECD PPP baskets.

I haven't seen PPP estimates of China using the ICP program though.

 

[swerve]

All PPP estimates are current and change yearly. Global PPP estimates are based on OECD packages not the world bank. China's PPP estimates are not based on 1986.

The World Bank is not responsible at all for PPP estimates. They do however alter certain sectors such as energy for their own use. That figure of 10 or so billion is using OECD.

What you are talking about is the ICP which is meant for developing countries. You cannot compare PPP of developing countries with OECD PPP baskets.

I haven't seen PPP estimates of China using the ICP program though.

Godd grief! Did you get all that from Google?

I have a copy of every ICP report, either paper or PDF. I've been collecting them since the 1970s. I got a copy of the first reduced data estimates based on it, done with regression equations, by writing personally to the head of the project (who passed it to Alan Heston, who replied very nicely, enclosing a photocopy), when I was a student. Please don't try telling me what it's for.

The ICP is not "meant for developing countries". Its first estimates were for 1967 (as a pilot project - main estimates began in 1967), for 6 developed & 4 developing countries. It has always been intended to provide a wide coverage geographically & economically, but as Derek Blades* said last month (luckily I'd just read his paper, & remembered it) - "Up to 1993 the ICP had mainly involved the developed countries." http://www.iariw.org/papers/2007/Blades_paper.PDF

BTW, that'll tell you about the China comparison. The new 2005 estimate is (and if Derek Blades says it, it's official) an ADB/World Bank estimate. There's a link to the preliminary report (3 meg PDF), including Chinese figures, in the paper.

The World Bank is in charge of the ICP, & has been for a long time. It was originally run by the UN statistical office, but originated in a couple of OEEC studies in the 1950s. The OECD comparisons of which you speak are incorporated into the ICP, & used to be part of it. ICP coverage of developed countries is limited to those not in the OECD, e.g. Singapore, Hong Kong & Taiwan, because of that linkage. No point in duplicating effort. The ICP coverage Blades shows in Figure 1 includes, in every round, the USA, UK, Japan, W. Germany (later united Germany), France, UK, Belgium, & Netherlands (from memory - there's no list in the paper). The 1990 round was almost entirely developed countries.

The OECD uses World Bank figures where appropriate, & vice-versa. The fact that it's in an OECD publication does not make it an OECD figure. Check the footnotes! The OECD does not produce PPP estimates for China. The figure you use is the World Bank figure, which is, as I said, (look here for the reference - footnote a) an academic estimate from 1986, slightly amended by the World Bank & projected forwards.
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf

Most PPP estimates are not current, in the sense that a new comparison is done each year. AFAIK only the EU estimates are truly current. The OECD estimates, for example, are based on benchmarks done every 3 years or so. For non-benchmark years, they're projected forward or back using national growth rates. The footnotes will tell you when the benchmarks change - you really should read them.

*Blades has been, at various times since 2000, described as an OECD employee, a consultant to the World Bank, & a consultant to the Asian Development Bank. And his name's been all over the ICP all that time. That should tell you a lot about how big international projects like this work. They're collaborative. The OECD, for example, gets the majority of its PPP estimates direct from Eurostat, & they all confer, exchange staff, & so on, under the aegis of the ICP.

 

[10ringr]

Around the 2020-2030, the US may probably have a GDP value over 20 trillion a year. The thing is, the dollar may be only worth half as much as it is today, and as a result we may be facing the prospect of buying fighters half a billion each. So in a sense, are you really growing or not? Real economic growth requires that the figure is ahead of both the inflation rate plus inventory replenishment rate, which alone can account to 2% of GDP reported growth figures. What's worst is that the dollar value seems to be slipping even faster, which can breed stagflation and higher inflation rates, so that we may lose half of the dollar's nominal value sooner than we think.

these stats reflect your correct assumptions and it is the concern that I have since so many of the companies responsible for our growth and GNP has left for cheap labor, or environmental issues and/or the incentives China and a few other players have given them. Hutch

 

[History1]

I wonder how long it would take them to build 10 Carriers


by Martin Walker
UPI Editor Emeritus
Washington (UPI) May 23, 2007

With more than $1,200 billion in U.S. dollars, T-bills and securities in its piggy bank, China has been losing money as the value of the dollar has fallen against the euro.

This helps explain that startling announcement last week that China is planning to launch a state investment fund that would seek better returns on its money. It plans to start by investing in stocks and private capital funds like the Blackstone group, which this week announced the infusion of $3 billion of China's massive hoard of cash.

Put this into perspective. At current market values, China's $300 billion fund could buy the whole of Wal-Mart, and still have enough left over to buy the Big Three American car makers: Ford, GM and Chrysler. Or it could buy British oil giant BP and still have enough left over to buy Germany's Siemens. If China wanted to put all its $1.2 trillion into stocks, it could buy Exxon-Mobil, Shell and BP and still have enough left to buy Wal-Mart.

Or China could put some of the money into its defense budget, buy aircraft carriers and challenge the traditional U.S. dominance of the seas. The standard U.S. Nimitz-style carriers cost around $6 billion each, and America's next generation CVN-21 carriers will cost about double that sum. Then there will be the cost of the warplanes, training the crews, and the other surface vessels in the standard task force that support and protect the carrier.

So a fleet of 10 state-of-the-art CVN-21 carriers with their warplane, crew and task force support could be had for about the $300 billion that China is planning to invest -- not counting the savings that Chinese manufacturing techniques and labor costs would bring. So China could in theory afford to challenge the traditional U.S. naval dominance in the Pacific Ocean.

Were it to choose to do so, it seems they would have a helping hand from the U.S. Navy. Adm. Tim Keating, who now runs the Pacific Command and used to serve on the carrier Nimitz, has just completed a five-day friendly visit to China. And at a lunch with Vice Adm. Wu Shengli, commander of China's navy, Keating stressed the difficulty and complexity of developing, building and operating an aircraft carrier. But at his news conference the following day, Keating said the United States would be willing to help if that is what China decides to do.

"It is not an area where we would want any tension to arise unnecessarily," he said. "And we would, if they choose to develop (an aircraft carrier program) help them to the degree that they seek and the degree that we're capable, in developing their programs."

The immediate response from many armchair strategists was to wonder if Admiral Keating had taken leave of his senses. Why would the U.S. Navy want to help a potential challenger for the control of the seas?

And yet the immediate Chinese response was very cautious. Maj. Gen. Yang Chunchang of China's Academy of Military Sciences told the Chinese-run Hong Kong daily, Wen Wei Po, that he "was concerned about (the implications of) Keating's remarks." Chinese strategists are wary of U.S. plans to infiltrate China's military machine and gather intelligence through joint exercises and exchange visits.

U.S. Navy officials have been thinking about China's plans for an aircraft carrier for more than a decade, since China first began talks with Russia about buying one of their small and obsolete carriers, so that they could start the long climb up the learning curve of naval aviation.

There is a school of American thought that would actually welcome a massive Chinese investment in aircraft carriers, on the grounds that it would take them as long as 20 years to be able to build the ships and aircraft, train the crews, and learn the tactics of operating carriers, and they would be very hard put to catch up with the U.S. Navy's 80 years of experience. (The U.S. Navy paid a stiff price for a similar over-confidence regarding another Asian fleet back on Dec. 7, 1941.)

Others maintain that luring China into building such a navy would be a clever fiscal trap that would overwhelm and distort the Chinese defense budget for decades to come, and simply offer some very fat targets for the U.S. advantage in stealthy hunter-killer submarines. There is also a view that in the age of stealthy submarines and super-fast torpedoes like the Russian Skval and precision-guided weapons, big aircraft carriers are already obsolete.

Maybe. But do not forget that China has already put men into space, and earlier this year a Chinese anti-satellite weapon knocked out an obsolete satellite orbiting high above the earth. The Chinese may be technologically behind the United States, but they are evidently catching up fast.

And the argument that building a carrier fleet would bust the Chinese budget looks very thin against the potential tsunami of dollars that Beijing is planning to pour into the world's financial markets. If the Beijing government decides that a carrier fleet is in the national interest, and that China's strategic goals require the ability to control its own waters and the key shipping lanes and oil tanker routes, they can certainly afford it. And there would be no more visible symbol of China's new role as a great power than a carrier fleet that embodies a challenge to America's command of the seas.

We have, of course, been here before, at the beginning of the 20th century when Kaiser Wilhelm's Germany decided to build a High Seas Fleet that could challenge Britain's dominance of the seas. The subsequent arms race as each side vied to produce more and more Dreadnought-type heavy battleships played an important role in the escalation of tensions that helped bring about the First World War.

This time, we have a third candidate for the new naval arms race. Indian Defense Minister A.K. Antony told his country's parliament last week that India plans to have three carriers on the seas by 2017. They already operate the Virar, bought from Britain (where it was known as HMS Hermes), and are currently refurbishing the former Soviet carrier Admiral Gorshkov. India is also now building at Cochin its own new 41,000-ton carrier, designed to carry Russian-designed Mig-29s.

But remembering the cost of all this, it should be emphasized that China's current account surplus grew by $136 billion in the first three months of this year. At that rate, they could afford to build a 10-carrier fleet with just half of this year's surplus. And last week, Credit Suisse estimated that China's total war chest, or rather its total reserves, could hit $2 trillion, or $2,000 billion, by the end of next year.

As China decides whether it wants to take the risk of challenging the United States for the command of the seas, or even just for the command of the waters around Taiwan, money will be no object.


China is surrounded by many nations that are opposed to any move on China's part to violate their economic zones (200-mile). China is a nation that does not possess much open, unfettered access to the sea. This is a reality that they must recognize, acknowledge and accept. Their own coastal economic zone intersects with those of Korea, Taiwan, Japan, Vietnam, Philippines, Malaysia, Indonesia and tiny but wealthy Brunei and Singapore. Just east of China in the Pacific is Guam, and the vast expanse U.S. Pacific Territories, as well as the Federated States of Micronesia.
In the sense of being "landlocked", China is truly "sealocked". It has, really, only a 200-mile coastal zone with little or no open access to the Pacific, because of the complexity of it's proximity to other nations and the adjacent sectors of the Pacific. This is what geology has bequeathed it.
Unlike the USA, Canada (both with unfettered oceanic seaboards on both sides; Pacific AND Atlantic), and other nations like Chile, Argentina, Brazil, India, Australia, South Africa, other African nations, United Kingdom, Norway, Iceland and even Mexico and Peru, China must observe the realities of it's relationship to the ocean. It is in fact, making many mistakes right now by building up a large, potent navy. What for?
One of the obvious, to the whole world, problems China may start is the situation in the Spratly Islands off the Philippines, Vietnam, Malaysia and Indonesia. These waters are not at all part of China's economic zone or near it's coastal waters, but wholly shared by the four nations mentioned above. To attempt to "flex" it's might in naval terms there would be a gross violation of the sovereign maritime economic zones of those nations - nothing short of an act of naked aggression in full disregard of those nations and their regional integrity. It would be belligerent aggression intent on illegal annexation of the physical territory/maritime economic zone of other nations.
The Paracel Islands that are equally shared by Vietnam and China (by virtue of Hainan) are another "hotspot" where China may simply imagine that it belongs to China alone. But this would be incorrect; it is equally in proximity to Vietnam as it is to Hainan Island. Therefore, Vietnam has equal jurisdiction of the Islands, and therefore the "ownership" of those islands should be bisected equally between China and Vietnam. It is obviously an simple matter; but China may turn it into a complicated one.
China's behavior is beginning to indicate trouble ahead; observe it's displeasure regarding it's restricted lanes connecting it to the Pacific high seas through Taiwan and Japan's territorial maritime zones. This is an irritant to China. It's shipping has to pass through the two nation's maritime zones, before China's shipping can reach it's own Pacific maritime zone. This is something China must simply recognize and acknowledge. They are nearly on the verge of announcing that it has the right to change these physical facts by ignoring it and taking control of it by might (naval might). To some degree, China also must respect the economic maritime zone of Korea by virtue of Korea's side of the Yellow Sea, which is really a gargantuan bay shared equally by Korea and China.
The so-named "East China Sea", is, like the "Sea of Japan", poorly termed. Just as the "Sea of Japan" should really be called the Korea-Japan Sea, the "East China Sea" is really something like the "Taichija Sea" (Taiwan-China-Japan Sea). Or perhaps it should not be called anything at all; for it is a sector of the Pacific that is shared by the coastlines of all three nations, and in fact, four, by virtue of Cheju-do island, Korea. This means that due to the physical reality of Cheju-do, a small sector of the "East China Sea" is actually Korea's economic maritime zone.
The "East China Sea" is very interesting. It is not the high seas; it is enclosed by and sectioned off from the Pacific high seas by Japan's Ryuku Island chain, and made into a small sea by the landmass of Taiwan. Taiwan, therefore, turns it into a "sea" that is "apart" from the Pacific Ocean.
All four nations equally share this sea.
There should really be no naval program there by any of the nations involved. They should really only be patrolling inside of their own 200-mile maritime economic zones. To practice any sort of naval maneuvers here is nothing short of idiotic. Four powerful modern nations each with vibrant economies to boast in their own rights all steaming around with navies in such confined, restricted waters where their economic maritime zones all converge almost immediately, simultaneously? China, Japan, Korea and Taiwan should convene and come to logical, rational, obvious conclusion and agreement over this sector of their shared interest in terms of shipping access and cooperative harmony. They need to; they have to.
China's naval buildup? It's posturing? It is rather a shame that China is building up such a navy. What for? It's truly ridiculous. What nation, or even nations, (who?) is going to threaten China, in any form or way whatsoever? Why, the answer is, nobody! China is simply being a nuisance right now in world affairs by wasting billions of it's financial resources by building a "built-up" navy.
Why does China need aircraft carrier(s)?! It's ridiculous, to put it mildly. The entire Pacific approach to it's national shores and coastline would be blanketed by it's land-based missiles and within range of it's modern aircraft. Nothing could nor will ever threaten it's coastline, economic maritime zone or it's territorial integrity. It's landmass not vast; it is immense. It is the world's fourth largest country. Bear in mind that this is in relation to Russia, Canada and the United States. It is almost exactly the same size as the United States - bear in mind that this includes Alaska! And it actually has MORE land than the United States, because a vast area of the United States is actually not land but water - in the form of the Great Lakes. China has the third AND sixth largest rivers of the world wholly inside it's borders. Three more of the world's 12 largest rivers are partly or mostly in China! One in every five human beings in the planet is Chinese!! And that is not including all of the Chinese persons all across the globe in the millions residing in other countries! China has a BILLION people, and then, ANOTHER THREE HUNDRED FORTY-FOUR MILLION people. That is over ONE BILLION people MORE than the ENTIRE population of the United States!!
Why does China, of all countries, need to build up a NAVY of all things. It is clear that China, among other reasons (by its leadership), is mainly "flexing" it's new found affluence and economic $$ power in the form of building up a navy. It would well serve itself by building more competitive trade shipping, rather than wasting it's time, resources and energy on military naval machinery and technology. If it's national security it's worried about, it may as well simply augment it's air force and land-based defense missile system - into what would essentially be the largest and most potent air system in the world.
CHINA?! Worried about IT'S national security? As if any nation or nation(s) could ever pose the most remote threat to China!!