China Embargos Rare Earth Exports To Japan

Hugh Pickens writes "The NY Times reports that the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles. China mines 93 percent of the world's rare earth minerals, and more than 99 percent of the world's supply of some of the most prized rare earths, which sell for several hundred dollars a pound. The embargo comes after a dispute over Japan's detention of a Chinese fishing trawler captain whose ship collided with two Japanese coast guard vessels as he tried to fish in waters controlled by Japan but long claimed by China. The Chinese embargo is likely to have immediate repercussions in Washington. The House Committee on Science and Technology is scheduled to review a detailed bill to subsidize the revival of the American rare earths industry and the House Armed Services Committee is scheduled to review the American military dependence on Chinese rare earth elements."

Comments

I can see the historians now

[Cruciform]

"And then World War 3 was fought over dirt."

"Don't you mean land, Grandpa?"

"No, dirt. But it was extra special expensive dirt. I shot me a lot of Chinese just to get a wheelbarrow full. It paid for your fancy university education. And your radiation pills."

Re:I can see the historians now

[MozeeToby]

You'd be shocked over the amount of wars fought over 'special dirt', or shiny but worthless metal, or salt. In any case, if China and Japan duke it out, it won't be about dirt, it will be about a century long conflict (which incidentally has had Japan framed up as the villains more often than China) that was never properly resolved after the end of WWII. Kind of how WWII itself was caused by the never properly resolved conflict known as WWI.

Re:I can see the historians now

[biobogonics]

"And then World War 3 was fought over dirt."

When the U.S. embargoed oil to Japan in July, 1941 it was almost a certainty that war would soon follow.

Re:I can see the historians now

[MightyYar]

Them's fightin' words...

Re:I can see the historians now

[confused one]

"Japan doesn't have much of a military,"

That's because it's constitutionally prevented from having more than a "defensive force" of small scale. Treaties signed with the U.S. post-WWII require the U.S. to assist in the defense of Japan if it is attacked. See Defense policy of Japan

Re:I can see the historians now

[interval1066]

"When the U.S. embargoed oil to Japan in July, 1941 it was almost a certainty that war would soon follow."

Only because of Japanese expansionist imperial policy and the invasion of Manchuria made it clear what Japanese goals were in the pacific. And their attack on Pearl Harbor later that year didnt help.

Re:I can see the historians now

[aurispector]

You guys are surprisingly lighthearted over this. The chinese control a significant percentage of various rare earth supplies. They're called "rare" for a reason. This embargo is just anther example of the strong arm tactics the chinese government so liberally employs in their bid to extend their power and influence over the world. Currency manipulation is another way they deliberately try to wreck western economies. They're succeeding, too.
.
They are not nice people. China is not "free" in any sense of the word.
.
As they continue to turn the screws, expect to spend more for just about everything, which will be extra hard since all the jobs are going to china...
.
Enjoy your coming third world lifestyle.

Re:I can see the historians now

[Antisyzygy]

Part of the problem stems from something a bit different than what you say. For one, aggression is relative, i.e. History is written by the victors. Japan tried numerous times to fit in with the "imperialist" nations like Britain, France, ect. They never were really accepted by the western imperialist countries as an equal. The few times they militarily dominated parts of China, western powers swooped in and told them they couldn't create a colony there mostly because the western powers wanted Chinese goods. The Japanese felt screwed over whenever the western powers decided that they should not in fact be allowed to create colonies when the western powers themselves were in Africa and other places creating colonies. Long story short, the Japanese did not care for us westerners much and saw us as an adversary to their acquirement of parts of mainland Asia (Mostly in China). This is part of the motivation for Pearl Harbor as they felt if they tried to conquer Manchuria again they would be opposed by westerners. This being the case, they wanted to wipe out the US naval fleet so we couldnt react quick enough to their invasion. After WWII, imperialism is pretty much dead and I would venture to say the Japanese people are not interested in acquiring any part of China. I doubt the situation between Japan and China is the Japanese peoples' fault at this point. If anything the history between them is used by Chinese people as motivation to hate the Japanese.

DISCLAIMER : There are other current economic reasons for the conflict between Japan and China, but I am addressing the "aggression" part of the parent statement.

Re:I can see the historians now

[JordanL]

Yes, but how do they fucking work?

Re:I can see the historians now

[Bowling Moses]

Japan also has the second largest navy in Asia; China's is larger. There are some signs of Japan building up, including the not exactly constitutional Hyuga class "destroyers" which are in reality small (currently VTOL-only) aircraft carriers capable of carrying up to 11 aircraft. Larger ships capable of carrying more aircraft and 4,000 troops are supposed to start construction in 2011. They sound more like an amphibious assault ship half the size of a Tarawa class ship of the US Navy than a destroyer.

Re:I can see the historians now

[TapeCutter]

They're called "rare" for a reason."

You would think so but despite the name they are not rare.

Re:I can see the historians now

[Dr_Barnowl]

Magnetic fields do no work.

Re:I can see the historians now

[Antisyzygy]

Any nations actions are the responsibility of their government, so I am not saying the west is at fault. I am just highlighting the fact that the Japanese tried to play the Imperialist game and no-one would let them. The British, the French, the Spanish, ect. were pulling the same crap all over the world. What the Japanese did was just like what the British, Spanish and French did. I.e. they came to the Americas and either forced or killed Native Americans so they would relinquish their land. However, the Japanese did this in Manchuria. Not to mention, you fail to consider that Japanese people lived through the war as well. What happened to them? They had most of their major cities reduced to ash with incendiaries (see firebombing of Tokyo) and atomic bombs were tested on them for the first time. I say tested because the US military literally wanted to see what would happen if an atomic bomb was dropped since they still didn't fully understand what radiation does to a human being. Before you say "well, the Japanese performed unethical medical experiments on people so they were worse" why don't you look at the plutonium injections given to healthy people, radioactive iron given to pregnant women, and full body irradiation of US citizens in studies funded and sponsored by our very own government and the Atomic Energy Commission. War is not so simple as "one side is right, the other is wrong". Usually there is a dispute, and then all diplomatic relations break down to the point where force is used. The History of the event is written by the victors. This is why we view Japanese as "evil" and look at ourselves as a having a moral high ground. We have anything but that.

Re:I can see the historians now

[geekpowa]

I am aware that the Japanese suffered during the war and attacks on Tokyo and usage of the Bomb represent highly controversial issues which will probably never be satisfactorily resolved and I think it is good and important that the controversy of using weapons of mass destruction is aired and looked at from every possible angle even 60+ years later: which conflicts your claim that history is written by the victors because if it was then such dialog would not be occurring.

But make no mistake, the Japanese were the aggressors here and they engaged in a programme of Total War underpinned with fundamentalist self righteous fervor. They could of brokered truce at any time. They could of chosen not to treat civilian populations and POWs with utter contempt. They, unlike the Germans, cannot claim that they were pushed into a corner in denied opportunity of economic prosperity or national self determination by Allied nations; they were completely in the wrong. Millions of people suffered terribly as a consequence of their actions, including themselves.

Re:I can see the historians now

[hackerjoe]

You're not supposed to feel sympathy for the Japanese of the 30s and 40s; they were guilty of terrible atrocities, but that war is over now. You're supposed to feel sympathy for the Japanese of 2010, who weren't in charge almost universally weren't even alive for World War II and are not acting particularly imperialist or aggressive.

The point is that most white westerners have similarly barbaric atrocities of imperialism somewhere in their not-too-distant past. Go back far enough and everyone can find an ancestor that murdered a rival warlord's entire tribe; if you believe that what your grandparents' neighbours did should condemn you, we are all guilty!

Eventually we have to forgive, or at least forget, if we're going to live together.

Re:I can see the historians now

[John Saffran]

You're supposed to feel sympathy for the Japanese of 2010, who weren't in charge almost universally weren't even alive for World War II and are not acting particularly imperialist or aggressive.

No, just no .. japanese of 2010 may not have undertaken those acts themselves, but that's no excuse for the denialism of history that's taking place in present day japan. When Tojo's granddaughter goes around saying things like:

"Japan did not fight a war of aggression. It fought in self-defense," she said. "Our children have been wrongly taught that their ancestors did evil things, that their country is evil. We need to give these children back their pride and confidence."

without condemnation, that is the responsibility of the japanese of 2010 to correct. This they have not done, which is why the legacy of the years leading up to the end of WW2 continue to plague us. Forgiveness will come in time, but only once the appropriate measures have been taken to atone.

The japanese of 2010 also have to take responsibility for the ongoing apartheid-like racism within their society. Numerous authors have, many of them japanese, have done much work to document this ongoing state and suffice to say that the evidence is quite damning. When the likes of David Suzuki (the well-known naturalist) goes out of his way to co-author of a book on the topic ("The Japan we never knew") then you know things are bad.

The best author on the topic is Yasunori FUKUOKA of Saitama University and many of his papers are available at http://www.kyy.saitama-u.ac.jp/~fukuoka/index.html. His opinion is not particularly complementary when speaking of the widespread discrimination against those no considered "japanese"

The Japanese government did not respect their rights as foreigners, instead they continued to oppress Korean human rights even after 1952, declaring "post-war democracy" whilst hiding the truth. The Japanese should recognize that not only the Japanese government, but also Japanese individuals should take responsibility for the difficulties imposed on Koreans in Japan.

The largest victims are the Zainichi, but similar oppression was experienced by the likes of the Burakumin and other groups.

Japan, both government and society, really needs to clean up their act before they claim to be victimised.

Re:I can see the historians now

[1u3hr]

I live in Hong Kong, which was occupied by Japan in 1941. Terrible as that was, massacres, rape, starvation; it was over 60 years ago. The "memory" of what happened is not simply recollection of the few remaining people who suffered, but the great mythology promoted by the Beijing government, demonising the Japanese. Admittedly, it's not hard with things like the Nanjing Massacre. But that didn't happen in a vacuum. The Chinese Communists and before them , Nationalists, churned the country into bloody mud for decades in their struggle for power, and killing untold millions. And Mao in the 50s and 60s in his insane Great Leap Forward and Cultural Revolution killed at least 50 million of his own people. That is something that is simply ignored and never spoken of in China, let alone taught in school history. Yet the memory of the Japanese atrocities much longer ago is referred to daily -- many suspect as a way to distract attention from current or past problems.

And this current idiocy was triggered by a Chinese fishing boat that rammed a Japanese coastguard ship, and the captain was detained. The islands where this happened have been occupied by Japan for over a century and were never populated by anyone before that. After WWII Japan was forced to give back all the territory it had occupied in Korea and China, and none bothered at the time about these insignificant islands. But about 20 years ago Chinese started wrapping themselves in the flag and calling this a great violation of their sovereignty. An issue that should be settled by low level bureaucrats is over and over again used to tear open the scabs of a war that ended in 1945.

Zen Magnets

[sexconker]

So this is the reason Zen Magnets are out of stock?

Re:Zen Magnets

[pregister]

I love this quote from the Zen Magnet website. "You'll never put them down for good. Zen Magnets are fun to play with, look good on cute people, go well with deep breaths, and may have health benefits. "

They look good on cute people. The rest of us...sol.

Re:Zen Magnets

[AJWM]

You're correct that rare earth elements aren't rare in the cosmic abundance sense. The original name came about because they were first isolated from a mineral only found in a particular mine in Ytterby, Sweden (hence the names of many of them: scandium (from scandanavia), yttrium, terbium, ytterbium, erbium).

The modern "rarity" issue comes in because they all have very similar chemical properties (mostly lanthanides, plus the rest of Group 3 (III-B oldstyle) of the periodic table). They tend to occur together, and because of the similar chemical properties, are difficult to separate. Not quite as difficult as, say, uranium isotopes, but not as trivial as separating lead or zinc from mixed sulfide ores.

Re:Simple answer

[bsDaemon]

MacArthur said if we didn't bomb China during the Korean War, we'd just end up fighting in Indochina next. Guess what? Indochina was the French Colonial name for Vietnam. Guess he was right. But seriously though, while nuking China isn't really feasible or productive, outsourcing production and relying too heavily on foreign sources of raw materials are generally bad ideas. Plus, its not like nearly every war in history has been fought over natural resources (to include territory) or anything...

Not quite that clear cut, but important nonetheles

[alexismadrigal]

We should probably note here that the Wall Street Journal printed all kinds of denials from the Chinese. http://online.wsj.com/article/SB10001424052748704062804575509640345070222.html Me, I'm just annoyed that we can't get a real industrial policy together to support a rare earth metals industry in the US. Got annoyed enough to write a piece for The Atlantic about it: http://www.theatlantic.com/technology/archive/2010/09/worried-about-chinas-monopoly-on-rare-elements-restart-american-production/63444/ One thing to watch out for on the rare earth metal tip is that the Department of Defense is releasing a report on their use for military purposes in the beginning of October. Will be interesting to see what they say.

Re:Not quite that clear cut, but important nonethe

[Sycraft-fu]

Ya we need to look in to this. Despite the name, Rare Earths aren't. There are plenty of them. Of course they have to be mined, refined, and all that shit. That is largely left to China simply because China pays people shit and has no safety or environmental standards. However as you accurately note, they are important, we need to be supplying ourselves.

The Chinese are notorious for these tactics

[antifoidulus]

Helps when your government has total control over your ostensibly "capitalist" system. They recently levied some random bullshit charges against Toyota as well, a not so thinly veiled swipe at the Japanese government. Then there is Rio Tinot case where China made sure Rio Tinto didn't compete against a Chinese company by jailing their executives on a bullshit charge. They are also the same market that abhors protectionism and then is protectionist every chance they get. Even during the heyday of Japanese protectionism there were no where NEAR as bad as the Chinese. But of course, protectionism is bad, unless it benefits the Chinese, then its good.

Japan the US and the EU really should team up to take China to task for all the bullshit its pulling.

Not really over a fisherman

[Anonymous Coward]

The fisherman story is a big piece of this story, but not all or even half of it. The real issue at stake has to do with some little tiny rock in the East China Sea. It was recognized as an island and part of Japan's soveriegn land by treaties with the US in WW2, but historically has been used by both China and Japan. The fact is, it doesn't really qualify as an island by the international legal definition; it's just a dead volcano with no active life or anything. Just a big rock.

However, if the Japanese can claim it as their territorial grounds, then what comes along with that is the 200 mile exclusive economic zone, and apparently that area has some of the best commercial fishing in East Asia as well as being suspected of having substantial undiscovered mineral and gas deposits. So while the talk about a fisherman is noteworthy, he's just a pawn, like this rare earth metals embargo is also a pawn, in this game over access to exploit those resources.

Summary and Article Misleading...

[coolmoose25]

... But not intentionally so... if you RTFA, and I did, you'll find that rare earths actually aren't really rare. So while China MINES 93 percent of the world's rare earths, and thus supplies 99% of it, most countries COULD also do this if they wanted to. In fact, the last mine in the US closed in 2002 because, according to the article, of a radiation leak... seems these rare earth's are usually found with radioactive thorium and uranium. So what has happened is that China positioned itself as a reliable supplier of rare earths, and did so cheaply. Although the article doesn't say this, my guess is that China probably doesn't take the same safety precautions with mines and the thorium, which the article did say was costly to dispose of.

What has happened here is that China, again, produces things in an environmentally unfriendly way (since they apparently don't care much about the cost of crapping on their own country), and thus does so with cheap labor, thus becoming the most economically viable producer. Only now do they start to flex that muscle they have built...

So the world has a few choices - they can continue to rely on China, and deal with politically induced supply disruptions, find other countries that are willing to cheaply crap on their own environments and buy from them, or produce such materials locally but at much higher cost.

US sources coming back on line

[Animats]

This was covered in the Economist last week.

The US has some of the largest deposits of rare earths in the world. One big location is Mountain Pass, California. The mine there was closed in 2002, because it wasn't competitive with the China price. (Or with China's mining with a complete lack of environmental controls.)

The Mountain Pass mine is being reopened under new management. In a few years, this problem will be over.

The problem with rare-earth mining is that, since the materials are rare, the waste problem is huge. The early stages of extractoin are messy. Big acid lakes, things like that.

Re:All this over a fishing boat

[atfrase]

If you think this is really just about a fishing boat, you haven't studied enough history or global politics.

Can they do it?

[blind biker]

I thought this kind of embargo would cause all sorts of sanctions from WTO members, and that China wasn't supposed to do this as a signatory of various WTO trade agreements.

I'm getting a bit annoyed at China's constant attempts at having their pie and eating it. But I guess they can get away with this - after all, way too many countries have their balls squeezed by China.

Re:Can they do it?

[SplashMyBandit]

I'm afraid the analogy you gave is wrong. The territory is "claimed by China" but "internationally recognized as belong to Japan". This is not the same situation you attempted to outline (seizing citizens on their sovereign territory is not the same as seizing someone else's citizens that are on your sovereign territory). That is why the Japanese had the legal power to do what they did. "Claiming" something is meaningless and doesn't make it yours until all the countries in the world agree with you.

Re:Japan is a dead rock

[DesScorp]

In terms of natural resources, Japan is practically void of anything valuable. Lucky for the Japanese, China is still pissed over that whole "Rape of Nanking" deal.

China is one of the oldest civilizations on Earth, and at one time had perhaps the most powerful. And yet, after their golden age, they withered and spent the rest of history being what we would call a Third World Country. Only now are they finally ready for world power status again.

Contrast them against Japan, who only a little more than a century ago, was a dirt poor, backwards country that had to be literally forced at the barrel of a gun to open their doors to the world. By the 1930's... scant decades away... they became one of the most powerful industrialized countries in the world, creating a war machine that conquered a huge part of the globe in just a few years.

And then we nuked them. They went from world power, to shambles, a conquered country with two radioactive wastes where cities had been. And in less than three decades after that, they became one of the wealthiest and most technologically advanced countries on the planet... again... arguably more powerful economically than they were at the hight of their military might.

They did all this... twice... in the span of a single century, with no natural resources to speak of, save one: the Japanese people themselves.

I wouldn't count Japan out just yet.

Re:I can see the viagra now

[Anonymous Coward]

Indeed, a thousand ships were launched when King Menelaus discovered that he had run out of condoms.

The greatest warrior on either side was Achilles, who was completely invulnerable everywhere except his heel. According to Homer, he slew Hector in a single blow with his unsheathed manhood.

We can thank the Trojan War for incredible advances in chemistry. Many important new developments were made in latex technology, due to the Greeks' need to properly protect the Trojan Horse.

Helen of Troy, ironically, and anachronistically, had syphilis.

Re:All this over a fishing boat

[jburroug]

You forgot the part where the captain of the fishing boat rammed a pair of Japanese coast guard vessels during the altercation which is what led to his arrest. Note that the boat itself and the crew were released promptly. The Japanese currently have the boat captain held while they determine whether or not to formerly charge him in the ramming. IIRC Japanese law gives them ten days to hold him while charges are pending and if they charge him he will be put on trial and run through their justice system just like anyone charged with a crime pretty much anywhere.

China wants Japan to ignore their laws and release the captain. Not so much I think because they care about the captain though. Japan is holding the captain for violating their domestic laws for an act committed in their territorial waters. China is throwing a hissy fit because they also claim the islands near where this occurred and if they concede to Japan's right to try the captain in their courts they are assenting to Japan's claims of sovereignty over the islands in question. Of course it would really be a lot easier to just file an official protest with Japan, the UN and I don't know maybe the ICC protesting blah blah blah Japan's actions and then just carrying on as usual. They can still maintain their claim over the islands and instead of looking childish and irresponsible to the international community they look like a responsible grown up nation.

Personally I'm glad to see China playing their hand so early in the game with this and other recent outbursts as it really gives lie to their whole Peaceful Rise message they try to sell to the rest of the world. Their neighbors and west are finally getting the message that China needs to be taken seriously as a rising power and a rising threat to our interests and not just a cheap place to order walmart crap from.

Cheers,

Josh

Re:Knew it

[Colonel Korn]

Japan isn't self-sufficient in the food area either. I hear they get most of their food, especially rice, from China. I've heard some estimates that if the food they get from China were to disappear and weren't replaced, they'd be facing starvations in about a month (though I don't have a citation on that, so that may be wildly inaccurate). Not to mention that Japan is militarily defenseless against China, and even if China didn't feel like getting their hands dirty, they could always tell North Korea to start acting up at Japan. In other words, Japan doesn't really have a strong foothold to be poking China like this. I guess they have a lot of faith that China will agree to a diplomatic solution.

More likely though, the bureaucratic head of the Japanese coast guard was pissed off at another part of the bureaucracy and wanted them to lose face. Or maybe he just decided that the last decade-long recession to hit Japan was pretty nice, so he should do his best to make sure the current one lasts that long too by sabotaging manufacturing dependent on those rare earth exports.

Japan grows about 10% more rice than it consumes. Read http://en.wikipedia.org/wiki/Rice#Production_and_export.

Re:No worries

[wanax]

I assume what the original poster means by pseudo-capitalism is that there is state control over certain sectors of the economy, and intervention in others (often at the whim of party officials with greased palms). In particular, this means that China has systematically undervalued their currency by ~20-40% against the dollar. This has several effects, the most obvious being that it substantially increases the competitiveness of China's exports (and cost of imports). This benefits a specific group of well connected industries in China, which among others are the mining and dirty manufacturing industries that are depleting China's natural resources and exporting them as quickly as they can. The trade-off domestically however, is that it decreases the buying power of the average worker considerably and leads to inflation. It leads to inflation because to maintain the undervaluation, China's central bank has to intervene in the currency markets and buy dollars to prevent the Yuan from appreciating, which increases the domestic money supply. By having to buy dollars (ie: US treasuries) China is essentially stuck buying huge amounts of US debt as long as it wants to maintain the export edge from having an undervalued currency (which is causing huge domestic pressures within China, there have been quite a few labor riots and urban-rural tension in the past few years). This has two effects on the US: one is that it keeps interest rates low and our debt cheap, the other is that it makes our exports 20-40% more expensive, costing the US at least a million jobs (most estimates are about 1.2m) at present.

So China is stuck with a dilemma: they can't become a first world country until they let their currency float, because their average citizens have reduced buying power. But they can't let their currency float until they have an economy that is sufficiently robust that it doesn't require a 20-40% import tariff/export subsidy (which is what the currency manipulation is doing), which means developing a domestic market under conditions of high inflation (currently ~8%) and high interest rates (currently 5.3%). And they have to do it before resource pressure (particularly food, water and pollution) overcomes economic growth, while funding a large chunk of the US current account deficit in the mean time. If China doesn't manage that, then both the current government and the economy collapses, and China goes through another cycle of regionalism and stagnation (and if China does manage it, we're probably looking at a world war over scarce resources).

Re:All this over a fishing boat

[khallow]

China itself is a massive country and a few small islands really are not worth their time or effort. The life of the fishing captain is.

The two hundred mile exclusive economic zone is worth more than the life of a fishing captain to the Chinese government. The precedent of getting Japan and its allies to back down on a territorial claim may be even more valuable than that.

Re:This is a lesson for China's trading partners..

[ObsessiveMathsFreak]

I wouldn't be too sure of that mine reopening. If China's state run economy has proved one thing it's that the free-market unmanaged economies of the West will time and again fail to even comprehend the forces arrayed against them. Narrow minded "Market Based" thinking is exactly what got us into this single supplier problem and naively thinking it will get us out is well... naive.

Whatever you think the "free-market" will do to get us out of this mess, the Chinese economic mega-complex has already considered three moves in advance and is working to counter it. People don't seem to understand that China-Inc is essentially the world greatest ever hyper-corporation: millions of companies, thousands of major corporations, and hundreds of banks all working under one overall direction and policy. Just about every trick you'd expect a major-corporation to pull can and has been considered, strategised and implemented by the this acutely self aware market entity.

Before anyone begins, this isn't some kind of bigoted post. What's really going on here is that the Chinese Communist Party has developed(invented really) a state controlled, capitalism driven, centrally managed and wholly unified economy; and it's as powerful an apparatus as you'd expect. It's one of the biggest civil and economic developments in world history. And if you expect this electric dragon--a vast, powerful and above all self aware economy under the control of a central brain--to act like your traditionally lauded free market fungus-like economies--efficient, large or small, but hopelessly undirected and prone to bottom feeding-- you are mistaken from the very outset. The Communist Party does not wait for startups, demand, financiers, or any other "market forces" to act. They order entire economic sectors to be created, dismantled and transformed overnight. And it has made them the richest country in the world.

That's what the Japanese are facing here, and that's what the rest of the world is going to have to face up to as well. If you think a little mine in a mountain pass is going to change things, then you're just another free market crazy barking at the invisible hand of the moon.

Not a dispute over a fisherman

[turkeyfish]

This is not a dispute over a fisherman. It is a territorial dispute over a very large chunk of water around a disputed island. It is also an opportunity for China to put pressure on Japan and indirectly on the US (which relies on Japanese to manufacture many critical industrial components, many military in nature that can no longer be manufactured in the US because the US is no longer economically competitive in many high-tech industrial technologies. China sees this as an opportunity to exert its growing economic influence at a time that the West is not economically or politically able to respond because it is bogged down in two land wars in Central Asia. They are sending a signal that they are now the dominant power in Asia and the rest of the world can expect them to be the dominant economy in the world in just 10-15 years time at current rates of growth. This will almost certainly happen sooner as the republicans who look as if they are about to come into power are determined to shrink the US government, which will almost certainly speed up the difference in infrastructure and military preparedness. If we get into it with Iran, expect the Chinese who rely heavily on Iranian oil to come into more direct conflict with the US, probably by igniting inflation in the US by pulling their underwriting of US debt instruments that are all that is propping up the US financial system presently.

If the China Japan situation escalates our treaty obligations will draw us into it. Its unclear how the US will fare being so dependent on middle eastern oil, which can be easily shut off at the Straits of Hormuz by the Iranians and its military highly dependent on satellites for its battlefield and tactical awareness. The strategic petroleum reserve won't last long in an all out draw down. To make matters worse, just a few well coordinated EMP generating blasts in space and the US military will be largely blind. No wonder DARPA is scrambling to counter the new maneuverable Chinese killer satellites with high altitude solar aircraft. My guess is the republicans will let Japan fall to the Chinese and go into a more conciliatory mode to keep the Chinese money needed for tax breaks for billionaires safe.