930148mike comments

What, in brief, can be said about Hu's important State Visit? It seems that the United States got what it wanted on reining in North Korea and the signing of beneficial trade deals worth US$45 billion but lost out on re-valuing the yuan and remains concerned about China's military build-up.

Hu last visited the US in April 2006, with little fanfare. This time the official welcome was much different and much more high profile. In Washington, Hu repeatedly said his visit to the US was "to increase mutual trust, enhance friendship, deepen cooperation and advance the positive and comprehensive China-US relationship for the 21st century." He also told the US-China Business Council that China's economy had grown by an annual average of 11% in the past decade and had average imports of US$687 billion, creating 14 million jobs in other countries.

President Obama, whilst being the hospitable host, spoke plainly - touching on Taiwan, Tibet, Iran, the Sudan and the Korean Peninsula - indicating that Washington was not about to cede its role as both a Pacific power and a world force in spite of China's dramatic rise. President Hu remained deferential to the declining superpower, acknowledging Washington's concerns about North Korean aggression and human rights, yielding a little on each issue without falling over to please his American hosts.

There are, however, a number of hard cold facts - known well to both leaders - which impact upon the kind of relationship that the US and China have. China is now the largest creditor of the US, holding around US$900 billion in US Treasury Bonds. Further, US federal debt is about to reach more than US$14.3 trillion, almost 100% of US GDP. Moreover, despite Obama's call for the yuan to strengthen faster against the dollar, China is holding firm on its currency regime.

Perhaps the greatest worrisome factor for Washington is Beijing's expanding and ever more powerful military capability - despite sweeping assurances from Hu that China is no threat to any nation and will never adopt an expansionist policy.

The Chinese Government's published 2010 military budget was US$77.95 billion, the second largest in the world, up 7.5% from 2009 (when it stood at US$70.3 billion.) Other estimates of China's actual spending are different. SIPRI appraises that PRC military spending in 2009 was US$100 billion; whilst the US Defense Department calculates such spending for 2009 at US$150 billion.

Whatever the true level of expenditure, Chinese military forces have been developing an array of advanced weaponry, including new nuclear ballistic and cruise missiles, anti-satellite and cyber-attack weaponry as well as new conventional ships, aircraft and ground-warfare capabilities.

The US fears that China is developing a layered military capability, which will allow it to strike decisive blows against adversaries close to the mainland and then employ harassing "guerrilla" air and sea tactics deeper in the Pacific to slow US forces rushing to the region.

It is these pressing realities that lay behind the friendly smiles and diplomatic toasts at the gala functions in The White House this past week. The United States is finding that it must, measure by measure, accommodate China as the world's second largest economy and most populous nation.

President Barack Obama and the Democrats went into the 2010 mid-term elections with three trenchant and inter-related handicaps: high unemployment, soaring health care costs and a stagnant, unresponsive economy. All three issues severely eroded public confidence and sparked much anger amongst voters who sought to punish a government which they believed had lost touch with the people who had so overwhelmingly elected it in 2008. Having rescued Wall Street bankers, President Obama was heavily criticized for apparently neglecting the troubles of the American middle class. The Republicans have ridden a wave of voter discontent, winning some 60 seats in the House of Representatives (giving the GOP a solid majority of at least 21 seats in the 435 seat Chamber) and winning at least six seats in the Senate (falling just short of an absolute majority in the 100 seat Upper House as well.) These outcomes comprise the largest shift in Congressional power for 62 years or more and may cripple the remaining two years of the President's badly mauled Administration. The question now would seem to be, what can the Republicans do that the Democrats have been unable to do? Simplistic GOP slogans such as cutting spending, reducing the size of government and granting tax cuts will not reverse years of economic decline. In foreign policy, Americans are sick of fighting wars they are unable to win, yet, are still fearful of global terrorism. Should the United States negotiate its way towards peace or should it continue sending thousands of soldiers into battle to do away with its enemies through armed force? The world still looks to the United States for democratic leadership and for international stability. This is largely due to the overwhelming nature of American firepower and heavy military spending. In 2008 alone, the United States spent US$696.3 billion on its military - a sum that was eight times more than that of China, 11 times more than that of Britain, 14 times more than that of Germany, 15 times more than that of Japan and nearly 73 times more than that of Iran. The US defence capacity outweighs that of the rest of the world - its Navy alone possesses 57 nuclear-powered attack and cruise missile submarines and 11 large nuclear-powered aircraft carriers - surpassing all other countries in terms of numbers and striking power. In short, the "Pax Americana" should continue for several decades yet, even allowing for rising powers such as China and India. The central issue, though, is how long will Americans be prepared to shoulder such onerous overseas commitments, given dire circumstances at home? New House-Speaker-In-Waiting Republican John Boehner has promised that his new majority " ... will be prepared to do things differently." One might wonder in what ways, to what extent and to what degree of effectiveness?

It is important that the new DPJ-led Government of Prime Minister Kan dissociate itself from previous LDP Governments whose Ministers made a point of officially visiting the Yasukuni Shrine, outraging China, Korea and much of Southeast Asia. The Kan Government is thus demonstrating Japan's contrition for its WWII atrocities and is standing by the 1977 Fukuda Doctrine, pledging that Japan will never again be a military power that wages aggressive war on its neighbours. Although building up its defensive military capability (faced with North Korean missile tests and Chinese armament expansion), Japan is still primarily a pacifist state, which never again wishes to wage open warfare nor to suffer massive damage through bombing and missile attack. There are those who wish to see Japan become a so-called 'normal' nation, armed with nuclear weapons and endowed with the capability to wage full scale war - presumably in support of its closest ally the United States. The Kan Government, by its words and its actions, has shown that such developments will not occur "on its watch" and that Japan will remain a "global civilian power", offering the benefits of peaceful commerce, generous amounts of Official Development Assistance grants and only humanitarian military support in the world's trouble spots. Japan has greatly benefitted from peace over the past 65 years and the historical lesson has not been lost, despite nationalistic calls for re-armament. Prime Minister Kan has rightly promised that Japan will never again endanger the peace of the world, nor try once more to gain by brutal conquest what it has won by gentle diplomacy.

The global recession is now hitting Japan and the impact is hard. Many of Japan's previously super-profitable and hitherto seemingly impervious iconic corporations are now haemorrhaging - in 2008 Panasonic lost US$1.0 billion; Toyota lost US$1.6 billion; Honda lost US$1.6 billion; Sony lost US$2.9 billion; Toshiba lost US$3.0 billion; NEC lost US$3.2 billion and Hitachi lost US$7.8 billion. Even more gloomily, economists cannot agree on how long the recession in Japan will last. The most optimistic say another quarter, whilst the most pessimistic say another 10 or even 12 years. Whichever way one looks at it, the prospects are threatening and Japan will be the poorer. The world's second largest economy is struggling and no one can accurately predict how long the hardship will continue.

The news item about Prime Minister Aso's reading misses the essential point. Mr Aso is now between a rock and a hard place, with popular support for him and his Cabinet plummeting and members of his own Party hinting at large scale defections unless a Lower House Election is called, possibly early in the New Year. Mr Aso, in spite of what he might read, is faced with a stark choice - heed what many voters are saying and call a snap poll, or, risk the fragmentation of the now severely-divided LDP into new, smaller parties. Diplomacy is important, but practicality lies closer to home.

Prime Minister Aso and Foreign Minister Medvedev have made a good start to re-opening negotiations over the "Northern Territories"/"Kurile Islands" dispute that has bedevilled Russo-Japanese relations since 1956. Until now, Japan has insisted on the return of all four occupied islands, whilst Russia has only offered two islands. The issue has become clouded by nationalist feelings in both countries, blocking the way to a possible compromise. Perhaps now, though, Japan and Russia can make a fresh beginning and finally resolve this long-standing controversy.

Finance Minister Nakagawa has a point in allocating most of the blame for the current global financial crisis on failed US banks and corporations. Because of inadequate regulation, firms like Lehman Brothers entered the high-risk sub-prime mortgage field, only to lose most, if not all, of their capitalization. Japan's experience of the "lost decade" of the 1990s is salutary and the Aso Government is demonstrating good will through its offer of $100 billion to the IMF. What is needed now is economic growth through properly-targeted investment. Japan can help to show the way.

Japan's first recession in seven years is cause for great concern. One by one, it seems that the major economies of the world are succumbing to economic hardship. The EU, the US and now Japan are caught in the iron grip of fiscal contraction, which shows no immediate sign of abating. Hopefully, the Aso government's stimulus packages of US$277 billion to small businesses and US$20 billion to householders will eventually lead to an improvement. What is desperately needed, however, is growth, and, for the present, this does not appear likely.