Fireworks on the 4th of July

Ahead of the G20 Summit China ups the ante with surrogate Kim Jong Un firing an ICBM on U.S. Independence Day.

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KIM JONG UN ON 4 JULY 2017

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Update 3 September 2017—North Korea detonated a thermo-nuclear device in a weapon test on Sunday before Labor Day. A second seismic shock that followed the detonation said Lassina Zerbo of the Comprehensive Test Ban Treaty Organization is believed to be a geological  tremor caused by the blast. The test came as Russian President Putin was in China meeting with other leaders of the BRICS economic bloc.

Update 27 August 2017—North Korea fired a missile over Japan air space flying for 2,700km (1,678 miles) before breaking up into 3 pieces and landing in the ocean 1,180km off the Japanese coast. The missile was fired by North Korea as the Japan, South Korea and the U.S. conducted annual joint military manoeuvres.

Update 7 August 2017—U.N. Security Council resolution “condemns in the strongest terms” North Korea’s July 4 and July 28 missile tests, and adds new individuals and entities, including the Foreign Trade Bank, a state-owned bank that acts as North Korea’s “primary foreign exchange bank,” to a U.N, sanctions list.

Update: 27 July 2017 North Korea fires another ICBM

The New York Times reminded readers on the 5th of July—the day after North Korea tested an ICBM—that before taking office President Trump had rated the possibility of North Korea obtaining an Inter-Continental Ballistic Missile as, “Not going to happen.” China’s puppet regime in North Korea waited until American Independence Day to show the new President wrong. What does this bode for the upcoming Congress of China’s Communist Party in September? And what constitutes an appropriate measured response from the United States and its allies?

Four days later there are increasing references—from Russia and others—that North Korea’s missile was ‘marketed as an ICBM’. That in fact it demonstrated only medium-range capability.

 

1. CHINA’S INTERNAL POLITICS
Party Congresses staged by Communist super powers—whether China or the old Soviet Union—find equivalency with national elections held in smaller dictatorial regimes. Thinking of the PRI in Mexico, for example, one could expect a loosening of party control and easing of economic policies in the run up to an election. The status quo would return after the ruling party had won a new mandate. The unprecedented flows of money from China to real estate markets in the Australia, the U.S. and Canada, for example, can be seen as a sign of the regime turning a blind eye before clamping down after securing a new mandate. Of course, the smaller regimes lack the military muscle of the USSR or China. A super power flexing its military strength in the run up to a Communist Party Congress may be using a show of prowess through a surrogate or even hit at risking an international crisis in order to elevate its prestige. Therefore, the firing of an ICBM by North Korea on Independence Day in America may be a case where the Politburo Standing Committee sought internal advantage calculating that the U.S. will be powerless to act.

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2. THE NON-QUESTION ABOUT NORTH KOREA
It is pointless to separate North Korea from Xi Jinping’s regime. Without China, Kim Jong Un’s regime would have imploded long ago. 90% of its imports are reported coming from China. Reports of China aid to North Korea rising by 40% over Q1 2017 establishes beyond the shadow of a doubt the relationship between the superpower and its surrogate. Therefore, North Korea’s military actions must be seen as one piece in what most observes believe is Xi’s plan to use the Communist Party Congress in September to consolidate power.

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3. THE WEST RESPONDS
How the West responds to this series of provocations is of the utmost concern for the entire Western alliance. A US military attack is ruled out by the meagre quality of targets in North Korea and the risk imposed on the 10 million people living is Seoul 35 miles from the North Korean border. A West shown impotent to act benefits China and flatters the image of Xi as a master player on the international scene. Thus, the best response pivots to confront the real aggressor—China. Here, it is a miscalculation to fail to understand that missiles hardly matter. The West wields a more preeminent economic threat. China must choose whether it is prepared to go it alone. Beginning at the G20 Summit participating members of the 29 NATO alliance can make clear to Xi and his supporters, that to the extent that China’s newly found fortunes derive from rapprochement and active participation in the western democratic system, these benefits can be rescinded.

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4. NATO
It has not been made clear exactly where NATO was on the 4th of July. The North Atlantic Treaty stipulates that if one member is attacked, all will rise to its defence. However, while this ICBM test poses a naked threat to member nations, it falls short of an attack.
Fraser Cameron, director of the respected EU-Asia Centre, sees that “NATO has no competence to deal with out-of-area threats such as DPRK. It monitors developments, but that is it… [this] is purely a US problem.”

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TRADE BALANCES IN THE G20 WITH THE US

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5. TRADE FLOURISHES AMONG ALLIANCE PARTNERS
Those who would decry the damage done to western economies from a loss of trade with Communist China, should consider that China’s removal would create new space for all the other players. On cue, 3 days after the North Korean ICBM testing, Bloomberg published a chart showing trade balances with the US. China’s over-dependence on international trade lay bare its core interests.

Trade among NATOs own members would quickly outpace trade with China once Chinese factories are sidelined. Extending to other partners in the G20 trade among allies in North America, Japan, SE Asia and Europe would flourish by breathing the oxygen freed up by China’s sudden departure. The inability to win back market share after the situation normalizes is a powerful weapon to wield against a recalcitrant China.

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6. THE ONE CHINA POLICY
Beijing is fully aware of the irrevocable fact that the West reads the One China Policy in just one way: a democratic Asia. After 40 years of prosperity in China—through diplomatic channels—the West can signal its disappointment with the pace of social and political reform in Asia.

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7. THE FIRST SHOE TO FALL
Perhaps the crisis in North Korea is best seen as the first shoe to drop in the unravelling of Xi’s Communist regime. On the one hand, if Xi has been earnestly trying to suppress Kim, but the latter has snubbed him, then a great weakness has been exposed in the Chinese leader. It is the kind of weakness that will not garner favor at the upcoming Communist Party Congress. If on the other hand Xi has been playing the West all along, and an economic response like the one outlined here—and intimated a year ago—succeeds in shaking the Chinese economy, then he will be exposed to internal criticism for having imperilled China’s prosperity in the pursuit of personal ambitions. Properly measured the North Korea crisis puts the Chinese leader in a double bind at the worst possible moment.

Both internally and internationally, the effect of turning the tables to expose China’s inability to use military force in the face of a balanced and punishing response from the West will deal Xi’s regime a damaging blow.

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8. A TWO PRONGED RESPONSE
The West can pursue both lines simultaneously. On the one hand, it can assume that Xi has not played all his cards on the table and punish him for double-dealing: Playing friend and foe to the West at one and the same time. On the other, western governments can take Xi at his word and point to the North Korea crisis as a clear sign of his ineffectiveness at containing a petty dictator. Both responses damage Xi.

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9. THE OTHER SHOE
Reports that show China’s balance of trade entering negative territory in 2017 for the first time in tree years credit “A spike in imports growth (hitting 38% year-on-year last month), driven by higher-than-expected demand from its domestic construction industry,”

With speculation that a real estate bubble is keeping China’s growth artificially high, and signs that outflows of renminbi are at exponential levels, the burst of the real estate bubble could finally test economic fundamentals in the last Communist super power.

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10. WITHERING CRITICISM
One can only hope that in Tokyo, Washington, Berlin, Rome, London, Ottawa and Paris senior policy analysts and economic strategists can weather the incoming barrage from multi-national corporations grown dependent on a free ride on China’s factories. This underscores how the ability to separate domestic policy from corporate self-interest dawns as a central challenge to western democracy in the first half of the 21st century.

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