Why we should fear China

China is in the news a lot lately, and the reasons are unsettling. China has passed Germany as the world's top exporter. They are closing in on Japan as the world's second largest economy, behind only the United States. Via their stimulus package, they are largely credited with preventing the Great Recession from becoming a global depression. They hosted the most recent summer Olympics. They played a large, contrarian role at the recent environmental summit in Copenhagen. Their battle with Google is front page news. They have economic might and political clout and are afraid to flex neither.

Those are the headlines. We've grown accustomed to annoying behavior from China - abstaining from key UN Security Council votes, refusing to sanction Iran's nuclear programs. Never quite an ally, and never quite a foe, China has always walked a fine line in their relationship with America. Refusing to bend on human rights violations, yet still retaining Most Favored Nation status. Low cost manufacturing lowers retail prices for American consumers while a suppressed Chinese currency creates an unfair advantage in global trade, which in turn hurts US corporations. If you read beyond the headlines, you should be scared. If you are not, read the six reasons why I am.

1) China Inc. China's major corporations are government owned and operated. In most communist countries, this doesn't work so well. The economy eventually collapses under the weight of inefficient bureaucracy and corruption. It works in China because China operates its businesses based on market forces, not government quotas, mixing Capitalism with Communism. It also gambles based on market forecasts - not something communism is known for. This philosophical soup gives Chinese businesses a tremendous advantage, in an Orwellian sense. The businesses are the government, and vice versa. Currency valuation affecting the ability to export? No problem, the Chinese central bank will devalue the currency making it easier for foreign nations to buy Chinese goods. Having labor difficulties? No problem, the businesses are nationalized, and you can't strike against the government, so we'll start throwing dissenters in jail. Your business creates pollution? We'll change the emissions laws. This unparalleled cooperation is achievable because there is little separation of public and private sectors. One need only look at how quickly US big banks recovered to profitability to understand how formidable companies can be when backed by government coffers.

2) Raw Material Acquisitions. While the US government is spending all its money fighting wars in third-world nations, the Chinese are busy spending its money - given to them by Americans buying cheap product in high volume - building infrastructure in these same countries so they can control their natural resources. Case in point, the Anyak ore deposit in Afghanistan. The Chinese government's mining company was able to offer something that no private company in the world could possibly have matched - military protection. Afghanistan is not in a position to secure what will be a very large tax revenue for the struggling nation. No private company would be, either. China was happy to. Expect more of this as they buy the mineral rights in places like Somalia, Algeria, Congo, and more in Afghanistan. The Chinese are colonizing in an ingenious, devious manner. Chinese owned businesses, aka - the Chinese Government, arrive in these countries with "security" and take control of their means of manufacture. This is more dangerous than people realize. When China tries and fails to acquire a company, they throw the negotiators in jail for bribery and stealing corporate secrets.

3) Taiwan. The US recently agreed to complete a military arms sale to Taiwan. Taiwan split from China following World War 2, but China never fully recognized their independence and has threatened to invade if Taiwan tries to make the split permanent. China has indicated that if the US follows through with the sale of military weaponry to Taiwan, there will be repercussions. These repercussions include sanctioning the companies who manufactured the arms, which would prevent companies like Boeing from selling to one of their largest customers. China has already suspended military talks with the US. This fight has been brewing for decades. Up until now, China did not feel it was in the superior position, despite having the world's largest army. Just ten years ago, a Chinese refusal to buy American technology - like Boeing airplanes - would have hurt their growth more than it would have hurt American companies. This is no longer the case. As President Obama alluded to in his recent State of the Union address, the Chinese are more than capable with their own technology. In fact, when it comes to clean energy, China already leads the world in the creation of wind turbines and solar panels. If you thought energy dependence on Muslim nations who despise us was dangerous, imagine a wold where our energy dependence is on an aggressive, expansionist regime with a population four times our size and technology that rivals our own.

4) Government sponsored industrial espionage/terrorism. I'm sure everyone has heard about the battle with Google. It goes well beyond the censorship. Google believes that Chinese hackers, with government backing, attempted to breach their network. They were moderately successful at doing so. We also know that Google was not the only target. These hackers also attacked companies with which China has a strategic interest. With China's insatiable hunger for copper, and our strategic play with this metal, we revisited our own security controls as a precaution. It doesn't stop at stealing company secrets. China is on a resource acquisition frenzy. They were the winning bid on a mine in Nevada that, really, no one else had much interest in. The deal had received all regulatory approvals...until the US Military learned that the Chinese were buying a mine that bordered one of their strategic air bases. The Chinese quickly and quietly withdrew their offer at that point.

5) Rare Earth minerals. Almost everyone knows about the common metals - iron ore, copper, gold, silver. Many even know about some of the less common minerals - cobalt, molybdenum, titanium. You probably have never heard of Rare Earth minerals like scandium, dysprosium, yttrium and lanthanides. Why should we care about these minerals? A few reasons: First, they are necessary components of the most advanced electronics - lasers, hybrid vehicles, wind turbines, commercial aircraft and night vision goggles, to name a few. Second, though they exist everywhere, they are only profitable to mine when they are in high concentrations. There are only a handful of places in the world where they exist in high enough concentrations to mine - most are in China. Third, China knows this and is tightening its control on these minerals. So not only are they gaining the technical capabilities to build the most advanced technology in the world (see #3), but they are also capable of controlling the raw materials so that other countries would be at an economic disadvantage if they attempted to manufacture a competing product.

6) The Dalai Lama. Last, but not least, China is growing increasingly incensed with the Dalai Lama. This carries over to countries that agree to meet with him, including the US. Taking a lesson from the US world governance textbook, China is using its economic might to achieve its desired political results. When the leaders of major world players like Germany and Great Britain are willing to relax their stance on human rights for fear of reprisals from China, you know that China is a force. Given their history when they do have muscle to flex, we should all be a little on edge.

There is no denying the importance of China on the world stage. The real question is, what, if anything, should the US government do about it? What should US citizens do? Government can start by ending our dependency on foreign nations for energy, of any kind. We have all the resources and ingenuity we need in our own nation. Second, we can stop being the world police. We must honor commitments to our allies. We must not interfere with how other nations govern their people. Finally, instead of being the world's biggest spender on military - more than the rest of the world COMBINED, actually - we should be the world's largest investor in energy, medical advances, and communications. As citizens, our only job is to write our elected representatives and push for this agenda. And, if they don't do as we ask, we vote in someone who will.