9/26/12 – Chinese Seas Get Even More Crowded

This entry was posted on Sep 26, 2012 11:22:25 AM by Brad McMillan

and tagged Yesterday's News

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China rolled out its first aircraft carrier, in a significant symbolic move. The Financial Times (FT) covered the story in “Sea change: China enlists first aircraft carrier” (p. 6), the Wall Street Journal (WSJ) in “China Adds Carrier to Its Navy” (p. A9), and the New York Times (NYT) in “China Launches Carrier, But Experts Doubt Its Worth” (p. A4). I say symbolic because it will only be used for training and the Chinese do not yet have planes capable of carrier landings, as the NYT article points out. This is a sign of things to come, but not of things right now.

It does raise the ante across Asia, though. Japan is feeling it, per “Island spat raises military heat” (FT, p. 6), which talks about how the confrontation is getting more military in nature. Most people do not realize this, but Japan actually has an extremely capable military, including an excellent navy. If these confrontations result in Japan starting to re-arm, that will change everything about the Asian environment. This is a big deal for the next 10 years and forward.

Japan is not the only one feeling the heat either. Taiwan has put its chips into the pot on the Senkaku/Diaoyu island dispute as well, as highlighted by “Near Disputed Islands, Japan Confronts Boats from Taiwan” (NYT, p. A9) and “Taiwan Enters Island Fray” (WSJ, p. A9). Everyone wants a piece of the resources around the islands, per “Century of dispute over rich resources” (FT, p. 6).

As the military face-off heats up, the economic consequences are starting to mount as well. The FT has “Toyota cuts China output among unrest” on the front page, and the WSJ has “Toyota Pulls Back Amid Chinese Chill” on page A9. Toyota, one of the largest and most global manufacturers, is probably the best placed of any company to withstand political winds; the fact that Toyota is starting to make meaningful economic decisions based on the situation with China is a sign that this will be a major economic problem going forward for both countries, at the very least. China is Japan’s largest trading partner, and Japan is China’s second largest trading partner. Any disruptions will be meaningful.

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