"The greatest of empires, is the empire over one's self." – Syrus, Maxims.

The changes in international relations brought by China continue to shape a significant part of today's adjustments in nations' diplomacy, but an inconvenient question to ask is whether China's rapid rise will mean over different time horizon.

China's transformation from dormant giant to the world second economic power surely impacted the world in tremendous ways, modifying whole countries' economies while introducing severe competition with others. This incredible rise has captivated Western media who are very keen on reporting China's actions abroad, mostly because the country is acting independently (i.e.: not under Western control) and its sheer size is perceived as a threat to Westerns interests throughout the world.

But China is under a lot of constraints which are not easy, or outright impossible, to combine: a large population to house, feed, power, give work and organize; an unforgiving landscape with serious shortages of water and arable land; a multifaceted economy from 19th century peasants to 20th century industry and 21st century tertiary sector; a number of international contentions with neighbours, old enemies and the world's superpower… Managing these various factors is a task that few humans can even start to ponder.

Domestic pressures are clearly the priority for the ruling government, which limits its foreign involvement to national strategic imperatives. The recent offer of Chinese air-strikes on ISIS should thus not be seen as the extension of China in the Middle East but a last resort action to protect its investments. Of course it also offers more than simple protection for its assets: more bargaining power with the Iraqi government, foreign military operation experience,  better knowledge of the Middle East… But China already has a lot to do domestically before even thinking of projecting its power abroad.

The history of similarly rising countries should indeed caution us against those warning us of the Chinese century: similar predictions were made for most, and subsequently failed, fast rising countries. If anything, the size of China makes it even more difficult to succeed. Over the short and medium term, China is unlikely to be anything more than a regional power, even though a very large one. But before it transitions away from a unsustainable economic paradigm, China cannot be anything more.

Science, General Knowledge & Environment

Beads Found In Ancient Danish Graves Match Glass Made For King Tut – "An analysis of artifacts retrieved from Bronze Age burial sites reveals that Denmark and ancient Egypt traded with one another 3,400 years ago, and possibly practiced similar religious rituals."

Why a mobile phone ring may make bees buzz off: Insects infuriated by handset signals – (Hat tip Michel) – "Dr Daniel Favre, who carried out the experiment, believes signals from mobile phones and masts could be contributing to the decline of honeybees and called for more research. But British bee experts say there is still no evidence that mobile phones posed a risk. They blame the vanishing honeybees on changes in farming, the decline of wild flowers and pesticides."

Tiny Plastic Bits Too Small To See Are Destroying The Oceans – "Therefore it isn't just the plastic itself that should concern us. We need to look at what it's carrying, as substances clinging to nanoparticles of plastic could badly damage marine ecosystems."

History & Geopolitic

Series Preview: The Geopolitics of Water Scarcity – [Video] – "Stratfor Editor-in-Chief David Judson and Science and Technology Analyst Rebecca Keller discuss the highlights of an upcoming series on water scarcity and stress around the globe."

The United States and Cuba Begin Restoring Relations -"Havana has much to gain from starting such a process, especially at a time when its regional partner, Venezuela, faces severe instability. Cuba fears that a declining Venezuelan economy will limit one of the island nation's sources of financing and low-cost petroleum shipments while it is attempting to transition toward a new leadership and economic model."

Viewing Russia From the Inside – "It would explain why the increased sanctions, plus oil price drops, economic downturns and the rest simply have not caused the erosion of confidence that would be expected. Reliable polling numbers show that President Vladimir Putin is still enormously popular. Whether he remains popular as the decline sets in, and whether the elite being hurt financially are equally sanguine, is another matter."

Conversation: Analyzing Russia's Economic Crisis – [Video] – "Stratfor Vice President of Global Analysis Reva Bhalla and Founder George Friedman discuss the potential fallout from Russia's worsening economy."

Enter the Dragon: China offers Iraq Aerial Strikes on ISIL/ Daesh – "China is heavily invested in Iraq’s petroleum sector. It is one of the world’s largest petroleum importers after the US, bringing in 6.1 million barrels a day. In addition, China has a restive population of Muslims in its northwest and is no doubt afraid of the influence on them of Daesh (Chinese Uigurs are fighting alongside militants in Syria). (…) China says it will not join President Obama’s ad hoc coalition, and so any bombing runs the Chinese do will be unilateral and possibly poorly coordinated."

Finance & Economics

My reading of the FT on China’s “turning away from the dollar” – "Beijing has been trying since at least 2007 to bring down China’s high savings rate, for example, and yet today it remain much higher than it did seven years ago. Chinese capital outflows, in other words, which are driven by its excessively high savings rates, may have less to do with master planning than we think, and certainly when I think of the most dramatic periods of major capital outflows in the past 100 years, I think of the US in the 1920s, the OPEC countries in the 1970s, and Japan in the 1980s. In each case I think we misinterpreted the institutional strengths and the quality of policymaking."

Pettis: Taking stock of China’s transition – "If Beijing can overcome political opposition to wealth transfers it is possible to maintain high consumption growth rates even as investment growth flattens or turns negative. In that case… Chinese household income and consumption might grow at a vibrant 5-6 percent annually while average GDP growth drops to 3-4 percent…"

How does China stack-up against Japan’s bubble? – "Phat Dragon concludes from all of this that China is a poor candidate for either a typical EM crisis or a Japan style meltdown. However, if the real economy cannot continue to grow the way Phat Dragon thinks it can, then the current flexibility afforded the authorities would be substantially diminished."

S Korea chaebol growth model hits limits – "South Korea is good at overcoming short-term crises but the manufacturing-driven economy is now facing longer-term challenges to sustain growth amid increasing competition from neighbouring China."

Picture of the day: 2014 Year in pictures


About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi