24 April 2007

(Anti-)China Bashing For Dummies: "The Coming China Wars" (and Other Hysteria)

China is a remarkable country. Within her borders one can find pristine, upper-class enclaves similar to Woodside, Bel Air and the Upper East Side, but also Fourth World shantytowns. During my three years living here, I've seen the glitter in Shanghai and the tranquil beauty in the expat suburbs of Beijing (truly sights to be seen; the cast of characters looks like something out of “Desperate Housewives”). But I've also experienced the flip-side of China, such as horrific poverty in parts of Henan Province (China's second most populous Province), a place misunderstood within China as being synonymous with HIV/AIDs, prostitutes, thieves and murderers. (The most popular meme in China's blogosphere is about the rampant discrimination faced by Henan migrant workers.)

I've also had the good fortune to talk with many "citizens" and "villagers" (more "citizens" than "villagers", but at least I've had a lot of feedback from the disenfranchised, too). Good ties to the best in China's academia, mainly professors and researchers affiliated with Tsinghua University, China's MIT. The company I'm with is the outsourcing hub for Tsinghua, so our affiliations run quite deep. And, thanks to Startech, I also have some links to Beida's elite (“Beida” is better known in the West as “Peking University”), as well as connections with Undersecretary equivalents within the Ministry of Science and Technology (MOST). Yet, although the intelligentsia is superb for a round of dialog and debate, the best discussions I've had have been with patrons of various Starbucks and some other (trendy) coffee bars.
(They're called "coffee bars" in China.)

I like to frequent the coffee bars, especially a particular Starbucks, one of the nicest Starbucks I've seen; not the fanciest or largest, but nicer than any I can think of in the Mid-Peninsula. I go there with my laptop (of course), but I also go armed with printed copies of China Daily, Shanghai Daily and Beijing Review, plus any current notes I have from China's two science and technology daily newspapers. (Yes, China has two national science and technology dailies.) And I have a little trick that I use to attract attention -- I'm trying to engage Starbucks patrons (primary market research). My trick: While I'm reading Shanghai Daily, for example, I leave my laptop open and displaying the title page of a report or article with a catchy (preferably provocative) title. My favorite, and the one that has attracted the most attention, is titled Simulated U.S. and Chinese Nuclear Strikes. Download it and you'll see: It displays quite nicely on a laptop; hard to miss even with a casual glance. My trick is often successful; in a short time, I'm off in discourse with a "citizen". I know that my audience is skewed: In China, Starbucks is mostly for the young, spoiled (or affluent), often with some overseas experience. But although it's a skewed audience, it's certainly different (and a generation younger) than my Tsinghua cohorts.

One of my most interesting encounters was with a women who is the equivalent of a First Lieutenant in the PLA (People's Liberation Army). She walked into Starbucks holding a carry-out bag from KFC and then ordered a vanilla latte. I have no love for photography, but this was one moment I wished that I had a camera (or a mobile phone with a camera): Young, female (and fairly attractive) PLA officer munching on KFC fried chicken and sipping a Starbucks latte. As you might expect, her attention was caught by my Simulated U.S. and Chinese Nuclear Strikes article. We talked about the article for ten minutes, but then she switched the topic to China bashing, noting a recent article published in the Global People bi-weekly People's Daily supplement (the links are listed below; the articles are in Chinese). Fortunately, I was aware of the article so I wasn't caught by surprise. The Global People cover story titled "Who is Viscously Attacking China?" goes on to discuss numerous China bashers. (An episode in finger pointing, as noted by the cover.) She was visibly upset by the article, feeling that there is way too much China-bashing coming from America, Japan and even Russia. To her total surprise, I was on her side.

People who have read my columns know that I'm hardly Polyannish about China. I don't pull my punches -- and I see a lot of problems in China. When I saw "Borat," I almost fell off my couch laughing: Many parts seemed like they were straight from China. All sorts of problems here: Nationalism/neo-Fascism, pollution, the widening gap between the rich and poor, endemic corruption, a lousy (almost non-existent) social net, atrocious health care (and to call some physicians here a "quack" would be paying them a compliment), food and pharmaceutical safety issues, moral decay. But there is way too much China bashing, which I define as stupid, unsubstantiated, anti-China (almost xenophobic) remarks, regardless of venue. What the PLA officer didn't know (and what the Global People cover story failed to mention) is that there's a new cheerleader among the China bashers: Peter Navarro, a professor at UC Irvine. His new book: The Coming China Wars: Where They Will Be Fought and How They Can Be Won.

I'll take a two-pronged (two-part) approach to countering his arguments. First, I'll scrutinize his scholarship, really his lack of scholarship. In the second part, I'll counter the arguments he made in his cover story that appeared in the December (2006) issue of Financial Executive. Neither space nor time permits a more thorough analysis.

The article is based on the book, so let me rip to shreds the so-called “scholarship” supporting many of the most absurd claims made in his book. Regardless that some Amazon reviewers were impressed by his research, the fact is that his research is abysmal. Let's start with his footnotes (a downloadable MS Word document). My primary concern is that his sources are shoddy at best. I'm not terribly impressed with the sources he cited. Not too many scholarly or research publications. Frankly, I download more English-language scholarly or research pubs on China in one month than he cited in his entire book!! Even among English-language business mags and trade rags, he didn't cite a wide variety of sources. My reading list for this past week alone included sources from the Morgan Stanley Global Economic Forum, ADB, World Bank, Brookings, European Foreign Affairs Review, Journal of International Marketing, and the usual stuff published in everyone's favorite dailies and weeklies. For trades, this past week included articles about China published in a dozen different periodicals. All of the above -- consumed in just the past week (and this past week wasn't particularly special). In comparison, it's hard for Navarro to claim that he really did his homework. For a high school civics class, his research is fine. For a professor at UCI, it's pitiful, especially since he makes a lot of sweeping, breathless claims (and with confrontational verbiage).

Navarro didn't cite many English-language China (or related) online dailies, either. He had only three footnotes from Xinhua, only four footnotes from People's Daily, five footnotes from China Daily, four footnotes from Asia Times and nothing from China Economic Net, Shanghai Daily (or their Eastday online edition), Shenzhen Daily, or ChinaTechNews. And let's not forget Hong Kong's best: the South China Morning Post (SCMP; only one footnote) or The Standard. Or my favorite English-language source, the PLA Daily. (Rats, no business section! Perhaps they should add a “doing business with the PLA” section. I admit, I read this for amusement purposes only.) Unfortunately, many of these seventeen footnotes are rather dated, pre-Hu Jintao era. Considering what recently happened to Chen (the deposed Party chief in Shanghai) and many other Jiang Zemin cronies, what's important to consider today is the reality of the Hu/Wen dynasty ... a dynasty in power until 2012.

What's also unacceptable is that he didn't even cover the "basics" among China's leading Chinese-language dailies, namely the government-sponsored Renmin Ribao (the "real" People's Daily), Ta Kung Pao and Wen Wei Po; the three main government wires (sans Xinhua variants), i.e., Zhongguo Tongxun She, Zhongguo Wang (which has an English version) or Zhongguo Xinwen She (also with an English version; he had one footnote from ZXS); or, the relatively independent Ming Pao, Sing Tao Jih Pao (well, this is somewhat pro-Beijing -- kind of like the KMT kissing up to the CCP) or The Hong Kong Economic Journal.

I consider all of the above "must reading" for any writer of a book about China, and for Navarro to simply skip over a lot of potentially relevant sources is inexcusable. Perhaps he consulted some of the aforementioned sources and made a conscious decision not to use them. But if he did, then he's playing into his own biases; like it or not, there's some pretty good analysis -- let's call it what it is, "apologetics" -- in some of the leading China dailies and Party journals. Hard to give a balanced perspective when one chooses to ignore possibly conflicting sources. In order for his book to have legs, he needed to demonstrate not just pithy journalism skills, but true scholarship. Instead of the New York Times, his book has the credibility of the National Enquirer.

I have a problem with Navarro's tone, too. He sounds omniscient, as if he's the only one that can notice the problems that China is facing. In fact, the central government is well aware of the challenges facing China (as are most Chinese). But if you listen to the book's audio excerpt or to his Bloomberg interview (the link is to a MP3 file), you'd likely come away with the impression that he's an alarmist at best, racist/extremist at worst (and with a bad attitude, to make things even worse). Bottom line: Discount and skip Navarro (and I'll continue to substantiate and reiterate this conclusion in my follow-up column).

For one of the best and most balanced pieces I've read about China's rising, see the recent cover story in TIME. I feel that it ends way too abruptly, so I'll pick up the pieces in my forthcoming “Letter from China” column that also tackles Navarro's absurdum in FE (i.e., the second and concluding part of this column). And if you'd like to read a balanced e-newsletter that focuses on China's challenges, I'd like to suggest China Brief from the Jamestown Foundation; China Brief often cites Chinese-language sources, the lack of which is one of the main criticisms I have of Navarro's so-called “research”.


Links to “Who is Viciously Attacking China?” special section in Global People:







Note: “03” is an introduction to this special section; “11” and “12” have the most interesting analysis as to why there is a lot of China bashing. I don't agree with their reasoning (it's almost as paranoid as Navarro's drivel), but it's a good read.

Originally published as a Sand Hill Group "Letter from China" column on January 26, 2007.


Howard Lee said...

Thank you for your great post. As China becomes stronger and extends itself out into the world, I am sure we will see more China bashing. Its inevitable because our media uses fear as a way to garner attention. However, I thank you for your effort and ability to be neutral in the way we should judge China.

Anonymous said...

OK. I get your point, I also get irritated by people who make big statements about China without taking Chinese sources into account. But you didn't say anything substantive about Navarro's argument at all - that's quite disappointing too.

Anonymous said...

a bit naive I think

Michael Turton said...

For those of us sitting in Taiwan under the Chinese threat to maim and murder Taiwanese in the service of Chinese expansionism, China "bashing" sometimes seems a lot more realistic than panda hugging.

I assume your counter to his arguments is arriving in a subsequent post? It isn't in this one....


Anonymous said...

I am somewhat confused. Are you arguing that Navarro's argument is wrong, or wrong because he does not use Chinese sources? (I assume that you must read Chinese yourself--am I correct?).

Also, would you consider yourself an expert on China? (I assume that you have a degree or two, perhaps advanced, in Chinese studies--am I correct?)

Thank you.

Anonymous said...

Well, up to a point, Lord Copper. It's true that when I tried to read Navarro's book I didn't get past the first chapter, it was so dreadful. I'm happy to take your word for it that the rest was as bad.
On the other hand, I hope you took the opportunity to disabuse your PLA friend of her own illusions. She reckons there's too much China-bashing abroad - but how does she know? Certainly not just from reading that ridiculous People's Daily article I hope. You don't say if she reads English, or has visited the west and read newspapers and books for herself there. I doubt it somehow.
Sure, there's Navarro-style China-bashing in western newspapers sometimes, just as there is America-bashing, Britain-bashing, France-bashing etc. That's the western media for you - they bash things. That's one thing PD etc never point out. The media are not the moderated voice of the state as here - something too few of your PLA types grasp (an ex Chinese ambassador pointed this out to me once). Just because one journalist - or academic, or politician, has a go at China, doesn't make it a policy. In fact, for every bit of OTT China-bashing, there is a least one bit of equally OTT, China's about to take over the world boosterism, and a lot more rational and sane reporting of China's ambitious and often difficult and contradictory reform strategy.
The PD article, and others similar, however, are deliberately designed to foster a sense of victimhood in otherwise intelligent and well-educated people who don't have direct access to the subject(for language, lack of travel opportunities and other reasons) but who might come across critical ideas, or think them for themselves, and must be warned in advance that these thoughts are all part of a western hegemonic plot. Then, when they do go abroad, forewarned as they are, they all too often see what they are taught to expect to see. Oh my god, the Washington Times has criticised China - it's that China-bashing we were told to expect, and we all know how important the Washington Times is - the People's Daily told us so.
Alternatively, they come to realise the whole thing is nonsense, counter-react badly and, as in the case of more than one friend, end up deeply and unfairly contemptuous of their own country, all too often staying abroad instead of returning and putting their considerable talents to use here.
It's crap, it's dangerous, and we should all try our best to counteract it, just as we should Navarro's nonsense.

Anonymous said...

I'll be tackling Navarro's specific points in a future post. My point in this post was to point out the sensationalism and tabloid-like quality of his book. A secondary point: To highlight that his scholarship is shoddy. Frankly, it's really much, much worse than most articles or books about China written by Western academics (and he's an academic).

I'm hardly a China apologist, but I don't believe in China bashing, either.

David Li said...

First, I want to say that's an awesome pick up line in Starbucks! ;)

I am looking forward to the second part of the post countering Navarro's point of view. I won't discount Navarro easily. His work may sometime be counterintuitive but well thought out.

There are two interviews of Navarro on Technation. Worth checking out.



Anonymous said...

David (Li), would you expect any less from me? ;-) BTW, great to see that you've found this blog. My original postings on the Sand Hill Group are not as easy to comment on since they require registration. I hope to get these back up on AlwaysOn, but they've had trouble with my authorship settings (this situation has lasted for several months).

Actually, I agree with some of Navarro's points (but I'll save the specifics for a future post/SHG column). But his scholarship is awful; no scholarship whatsoever. That's my chief complaint: Even when he's right, he doesn't have any credibility. In other words, how can I realistically ascertain when he's correct and when he isn't?

Also, his tome is alarmist. Makes Fox News look temperate. This doesn't do anything to help his credibility.

I will listen to the IT Conversations MP3s after I return from SOFTWARE 2007.



P.S.--Please look me up whenever you're in the two places where you know to find me. (Think the last time we met; think sailing.)

P.P.S.--To Michael Turton, don't worry, China can't do anything to your "renegade province" for at least several years. Funny how the KMT is kissing up to the CPC these days. Remember, there's a de facto Asian NATO with Japan and the U.S. pledging support to Taiwan, and with Australia joining with Japan.

Anonymous said...

Just from the excerpts and book review there is no way I could read beyond the first 20 pages. Having lived in Shanghai and Chengdu for about a year it's blindingly obvious Navarro never has. Maybe doubtful he stayed longer than a few weeks, if that. No doubt there are issues that the book raises that cannot be disputed but his tone is more than contempt and leans toward conspiracy theory. Like the Chinese gvt actually sponsors piracy, not that he comes right out and says that but you get the impression he thinks they are basing thier sucess on it. Reality is they crack down in one spot and it flares up in another. If you've ever looked for the pirate DVD guy in the alley only to find him gone to another location, you know what i mean. Definitely the Communist party is most corrupt and unlikely to change as pay offs are the major source of income and survival at every local level so his suggestion that the rest of the world just needs to crack down on them seems useless to me. Was looking for the continuation of this blog to see what anybody else thought but seems like it came to an end. Below is excerpt of book review.

Synopsis from "Businessbookreview".

A complete understanding of the “China Wars” begins with this observation: China’s “hyper” rate of economic growth is export driven, and the ability of the Chinese to conquer one export market after another is a result of their ability to set the so-called “China Price.” The China Price refers to the fact that Chinese manufacturers can significantly undercut the prices offered by foreign competitors over a wide array of products and services. China has established dominant market positions in everything from furniture, refrigerators, and washing machines to jeans and underwear.
The China Price, which has made this market
dominance possible, is the result of nine economic drivers.
1. Low wages for high quality work from a disciplined,
educated, nonunion work force
2. Minimal health and safety regulations
3. Lax environmental regulations and enforcement
4. The “supercharging” catalytic role of foreign direct
5. A highly efficient form of industrial organization
known as “network clustering”
6. An elaborate, government-sanctioned system of
counterfeiting and piracy
7. A chronically undervalued “beggar thy neighbor”
8. Massive government subsidies to numerous targeted
9. Great Wall protectionist trade barriers, particularly for
“infant” industries
Only one of these, network clustering, Navarro points out, is truly legitimate from the perspective of a global economic system based on free and fair trade. Each of the other eight, he notes, violate one or more of the “rules of the trading road” established by the World Trade Organization and treaties such as the General Agreement on Tariffs and Trade or that are embodied in international labor and environmental standards. By engaging in these trade policies and wielding its “weapon of mass production,” the China Price, the country is enjoying unprecedented rates of export-driven economic growth, thereby trouncing the competition in global markets.
Although it is difficult to accurately estimate wage levels in China—for a number of reasons—the estimates that do exist put the average hourly earnings well below a dollar. Interestingly, however, in many other countries in the world, the wages are as low or even lower and in often equally wretched working conditions. None of these countries can effectively compete with China, however. Manufacturers in China get more “productivity bang out of the wage buck.” Chinese workers are better educated and more disciplined than workers found in other low wage countries so that on a productivity-adjusted basis, Chinese workers are highly competitive with any other country in the world.
Why do Chinese wages not rise considering the country is experiencing year after year (decade after decade even) of record economic growth? How do Chinese manufacturers continue to pay such low wages for a high-quality work force in the face of rapid growth that would, in other countries, tighten the labor market and cause wages to increase? In China, which was created on a foundation of Marxist doctrine, exists the largest surplus of unemployed people ever created, and this “reserve army”
of unemployed workers continues to grow, thereby depressing wages and benefits. The reasons are four-fold: 1) continued population growth in what is already the world’s most populous country; 2) massive privatization of the work force has cast off tens of millions of industrial workers; 3) government-decreed, rapid urbanization that
is moving hundreds of millions of farmers into Chinese cities and factories; and 4) a system, in many cases, of quasi-slave labor facilitated by the outlawing of labor unions.
The result is the largest “floating population” of unemployed and underemployed workers ever seen. Even if China continues to grow at a rate of about 10 percent a year, its reserve army of unemployed is not likely to shrink and may even swell, according to Navarro. If the Chinese economy slows down, unemployment—and political discontent—will skyrocket.
The Chinese government imposes few health and safety or environmental regulations on its corporations or its remaining state-run industries. The rules that do exist, Navarro notes, are only weakly enforced, evaded, or ignored. This lack of a basic regulatory and legal system is enticing to foreign corporations that want to evade much harsher regulatory and legal systems in their own countries. Foreign capital and foreign companies (from neighboring Korea, Japan, Taiwan, and the United States) have arrived in China, effectively “exporting” their pollution and workplace risks. Today’s Chinese production facilities have much in common with nineteenth century Dickensian sweatshops in industrializing England and the dangerous factories of turn- of-the-century America that were exposed by the group of journalists known as “muckrakers.” Chinese and multinational companies that “grind up and spit out” these workers enjoy a significant cost advantage over countries where workers are better protected. Cheap labor and lax health, safety, and environmental regulations are giving China a direct competitive edge over many other nations, particularly in the developed world.
It is these elements, however, that have helped attract a massive inflow of catalytic foreign direct investment (FDI). The lion’s share of these funds comes from Hong Kong, the United States, Japan, Korea, and Taiwan. This FDI influx provides Chinese companies with two powerful catalysts to hone their competitive edge. First, this FDI is being spent on the most sophisticated and technically advanced manufacturing processes available. This means that China is getting better equipment and machinery—and sooner—than other developing countries, which allows Chinese manufacturers to produce more efficiently on the cutting edge. These FDI efficiencies are reflected in the double-digit rates of productivity over the past decade. Second, the FDI has brought with it some of the best managerial talent and managerial “best practices” from around the world. The result, Navarro indicates, is a winning combination: cheap Chinese labor on the production lines and the crème de la crème of foreign managerial talent in the middle and upper ranks.
While the world can rightly object to the unfairness and illegality of many aspects of the China Price, what no one can complain about is—and what every business executive can learn from—is China’s “industrial network clustering.” For the production of a wide range of export goods, companies located in close physical proximity have formed highly synergistic networks and clusters of activity that yield significant economies of scale and scope. Every single factor needed for production is produced in close proximity to the manufacturers. And, what is even more impressive about clustering, is that it is often done by whole townships or cities; there are entire Chinese towns and cities that specialize in particular industries or industry segments. The result is the generation of synergies and economies of scope all along the supply chain.
The Chinese have taken Japan’s much vaunted “just-in-time” system one level higher, transforming whole cities and towns and tens of thousands of acres of farmland into industrial production sites, with the resulting savings in transportation and transaction costs. In addition, using counterfeit or pirated factors of production, such as pirated software on computers, companies are able to cut significantly their costs relative to countries where intellectual property rights are respected. The piracy and counterfeiting that exists in China is largely, Navarro explains, the result of a tacit government policy to allow such practices to flourish. While the country may have a comprehensive set of anti-piracy statutes, little or no enforcement exists. The reason for China’s tacit sanctioning of widespread counterfeiting and piracy is the government’s awareness that counterfeit and pirated goods sold domestically help keep inflation low and that selling these goods internationally creates jobs and export revenues.
While the United States, Japan, and the European Union abide by “floating exchange rates” in which the values of the dollar, yen, and euro are determined in the free market and free-market forces in the world’s currency markets help bring global trade flows into balance, China, on the other hand, has adopted a “fixed exchange rate system.” It pegs the value of its currency, the yuan, to the value of the U.S. dollar. The result, as Chinese imports have flooded into the United States, has been a large undervaluation of the yuan relative to the dollar; most estimates put the size of this currency undervaluation at anywhere from 15 to 40 percent. Therefore, China’s “fixed peg system” means that no matter how large a trade deficit the United States runs with China, the dollar cannot fall relative to the yuan. This fixed peg also gives China an advantage over the rest of the world when it comes to accessing U.S. markets. Accordingly, China’s “beggar they neighbor” currency policy is an important driver of its export-driven growth.
As part of its broader mercantilist trade strategy, China has constructed what Navarro terms a “Great Wall of Protectionism” around its agricultural and industrial sectors. Part of this strategy involves a complex web of direct and indirect subsidies, particularly to key industries, while another part involves an equally complex set of trade barriers that provide shelter to some of China’s most vulnerable domestic industries and agricultural sectors. Both energy and water are heavily subsidized, and cheap electricity is a significant cost advantage for China’s steel plants and heavy industry. At the same time, its state-owned enterprises, which still control key sectors of the economy such as oil and steel, benefit from free land, and other enterprises are given preferential access to land by local and regional governments. China’s state-run banks provide heavily subsidized capital and credit to Chinese enterprises. Finally, on the subsidy side, many industries in the high-tech sector (biotech, electronics, and computers) and in the middle-tech sector (autos and aircraft) receive direct and substantial research and development support from the government.
While the Chinese government provides its export industries with every possible advantage, it protects its domestic sectors with a labyrinthine set of tariff and nontariff barriers. In addition, it has used preferential tax treatment to protect key industries, limited access to domestic market channels, and imposed excessive capitalization requirements on foreign financial services. While China’s entry into the World Trade Organization in 2001 was supposed to have eliminated these subsidies and protectionist measures, in reality, Navarro says, this has turned to be “a farce and fiction.” China’s export-led hyper-growth is, in turn, spawning many different points of conflict.

It is a perspective shared by most Chinese, and many Americans and Europeans, that “knock off” goods offered at affordable prices are acceptable because the branding companies can afford the loss. However, what is missing in this scenario is the fact that piracy and counterfeiting can
be dangerous. The worldwide production of counterfeit goods has increased by 1,700 percent since 1993. While China is not the only country engaged in this half-trillion dollar trade, it does account for two-thirds of the world’s pirated and counterfeited goods and 80 percent of all counterfeit goods seized at U.S. borders.
Why does the Chinese government allow piracy and counterfeiting to flourish? The answer is found in an intertwining set of economic piracy drivers and cultural norms. From an economic perspective, Chinese state-sanctioned piracy and counterfeiting is a vital “policy tool” that allows all layers of the Chinese government to control inflation, create jobs, expand its tax base, and raise the standard of living for the Chinese people. Because of the positive and powerful effects that piracy and counterfeiting have on the Chinese economy, pirates and counterfeiters are protected. It is the same kind of “local protectionism” that exists for those who pollute the air and water or who injure their workers but who provide an important source of employment and tax revenues for the local economy. As a final driver of the “China Piracy Wars,” there is the problem of the cultural norms that result from
the fusion of Maoism and centuries-old Confucianism. Several generations of Chinese executives grew up believing that property rights do not exist outside of the collective. Add to this, the fact that Confucianism has revered rather than reviled imitation, and the result is a “cultural laboratory” for the counterfeiting boom.
Counterfeiters have a huge cost advantage over legitimate producers. They do not have to engage in research and development; they do not have to spend money on advertising and marketing to build and sustain a brand name or open new markets. They piggyback on the efforts of legitimate companies and destroy much of those companies’ brand value and goodwill. Nor do they have to abide by environmental or worker safety regulations or pay corporate contributions to the government for Social Security or workers’ compensation, not to mention paying any corporate income or sales tax. Chinese counterfeiters have mastered economies of scale and economies of scope, producing products at larger volumes and at substantially lower costs. Neither do they have the legal costs of legitimate companies. And, the largest and not yet fully realized economic cost of counterfeiting and piracy, Navarro believes, is its effect on stifling the rate of global innovation. Without the prospect of being able to realize the rewards of innovation, individuals and companies will expend less time, money, and other resources to produce innovative new products.
When the contraband leaves China, it finds its way into the world’s supply chain or distribution network in thousands of different ways, and many of these conduits are controlled by organized crime networks, particularly China’s infamous Mafia equivalent, the Triads. These crime networks are increasingly moving out of their traditional staples such as illegal drugs and prostitution because the profit margins are larger from contraband and because the punishment for getting caught is much less severe for dealing in counterfeit goods. In some cases, counterfeit products are palmed off on big multinational corporations by unscrupulous wholesalers and used in brand-new equipment or products, and in other cases, the easiest targets are still small businesses and value-conscious consumers at the bargain-priced end of the retail network. China will not crack down on its counterfeiters and pirates until, Navarro says, it becomes in its best interest to do so or until the international community puts sufficient pressure on the Chinese government to do so—which, he notes, will only contribute to the country’s domestic problems.

China’s extremely lax environmental regulations and weak enforcement allow Chinese manufacturers to produce at an unfair cost advantage over competitors. While this wanton polluting of the air and water represents an important source of competitive economic advantage that is putting millions of people out of work and depressing wages in other countries around the world, there is also another problem. China’s pollution is spewing beyond its borders.
The statistics are startling. China is home to 16 of the 20 most polluted cities in the world. It is the world leader in sulfur dioxide emissions and has the second highest carbon dioxide emissions in the world. The country releases a fourth of the world’s non-natural mercury into the air, and it is the world leader in the generation of substances that deplete the world’s ozone layer. Acid rain affects one fourth of China’s land, and as much as half of the acid rain that falls in Korea and Japan is of Chinese origin. The World Bank estimates that pollution is annually costing China between 8 and 12 percent of its more than $1 trillion GDP in terms of problems such as increased medical bills, lost work due to illness, damage to fish and crops, and money spent on disaster relief.
At the root of many of China’s air-quality problems is its heavy dependence on relatively high- sulfur, low-quality coal, which it relies on for 75 percent of its energy needs. This is quite different from the other major economies of the world, which depend much more on oil. The result of this coal dependence, coupled with a lack of pollution-control technologies, is that China’s air-quality problem is different in several ways from countries such as the United States. Much of what Chinese power plants and factories spew into the air is not sulfur dioxide, but a high percentage of fine particulate matter, the most damaging airborne pollutant. Further, China’s air pollution problems are spread over the country rather than being concentrated in a few industrial hubs because small and large cities rely on coal for industrial and residential use. Unlike the developed world, where the automobile is the largest single source of pollution, China’s problem is a “stationary” one. Sources range from large coal-fired power plants in huge factory towns to coal-fired stoves and heaters in homes.
This situation is complicated by other factors. Even if the Chinese were able to get better control of pollution from factories and power plants and convert some of its population from coal to natural gas for residential use, the explosion in the market for cars and trucks, the result of a booming economy, is turning China into the world’s second largest petroleum consumer.
China is now one of the most desert-plagued nations on earth. One-fourth of its land mass, primarily in the northwestern portion of the country, is now desiccated dust. In another 20 years, some experts predict, almost 40 percent of China will have been ground into sand. The frequency of the sand and dust storms that represent environmental fallout is also increasing, and the fallout from these storms has become a global problem. The major causes of this problem are man-made: over cultivation of the land, overgrazing by livestock, rampant deforestation, the mismanagement of water resources, and indirectly, global warming. All the causes are tied to China’s rapid economic growth and imperative to feed its people.
On paper, China appears to have a set of environmental regulations almost as tough as those of United States or Japan. In practice, however, the laws are a sham, according to Navarro. At the root of the problem lies a set of economic incentives that have derailed attempts to control pollution. The practical effect of a weak central government is that national environmental regulations are not generally enforced at the local level. Some of the worst polluters are also some of the largest employers. A related problem is that many of the worst polluters are state-run enterprises or companies in which the government is a major shareholder, which raises the problem of requiring the government to police itself. All of this added together makes China one of the most polluted countries in the world with problems that are not just national, but regional and global in their trans-border implications. Yet it is China’s dysfunctional system of environmental protection that continues to make it such a magnet for foreign investment.

With oil being the lifeblood of every modern economy, oil and war, Navarro points out, are hardly strange bedfellows. What is new about today’s “blood for oil” wars is how China’s rapidly expanding need for petroleum is changing the battlefields.
Economically, the country’s increasing demand for oil is creating persistent and significant oil price shocks and is increasing volatility in the world’s oil markets, shocks which are destabilizing the global economy. On the foreign policy side, Navarro indicates, China’s oil thirst is accelerating the global arms race and the further spread of weapons of mass destruction. China’s approach to foreign policy and business dealings, in Navarro’s view, is helping prop up dictators and rogue nations with a propensity to loot their public treasuries, stifle human rights, and in at least two cases to date, conduct campaigns of genocide and ethnic cleansing. Finally, the China Oil Wars may spill over into an array of dangerous military confrontations. One possible trigger may be the discovery of large oil reserves in the South and East China Seas. China has already been engaged in disputes with Japan, Indonesia, the Philippines, and Vietnam in these areas and has already used military might to seize several islands in dispute and assert its claims.
As China’s economy continues to grow rapidly, so too will its oil consumption and share of the world oil market, while the U.S. share of that market stabilizes. It is also the largest economy in the world without a substantial strategic petroleum reserve (less than ten days supply in comparison with a sixty day supply for the United States), which makes it highly vulnerable to oil-market disruptions.
As a result of China’s growing thirst for oil, today’s oil market is characterized by both dramatically higher prices and significantly greater price volatility. Because of surging oil demand in countries like China and India, the International Monetary Fund has warned of a “permanent oil shock” and possible sustained global recession over the next several decades. Despite the serious economic impacts of inflation and recession that may result from China’s increasing participation in world oil markets, it is the other more geopolitical and foreign-policy-oriented effects—driven by China’s highly provocative energy security strategies—that may ultimately prove to be most dangerous to global economic and political stability.
The paramount fear of the Chinese is that, at some point, the United States might attempt to disrupt China’s oil supplies as a means of exerting pressure on Chinese economic, trade, or foreign policies or in response to a Chinese invasion of Taiwan. How has China sought to strategically address its oil-security fears? Unlike the U.S. focus on ensuring the security of the international oil market, China has adopted a “bilateral contracting approach” in which it seeks to lock down physical supplies of oil with other oil-producing countries. This approach, in Navarro’s view, is a conflict-generating strategy that is designed to lock out other potential buyers such as the United States and Europe.
China has entered into deals with some of the more rogue nations in the world, and in some cases, the author indicates, China has entered into bilateral deals that have involved the sale of weapons of mass destruction in return for oil. In other cases, these deals have involved the exchange of nuclear resources and technology for oil, and in still other cases, deals have literally involved genocidal “blood for oil.” China has promised that, in exchange for oil, other resources, or market access, it will use its United Nations veto as a tool to protect dictators and rogue states from any UN sanctions.

In a great historical irony, the Marxist-Leninist People’s Republic of China has become the world’s newest imperialist power, according to Navarro, in its relationships with less developed nations throughout Africa, Asia, and Latin America. It uses what he terms a “ Trojan horse” approach with a “South-South” message that allies Chinese workers with other developing countries against “Northern hemisphere” imperialists such as the United States, France, Russia, and Great Britain.
Under cover of this South-South diplomacy, China is employing a mix of state-subsidized capital, managerial expertise, skilled labor, and is rapidly gaining economic control of a lion’s share of the world’s metals, minerals, raw materials, and agricultural resources. This wave of capital and labor—the imperialist’s “weapons of mass construction”—build the transportation and communication networks and the extraction infrastructure needed for the subsequent exploitation of a country’s natural resources. These resources are then shipped back to the home country to feed its industrial machine, and the exploited country is stripped of its wealth and sees its environment degraded.
At the root of this imperialism is a voracious economic appetite for resources and raw materials. In less than three decades, China has transformed itself from a quiet agricultural backwater into one of the world’s largest consumers of metals, minerals, lumber, and other raw materials for its emphasis on heavy manufacturing. This is in contrast, it should be noted, to India, the other great emerging economic power, which is focusing instead on software, information technology niches, and global service industries.
China’s strategy for securing supplies of these resources is similar to that for securing oil. It seeks to gain as tight physical control of the resources as is possible. In the first stage of a relationship with a developing country rich in resources that China needs, it uses low-interest loans as bait and its huge army of engineers and laborers to build up the developing country, using funding to gain political and economic leverage. In some cases, Navarro reports, China also sells weaponry to the developing country as a means of ensuring continued political control by the ruling elites of that country. In the worst cases, he says, China offers political favors ranging from the use of its veto at the United Nations to threatening retaliation if the United States, Europe, or Japan engages in any type of economic embargoes aimed at curbing human-rights violations or violations of democratic freedoms.
The “investments” the Chinese government makes pave the way for the kind of “high-low” trade it seeks. China directs its financial capital and human resources to the development of the extraction and harvesting activities of resources, transporting the goods back home for the production of higher value-added goods and providing employment for Chinese workers. It systematically strips nations of their raw materials and natural resources while recovering the costs of these resources and materials by dumping cheap finished goods into these same countries, often driving out local, indigenous labor and driving up local unemployment. This scenario is playing out particularly in Africa and Latin America, Navarro notes.

Despite an abundance of “bad company,” no single country plays more of a key role than China, Navarro points out, in the global production, transportation, and distribution of all four illegal hard drugs—cocaine, heroin, methamphetamine, and Ecstasy—and the “precursor chemicals” to make these drugs. The country’s rapidly emerging role as the world’s “factory floor” for precursor chemicals and increasingly as a hard-drug producer in its own right has come about despite apparently sincere and severe attempts by the central government to control the trade. This failure, however, to curb its drug trade portends China’s conflict with other nations.
Today, one of the most important roles that China plays in the global heroin trade is to provide criminal syndicates with the vast quantities of the precursor chemicals needed to turn opium paste into heroin. As with the heroin trade, Chinese criminal syndicates facilitate the production, transportation, and distribution of various forms of methamphetamine across Europe, Asia, and the Americas. The irony is that the birth and subsequent rapid growth of the China methamphetamine trade is largely a response to events in the early 1980s when Chinese drug lords began synthesizing methamphetamine as a way to diversify their drug business away from its dependence on heroin, which was facing harsh government crackdown. While China plays an ever-growing role in
world methamphetamine production and distribution, its far more important role is to serve as the world’s leading supplier of bulk ephedrine, the principal precursor used to mass produce methamphetamine all over the world. Likewise, while there are many different ways to manufacture the drug Ecstasy, the primary method for its mass production typically involves several essential precursors that are supplied, in large part, by China.
Although China’s economy and its manufacturing facilities are first class, much of its banking system is still very much Third World, which has made China easy prey for drug syndicates seeking to launder money through the Chinese banking system. As a result of the drug trade, China is now emerging not just as the factory floor for the world’s hard-drug trade, but also as a major money-laundering center as well.

Navarro describes China’s water management policy with one phrase, “dam happy.” The country has 85,000 dams—and counting. It has 22,000 of the world’s 45,000 large dams. It has the tallest dam, the largest by reservoir capacity, the dam with the highest ship lift, and the most powerful electricity producing dam. Rather than boasting about its dams, Navarro says, its leadership may want to reconsider its water management policies.
A large dam strategy is a double-edged sword. While there is a beneficial side, there is also a more costly and dangerous side. Large dams are capable of destroying the very waters they harness as well as the agricultural lands they are trying to improve. Dams tend to slow down river flows, therefore decreasing the ability of rivers to rejuvenate and cleanse themselves of pollutants. Perhaps the worst aspect of large dams is their relatively short useful shelf life. As silt builds up behind a dam and the reservoir becomes more and more shallow, less electricity is generated, less water for irrigation is stored, and flood control becomes increasingly more difficult.
Chinese leadership is the midst of construction of an ever larger and larger set of dam projects that will be built on one of the most highly polluted and heavily dammed set of river basins in the world. The result is a set of great risks for China and for its downstream neighbors. Many of the dams, Navarro writes, are deathtraps waiting to happen: 30,000 of China’s dams are in critical condition, threatening over 400 cities and almost 150 million people. One of the reasons is neglect. As China pours billions and billions of dollars into more dams, it continues to underfund basic maintenance and repair of many of its older dams.
Much of China’s water in its rivers, lakes, streams, and wells is too polluted to use for irrigation, much less for drinking, and this pollution problem contributes greatly to a rapidly growing water scarcity problem. The pollution is caused by massive industrial dumping and indiscriminate industrial burning of toxic wastes, while an avalanche of excess fertilizer and pesticide runoff and mountains of animal and human waste are another cause.
China’s manufacturing industries are flooding the country’s waterways with toxic ash and effluents. In some cases, small to medium size factories that do not have adequate pollution-control technology wantonly dump toxic wastes into rivers and streams; in other cases, large factories with the latest pollution-control technology do use the technology for fear of driving up production costs.
China is the second-largest consumer and producer of pesticides in the world. Toxic pesticides are causing an array of negative health effects for the Chinese people, ranging from allergies, cancer, and damage to the nervous system to reproductive disorders, birth defects, and a weakening of the immune system. Besides the toxic pollution from pesticides, there is the problem of organic pollution from fertilizer runoff. China is the world’s user, and misuser, of fertilizer. Poorly educated farmers do not apply fertilizer properly and therefore need larger amounts to achieve a given yield. The result is a “flooding” of excess fertilizer runoff into China’s rivers and streams.
China has the largest urban population in the world. Its cities generate more than a trillion tons of sewage each year. Ninety percent of these municipal wastes, according to Navarro, either go untreated or fail to receive proper treatment. Adding significantly to the problem is the fact that the construction of sewer lines is failing to keep pace with rapid urban growth, and many sewage treatment plants are inefficiently run.
The overflow of animal and human wastes in China has broad international implications. China has become the breeding ground for new strains of influenza and other viruses, including the SARS virus and avian flu. The primary reason is because so many different farm animals live in such close proximity to humans and other species. The resultant “cross-pollution” creates a “soup of chemicals and viruses” that now threaten the world, Navarro writes, with new and exotic influenza and other viruses.
By reducing the amount of potable water and water available for irrigation, China’s severe water-pollution problems dramatically worsen China’s water-scarcity issues. China suffers from huge regional disparities in the allocation of water resources. Its best agricultural lands are in the north, but most of its water resources are in the south. And, it is not just Chinese farmers who are suffering from a lack of water. Water is also scarce in some of China’s most heavily populated and industrialized cities, including Beijing and Shanghai. Reduced flows on many of China’s rivers are already significantly reducing the amount of hydroelectric power necessary to keep the country’s smelters, paper mills, petrochemical plants, and other factories operating.
China offers a textbook case of how a complex array of economic forces is rapidly propelling the country to water scarcity ruin. The already intense pressures on China’s limited water resources are increasing with the forces of both economic and population growth and the attendant urbanization and industrialization. Navarro believes that misguided government policies also shoulder some of the blame, including the government’s failure to price its water resources correctly. Chinese water prices are among the lowest in the world. This not only encourages over consumption and inefficient use, but also provides inadequate incentives for investments in water-saving technologies and other demand-side conservation measures. According to China’s own Ministry of Water Resources, China uses four times as much water to produce a unit of GDP than the world average—and this in a country that is already facing serious water shortages.

Economic restructuring and industry privatization
have created a “reserve army of the unemployed” numbering more than 100 million. The Chinese countryside has
become a dumping ground for air and water pollutants, while the rural peasantry is heavily taxed. The country’s aggressive dam projects have displaced more than two million peasants, and the onslaught of industrial
development has evicted hundreds of thousands more.
As part of the march of progress, Navarro says, local government officials have had a tendency to seize land on behalf of developers, pocket the monies that are supposed to compensate villagers, and then enlist local gangsters to quell protests. In the large cities, wages that go unpaid to poor migrant workers is in the billions of dollars. Meanwhile, on China’s western frontier, ethnic separatist tensions are smoldering over the ongoing oppression of the Muslim minority by the Chinese government in the western frontier region. Social inequality has grown as millions of workers from former state-owned enterprises have been put out of work, and farmers have been compelled to compete on the capitalist market and pay rising levels of taxes. Tens of millions of rural immigrants have been forced to labor in harsh conditions in sweatshops in coastal China.
For these reasons, Navarro believes, none of the Coming China Wars outside of China’s borders will be as wrenching and violent as the wars from within. Skirmishes have already been fought. Over the past decade, the number of protests and riots has risen to nearly 100,000 annually, with both their scale and scope increasing. What is most alarming to the Chinese government about these protests, riots, and strikes is the diversity of causes and their broad geographic sweep.
In many ways, China’s coming wars from within are not just a tale of a growing urban-rural divide. They are also a tale of two very familiar Chinese warring factions. On one side, there are the dirt poor peasants and oppressed proletariat labor who comprise most of China’s enormous population and who provided Mao with his original power base. On the other side, there is the same coalition of wealthy corporate entrepreneurs and corrupt government officials that, during the pre-Mao/Chiang Kai-shek era, enriched themselves at the expense of the peasantry and proletariat. The irony here is that the great facilitator of the exploitation of labor by capitalists that Marx described is now the Communist Party itself.
China is also a nation that is rapidly aging. Looming ahead for the Chinese, Navarro believes, is a pension crisis, the severity of which will make the Social Security problems of the United States and countries like Japan and Germany look “like strolls through the park.” China is also a nation that is getting increasingly sick. Environmental pollution is proving to be a catalyst for an explosion of cancers and an epidemic of respiratory and heart diseases. This rapid increase in ill health is coming at a time when China’s once much-applauded healthcare system has unraveled under the weight of the country’s ongoing privatization of social services and other sweeping economic changes. Adding to the pressures on the healthcare system is an HIV/AIDS crisis that some experts predict will be the worst in the world. It is being rapidly fueled, observers note, by rampant and rising intravenous drug use, a late-blooming, 1960s style sexual revolution, and the reemergence of China’s once-infamous flesh trade.
At a macroeconomic level, HIV/AIDS does not just hit factories and offices. It also hits retail spending. The existence of HIV/AIDS lowers income and savings rates and drives down consumer spending, which is a key stimulus to GDP growth. Many analysts believe that the economic effects of China’s HIV/AIDS crisis will spill over into Chinese society and the broader world economy. Total deaths from HIV/AIDS are projected to reach 40 million by 2025, and the epidemic will conservatively shave anywhere from 1 to 3 percent off China’s GDP growth rate.
Any one of these explosive issues is capable of triggering bouts of economic and political instability. Taken together with the various wars from within, these ticking time bombs, in Navarro’s view, threaten to trigger what the Chinese fear most: luan or chaos.

Navarro believes that if all the major stakeholders in the Coming China Wars come to understand the high stakes involved, appropriate steps can be taken, all of which are difficult. What is missing, he says, is any real sense of urgency. The problem, he adds, is not so much knowing the “policy prescriptions,” but having the political will to adopt them.
Many of the prescriptions have been discussed in policy circles and featured in debates and negotiations in the U.S. Congress, in Asian and European parliaments, and in bilateral negotiations between the Chinese and many other countries. For example, in regard to the problem of rampant Chinese counterfeiting and piracy, the policy should be for other nations to adopt a zero-tolerance policy toward intellectual property theft, and any country that violates this policy should be held to account in bodies such as the World Trade Organization and punished accordingly. The international tightening of border security to more effectively interdict pirate and counterfeit goods would serve other goals, too, especially in the United States. These goals range from reducing the risks from terrorism and interdicting illegal drugs to clamping down on the trade in precursor chemicals from China (and elsewhere) used in producing the four major hard drugs described above.
In regard to the spillover of Chinese environmental pollution onto the global stage, one solution is to set minimum environmental (and health and safety) standards in every multinational and bilateral trade agreement. By adopting and enforcing such standards in a free-trade network, all nations of the world—not just China—would be forced to compete on a level playing field. To further combat China’s global pollution, the governments of countries that have large foreign investments in China, such as the United States, Japan, Korea, and Taiwan, should not tolerate their country’s business enterprises setting up shop in China to avoid more stringent restrictions in the home country.
China’s opportunistic use of its UN veto as a diplomatic shield for human rights violations in developing nations should be condemned, Navarro writes, and if the abuses continue, attempts should be made to strip China of its permanent veto. Continued efforts by the United States to reduce its dependence on Middle East oil will also go a long way toward reducing tensions with China, in his view, from reducing military and political conflict in the Middle East to slowing the process of global warming.
What all of these policy prescriptions share is that they require the economic and political will to stand up to China, along with the military might to back up the prescriptions. The policies will also, at least in the short term, entail significant economic costs. For example, raising global environmental standards will raise the cost of manufacturing goods, tightening border security puts pressure on an already strained budget, and reducing oil import dependence requires significant industrial realignment.
Nowhere, Navarro says, is the problem of the political will to confront China more problematic than in the United States. Although the United States is the world’s best hope for challenging China’s bid for world economic hegemony, it has also been the world’s greatest failure in doing so. The underlying problem, Navarro points out, is the highly destructive economic relationship each country has with the other, a relationship founded on “mutually parasitic economic codependence.” American politicians use large and chronic budget deficits together with “easy” money policies to keep American consumers and voters happy, or at least pacified. The biggest beneficiary of America’s fiscal and monetary irresponsibility is China. Tax cuts and a lack of fiscal restraint leave Americans flush with cash to buy more Chinese products and create more Chinese jobs. In less than a decade, China has become the biggest U.S. creditor and will soon pass Japan as the single largest holder of U.S. debt. By buying so much American debt, China is able to maintain a huge trade surplus with the United States and contribute to chronic U.S. trade deficits.
Until the United States becomes more fiscally and monetarily responsible, however, it will never be able to challenge China. Every American citizen, Navarro warns, will have to understand the real and hidden costs that are embedded in the purchase of cheap Chinese goods. Just as the United States must get its own political and economic houses in order to fight The Coming China Wars, so must the Chinese, particularly if they are to deal with the many wars from within.

* * *
Endnotes by chapter and a subject index
are provided.

Features of the Book
Reading Time: 5-6 hours, 288 pages
China’s economic miracle has already been much analyzed and discussed. Navarro’s contribution to the current China literature is his presentation of the explosive issues that he observes behind the miracle. These issues, in his opinion, pose risks to the United States and the rest of the world and are the result of China’s now out-of-control economic and industrial growth. China’s focus on urban economic growth has, undoubtedly, led the country to sacrifices and a lack of attention to other—primarily internal—problems. The primary purpose of the book, therefore, is to raise the level of economic and political awareness to a level that will allow the Chinese—and the rest of the world—to begin thinking about the issues raised in the book and to participate in what will be a set of hard choices, for the Chinese and the rest of the world.
The author uses a combination of data and anecdotes to illustrate how China’s manufacturing infrastructure is affecting the world. While some of the evidence may be startling to people who are not familiar with China, Navarro frames his observations in a cultural and historical context. While some China watchers may consider his observations alarmist, most would not dispute that the issues covered in the book are issues destined for inevitable discussion. Navarro does not shy away from discussing the involvement that America and other countries play in China’s current world situation. He writes, in Chapter 11, “From this discussion, it should be obvious why the United States, over time, is becoming increasingly unable to stand up to the Chinese . . . From this discussion, it should be equally obvious that the United States will never be able to credibly and effectively challenge China until it gets its own house in order.”
Navarro’s work is of benefit to anyone interested in China’s rapid economic expansion and the major issues associated with it, especially the so-called “China Price,” and its effect on American business (Chapter 1). Navarro describes all the variables, or the all the pieces of the puzzle, that go into China’s ability to compete with such low prices in the world marketplace, and for readers unfamiliar with China’s problems, the book is an excellent introduction to the country’s environmental problems, its natural resource crisis, and the social, political, and economic crises that it faces with its aging population.

Chapter 1: The “China Price” and Weapons of Mass
Chapter 2: China’s Counterfeit Economy and Not-So-
Swashbuckling Pirates
Chapter 3: Killing Us (and Them) Softly With Their
Chapter 4: The “Blood for Oil” Wars—The Sum of All
Chinese Fears
Chapter 5: The “New Imperialist” Wars and Weapons
of Mass Construction
Chapter 6: The 21st Century Opium Wars—The
World’s Emperor of “Precursor Chemicals”
Chapter 7: The Damnable Dam Wars and Drums Along
the Mekong
Chapter 8: The Bread and Water Wars—Nary a (Clean)
Drop to Drink
Chapter 9: China’s Wars from Within—The Dragon
Comes Apart at the Seams
Chapter 10: Of “Bloodheads,” Gray Dragons, and Other
“Ticking Time Bombs”
Chapter 11: How to Fight—and Win!—The Coming
China Wars
Key Concepts
Author Peter Navarro identifies eight policy areas in which China faces internal and external conflicts –sufficient to be termed “wars”—as a result of its rapid economic and population growth.
1. Piracy/counterfeiting of a myriad of goods
2. Its role in the world’s illegal drug trade
3. Environmental pollution that is extending beyond
China’s boundaries
4. An increasing demand for oil and the political
5. Imperialistic policies in the procurement of
natural resources around the world
6. Water scarcity challenges
7. Social change and unrest caused by the
transition form communism to capitalism
8. Demographic and healthcare crises