August 29, 2012: China has a growing list of problems with its neighbors, both the ones who are allies (North Korea, Burma, Pakistan) and those who are not (all the rest). The "allies" are a sorry lot, all of them failed states with troubled economies and inept governments. The other neighbors are increasingly hostile because of the nationalistic polices of China, which have led to bullying and threats. China has become more vocal about claims on the territory of its neighbors. This has caused the neighbors, despite many differences they have with each other, to form a growing anti-China coalition. This simply inflames the nationalistic attitudes within China. China has shown no interest in defusing the growing crisis.

The government has, for decades, used nationalism (appealing to popular sentiment about China being strong and powerful) to keep people from dwelling on government corruption and incompetence. That has worked a bit too well, with opinion polls showing the majority of the population wants China to be more forceful with other countries that refuse to do what China tells them to do. There is also public support for doing the opposite of whatever the West demands. That means supporting dictators, especially if there's a profit to be made selling weapons to a nation like Iran. China already does this secretly but most Chinese believe it should be done openly and proudly.

North Korea is a particularly troublesome ally. North Korea is an economic basket case with widespread hunger and a growing number of starvation deaths. Corruption is worse than it is in China, with North Korean officials even stealing from Chinese businesses investing in North Korea. The government there clings to the discredited communist centralized control of the economy and sees Chinese businessmen as decadent capitalists who are out to exploit North Korea. For over a decade China has urged North Korea to adopt Chinese-style market reforms (a market economy under a police state government). North Korean leaders fear that this will not work for them because of the risk that wealthy entrepreneurs will support a revolution. China points out that this has not happened to them, but the North Koreans insist that Koreans are different.

Meanwhile China has been quietly recruiting supporters for the "Chinese Solution" among the North Korean ruling class (a thousand or so families that dominate the government and military). This serves as a growing threat to North Korean leaders who continue to resist the Chinese Solution. An attack on the pro-Chinese North Koreans might quickly turn into a civil war, with China coming to the aid of its partisans. So negotiations continue. China wants to get North Korea back on its feet before it falls apart and those nuclear weapons North Korea has created get into the wrong hands. Another reason to shift North Korean efforts from the military to the economy is to dismantle the North Korean ballistic missile program. These missiles give the U.S. and its local allies an excuse to build anti-missile defenses that can stop Chinese as well as North Korean missiles.

Burma (Myanmar) and Pakistan are a different matter. China makes some money here by supplying the two with cheap civilian and military goods and making investments. Both these nations have lots of internal disorder and foreign investment from anyone is a risky proposition. But China gets the most favorable terms. Burma is particularly troublesome, as Burmese rebels operating near the Chinese border regularly send thousands of civilians fleeing into China. The recent response has been to force the refugees back into Burma, which has caused China a lot of bad publicity. China has to make the most of what few allies it has and tolerates the embarrassing antics of its few pro-China neighbors.

Attempts to control government corruption in China continue to fail and public anger grows. Some officials are pointing out that the corruption is often encouraged by government policies. For example, the retirement benefits for senior officials have not kept up with the times and senior officials can't help but notice that corrupt officials have much nicer retirement lifestyles than their honest counterparts.

More of the corruption at the top is becoming visible. The recently dismissed politician Bo Xilai was at the center of a huge web of corruption and the government is having a hard time with damage control. Bo Xilai's wife was recently convicted of murdering a British businessman and given a suspended death sentence. She will most likely be out of jail in five years or so, in return for keeping her secrets to herself. Bo Xilai and his wife were at the center of numerous corrupt schemes, an arrangement that is increasingly typical in China. For the ruling families, corruption is a family affair, with everyone taking part. The state-controlled media will not discuss this but most Chinese will.

China has a growing crisis on its hands, with the population losing faith in the government being able to control shoddy construction practices. This is the result of corrupt officials taking bribes to approve substandard construction projects. The results of this are increasingly apparent, despite government attempts to keep it out of the news. Every time there is an earthquake a disproportionate number of government buildings (especially schools) collapse. Structures built by non-government organizations (who are concerned about their personal safety) are built properly and tend to survive. Then there's the problem with the growing number of new bridges that simply collapse in regular use. There have been seven such collapses in the last year alone and people have died from these incidents. More to the point, most Chinese can see themselves as the victim of a poorly built bridge that only benefitted the thieving builder and the government officials who took the bribes.

Another growing problem is the fact that economic activity has been slowing down in China for several years now, and the government tried to hide that by manipulating economic statistics. But the obvious evidence of an economic slowdown (huge numbers of unsold residential and commercial buildings, warehouses full of unsold goods, and a growing number of unemployed and underemployed Chinese) are difficult to hide. The government is under a lot of pressure to admit there is a problem and do something about it, rather than trying to keep the obvious secret.

China is also having more problems keeping its arms exports secret. This is not a problem when the weapons go to some dictatorship and stay there. But in Africa, the secret Chinese weapons shipments tend to spread around. The UN has noted that Chinese weapons are increasingly showing up in trouble spots. When captured, the owners of these weapons simply say they got the weapons from some local arms dealers. The dealers are hard to capture, or even identify, but the weapons are obviously of Chinese origin. China denies everything but that approach is getting old and there are growing demands for international cooperation to investigate and measure this underground Chinese weapons market.

Africa has become a new land of opportunity for adventurous and ambitious Chinese. But this has also attracted Chinese criminal gangs. The Chinese gangsters mainly prey on the growing Chinese populations in Africa, using kidnapping, extortion, and robbery to get a share of the new wealth being created by the hard working Chinese migrants. Local governments have a hard time coping with this sort of thing, and in the past year China has offered to send police investigators to find out who the bad guys are and, in cooperation with the local police, arrest and deport these crooks back to China for prosecution. Angola recently arrested and deported 37 Chinese under this program.

Meanwhile, the temptation remains for Chinese gangsters. Goods from China are cheap, if shoddy compared to European or American items. But in Africa low prices are king and the Chinese know how to play that way. The Chinese also don’t mind the nasty remarks from the locals. Chinese traders have been going abroad, often into hostile environments, for thousands of years. For the Chinese government, these “overseas Chinese” are an economic, diplomatic, and sometimes military bridgehead into foreign lands. The “overseas Chinese” can be a source of military intelligence and local knowledge for espionage and other missions. Most Western nations have pulled their diplomatic and intelligence people out rural areas in Africa, losing touch with what’s going on out there. Not so with the Chinese, where the Chinese entrepreneurs will go anywhere that appears capable of providing some profit. There are over a million Chinese in Africa now, most of them recent migrants.

August 28, 2012: For the first time in four years China and Japan resumed direct talks over problems with North Korea. This went ahead despite anti-Japanese demonstrations in China over territorial disputes between the two nations (regarding the uninhabited Diaoyu islands in the East China Sea). Japan is also concerned about the growing power of the Chinese military within the Chinese government. Chinese leaders are concerned about this as well and will probably try to reassure the Japanese that the problem is being tended to.

Despite growing tensions, and military completion between the two countries, India and China agreed to a five year plan for economic cooperation. Business is business, even if China claims a large chunk of northeastern India.