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China, Friend Or Foe

China can be a great friend or a terrible foe.

To understand China, one has to know a little history of China, where China came from, why is China the way it is.

In China's 5000 year history, China had many ups and many downs.

From mid 1800's to mid 1900's, China faced one of its darkest periods in its history. During this period, China was invaded, robbed, burned, and spitted on by Western powers and Japan.

In 1949, Mao's Communist Party came to power. He wanted to make China powerful both economically and militarily in a hurry. His economic Great Leap Forward and Cultural revolution were disasters.

After Mao died and when Deng became the Chinese leader, he changed direction. He knew that communism will neither make China economically powerful nor stable.

From 1978 to the present, China grew rapidly to become the 2nd largest economy after the USA.

Back to the title, is China a friend or foe? China has many friends and some foes. For the countries that want China to be a friend, China is happy to accommodate. For those countries that treat China as a foe, China would accommodate them too.

China is a big country and has many neighbors. There were many disputes among neighbors from the past. China prefer to settle these disputes with talks rather than force.

To date, China settled all the disputes with its eight northern and western neighbors. China want to settle with the rest of the neighbors using the same way, bilateral talks. Some tried to bring in outside influence.

In the first 30 years after 1949 when the CPC took control of China, China had a few military encounters with its neighbors. They were all very brief and nothing were settled. In the last 30 years, Asia was relatively trouble free. Chinese leaders since Mao wanted to concentrate on economic developments. Military spending was reduced to a minimum, as little as 1.4% of GDP. THe US spend as much as 4% of its GDP on the military. Even India spend about 3% of its GDP on defence.

However, in the last two years, since the US started a "back to Asia" movement, troubles started to brew. Is it a coincidence? China certainly did not think so because since then, China upped its military spending by as much as 15% by some estimate and acquired a aircraft carrier too. Is that the beginning of a new arms race in Asia? I certainly hope not.

The former USSR got into economic trouble by trying to keep up an arms race with the US. We knew what happened to the former USSR. I hope China does not make the same mistake. But will China allow Japan and the Philippines to walk all over China?

Coincidentally, China's economy started to slow down in the last two years. Will that make Chinese leaders less tolerant?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.