Trade Deficits Paying for China Military Buildup

One little detail largely escaped media notice when Chinese president Xi Jinping met with North Korean dictator Kim Jong-un on May 8.  The visit coincided with China's launch of its first indigenous aircraft carrier in the town where the two met, perhaps sending a message to friend and foes of both China and North Korea:

The pair reportedly met in Dalian, where Xi will attend a ceremony launching the country's first domestically-built aircraft carrier.

To North Korea, the message was, don't worry, because China has your back.  To the U.S., the message was, you'd better start worrying about more than the price of soybeans.

China has global ambitions, and those ambitions, like that new carrier, are being paid for in large part by the vast transfer of wealth via our huge trade deficits with Beijing.

Agreeing with that assessment is former Wall Street Journal editor and Asia expert Brett M. Decker, who warns that those who worry that tariffs will increase the price of consumer goods and provoke a trade war are missing the big picture: that China is using its trade surplus us to prepare perhaps for a real war.

America's trade deficit with China serves the authoritarian state's global ascendance and regional power ambitions, said Decker.

"What are our dollars doing?" asked Decker.  "We're building, paying for, and underwriting [China's] military buildup.  We're building their infrastructure.  We're making their country stronger for the future, sort of at the long-term expense of our own.  We're not making the investments in our own infrastructure."

"Every three years, we're at a rate of $1.2 trillion in trade deficit with China," said Decker.  "That's money they're just using to build a deepwater fleet so they can project force in the Pacific. It's a national security issue, as well." ...

The trade deficit "is not only a consumer question," said Decker, inviting political observers to contemplate "the bigger picture" of geopolitics.

For those who cheerfully chirp that they personally have a trade deficit with K-Mart to neither's disadvantage and both getting what they want, consider that K-Mart is not taking your money and building aircraft carriers, anti-satellite weapons, and ballistic missiles with multiple and maneuverable warheads.  Those militarized islands in the South China Sea are there not for tourists, but to militarily support China's territorial and resource theft in the region as it pursues its global ambitions.

Peter Navarro, assistant to President Trump and White House Office of Trade and Manufacturing policy director, writing in the February 9, 2016 National Interest, uses America's F-22 Raptor as an example of how China's intellectual property theft in combination with our huge trade deficits has placed us in mortal peril:

Let's see, however, if we can put the size of the U.S. trade deficit with China into some perspective; and let's start with the F-22 – the only U.S. fighter jet with the agility, speed and stealth to overcome the latest Russian air defense systems and newest Chinese and Russian fighters[.] ...

America can deploy only 187 F-22s because Congress, with President Obama's veto gun to its head, cancelled further construction due to high costs: about $360 million a plane[.] ...

In contrast, China surely will have the capability to churn out record numbers of its F-22 clone known as the Chengdu J-20 Mighty Dragon.  The sad irony here is that even as Congress was voting to halt F-22 construction, Chinese cyber hackers were brazenly stealing the F-22's blueprints.

Now here's the relevant trade deficit math: Assuming that it costs about half the price for China to build its F-22 clone because of cheap labor and no need to pay for the R&D that went into developing the F-22, China can use a little more than one month of its trade surplus to replicate the entire U.S. F-22 air wing – and pay for 1,000 of these planes with American consumer dollars in less than six months.

There's clearly a lot more going on here than the price of a refrigerator at Home Depot.  While we wring our hands over how China boycotting our soybeans might affect the midterm elections, China is figuring out how to allocate our gift in the financing of its major weapons systems:

[Y]ou can do the (admittedly) rough numbers for any of a number of other Chinese weapons systems.  For example, one day's worth of China's trade surplus with the United States buys 1,000 new cruise missiles that Beijing can point at Taipei or one hundred anti-ship ballistic missiles to target American carriers.

Similarly, just one week's worth of China's trade surplus finances the construction of at least three new Chinese aircraft carriers to patrol the South China Sea and Indian Ocean or twenty new Yuan class diesel electric submarines to lay [sic] in wait for Japanese destroyers or American aircraft carrier strike groups.  And Beijing can pay for its entire annual defense budget with a mere five months of what American consumers contribute to Beijing's imperial fisc.

American consumers are quite simply financing China's war machine.  They financed China's new aircraft carrier.  And they are financing China's long-term territorial ambitions in the East and South China Seas:

Beijing has long declared the South China Sea to be its territorial waters and has laid claim to two disputed chains: the Paracel Islands, about 200 miles from the coast of Vietnam, and the Spratly Islands in the southeastern part of the South China Sea.  China's territorial ambitions include the Senkakus in the East China Sea, part of what Chinese military doctrine refers to as the "first island chain" that surrounds China.

China's claim to the Senkaku Islands in the East China Sea involves islands under Japanese administration and that Tokyo claims as Japanese territory.  In the South China Sea, as of February, according to Reuters, China had finished construction on no fewer than six different island reefs from which to project its power in the South China Sea.  Included in its military effort is the construction of a 3,000-meter (9,842 feet)-long runway on the artificially expanded Fiery Cross Reef as a base for Chinese fighter aircraft.

The Chinese know the nexus between national wealth and national strength.  While we struggle to find a way to get Mexico to pay for the border wall, China has found the easy way to get America to pay for its military.

Daniel John Sobieski is a freelance writer whose pieces have appeared in Investor's Business Daily, Human Events, Reason Magazine, and the Chicago Sun-Times among other publications.

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