Markets Insight

Last updated: March 5, 2012 12:53 pm

Beijing’s lessons for central banks

Contrary to widespread concerns over an imminent hard landing, China will defy the naysayers.
Even after premier Wen Jiabao’s latest warning over a moderate slowing of growth, it is doing a far better job in managing its economy than most give it credit. It even offers some lessons in macro policy strategy that the rest of the world should heed.


Nowhere is that more evident than on the inflation front, where Chinese authorities have waged a very successful campaign against what has long been the nation’s most destabilising economic threat. After peaking at 6.5 per cent in July 2011, the headline consumer price index (CPI) has decelerated to 4.5 per cent in early 2012, with more disinflation likely in the coming months.

This reflects the impacts of three very deliberate policy actions taken by Beijing.

First, administrative measures were put in place to deal with bottlenecks in agriculturepork, cooking oil, fresh vegetables and fertiliser. Food inflation, which accounts for about one-third of the items on the Chinese CPI, peaked at 15 per cent in mid-2011. It has slowed to about 10 per cent.

Second, bank required reserve ratios were raised 12 times in 2011 to slow credit growth. The results are encouraging. Renminbi bank loan growth decelerated from 19.9 per cent in 2010 to 15.8 per cent in 2011 and renminbi deposit growth slowed even more sharply from 20.2 per cent in 2010 to 13.5 per cent in 2011.

Third, the People’s Bank of China (PBoC) raised policy interest rates five times in 2011. This was particularly important in light of the acceleration of non-food, or core inflation, to a 3 per cent high last northern summer – the sharpest such increase in more than a decade. Had the PBoC not acted, underlying inflationary pressures could have intensified further. Instead, they have now begun to moderate – with non-food CPI inflation easing off to 1.8 per cent in January 2012.

This three-pronged approach – in conjunction with a modest acceleration in renminbi currency appreciation – is an important example of China’s increased prowess in macro policy stabilisation.

Particularly significant was the central bank’s willingness to take its policy rate – the one-year benchmark lending rate up to the peak headline inflation rate of 6.5 per cent last northern summer.

By doing so, the PBoC not only ended the excessive accommodation imparted by negative real interest rates but it was then able to orchestrate a “passivemonetary tighteningallowing real short-term interest rates to climb to 2 per cent as administrative actions took food price and headline inflation lower in the second half of 2011.

This is classic central banking at its best. China now has plenty of ammunition in its monetary policy arsenalnamely, high required bank reserve ratios and positive real short-term interest rates – to deploy as circumstances dictate. In contrast, the US Federal Reserve, the European Central Bank and the Bank of England are out of traditional ammunition. They have followed the Bank of Japan and taken their short-term policy rates down to the zero bound.

As a result, the world’s big central banks have been forced to rely on untested and dubious liquidity injections as the primary means of monetary control. Where this ends and what it implies for the futureinflation, another outbreak of asset and credit bubbles, or some combination of all that – is anyone’s guess.

In the event of a downside shock to its economy, Chinese authorities have ample scope to ease. With economic activity slowing, they have already taken modest actions in that direction with two recent 50 basis point cuts in the required reserve ratio to a still very high 20.5 per cent. At the same time, with real policy rates at 2 per cent and likely to rise a little further as headline inflation eases, there is plenty of scope for traditional monetary easing if there is further weakening in the economy. The westout of basis points and with massive budget deficits – has no such option.

In a crisis-prone world, there is a gathering sense of foreboding over China. First it was the US, then Europe. Now there are growing fears the Chinese economy must be next. It’s not just the hand-wringing over inflation but also worries of a huge property bubble, a banking crisis or social unrest.

Those fears are overblown. China is cut from a very different cloth than the advanced economies of the west. Long focused on stability, it is more than willing to accept the short-term costs of a growth sacrifice to keep its development strategy on track.

A successful battle against inflation is an important example of the interplay between China’s tactical imperatives and its overarching strategic objectives. That’s a lesson the rest of the world could certainly stand to learn.

Stephen S. Roach, a member of the faculty at Yale University, was formerly chairman of Morgan Stanley Asia and is the author of ‘The Next Asia’

Copyright The Financial Times Limited 2012.

Western Civilisation: Decline – or Fall?

By Niall Ferguson

As a freshman historian at Oxford back in 1982, I was required to read Edward Gibbon's Decline and Fall of the Roman Empire. Ever since that first encounter with the greatest of all historians, I have pondered the question whether or not the modern West could succumb to degenerative tendencies similar to the ones described so vividly by Gibbon. My most recent book, Civilization: The West and the Rest attempts an answer to that question.

The good news is that I do not believe that Western civilization is in some kind of gradual, inexorable decline. In my view, civilizations do not rise, fall, and then gently decline, as inevitably and predictably as the four seasons or the seven ages of man. History is not one smooth, parabolic curve after another. The bad news is that its shape is more like an exponentially steepening slope that quite suddenly drops off like a cliff.

To see what I mean, pay a visit to Machu Picchu, the lost city of the Incas. In 1530 the Incas were the masters of all they surveyed from the heights of the Peruvian Andes. Within less than a decade, foreign invaders with horses, gunpowder, and lethal diseases had smashed their empire to smithereens. Today tourists gawp at the ruins that remain.

The notion that civilizations do not decline but collapse inspired the anthropologist Jared Diamond's 2005 book, Collapse. But Diamond focused, fashionably, on man-made environmental disasters as the causes of collapse. As a historian, I take a broader view. My point is that when you look back on the history of past civilizations, a striking feature is the speed with which most of them collapsed, regardless of the cause.

The Roman Empire did not decline and fall over a millennium, as Gibbon's monumental work seemed to suggest. It collapsed within a few decades in the early fifth century, tipped over the edge of chaos by barbarian invaders and internal divisions. In the space of a generation, the vast imperial metropolis of Rome fell into disrepair, the aqueducts broken, the splendid marketplaces deserted. The Ming dynasty's rule in China also fell apart with extraordinary speed in the mid–17th century, succumbing to internal strife and external invasion. Again, the transition from equipoise to anarchy took little more than a decade.

A more recent and familiar example of precipitous decline is, of course, the collapse of the Soviet Union. And, if you still doubt that collapse comes suddenly, just think of how the postcolonial dictatorships of North Africa and the Middle East imploded this year. Twelve months ago, Messrs. Ben Ali, Mubarak, and Gaddafi seemed secure in their gaudy palaces. Here yesterday, gone today.

What all these collapsed powers have in common is that the complex social systems that underpinned them suddenly ceased to function. One minute rulers had legitimacy in the eyes of their people; the next they did not. This process is a familiar one to students of financial markets. Even as I write, it is far from clear that the European Monetary Union can be salvaged from the dramatic collapse of confidence in the fiscal policies of its peripheral member states. In the realm of power, as in the domain of the bond vigilantes, you are fine until you are not fine—and when you're not fine, you are suddenly in a terrifying death spiral.

The West first surged ahead of the Rest after about 1500 thanks to a series of institutional innovations that (to entice younger readers) I call the "killer applications":

1.Competition. Europe was politically fragmented into multiple monarchies and republics, which were in turn internally divided into competing corporate entities, among them the ancestors of modern business corporations.

2.The Scientific Revolution. All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry, and biology happened in Western Europe.

3.The Rule of Law and Representative Government. An optimal system of social and political order emerged in the English-speaking world, based on private-property rights and the representation of property owners in elected legislatures.

4.Modern Medicine. Nearly all the major 19th- and 20th-century breakthroughs in health care were made by Western Europeans and North Americans.

5.The Consumer Society. The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better, and cheaper goods, beginning with cotton garments.

6.The Work Ethic. Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.

For hundreds of years, these killer apps were essentially monopolized by Europeans and their cousins who settled in North America and Australasia. They are the best explanation for what economic historians call "the great divergence": the astonishing gap that arose between Western standards of living and those in the rest of the world. In 1500 the average Chinese was richer than the average North American. By the late 1970s the American was more than 20 times richer than the Chinese.

Westerners not only grew richer than "Resterners." They grew taller, healthier, and longer-lived. They also grew more powerful. By the early 20th century, just a dozen Western empires—including the United Statescontrolled 58 percent of the world's land surface and population, and a staggering 74 percent of the global economy.

Beginning with Japan, however, one non-Western society after another has worked out that these apps can be downloaded and installed in non-Western operating systems. That explains about half the catching up that we have witnessed in our lifetimes, especially since the onset of economic reforms in China in 1978.

I am not one of those people filled with angst at the thought of a world in which the average American is no longer vastly richer than the average Chinese. I welcome the escape of hundreds of millions of Asians from poverty, not to mention the improvements we are seeing in South America and parts of Africa. But there is a second, more insidious cause of the "great reconvergence," which I do deplore—and that is the tendency of Western societies to delete their own killer apps.

Who's got the work ethic now? The average South Korean works about 39 percent more hours per week than the average American. The school year in South Korea is 220 days long, compared with 180 days in the U.S. And you do not have to spend too long at any major U.S. university to know which students really drive themselves: the Asians and Asian-Americans. The consumer society? 26 of the 30 biggest shopping malls in the world are now in emerging markets, mostly in Asia. Modern medicine? As a share of gross domestic product, the United States spends twice what Japan spends on health care and more than three times what China spends. Yet life expectancy in the U.S. has risen from 70 to 78 in the past 50 years, compared with leaps from 68 to 83 in Japan and from 43 to 73 in China.

The rule of law? For a real eye-opener, take a look at the latest World Economic Forum (WEF) Executive Opinion Survey. On no fewer than 15 of 16 different issues relating to property rights and governance, the United States fares worse than Hong Kong.

Indeed, the U.S. makes the global top 20 in only one area: investor protection. On every other count, its reputation is shockingly bad. The U.S. ranks 86th in the world for the costs imposed on business by organized crime, 50th for public trust in the ethics of politicians, 42nd for various forms of bribery, and 40th for standards of auditing and financial reporting.

What about science? U.S.-based scientists continue to walk off with plenty of Nobel Prizes each year. But Nobel winners are old men. The future belongs not to them but to today's teenagers.

Here is another striking statistic. Every three years the Organization of Economic Cooperation and Development's Program for International Student Assessment tests the educational attainment of 15-year-olds around the world. The latest data on "mathematical literacy" reveal that the gap between the world leaders—the students of Shanghai and Singapore—and their American counterparts is now as big as the gap between U.S. kids and teenagers in Albania and Tunisia.

The late, lamented Steve Jobs convinced Americans that the future would be "Designed by Apple in California. Assembled in China." Yet statistics from the World Intellectual Property Organization show that already more patents originate in Japan than in the U.S., that South Korea overtook Germany to take third place in 2005, and that China has just overtaken Germany too.

Finally, there's competition, the original killer app that sent the fragmented West down a completely different path from monolithic imperial China. The WEF has conducted a comprehensive Global Competitiveness survey every year since 1979. Since the current methodology was adopted in 2004, the United States' average competitiveness score has fallen from 5.82 to 5.43, one of the steepest declines among developed economies. China's score, meanwhile, has leapt up from 4.29 to 4.90.

Not only is the U.S. less competitive abroad. Perhaps more disturbing is the decline of meaningful competition at home, as the social mobility of the postwar era has given way to an extraordinary social polarization.
You do not have to be an Occupy Wall Street activist to believe that the American super-rich elite—the 1 percent that collects 20 percent of the income—has become dangerously divorced from the rest of society, especially from the underclass at the bottom of the income distribution.

But if we are headed toward collapse, what will it look like? An upsurge in civil unrest and crime, as happened in the 1970s? A loss of faith on the part of investors and a sudden Greek-style leap in government borrowing costs? How about a spike of violence in the Middle East, from Iraq to Afghanistan, as insurgents capitalize on our troop withdrawals? Or a paralyzing cyberattack from the rising Asian superpower we complacently underrate?

Is there anything we can do to prevent such disasters? Social scientist Charles Murray calls for a "civic great awakening"—a return to the original values of the American republic. He has a point.

Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just cannot understand why it is running so damn slowly.

What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent—to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic.

Then we need to download the updates that are running more successfully in other countries, from Finland to New Zealand, from Denmark to Hong Kong, from Singapore to Sweden. And finally we need to reboot our whole system.

Voters and politicians alike dare not postpone the big reboot. If what we are risking is not decline but downright collapse, then the time frame may even be tighter than one election cycle.

The State of the World: Assessing China's Strategy
March 6, 2012 | 0016 GMT

By George Friedman

Simply put, China has three core strategic interests.

Paramount among them is the maintenance of domestic security. Historically, when China involves itself in global trade, as it did in the 19th and early 20th century, the coastal region prospers, while the interior of China -- which begins about 100 miles from the coast and runs about 1,000 miles to the west -- languishes. Roughly 80 percent of all Chinese citizens currently have household incomes lower than the average household income in Bolivia. Most of China's poor are located west of the richer coastal region; this disparity of wealth time and again has exposed tensions between the interests of the coast and those of the interior. After a failed rising in Shanghai in 1927, Mao Zedong exploited these tensions by undertaking the Long March into the interior, raising a peasant army and ultimately conquering the coastal region. He shut China off from the international trading system, leaving China more united and equal, but extremely poor.

The current government has sought a more wealth-friendly means of achieving stability: buying popular loyalty with mass employment. Plans for industrial expansion are implemented with little thought to markets or margins; instead, maximum employment is the driving goal. Private savings are harnessed to finance the industrial effort, leaving little domestic capital to purchase the output. China must export accordingly.

China's second strategic concern derives from the first. China's industrial base by design produces more than its domestic economy can consume, so China must export goods to the rest of the world while importing raw materials. The Chinese therefore must do everything possible to ensure international demand for their exports. This includes a range of activities, from investing money in the economies of consumer countries to establishing unfettered access to global sea-lanes.

The third strategic interest is in maintaining control over buffer states. The population of the historic Han Chinese heartland is clustered in the eastern third of the country, where ample precipitation distinguishes it from the much more dry and arid central and western thirds.

China's physical security therefore depends on controlling the four non-Han Chinese buffer states that surround it: Manchuria, Inner Mongolia, Xinjiang and Tibet. Securing these regions means China can insulate itself from Russia to the north, any attack from the western steppes, and any attack from India or Southeast Asia.

Controlling the buffer states provides China geographical barriers -- jungles, mountains, steppes and the Siberian wasteland -- that are difficult to surmount and creates a defense in depth that puts any attacker at a grave disadvantage.

Challenged Interests

Today, China faces challenges on all three of these interests.

The economic downturn in Europe and the United States -- China's two main customers -- has exposed Chinese exports to increased competition and decreased appetite. Meanwhile, China has been unable to appropriately increase domestic demand and guarantee access to global sea-lanes independent of what the U.S. Navy is willing to allow.

Those same economic stresses also challenge China domestically. The wealthier coast depends on trade that is now faltering, and the impoverished interior requires subsidies that are difficult to provide when economic growth is slowing substantially.

In addition, two of China's buffer regions are in flux. Elements within Tibet and Xinjiang adamantly resist Han Chinese occupation. China understands that the loss of these regions could pose severe threats to China's security -- particularly if such losses would draw India north of the Himalayas or create a radical Islamic regime in Xinjiang.

The situation in Tibet is potentially the most troubling. Outright war between India and China -- anything beyond minor skirmishes -- is impossible so long as both are separated by the Himalayas. Neither side could logistically sustain large-scale multi-divisional warfare in that terrain. But China and India could threaten one another if they were to cross the Himalayas and establish a military presence on the either side of the mountain chain. For India, the threat would emerge if Chinese forces entered Pakistan in large numbers. For China, the threat would occur if large numbers of Indian troops entered Tibet.

China therefore constantly postures as if it were going to send large numbers of forces into Pakistan, but in the end, the Pakistanis have no interest in de facto Chinese occupation -- even if the occupation were directed against India. The Chinese likewise are not interested in undertaking security operations in Pakistan. The Indians have little interest in sending forces into Tibet in the event of a Tibetan revolution. For India, an independent Tibet without Chinese forces would be interesting, but a Tibet where the Indians would have to commit significant forces would not be. As much as the Tibetans represent a problem for China, the problem is manageable. Tibetan insurgents might receive some minimal encouragement and support from India, but not to a degree that would threaten Chinese control.

So long as the internal problems in Han China are manageable, so is Chinese domination of the buffer states, albeit with some effort and some damage to China's reputation abroad.

The key for China is maintaining interior stability. If this portion of Han China destabilizes, control of the buffers becomes impossible. Maintaining interior stability requires the transfer of resources, which in turn requires continued robust growth of the Chinese coastal economy to generate the capital to transfer inland. Should exports stop flowing out and raw materials in, incomes in the interior would quickly fall to politically explosive levels. (China today is far from revolution, but social tensions are increasing, and China must use its security apparatus and the People's Liberation Army to control these tensions.)

Maintaining those flows is a considerable challenge. The very model of employment and market share over profitability misallocates scores of resources and breaks the normally self-regulating link between supply and demand. One of the more disruptive results is inflation, which alternatively raises the costs of subsidizing the interior while eroding China's competitiveness with other low-cost global exporters.

For the Chinese, this represents a strategic challenge, a challenge that can only be countered by increasing the profitability on Chinese economic activity. This is nearly impossible for low value-added producers. The solution is to begin manufacturing higher value-added products (fewer shoes, more cars), but this necessitates a different sort of work force, one with years more education and training than the average Chinese coastal inhabitant, much less someone from the interior. It also requires direct competition with the well-established economies of Japan, Germany and the United States. This is the strategic battleground that China must attack if it is to maintain its stability.

A Military Component

Besides the issues with its economic model, China also faces a primarily military problem. China depends on the high seas to survive. The configuration of the South China Sea and the East China Sea render China relatively easy to blockade. The East China Sea is enclosed on a line from Korea to Japan to Taiwan, with a string of islands between Japan and Taiwan. The South China Sea is even more enclosed on a line from Taiwan to the Philippines, and from Indonesia to Singapore. Beijing's single greatest strategic concern is that the United States would impose a blockade on China, not by positioning its 7th Fleet inside the two island barriers but outside them. From there, the United States could compel China to send its naval forces far away from the mainland to force an opening -- and encounter U.S. warships -- and still be able to close off China's exits.

That China does not have a navy capable of challenging the United States compounds the problem. China is still in the process of completing its first aircraft carrier; indeed, its navy is insufficient in size and quality to challenge the United States.

But naval hardware is not China's greatest challenge. The United States commissioned its first aircraft carrier in 1922 and has been refining both carrier aviation and battle group tactics ever since. Developing admirals and staffs capable of commanding carrier battle groups takes generations. Since the Chinese have never had a carrier battle group in the first place, they have never had an admiral commanding a carrier battle group.

China understands this problem and has chosen a different strategy to deter a U.S. naval blockade: anti-ship missiles capable of engaging and perhaps penetrating U.S. carrier defensive systems, along with a substantial submarine presence. The United States has no desire to engage the Chinese at all, but were this to change, the Chinese response would be fraught with difficulty.

While China has a robust land-based missile system, a land-based missile system is inherently vulnerable to strikes by cruise missiles, aircraft, unmanned aerial vehicles currently in development and other types of attack. China's ability to fight a sustained battle is limited. Moreover, a missile strategy works only with an effective reconnaissance capability. You can't destroy a ship if you don't know where it is. This in turn necessitates space-based systems able to identify U.S. ships and a tightly integrated fire-control system. That raises the question of whether the United States has an anti-satellite capability. We would assume that it does, and if the United States used it, it would leave China blind.

China is therefore supplementing this strategy by acquiring port access in countries in the Indian Ocean and outside the South China Sea box. Beijing has plans to build ports in Myanmar, which is flirting with ending its international isolation, and Pakistan. Beijing already has financed and developed port access to Gwadar in Pakistan, Colombo and Hambantota in Sri Lanka, Chittagong in Bangladesh, and it has hopes for a deepwater port at Sittwe, Myanmar. In order for this strategy to work, China needs transportation infrastructure linking China to the ports. This means extensive rail and road systems. The difficulty of building this in Myanmar, for example, should not be underestimated.

But more important, China needs to maintain political relationships that will allow it to access the ports. Pakistan and Myanmar, for example, have a degree of instability, and China cannot assume that cooperative governments will always be in place in such countries. In Myanmar's case, recent political openings could result in Naypyidaw's falling out of China's sphere of influence. Building a port and roads and finding that a coup or an election has created an anti-Chinese government is a possibility. Given that this is one of China's fundamental strategic interests, Beijing cannot simply assume that building a port will give it unrestricted access to the port. Add to this that roads and rail lines are easily sabotaged by guerrilla forces or destroyed by air or missile attacks.

In order for the ports on the Indian Ocean to prove useful, Beijing must be confident in its ability to control the political situation in the host country for a long time. That sort of extended control can only be guaranteed by having overwhelming power available to force access to the ports and the transportation system. It is important to bear in mind that since the Communists took power, China has undertaken offensive military operations infrequently -- and to undesirable results. Its invasion of Tibet was successful, but it was met with minimal effective resistance. Its intervention in Korea did achieve a stalemate but at horrendous cost to the Chinese, who endured the losses but became very cautious in the future. In 1979 China attacked Vietnam, but suffered a significant defeat. China has managed to project an image of itself as a competent military force, but in reality it has had little experience in force projection, and that experience has not been pleasant.

Internal Security vs. Power Projection

The reason for this inexperience stems from internal security. The People's Liberation Army (PLA) is primarily configured as a domestic security force -- a necessity because of China's history of internal tensions. It is not a question of whether China is currently experiencing such tensions; it is a question of possibility. Prudent strategic planning requires building forces to deal with worst-case situations.

Having been designed for internal security, the PLA is doctrinally and logistically disinclined toward offensive operations. Using a force trained for security as a force for offensive operations leads either to defeat or very painful stalemates. And given the size of China's potential internal issues and the challenge of occupying a country like Myanmar, let alone Pakistan, building a secondary force of sufficient capability might not outstrip China's available manpower but would certainly outstrip its command and logistical capabilities. The PLA was built to control China, not to project power outward, and strategies built around the potential need for power projection are risky at best.

It should be noted that since the 1980s the Chinese have been attempting to transfer internal security responsibilities to the People's Armed Police, the border forces and other internal security forces that have been expanded and trained to deal with social instability. But despite this restructuring, there remain enormous limitations on China's ability to project military power on a scale sufficient to challenge the United States directly.

There is a disjuncture between the perception of China as a regional power and the reality. China can control its interior, but its ability to control its neighbors through military force is limited. Indeed, the fear of a Chinese invasion of Taiwan is unfounded.

It cannot mount an amphibious assault at that distance, let alone sustain extended combat logistically. One option China does have is surrogate guerrilla warfare in places like the Philippines or Indonesia. The problem with such warfare is that China needs to open sea-lanes, and guerrillas -- even guerrillas armed with anti-ship missiles or mines -- can at best close them.

Political Solution

China therefore faces a significant strategic problem. China must base its national security strategy on what the United States is capable of doing, not on what Beijing seems to want at the moment. China cannot counter the United States at sea, and its strategy of building ports in the Indian Ocean suffers from the fact that its costs are huge and the political conditions for access uncertain. The demands of creating a force capable of guaranteeing access runs counter to the security requirements inside China itself.

As long as the United States is the world's dominant naval power, China's strategy must be the political neutralization of the United States. But Beijing must make certain that Washington does not feel so pressured that it chooses blockade as an option.

Therefore China must present itself as an essential part of U.S. economic life. But the United States does not necessarily see China's economic activity as beneficial, and it is unclear whether China can maintain its unique position with the United States indefinitely. Other, cheaper alternatives are available. China's official rhetoric and hard-line stances -- designed to generate nationalist support inside the country -- might be useful politically, but strain relations with the United States. It doesn't strain relations to the point of risking military conflict, but given China's weakness, any strain is dangerous. The Chinese feel they know how to walk the line between rhetoric and real danger with the United States. It is still a delicate balance.

There is a perception that China is a rising regional and even global power. It may be rising but it is still far from solving its fundamental strategic problems and further yet from challenging the United States. The tensions within China's strategy are certainly debilitating, if not fatal. All of its options have serious weaknesses. China's real strategy must be to avoid having to make risky strategic choices. China has been fortunate for the past 30 years being able to avoid such decisions, but Beijing utterly lacks the tools required to reshape that environment.
Considering how much of China's world is in play right now -- Sudanese energy disputes and Myanmar's political experimentation leap to mind -- this is essentially a policy of blind hope.