The first shots?

Cyber technology has been used before in warfare in Estonia and Georgia by Russia. However, the Chinese, in their continuing spat with nearly all their regional neighbours, have used economic weapons in an attempt to bring their historical foe to heel.

Press reports note that a “senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea”. The author elaborates mentioning that “Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to ‘impose sanctions on Japan in the most effective manner’ and bring Tokyo’s festering fiscal crisis to a head”.

Of course such an act by China would be seen as openly aggressive in such a climate. The fact that it might precipate a trade war between the two nations was dismissed by China. However, if China did bring on a funding crisis in Japan, war would actually be made easier between the two nations as the major block holding them from taking such a step would have been removed.

The article goes on to say that ” Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry“. As ever, the ratings agencies, not content in destroying the Western capitalist system, seem happy to ignore any long term gain and make a confrontation even more likely has he mentions, “Fitch Ratings threatened to downgrade a clutch of Japanese exporters if the clash drags on. It warned that Nissan is heavily at risk with 26pc of its global car sales in China, followed by Honda with 20pc. Sharp and Panasonic both have major exposure”.

He goes on to mention that “Jin said China can afford to sacrifice its ‘low-value-added’ exports to Japan at a small cost. By contrast, Japan relies on Chinese demand to keep its economy afloat and stave off ‘irreversible’ decline. ‘It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much,’ he said. It is unclear whether he was speaking with the full backing of the Politburo or whether sales of Japanese debt would do much damage. The Bank of Japan could counter the move with bond purchases”.

He adds later on in the article that “[Leon] Panetta said the US is neutral but this is a hard balancing act, given the US nuclear umbrella for Japan and its use of military bases on Japanese soil as an ‘unsinkable aircraft carrier’. The ambiguity of the US role was glaring after a deal with Tokyo on Monday to build a new anti-missile radar shield – ostensibly against North Korea. Diplomats say China is calibrating the crisis to probe the strength of US ties with Japan, knowing that alliance fatigue in Washington and the clumsy handling of the dispute by Tokyo has created a rare opportunity”. This shows the usual Chinese desire to control the entire Pacific region but its clumsy moves could easily have the opposite effect, by strengthening US-Japanese ties.

He concludes the article noting ominously that “Markets are already starting to price in an arms race in Asia. Shares of China’s North Navigation Control Technology, which makes missile systems, have jumped 30pc in recent days. China is becoming self-sufficient in defence. It was the world’s biggest net importer of weapons six years ago. It fell to fourth place last year. Japan is at the other extreme. An official report this year – ‘A Strategy for Survival’ – said Japan’s spending on its ‘Self-Defence Force’ had shrunk by 4pc in 10 years. It called for ‘urgent’ action to rebuild the country’s military”.


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