this is a naked attempt to deflect from the foreign policy failure of obama in the middle east.

Congratulations to KENNETH LIEBERTHAL for an excellent, very thoughtful analysis! I wish our presidential candidates could articulate a complete and thought strategy and policy. China will be our most important relationship in the next 25 years. Our politicians seem to be good at only periodical paroxysm of rage, hatred, castigation or admiration toward China.

This is one of the best foreign policy articles I have read on China. It's even handed, informative, and most importantly realistic about the current situations in the region. Why can't more FP articles be like this one?

I think the Obama administration is stuck what they start in middle east.
I have no shame to say that Obama have no future in next elections.

Thanks

The sudden death of North Korean leader Kim Jong Il drives home the importance of being able to work not only with U.S. allies but also with China in managing Asia's key threats. This is what makes striking the right balance in America's overall strategy.
Thanks

President Obama declared Wednesday that the United States had largely achieved its goals in Afghanistan, setting in motion a substantial withdrawal of American troops in an acknowledgment of the shifting threat in the region and the fast-changing political and economic landscape in a war-weary America.

Asserting that the country that served as a base for the Sept. 11, 2001, attacks no longer represented a terrorist threat to the United States, Mr. Obama declared that the “tide of war is receding.” And in a blunt recognition of domestic economic strains, he said, “America, it is time to focus on nation-building here at home.”

Mr. Obama announced plans to withdraw 10,000 troops from Afghanistan by the end of this year. The remaining 20,000 troops from the 2009 “surge” of forces would leave by next summer, amounting to about a third of the 100,000 troops now in the country. He said the drawdown would continue “at a steady pace” until the United States handed over security to the Afghan authorities in 2014.

The troop reductions, which were decided after a short but fierce internal debate, will be both deeper and faster than the recommendations made by Mr. Obama’s military commanders, and they will come as the president faces relentless budget pressures, an increasingly restive American public and a re-election campaign next year.

Only hours after Mr. Obama spoke, President Nicolas Sarkozy of France said on Thursday that he would also begin drawing down the 4,000-strong French contingent in Afghanistan.

”Given the progress we have seen, France will begin a gradual withdrawal of reinforcement troops sent to Afghanistan, in a proportional manner and in a calendar comparable to the withdrawal of American reinforcements,” Mr. Sarkozy said in a statement issued by his office, Reuters reported.

Mr. Obama, speaking in businesslike tones during a 15-minute address from the East Room of the White House, talked of ending America’s longest war and of the painful lessons he thought could be taken from it. While justifying the nation’s decade-long commitment, he talked of “ending the war responsibly” and warned of the perils of overextending the military by sending large numbers of soldiers into combat. He acknowledged that huge challenges remained before an end to the conflict that has cost hundreds of billions of dollars and 1,500 American lives.

The withdrawals would begin winding down the military’s counterinsurgency strategy, which Mr. Obama adopted 18 months ago. Administration officials indicated that they now planned to place more emphasis on focused clandestine counterterrorism operations of the kind that killed Osama bin Laden, which the president cited as Exhibit A in the case for a substantial American troop reduction.

“We are starting this drawdown from a position of strength,” Mr. Obama said. “Al Qaeda is under more pressure than at any time since 9/11.” He said that an intense campaign of drone strikes and other covert operations in Pakistan had crippled Al Qaeda’s original network in the region, leaving its leaders either dead or pinned down in the rugged border between Pakistan and Afghanistan. Of 30 top Qaeda leaders identified by American intelligence, 20 have been killed in the last year and a half, administration officials said.

But the withdrawal of the entire surge force by the end of next summer will significantly change the way that the United States wages war in Afghanistan, analysts said, suggesting that the administration may have concluded it can no longer achieve its loftiest ambitions there.

Mr. Obama acknowledged as much in his remarks. “We will not try to make Afghanistan a perfect place,” he said. “We will not police its streets or patrol its mountains indefinitely. That is the responsibility of the Afghan government.”

Mr. Obama’s decision is a victory for Vice President Joseph R. Biden Jr., who has long argued for curtailing the military operation in Afghanistan. Mr. Obama indicated a willingness to move toward more focused covert operations of the type that the United States is conducting in Pakistan, Yemen and elsewhere. “When threatened, we must respond with force,” he said. “But when that force can be targeted, we need not deploy large armies overseas.”

The pace of the withdrawal is a setback for the president’s top commander in Afghanistan, Gen. David H. Petraeus, who has been named director of the Central Intelligence Agency. General Petraeus did not endorse the decision, said another official. Defense Secretary Robert M. Gates argued publicly against a too-hasty withdrawal of troops, but he said in a statement on Wednesday that he supported Mr. Obama’s decision.

During the internal debate, Secretary of State Hillary Rodham Clinton also expressed reservations about the scale of the reductions, officials said.

General Petraeus had recommended limiting withdrawals to 5,000 troops this year and another 5,000 over the winter.

He and other military commanders argued that the 18 months since Mr. Obama announced the troop increase did not allow for enough time for the Americans to consolidate the fragile gains that they had made in Helmand and other provinces.

But troops have succeeded in clearing many towns and cities of insurgents, and then keeping them safe so that markets were able to reopen and girls could go to school, for example.

Military officials say the withdrawal of American troops will impose limits on which areas of the country can be pacified. In particular, plans to pivot extra American troops from south and southwestern Afghanistan to volatile areas in the east, along the Pakistan border, will be curtailed or even canceled, officials said.

The effort to transfer responsibility for security to Afghan forces remains elusive because the Afghan troops are proving unprepared for the job. Corruption in the government of President Hamid Karzai continues to be rampant, sapping the confidence of many Afghans.

Still, the growing disenchantment in the United States with the war, particularly given the ballooning national debt, the country’s slow economic recovery and the whopping $120 billion price tag of the Afghan conflict this year alone, were all considerations weighed by the president. “Over the last decade, we have spent a trillion dollars on war at a time of rising debt and hard economic times,” Mr. Obama said. “Now, we must invest in America’s greatest resource: our people.”

Republican presidential candidates including Mitt Romney and Jon M. Huntsman Jr. are demanding a swift withdrawal from Afghanistan, while Democrats complain that the cost of the war is siphoning money away from efforts to create jobs in the United States. Representative Dana Rohrabacher, Republican of California, called on Mr. Obama to speed the withdrawal. “If we’re going to leave, we should leave,” he said in a statement. “The centralized system of government foisted upon the Afghan people is not going to hold after we leave. So let’s quit prolonging the agony and the inevitable.”

Highlighting the unusual political splits the war is causing, other Republicans criticized the president for pulling out too soon. Representative Mike Rogers, the Michigan Republican who is chairman of the House Intelligence Committee, suggested that Mr. Obama was playing politics with the troop reduction, saying, “The president is trying to find a political solution with a military component, when it needs to be the other way around.” He said the situation in Afghanistan was “very precarious,” and that the White House seemed to be panicking about the levels of violence.

Mr. Obama’s speech, delivered at dawn on Thursday, Kabul time, is expected to be the subject of a speech by Afghanistan’s president, Hamid Karzai, scheduled for later in the day. Senior figures in Mr. Karzai’s administration began signaling that they were comfortable with the withdrawal of 10,000 troops by year’s end.

Gen. Mohammad Zahir Azimi, a spokesman for the Defense Ministry, said the Afghan National Army “has this capability and quantity to fill the gap of those places where the foreign troops withdraw and leave Afghanistan.
Thanks
valkee

China in managing Asia's key threats. This is what makes striking the right balance in America's overall strategy. Thanks
Massagista

America's primary domain is the Atlantic Basin and therefore the primary focus of it's foreign and domestic policy. It has a secondary interest in the Indian Ocean because of cultural ties to Australia and India, both being former British colonies. If the need for America's global expansion is to secure new markets and trading partners then India's one billion people should satisfy that need in a manner mutually acceptable to both. If however it's pacific expansion is derived from a desire to contain China's military expansion then the countries military assets are being misplaced and should remain in the Middle East. The Chinese nation expands " successfully " through Central Asia into Iran and the Euphrates River Valley in past eras and will most likely follow the same path.Their past naval adventures have all been failures.While it is not being suggested that they are incapable of naval success , history would seem to suggest the odds are against them in that venture

In Revelation 9:16 and 16:12 Quote: as for King of East

"we see a vast army of 200 million soldiers moving westwards across Asia, the Euphrates River and moving onto to a place called Armageddon."

Asia Pacific Pivot, NEOCONS daydream or nightmare??

now go back do a back flip or perhaps sommersault, before it is too late,

Spend a fortune to get into Iraq & Afghan,

then spend a fortune to get away; problems still linger for a long long time.

Winston Churchill was coloinal administrator of Middle East between World I & World II.

He even resorted to aerial bombing ( he had too few english troops to garrison vast land) Kurd tribesmen who refused to pay colonial tax, in vain attempt to teach Iraqui the benefits of Bristish democratic system and wisdom of superior english civilization. After 35 years, British pulled out, Churchill cursed the whole place " these thankless deserts"

oh well , it is better to having loved and lost, than never to love at all.

As American supremacy in Asia? That seems to be the overall message here and the objective of the policy change.

Actually achieving that might be rather more difficult than even the author suggests as it would require Chinese to accept the idea of "Balance" as Mr. Obama and the author have defined it; where the US has a big thumb on the scale and China looks the other way.

While we wait for that to happen I can suggest an amusing parlor game to occupy the time. Imagine the reaction of the US Government and the American people if the seats at the table were reversed and Chinese promoted the idea of "pivoting" it's foreign policy attention to the Western Hemisphere, reinforced by a military presence in the region including war games in international waters off the coast of the US and a declaration of leadership.

Given the history of at least the past century since the US arrived on the scene as a military power, it's actually far more credible China would promote peace than the US, but don't let that put a damper on the fun as you role-play in the parlor.

Asians are starting to see the TPP in a very different light. The TPP has very little to do with goods trade. It has everything to do with propagating American dominance in the post-industrial 21st Century. When you look at why REMOVAL OF CAPITAL CONTROLS would be included in a trade pact, the answer is clear as day.

America, with bipartisan support, chose ultra highly leveraged FINANCIAL ENGINEERING as a post-industrial era "industrial policy", and in the last 15 years has staked the policy with the full faith and credit of the nation, and the best minds the country can offer. Bloomberg reported the size of the derivatives casino reaching US$700 TRILLION (50 times the American GDP) by June 2011. When you consider that the American banking sector has only $16 Trillion in total balance sheet assets, gambling at this level of $700 Trillion (about 44 TIMES assets) is RECKLESS. And yet Washington acts as if the irresponsibility is a good thing. This festering financial cancer is affecting not only America, but the entire world.

The world's economic malady since 2008 was basically caused by an American decision about 15 years ago, to enable massive OTC derivatives trading, as the nation's industrial policy in a post industrial world. The policy is imposed on the rest of the world through FREE TRADE, which eventually led to the 2008 debacle.

Today, American banking is synonymous with "trading", mostly in unregulated OTC derivatives. I believe it was reported that B of A made 90% of its profits in 2010 on trading; the number of SBA loans made also dropped by about 90% from previous levels. American banks don't bank (lend) anymore, they trade. They are not really banks anymore, but malignant forms of their former selves.

On its face, as a grand national strategy, derivatives look brilliant: not constrained by natural resources, not limited by labor, “new products” galore come forth from the "ingenuity" of the new-fangled breed of financial engineers, and growth looks unlimited, basically constrained only by the salesmen’s ability to sell.

The "minor detail" is that unlike most other business endeavors, derivatives do not produce anything. $700 Trillion in derivatives did not produce a shirt, a tire, or even a single hamburger. It is purely redistributive - one side wins, and the other loses, with the croupier (banker) taking a cut as intermediary. Derivatives, in other words, is PURE GAMBLING. Or is it rigged gambling? The "contracts" are typically crafted by the best Wall Street prospectus writers, and not even the salesmen can really explain them. The suspicion is unavoidable that if they are truthfully explained, nobody would buy them. The products are typiclaly sold on the age old "confidence" basis - "Hey, this is a sophisticated business instrument coming from one of the world's largest financial institutions, what can possibly go wrong? Just trust me." It is also a VERY profitable export. Foreign central bankers and major insurance houses, sick and tired of 2.5% returns on Treasuries, are prime customers (victims).

There is no sign of abatement, even after the 2008 debacle. With the American mutual funds industry now (year end 2011) pushing for massive adoption of derivatives, and the Commodities Commission promulgating regulations to allow the small guys to join the fun, the derivatives casino is going to be US$1.5 QUADRILLION in no time. That would be 100 times the size of the American GDP, and more than the entire world's total GDP!! That is sheer MADNESS. What is scary is that many in Washington believe that there is method (and good) in that madness.

2008 complicated things a bit. The world witnessed how even 100 year old financial houses can go belly up overnight. Lehman Bros. had $60 Billion of derivatives on its books, lost 3% or $2 Billion, which wiped out its equity. WHAT is the significance of that? 3% of $700 Trillion is $21 Trillion, which is more than the TOTAL equity of ALL American financial companies. AND you would never know when it would hit, or even which bank it might hit. MF Global is just the latest example - total wipeout with very little prior warning.

You think that would stabilize the world economy?

2008 complicated things, as I said. Both Germany and China ordered their banks to stop massive gambling in derivatives. Both of their economies recovered. America bet the farm, and counted on EXPANDING the scope of the casino, betting heavily that (a) in the name of FREE TRADE or other trade arrangements (such as TPP), other countries will be forced to open their markets to this contagion, and (b) the American banks would always win HUGE against foreigners, as they did in the decade before.

The $7.77 TRILLION in subsidies (in the form of no cost or very low cost loans) to the American banking industry also complicated things (Bloomberg reported the practice after 2 years of FOIA requests). Now the foreigners are going to point to that as an violation of WTO rules, and refuse to allow the American banks to come in and maraud.

As an aside, against that backdrop, disputes over merchandise trade (a billion here, a few hundred millions there) are rather irrelevant. The real economic "battleground" in this 21st century is going to be over industrial policies in a post industrial world - mostly over the financial industry. It is absolutely necessary to discuss and compare risks in various nations' banking and financial systems, to identify systemic risks and frauds that could infect the whole world.

It is clear that TPP goes way beyond balancing merchandise trade, as it seeks to take away sovereignty as protection for nations' industries, be they financial or manufacturing or farming, and substitute them with rules written to benefit special interests. It is not in America's national interest to see multiple Asia Pacific nations impoverished. But if the American banksters have their way, and successfully destroy national financial defenses in the name of trade negotiations, Asia Pacifics and the world would be the poorer.

America's financial cancer (a gambling addiction already 50 times the size of the U.S. GDP) is unfortunate. But trying to feed the habit upon the hard earned savings of other nations simply is immoral.

"The biggest question in Asia is whether America will bounce back from its current fiscal crisis and soon get onto a path to fiscal health and future strength."

What do you think? Since 2008, the implementation of those provisions of the Dodd Frank Act that would have pushed back against derivatives trading excesses by the American financial industry, had been deferred with BIPARTISAN SUPPORT, for almost 30 times. Now the implementation is deferred beyond the 2012 elections.

As quid pro quo, the "Industry" spent over US$100 million in lobbying and bribes (legit under American law, as they are "campaign contributions").

When the NATIONAL POLICY allows the entire financial industry to engage in gambling (to the dereliction of the duty to LEND and support the real economy), to the tune of 50 times the national GDP ($700 Trillion by June 2011, according to Bloomberg), WHAT do you think are the chances of financial health and future strength?

Here's a partial transcript from Bloomberg TV presented after Jim Chanos, president and founder of New York based Kynikos Associates, returned from a trip to Hong Kong and Australia. (Kynikos is Greek for cynic.) Chanos famously predicted the downfall of Enron Corp.

"I think we probably came back a little bit more bearish….Our concerns about what we saw in Australia: an economy clearly tied to China has hitched its wagon to the tail of the tiger. In terms of the general complacency, what we heard over and over from investors and clients and potential clients is, 'yes, yes, there are some excesses, but the government will figure out a way. That the government is this all-knowing, omniscient basic entity that will not prevent me from losing money."

"[The Chinese government] doesn't [have money], and that's the problem. The banking system in China is extremely fragile, and that's one of the messages we wanted to get to people."

"In fact, because what happened the last two crises, in '99 and '04, when non-performing loans went crazy in China without even a recession, the Chinese banking system was not re-capitalized like ours was, it was papered over. Going into this credit expansion, Chinese banks are sitting on lots of bonds from the so-called asset management companies set up in 1999 and 2004, and they are keeping them on the books at par, at full value. In the case of Agricultural Bank of China, which we're short, those restructuring receivables are equal to over 100% of their tangible book. The Chinese banking system is built on quicksand, and that's the one thing a lot of people don't realize. When they talk about the foreign reserves of $3 trillion, what everybody forgets is there's liabilities against that."

"Everybody seems to think it is a free and clear open checkbook. It's not. That is what we have been trying to tell people. Focus on the lending system over there, because everything occurs through the banking system."

On the Chinese economy:

"Property prices and transactions are really beginning to decelerate. We saw that starting in August, that's continued into November. Transactions are down 40% to 50% year over year in the tier 1 through 3 cities. Prices are down. In some cases, we've seen riots in sales offices, where people are amazed that prices could actually go down. There's lots of indicators on the side. There's a growing sense that the Chinese government will ease. We point out that credit this year will grow between 30% and 40% of Chinese GDP. If that’s tight, I'd hate to see it ease."

On the scenario in which Chanos would cover his shorts in China:

"At some point, we will cover our shorts. [The scenario would be] a system where the banking system would have to be recapitalized again, most likely. You would see a flood of RMB in the system, and a realization that the growth by fixed asset model has got to change. Mr. [Stephen] Roach and others are convinced that the Chinese customers will pick up the slack. And at some point, he and she will. But the transition is going to be the real tough part. And right now, the consumer continues to decline as a percent of the Chinese economy. That is, I think, flies right in the face of what most people think will happen."

The Chinese government balance looks good on paper. But if we look at state enterprise (that are implicitly backed by the government), the debt to GDP ratio went from 100% to 200% that is the same or even worse than European countries, especially the PIIGS.

Even if the Chinese government tries to reign in the increase in debt, many real estate developers turn to the black market, and that experts expect 50% of new loans to go bad, that kind of issue could wipe out the Chinese GDP growth this year. A Chinese slowdown of that scale would negatively affect the global economy (remove 1% of global GDP growth).

In the Central Government only 'owns' about $900B of US treasuries, but has nearly 2T of USD denominated reserves. How is that? Well, Chinese exporters deposit USD in Chinese banks, the Chinese government then issues CNY and 'exchanges' CNY for USD, and the exporters bank account is denominated in CNY, and the Central Government then holds USD against the CNY deposits. If the? US consumer stops spending, those Chinese exporters will start withdrawing funds to cover their losses.

Some folks, because of ideological bent, would blithely ignore facts, and rely on wishful thinking instead.

The crux of the matter is that loans to build infrastructure in any given year can NEVER exceed the GDP, and typically (as the case is in China), a mere fraction of the size of the GDP. In other words, it will remain manageable within the resources of a nation like China - especially since most of the loans are in RMB. The Central Bank of China has unlimited ability to print RMB. In the worst case, a Resolution Trust type arrangement, in which a few hundred billion (US$) is used to buy the problem assets and move them off the balance sheet of the banks, and all would be healthy again. That was necessary only once in New China, but there is no reason it cannot be repeated.

The Chinese banks are rated much safer than American banks for a reason. Chinese banks are not inveterate gambling addicts. The U.S. derivatives casino is already $700 TRILLION (as of June, 2011, according to Bloomberg), or almost 50 times the GDP.

When you consider that the American banking sector has only $16 Trillion in total balance sheet assets (much of which is questionable due to the fact that most derivatives cannot be priced), gambling at a level of $700 Trillion (about 44 TIMES assets) is RECKLESS to the extreme. And yet Washington acts as if the irresponsibility is a good thing.

And American media rather talk about China's banking problems.

Look at the 2012 numbers. These are the debts that are COMING DUE, and the current year coupons (interests to be paid). WHICH country's financial system is healthy, is clear as day:

Country — 2012 Bond, Bill Redemptions ($) — Coupon Payments

U.S. — 2,783 billion — 212 billion
China — 121 billion — 41 billion

Reality: China Says Its Debt-To-GDP Ratio Is 17 Percent; Other Estimates A

Harvard Researcher: Chinese Government Lists Ratio At 17 Percent, But Independent Studies Put It "Between 75 and 150 Percent." From a December 14 Christian Science Monitor op-ed by Michael Beckley, "a research fellow in the International Security Program at Harvard Kennedy School's Belfer Center for Science and International Affairs":

Another misleading statistic is China's debt-to-GDP ratio, which the Chinese government lists at 17 percent. America's debt-to-GDP ratio, by contrast, will remain above 60 percent through 2020.

But most Chinese state spending is not reported in official figures because it is funneled through investment entities connected to local governments. Studies that account for this spending place China's debt-to-GDP ratio between 75 and 150 percent. [CSMonitor.com, 12/14/11]

International Monetary Fund Lists China's 2010 Debt-To-GDP Ratio At 33.8 Percent. [IMF.org, accessed 1/4/12]

My comment would be very simple and short to the fact that President Obma as the president of US the world’s Lone Super Power not only retrieved the devastated Foreign Policy but has set a mission for himself and also for all subsequent Presidents of US to follow and achieve the targeted objective. The mission set is not a very easy one particularly in these days of financial and economical hardship at home. But never the less it is not to be achieved in one day but has to be pursued as long as it takes to accomplish the mission successful in all respect.
The mission speaks of the far sightedness of the President but to accomplish it successfully would require experienced, sincere, arduous working, Loyal, efficient, and intelligent people in both administration and diplomatic core and unmatched leader to lead the team. With liars, flip floppers and pretenders this mission will never be able to be achieved.
The mission, Trade and investment Platform in the Asia-Pacific (TTP ) is absolutely a new concept and basically is a nonviolent project but would require substantial amount of financial support to implement and sustain it to keep the status quoi of the balance of power with China the growing power of the east.
China is a formidable competitor and is not a dumb not to understand with what interest & Intent US launched TTP. Therefore, China will take all necessary measure s to make the mission to fail. The dragon talks less and does all things in silence. Hence there is no scope to doubt its capabilities.
Both the countries have plus and minus points as also advantage and disadvantage over each other. As has been vividly discussed in the article regarding political, economical, financial and internal commercial sectors apart from China’s handicap in defense matters with respect to American but China is a fast developing nation in defense too.

Before, conclusion I would not do Justice to the Subject if I do not mention that by Launching the “Mission” China has much to benefit from analyzing the mission and using the weaknesses to its advantages, the rest should not be difficult to deduce and understand.

At least the Chinese banks make their living by BANKING (lending money). They are not gambling addicts like all of the major American banks, which balance sheets are not quantifiable since nobody knows what the derivatives they carry on the books are worth.