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About the Author
Professor Navarro is a widely sought-after and gifted public speaker and a regular CNBC contributor. Before joining CNBC, he appeared frequently on Bloomberg TV and radio, CNN, and NPR, as well as on all three major network news shows.
Professor Navarro’s unique and internationally recognized expertise lies in his “big picture” application of a highly sophisticated but easily accessible macroeconomic analysis of the business environment and financial markets for consumers, investors, and corporate executives. His articles have appeared in a wide range of publications, from Business Week, the Los Angeles Times, the New York Times, the Washington Post, and the Wall Street Journal to the Harvard Business Review, the Sloan Management Review, and the Journal of Business.
Professor Navarro’s free weekly investment newsletter is published at www.peternavarro.com. His video series, The China Effect, appears on YouTube at www.youtube.com/comingchinawars.
Table of ContentsAuthor’s Comment on the Updated and Expanded Edition xi
Introduction to China’s “Butterfly Effect on Steroids” xv
Chapter 1: The Cheating "China Price” and Weapons of Mass Production 1
Chapter 2: China’s Counterfeit Economy and Not-So-Swashbuckling Pirates 15
Chapter 3: “Made in China”–The Ultimate Warning Label 27
Chapter 4: The “Blood and Nukes for Oil” Wars–The Sum of All Chinese Fears 43
Chapter 5: The World’s Most Ironic Imperialist and Weapons of Mass Construction 59
Chapter 6: The Global Warming Wars–Killing Us (and Them) Softly with Their Coal 77
Chapter 7: The Damnable Dam and Water Wars–Nary a (Clean) Drop to Drink 93
Chapter 8: China’s Chaotic “Wars from Within”–The Dragon Comes Apart at the Seams 111
Chapter 9: Inside the World’s Biggest Prison with Yahoo! the Stool Pigeon and Comrade Orwell 127
Chapter 10: Red Army Rising–The Coming China Hot Wars 149
Chapter 11: Racing for the Ultimate Strategic High Ground–The Coming China Star Wars 165
Chapter 12: How to Fight and Win the Coming China Wars! 183
About the Author 207
"The Coming China Wars is a gripping, fact-filled account of the dark side of China's rise that will be of interest to anyone interested in this complex and fascinating country. Navarro issues a call to arms for China and the rest of the world to act now to address the country's mounting problemspollution, public health, intellectual property piracy, resource scarcity, and moreor risk both serious instability within China and military conflict between China and other major powers."
Elizabeth C. Economy, Director for Asia Studies, Council on Foreign Relations
"In this comprehensive examination of China's mushrooming economy, Navarro masterfully illuminates the dark sides of China's great leaps into privatization and globalization."
"...serves as an important touchstone for any prudent discussion regarding the implications to China's growth. For those unfamiliar with China's ecological disaster, natural-resource crisis or aging and soon to be inverted demographics, this book is a very good introduction."
"In this informative volume, Navarro explores China's impact on the world and the perils it creates. This provocative and potentially controversial book will be of value to a wide audience. Summing up: Highly recommended"
"The Coming China Wars has a wealth of fascinating information about the impact of China on the world and the perils it creates. Because of China's great importance, this is a book we should all read."
D. Quinn Mills, Harvard Business School
"Peter Navarro has captured the breadth of areas where China and the United States have fundamental conflicts of business, economic, and strategic interests. He puts this into a global context demonstrating where China's current development course can lead to conflict. His recommendations for nations to coalesce to respond to the challenges posed by China are practical. This book should be in the hands of every businessperson, economist, and policy-maker."
Dr. Larry M. Wortzel, Chairman, US-China Economic and Security Review CommissionIntroduction to China's "Butterfly Effect on Steroids"
What happens in China, doesn't stay in China. It's the "Butterfly Effect" on steroids.
Communist China has leaped onto the world stage as a capitalist superpower with astonishing speed. Today, China exports its vast array of wares at the competition-crushing "China Price," and we as consumers benefit greatly. If that were the end of the story, there would be no storyjust an enchanting little ode to the virtues of competition in an increasingly "flat world."
Unfortunately, this story doesn't end with a cornucopia of cheap Chinese goods. Instead, this story about The Coming China Wars begins precisely at this point. It is a complex story about how the extremely rapid and often chaotic industrialization of the most populous country on the planet has put China on a collision course with the rest of the world.
At least one dimension of this complex story is already well understood. China's conquest of so many of the world's export markets has vaporized literally millions of manufacturing jobs and driven down wages from the heartland of America and the maquiladoras of Mexico to the slums of Bangladesh, the shores of Indonesia, and the once teeming textile factories of Africa. But that "good jobs gone bad" story, tragic and politically explosive though it may be, is only a very small piece of The Coming China Wars puzzle.
The real story provides a thousand variations on the famous Butterfly Effect of Chaos Theory in which butterflies flapping their wings in China set in motion a seemingly disparate and chaotic chain of meteorological events that eventually result in typhoons in Japan or hurricanes in the Gulf of Mexico. In this case, China is now flapping its mighty economic wings, thereby causing all sorts of energy, environmental, political, social, and military typhoons around the world. The myriad of dangers each of us now face from China's Butterfly Effects are very real and often quite personal, as illustrated in these fact-based vignettes from a "day in your life" in a world increasingly "Made in China":
- At the breakfast table, you turn on your Chinese-made TV to watch CNBC and watch intently as CNBC anchor Dylan Ratigan reports that another child has died from acute lead poisoning after swallowing a heart-shaped charm bearing the Reebok logo. The charm and its bracelet had been manufactured in China by a Reebok subcontractor that substituted cheap lead in the product to boost profit margins.
- Your spouse, one of the top-selling real estate brokers in your community, joins you at the breakfast table and promptly groans when CNBC economist Steve Liesman reports that interest rates and home foreclosures continue to rise in response to China's dumping of U.S. dollars in retaliation for a U.S. crackdown on defective Chinese products. Whereas you had the good sense to lock into a fixed-rate mortgage, your neighbor went the adjustable rate mortgage (ARM) route to save what he thought would be a few bucks on his monthly payment. Now, with interest rates spiking, his "exploding ARM" mortgage is doing just that, and he's maxing out his credit cards just to meet his payments.
- Later that morning, you walk out of Wal-Mart with a computer, a laser printer, a flat-panel monitor and some socks, shorts, and new running shoes. Outside, your eyes begin to sting, and your lungs begin to burn from the Asian "brown cloud" now visible on the horizon. It's 90-proof "Chinese chog"a particularly toxic atmospheric smog that has hitchhiked on the jet stream all the way from China's industrial heartland where everything in your cart was manufactured.
- Driving home, you stop at a gas station to fill up your SUV at a very painful four bucks a gallon. As you watch the gas pump eat up your dollars faster than a Vegas slot machine, you listen to a report on your car radio about how China's addition of more than 100 million new cars to its highways and burgeoning oil demand have helped push oil prices over the $125 a barrel mark.
- Pulling out of the gas station back into traffic, you are horrified to see a sporty little compact car made in Shanghai scream through a red light and plow directly into a school bus when the car's counterfeit brake pads fail. Fortunately, none of the children are badly hurt, but the driver winds up in the morgue after the front end of his Made in China car crumples because of its low-quality steel and the driver-side airbag failing to deploy.
- That night, you get a very alarming call from the hospital. Your father has almost died from a heart attack because the Lipitor he bought at a local discount drugstore for his high cholesterol was a Chinese fake with no active ingredients.
Although each of these dangers is real, this book is not just a story about how China's emergence as the world's "factory floor" might personally affect you and your family. To illustrate the global reach of the China Butterfly Effect, consider these additional scenarios:
- A Filipino family of six is crushed to death when their newly constructed home collapses during a relatively mild typhoon. Government officials later determine defective Chinese building materials are to blame for the building's failure.
- Ten American soldiers are killed in Iraq in a single week by armor-piercing Chinese bullets that slice through their body armor like a hot knife through butter. The bullets had been sold to the Iranian government by state-run Chinese companies as part of a much broader deal involving access to Iranian petroleum reserves. The bullets were smuggled into Iraq by covert Iranian operatives seeking to destabilize the Iraqi regime.
- Telecommunications are disrupted across Asia when a critical satellite is damaged by a large piece of space debris. This space debris was left behind when the Chinese military, without knowledge of the civilian government, blasted one of its own weather satellites out of the sky to test China's anti-satellite weapons capabilities.
- A severe drought hits South America, withering crops and driving up food prices. Climatologists blame the drought on the ongoing destruction of the rainmaking Amazon River Basin to make way for soybean cultivation. South America's soybean boom has been triggered in large part by dramatically increased demand from China, which continues to replace much of its own farmland with factories and industrial parks.
- More than 5,000 villagers in Darfur are forced to flee their homes after a coordinated attack by the Sudanese government that begins with a bombing raid by a squadron of Chinese-made Fantan fighter aircraft. This air assault is followed by a ground-based attack by Janjaweed militiaan Arab paramilitary force tacitly supported by the Sudanese government, whose goal is to completely exterminate black Africans in Darfur. In a classic "blood for oil" deal, the Chinese fighters have been sold to the Sudanese governmentChina's biggest oil supplier in Africain direct violation of a United Nations ban.
The purpose of each of these Butterfly Effect scenarios is to illustrate the incredibly broad scope of China's growing impact on the world. The purpose of this book is to warn that unless strong actions are taken now both by China and the rest of the world, The Coming China Wars are destined to be fought over everything from decent jobs, livable wages, and leading-edge technologies to strategic resources such as oil, copper, and steel, and eventually to our most basic of all needsbread, water, and air.
Each of the next 11 chapters of this book focuses on one particular battleground. The concluding chapter is dedicated to finding constructive solutions to the emerging conflicts.
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