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Trading  | March 12, 2018

China’s government has been relatively vocal in transforming itself into a serious threat against the West — by modernizing its military in anticipation of future wars with Washington. It it therefore not surprising when the official Xinhua news agency reports that China will increase its defense budget by 8.1 percent in 2018, up marginally from last year’s 7 percent.

China has undoubtedly given America’s military-industrial complex and clueless politicians in Washington a stern message, by increasing its defense budget to the highest levels in more than three years, even as the country insists it does not mean harm.

According to the annual budget report, submitted to the first session of the 13th National People’s Congress Monday, the 2018 defense budget will be 1.11 trillion yuan (approximately 175 billion U.S. dollars). In 2017, the country spent roughly 1.02 trillion yuan (approximately 161.87 billion dollars) on its military budget in 2017, or about 1.3 percent of its gross domestic product (GDP).

The United States is the only country that outpaces China in defense spending, with the Pentagon’s expenditures exceeding four times Beijing’s, according to the latest report of the 2018 Military Budgets via the London-based International Institute for Strategic Studies (IISS).

In a speech at an annual Meeting of China’s National People’s Congress, Premier Li Keqiang suggested the country faced “profound changes in the national security environment,” requiring a stronger military.

As we stated before the conference, geopolitical strategists are concerned about President Xi Jinping aggressive military buildup and power grab, which has put Beijing on a crash course for military conflict with Washington.

“In the Asia-Pacific, the dominant role of the United States in a political and military sense will have to be readjusted,” said Cui Liru, former president of the China Institutes of Contemporary International Relations, a think tank under the Ministry of State Security that often reflects official thinking. “It doesn’t mean U.S. interests must be sacrificed. But if the U.S. insists on a dominant role forever, that’s a problem.”

Cui added that it was “not normal for China to be under U.S. dominance forever. You can’t justify dominance forever.”

“China’s military objective is to break through the first chain of islands,” said Mr. Cui, referring to the waters beyond Japan and Taiwan where the Chinese military wants to establish a presence. -NYT

According to the latest research from Stockholm International Peace Research Institute, China defense spending is around 1.9 percent of gross domestic product in 2016, when compared to 3.3 percent for the United States.

National Public Radio (NPR) signals that the increased military budget comes as the National People’s Congress scraps constitutional term limits for President Xi Jinping:

“The new military budget comes as the NPC abolishes term limits for China’s President Xi Jinping, a move that hearkens back to the era of autocratic rule under Mao Zedong and was signaled in October when Xi broke with precedent and failed to name a successor at China’s Communist Party Congress. ASIA USS Carl Vinson Will Spend The Next Few Days In Da Nang, Vietnam.

It also comes amid increased tension with the U.S., as Washington beefs up its naval presence in the South China Sea and Beijing has shown an increasing willingness to flex its muscles there, much to the chagrin of many of its maritime neighbors.”

Xinhua cites Major General Chen Zhou, a research fellow at the Academy of Military Sciences affiliated with the People’s Liberation Army (PLA) as stating:

“Steady and appropriate growth of defense spending is necessary because the Chinese armed forces have been modernizing to keep up with the country’s development. A large part of the increased spending is for upgrading equipment, supporting military reforms and improving the welfare and training conditions of servicemen and women.”

As we have noted before, China has set many goals to complete the modernization of its national defense and armed forces in the coming decades and transform its military into a world-class war machine by the mid-21st century.

In the past few years, China has been rapidly modernizing its armed forces that will enhance its equipment, tactics, technology, and combat readiness for the next conflict. Recently, the country has been vocal in its rollout of stealth jets, hypersonic aircraft and weapons, rail guns, and militarized islands.

“China’s emerging weapons developments and broader defense-technological progress mean that it has become a global defense innovator,” says Dr. John Chipman, Director-General and Chief Executive of the London-based International Institute for Strategic Studies (IISS).

“[While] a great power war is not inevitable, states are systematically preparing for the possibility of conflict,” he said, adding that China’s “land and naval forces are modernizing and progress in defense aerospace remains remarkable.”

* * * *

Following Trump’s initiation of a trade war, China is preparing to retaliate to Trump’s proposed new tariffs. Bridgewater Associates founder Ray Dalio said Monday that a trade war is avoidable, but “tit-for-tat escalations” could be harmful to the global economy.

“It seems to me that good deals are to be had for both countries, while a trade war has the risk of tit-for-tat escalations that could have very harmful trade and capital flow implications for both countries and for the world,” Dalio wrote in a LinkedIn blog titled “A US-China Trade War Would Be a Tragedy.”

Nevertheless, perhaps now we understand why China is modernizing its military, because after trade wars comes hot wars…

A revolutionary initiative is helping average Americans find quick and lasting stock market success.

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