`But we can still send four more carrier groups to the South China Sea.'
`Again, Mr President, yes and no. We maintain 35 operational deployments around the world. There's 160,000 American service personnel out there in jobs ranging from the 35,000 on the Korean Peninsula to 2,000 in Burundi. They're costing money. Burundi is $120 million. The processing of Caribbean refugees at the Guantanamo base in Cuba by 1,100 soldiers is costing $250 million a year. Unforeseen flare-ups with Iraq and Libya amounted to $550 million. It's little bits here and there which mount up and get noticed by Congress. We have to go cap in hand every time we want to set up another operation.
`The current configuration of our armed forces is precisely for these multilateral operations and has been since the 1990s, when we went into post-Cold War deployment. But the reduction has meant that we are incapable of fighting two regional conflicts at once. One example is the new C-17 transport plane. Our operations mean the airlifting of thousands of troops very quickly. In this crisis, they would probably go to Vietnam or we could persuade the Philippines to let us back in. Our C-17 airlift fleet is thirty aircraft short because they haven't come off the production line yet. America's ability to fight two major regional conflicts will remain sharply limited until 2006.'
`I'm hearing you, Marty, but we've only got one conflict right now, in the South China Sea.'
`That's this week, Mr President.'
The two men were silent for a moment, watching the pictures of the bombing in Haiphong. Fire and black smoke leapt out from an apartment block. Ships listed, ablaze, in the harbour.
`Who's on our side, then?' Bradlay asked.
`Western Europe. Most of them will pontificate. But we can rely on France and Britain. Japan's an ally. But do we want it to get militarily involved? Shades of World War II and all that. India will stay neutral and privately back us. India's wary of China and of Pakistan. They like us around. Don't count on Pakistan. They've been thick with China. Their Karakoram-8 jet trainer, Khalid tank, HJ-8 anti-tank missiles, and Anza-2 surface-to-air missile are all based on Chinese design and technology. Burma's military is kitted out and bankrolled by the PLA. The rest of South-East Asia wants to make money. If America looks like jeopardizing that, they won't support us. Africa doesn't matter.'
`What about the Russians?' asked the President.
`They have teams of engineers right now down on Hainan Island, working on the Su-27s at Yulin, the Kilos at the Sanya submarine base next door, and whatever else they've sold to China at Zhanjiang, the headquarters of the South Sea Fleet. On top of that, their scientists are helping with Chinese missile programmes. Without Russian cooperation, sir, we should be a lot better placed to go to war with the Chinese.'
The morning trading session, which in Tokyo lasts from 9.00 until 11.00, was overactive, with 200 million shares trading. But what was worrying was the scale of the fall in share prices in the Nikkei index of 225 leading Japanese stocks led by Matsushita, Nippon Oil, and a raft of blue-chip Japanese companies. The index had only sailed through the 40,000 barrier at the end of January, and it ended the morning more than 400 points, or more than 1 per cent, lower, at 39,700. More worrying still was the behaviour of the yen. It had been trading in a narrow band of to to the US dollar, but in the Tokyo morning session it had fallen to.6 4 per cent depreciation. The Bank of Japan was frantically selling dollars for yen, but dollars were what the market wanted to buy… except First China. As investors dumped the yen it began to calculate the value of its short-yen position. First China, with General Zhao's backing, had borrowed billion and immediately sold it forward. For the bet to pay off, the spot yen rate against the dollar e rate at which people deal minute to minute during the day would have to weaken from the average rate at which First China borrowed. The collapse in the yen was just what Phillips and Zhao had predicted. Trading through the day in Tokyo it managed to achieve an overall profit for General Zhao of 10.8 per cent or the equivalent of $181.95 million. But Damian Phillips was only a keen spectator on Monday. He knew the yen had far further to fall.
In 2001 the countries of South-East Asia possessed sizeable minorities of ethnic Chinese. Tens of millions had fled their country's civil wars, tumults, and famines to far-flung corners of the Earth. They built the railways in Canada, America, and Australia and stayed on to pan for gold and set up restaurants and business, but most emigrated to the countries bordering the South China Sea. In these countries their business acumen enabled them to build formidable money empires which dwarfed those of the generally less entrepreneurial native populations. Small in number, these overseas Chinese possessed great financial power. In Indonesia just 3.5 per cent of the population were ethnic Chinese yet they controlled 80 per cent of the assets of the top 300 companies. This pattern of economic dominance was repeated throughout the region. In the Philippines the ethnic Chinese represented 2 per cent of the population and controlled up to 60 per cent of the stock market; in Thailand, about 10 per cent of the population and 80 per cent of the stock market. Hong Kong was the point at which the overseas Chinese met the mainlanders. While they loathed the Communist system which had compelled many of them to flee China, their adherence to the teachings of the ancient Chinese sage Confucius and their yearning for China had not diminished. Importantly, neither were their links to the ancestral villages of their ancestors' birth completely severed. Chinese businessmen from Indonesia, Malaysia, Singapore, and the Philippines had traditionally used Hong Kong as the base for the `offshore' wealth. Now it had become the beachhead for their commercial thrust into China and the place where they felt most comfortable wining and dining their mainland business partners and contacts.
Since the mainland takeover of Hong Kong on 1 July 1997 little appeared to have changed. Hong Kong still retained its astonishingly modern skyline. Towers of glass and steel, designed by some of the world's leading monument builders to the rich, were set dramatically against the steeply rising north face of Victoria Peak. To the tourist who stopped over for three days on his way to Australia, or before or after visiting China, Hong Kong appeared to be business as usual. The Stanley market still offered value with its cheap T-shirts and fake Ming porcelain, the jade market in Kowloon still did a lively trade, and, to the amazement of many (especially given China's tough laws on the export of antiquities) it was still possible to buy a horse from the Tang Dynasty (ad 618) in the antique shops along Hollywood Road in Central. But below the surface, the new tougher sovereign exercised power in place of its benign and neglectful predecessor. China observed the outward forms of civic life bequeathed by the British. Beijing had no need to send down officials from the capital to rule Hong Kong; through inducement they saw to it that their chosen people found success in elections to the local parliament, or in appointments to the top jobs in government, academe, and the media. The worst time for the local administrators was the winter. Since the takeover Hong Kong had become a popular place for the more elderly military and Party leaders to spend the harshest months of the northern Chinese winter. A vast estate on the south-east of the island at Chum Hum Kok which the British had used to spy on China had been converted into a resort for the leadership. The local Cantonese referred to the place as the `retirement village'. But it was a whispered joke. A telephone call from any of the thirty or so senior leaders ensconced at the resort and a livelihood, though rarely a life, could be lost. Outside the random interventions of the elderly, Beijing's control was exercised at a weekly meeting between Hong Kong's Chief Executive, as the post-colonial governor was styled, and Beijing's senior representative in the `Special Administrative Region', as the colony was now known. A curl of the Beijing representative's lip or a flicker of his eyebrow was sufficient to indicate to the Chief Executive whether his choice for, say, the chairman of the hospital authority or monetary authority was likely to find favour in Beijing.