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For those so inclined the big money in investing and high returns lies in the economic accession and growth of India and particularly China. Chinese index funds returned more than 40% in 2006 and expect more of the same in 2007. Chinese and Indian demand will keep oil and commodity prices high for the next 5 years. Another play on the China syndrome? buy Exxon and hold. For the small investor the awakening of Napoleons sleeping giant is a boon but how about for the political-economy of East Asia and the Pacific? How should we view China beyond being a place of profits and high returns? Chinas inaction on North Korea and its stalking of Russian resources should provide some clear clues.

There are actually 2 Chinas. One China is the 1.3 billion strong Communist dictatorship that is selectively opening up its markets in order to survive and compete with the USA. This is the China that bulled its way into the World Trade Organization. There is a however a second and far more powerful China. The intertwined economies of mainland China, Hong Kong, Taiwan, and the expatriate Chinese communities of Southeast Asia are an extended Chinese state. The second and more powerful China is a regional unit based on Chinese economic and political power. Such a grouping will have important ramifications for the East Asian sphere in the future as China expands into Siberia taking over Russian resources, and modernizes its army and navy.

The first Chinas recent 30 year economic success has propelled more people from poverty than other epoch in history. It is a blessing. Yet recently heavy hitters of US trade policy descended on China to discuss the implications of the $60 billion per annum trade deficit with the US. This is really a political canard. Chinas trade surplus with the US is a little larger than Japans and most large exporters are US and Western firms re-exporting product from China. In fact foreign firms account for 75 % of Chinese exports. The argument that a Chinese deficit means a loss of jobs in the US is sheer bunk. In fact it is the opposite. Cheaper offshore products produce jobs locally through expanded retail operations; more product supply and spin-offs throughout the entire production cycle; and cheaper inputs and more capital for consumers and businesses.