China "Can't Believe Its Luck" On Investment Bank

[galdur]

A few weeks back, we noted that China (via a state-run media outlet) appeared to be adopting a more conciliatory approach when it comes to describing Beijing’s vision for the Asian Infrastructure Investment Bank. The venture, which Washington did its best to undermine last year, has made an unlikely run at taking center-geopolitical-stage even as other, more ostensibly newsworthy events (such as the veritable collapse of the Yemeni state and the ongoing crisis in Greece) vie for the market’s very limited attention span.

And while we, more than perhaps any other news outlet, have gone to great lengths to demonstrate the importance of what is not only a move by Beijing to inaugurate a sino-Monroe Doctrine but to simultaneously start the world on the path to yuan hegemony, we were also quick to note that there’s such a thing as being too successful, especially when it comes to making sure a whole cohort of Western nations who have just gone out on the proverbial limb in defiance of The White House, are left with some assurance that there’s at least some part of the institution which is actually aimed at promoting infrastructure development rather than operating solely as Beijing’s newest foreign policy tool. .....

http://www.zerohedge.com/news/2015-04-07/china-cant-believe-its-luck-investment-bank

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[galdur]

Published on Mar 24, 2015
Over the past couple weeks, large western countries led by the United Kingdom have rushed to join the China-run Asian Infrastructure Investment Bank. March 31st is the deadline for founding members and at least 35 countries, most of them in Asia, have joined. Germany, France, and Italy have followed Britain in saying that they would also join the bank. The eager European applicants have certainly annoyed the United States. Erin weighs in.

https://www.youtube.com/watch?v=ZLAlDCGaiAc

[galdur]

AIIB – It Just Happened: “The Moment The United States Lost Its Role . . .”

April 6, 2015

Santiago, Chile

Last week, the government of China closed the enrollment window to join its new Asian Infrastructure Investment Bank (AIIB) as a ‘founding member’.

The AIIB, if you haven’t heard of this yet, is designed to essentially displace the Western-controlled IMF and World Bank.

And prior to last Tuesday’s deadline, dozens of nations around the world from New Zealand to Denmark signed up to join.

Even staunch US allies like the United Kingdom and Israel agreed to be part of AIIB.

This is a huge coup for China, and probably the most obvious sign yet that the global financial system is in for a giant reset.

Under the weight of nearly incalculable debt and liabilities, the United States is in terminal decline as the dominant superpower.

From Ancient Rome to the British Empire, this has happened many other times in history.

This time is not different. And everyone else in the world seems to get it. . . except for the US government.

They act as if the financial universe will revolve around America forever—that they can print money, indebt future generations, and wage war as much as they want without consequence.

But they’re completely blind.

Practically the entire world is lining up against them to form a brand new financial system that is no longer controlled by the US government.
 
In an editorial published in the Financial Times, former US Treasury Secretary Larry Summers summed it up plainly saying that this “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”

The consequences of this shift away from a US-controlled financial system cannot be understated.

No more endless spending. No more solving problems with more debt and more money printing.

Suddenly it will be time for painful decisions in the US—like slashing Social Security benefits, drastically scaling back the military, and selectively defaulting on the debt.

Make no mistake, this transition is going to be bumpy.

China may already be the largest economy in the world by many measurements. But the Chinese economy is in for some serious strain over the coming months and years as its massive credit bubble bursts.

So in addition to America’s fiscal and monetary challenges, the world is going to have to suffer through a potential Chinese crisis as well.

But this does not affect the long-term story. Remember, nothing goes up or down in a straight line.

On its road to becoming the global superpower in the 20th century, the United States suffered its own series of deep economic setbacks—from the Panic of 1907 to the Great Depression, and several recessions in between.

China’s path will likely be similar.

This is one of the most important trends of our time. And it’s happening right in front of our eyes.

The world is rapidly throwing off US financial domination. The global financial system is starting to reset. Global financial and political dominance is shifting.

As with any great change, there are going to be people who get completely wiped out—primarily, people who didn’t see the change coming or chose to ignore the trend.

The flip side of this is that, for anyone with the intellectual courage and independence of mind to be paying attention, this is a time of extraordinary opportunity.

Some of the wealthiest people in Europe were minted in just a few years during the Weimar hyperinflation of the 1920s.

And some of the greatest fortunes in the world (some of which still exist today) were made in the early days of the United States as the country rose to dominance.

That’s ultimately the opportunity we have today. We can’t do anything about the trend. It’s happening.

What we can control is how we react to it: ignore it at our own peril, or seize the opportunities that come from it.

http://www.valuewalk.com/2015/04/aiib-dollar/

[galdur]

The US Dollar Rally Will Crush Stocks…Just As It Did in 2008

The world carry trade for US Dollars is over $9 trillion.

 

In today’s world of monetary insanity, investors seem to forget that $1 trillion is a staggering amount of money. So to put that $9 trillion carry trade into perspective, if it were a country instead of a carry trade, it would be roughly equal in size to the economy of China, the second largest economy in the world.

 

Suffice to say, we’re talking about a truly staggering amount of borrowed US Dollars that have been invested into other assets/ investments.

 

Carry trades only work if the currency you are borrowing in doesn’t rally. As soon as it does, your trade very quickly goes into the red.

 

This is particularly true if you’re talking about a corporation that has borrowed in US Dollars to fund projects in countries where sales are denominated in other currencies (Europe, Asia, etc.)

 

The reason for this is that many multi-nationals do not hedge their currency risk. So if, for instance, they are borrowing in US Dollars without a hedge to invest in Europe and the US Dollar rallies, their projects very quickly begin to lose their appeal… and a LOT of money.

 

Ka-Boom:

more:

http://www.zerohedge.com/news/2015-04-09/us-dollar-rally-will-crush-stocks%E2%80%A6just-it-did-2008

[galdur]

U.S. gets little support in its opposition to AIIB

April 9, 2015

When China rolled out the Asian Infrastructure Investment Bank last October, the stiff resistance from the U.S. (as well as Japan) took the world by surprise. This opposition notwithstanding, AIIB, has so far picked up 27 regional members and seven non-regional members, including the U.K., Germany, France and Italy. In addition, there was a virtual avalanche of applications before the March deadline for founding membership, which included another 23 countries that are currently under consideration. This overwhelming positive response to the AIIB from countries across the globe was perhaps more than China initially anticipated.

Why did the U.S. opposition not convince even its traditional allies to steer clear? Part of the reason was a serious misreading of global sentiments on this matter.

To Asian developing countries, the U.S. opposition reflected a retrograde cold-war mindset that wasn't attuned to their economic wishes and aspirations. To sustain its current growth trajectory, developing Asia needs to invest about $800 million annually in infrastructure, according to an Asian Development Bank (ADB) study. And the existing international development finance institutions, such as the World Bank and ADB, cannot muster sufficient resources to meet this demand. ... more

http://www.baltimoresun.com/news/opinion/bs-ed-aiib-opposition-20150409-story.html

[galdur]

When you think the financial world can’t get any crazier… this happens

April 9, 2015
Medellín, Colombia

The world has truly gone mad.

We’ve become accustomed somewhat in the last several years to historical anomalies such as zero percent interest rates, Quantitative Easing, competitive currency devaluation, etc. by governments and central banks the world over.

It’s almost become the new norm.

But then there’s always something that happens that shocks us all over again.

And just like with any other addiction, the infusion of ridiculous and unsustainable policies has to be that much more potent to have any effect.

Two such developments have just taken place in the financial world.

First, Switzerland became the first to issue 10-year government bonds with a negative yield.

Let that sink in for a moment.

Especially in the last year we’ve seen governments issue short-term debt with negative interest rates. But now the Swiss government is the first that will actually profit from its long-term 10-year debt.

It’s insane.

Just like in a bad infomercial—“But wait, there’s more!”

The government of Mexico just sold 100-year bonds denominated in EUROS. Also the first ever of its kind.

A few years ago, Mexico sold its first 100-year bond—that one was denominated in US dollars. Later, they sold another century-bond in British pounds.

You can just imagine the figures at the Mexican central bank’s meeting going: “Well, that went great. I wouldn’t have believed we could ever get away with that… Hey, what if we tried to do it in euros next time, haha?”

So they did. They took advantage of the European Central Bank’s unprecedented stimulus and issued a 100-year bond in a currency that most likely won’t even be around in the next decade.

Who’s dumb enough to buy this stuff—10-year debt at negative yields and 100-year debt in a doomed currency?

Institutional investors, of course—large pension funds and the like. You might look at news like that and think, well, that’s crazy, I’d never do that. But the fact is, it’s being done with YOUR MONEY.

Just like Winston Churchill commented that it’s false to characterize the fighting at places like the Somme, Verdun etc. in WWI as battles, when they were actually more like prolonged sieges, what’s happening in the financial world today is similar. .... more

https://sep.yimg.com/ty/cdn/realityzone/UFNswiss10yearNegativeInterestBond.html

[Ingatqhvq]

sometimes good luck follows by bad luck,, by keeping more hope on this bank,, is lot pressure as well as lot countries wants low cheap loans n dont even pay bank n bankrupt,, particularly these european nations having strong history of attacking n looting other countries,, by giving loans to those countries only brings bad luck

[galdur]

sometimes good luck follows by bad luck,, by keeping more hope on this bank,, is lot pressure as well as lot countries wants low cheap loans n dont even pay bank n bankrupt,, particularly these european nations having strong history of attacking n looting other countries,, by giving loans to those countries only brings bad luck

Well, the Chinese are quite brilliant of course. First they help Uncle Sam spend itself to bankruptcy in endless war adventures and regime changes leaving a string of ruined basket cases here and there. Then they come in flushed with currency, not weapons and war, and finance the rebuilding of the whole thing. And more. And their Russian partners will join in. The American shell corporation will be on the sidelines licking its wounds for the next decades. That small appendage in westernmost Eurasia called Western Europe will join the Eurasian Trade Zone in due course. This will be

The New World Order.

Good luck, g

[galdur]

China’s AIIB: The Final Tally
Interesting facts about the members of China’s AIIB — with even more interesting implications.

The deadline for prospective founding members to submit their applications to China’s new Asian Infrastructure Investment Bank (AIIB) came on March 31, leading a flurry of final applications from countries all over the world. When the dust settled, China moved on to selecting who would actually made the cut. Yesterday, the AIIB released its final, approved list of founding members (excluding Taiwan). With 57 countries signed up, the AIIB includes well over a quarter of the world’s nations. Even more interestingly, 16 of the world’s 20 largest economies are on board (with the U.S., Japan, Mexico, and Canada as the holdouts). .......

http://thediplomat.com/2015/04/chinas-aiib-the-final-tally/

[countryfree]

I'm still waiting because we don't know yet what China will do with that new investment bank. Will anything change? China has already made huge investments in Africa, paying for roads and ports to ship raw materials to its factories. Will it do anything more than that? So far, this new bank certainly looks like a nuclear bomb, but that doesn't mean China wants to use it to destroy the USA.

[galdur]

I'm still waiting because we don't know yet what China will do with that new investment bank. Will anything change? China has already made huge investments in Africa, paying for roads and ports to ship raw materials to its factories. Will it do anything more than that? So far, this new bank certainly looks like a nuclear bomb, but that doesn't mean China wants to use it to destroy the USA.

Well,it just got started virtually the other day so you´ll have to wait a while to see the results - I guess.

Good luck, g

[galdur]

AIIB: Has The U.S. Lost Its Role As Driver Of Global Economy?

Former U.S. Treasury Secretary Lawrence Summers wrote on April 5 that this month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. His comments refer to the circumstances surrounding China’s launch of a new venture, the Asian Infrastructure Investment Bank (AIIB). Wary of China’s growing ambitions and influence, the United States had advised its allies not to join the institution, but many signed up anyway. The debacle was undoubtedly embarrassing for Washington, but even so, Summers’ prophecy is a bit premature at this stage. ... more

http://www.valuewalk.com/2015/04/aiib-america/

[Chef Ramsay]

Anyone placing bets how much longer the US can keep up the current trajectory before the house of cards comes crashing down or will this just gradually just keep diminishing? The most interesting and perhaps unfortunate aspect to this whole thing is the sheer numbers of people who have no plan at all to deal w/ such a scenario outside of the survival, metals and bitcoin types. The boobs' ignorance and bliss will become their terror.

[galdur]

It´ll probably collapse at an opportune time before the next U.S. "election" so it can all be blamed on the outgoing puppet and the next desired puppet will thus come riding in like a savior. Then rinse and repeat for the next cycle.

[galdur]

AIIB: China's 'Phase Zero Operation'?
Can Beijing’s claim that it wants to provide ‘global public goods’ via the AIIB be taken at face value?

A month after controversy erupted over the announcement that multiple U.S. allies will join China’s new Asian Infrastructure Investment Bank (AIIB), the Obama administration’s response was clearly misguided. Concerned that the AIIB represented a power play by China for influence in the rest of the world at the expense of the U.S., administration officials criticized the bank for not adhering to the “high standards” required of U.S. and Western-led international institutions such as the World Bank and the Asian Development Bank. ....more

http://thediplomat.com/2015/04/aiib-chinas-phase-zero-operation/

High standards ? Yeah yeah yeah 

[galdur]

Well, a good chunk of the Chinese investments will most likely go to rebuild countries that Uncle Sam has blown to smithereens in numerous war scams. Someone has to do it, you can´t expect psychopaths to ever take responsibility for their actions.

[galdur]

China's AIIB Bank: Part of a Much Bigger Master Plan

In his latest book Henry Kissinger anticipated China’s initiative to create the first new international organization of the 21st century. He didn’t foresee the Asian Infrastructure Investment Bank (AIIB) as such, but argued that as China continued to increase its global economic weight, it would inevitably seek its security, in part, by building international organizations in which it sat at the center. And that this would rightly or wrongly be seen as a challenge to the post-World War II US-centric international architecture.

China and other major developing economies have long expressed their dissatisfaction with US and European dominated international institutions created at the end of WWII. China’s efforts to increase its contributions and hence voting power in the IMF, for instance, have been stalled for years in the US Congress. The reservation of the top job in each of the World Bank and the IMF for citizens of the US and EU, respectively, is offensive. The deal between the two that has stuck for over sixty years smacks of a global Tammany Hall racket. .... more

http://nationalinterest.org/blog/the-buzz/chinas-aiib-bank-part-much-bigger-master-plan-12748

[galdur]

China's Plan to Lead the Globe

BY ERIC MARGOLIS • MAY 23, 2015 •

As tensions in the South China Sea between the US and China continue to rise, the US Navy and Air Force are quietly gearing up to fight a war in the disputed region.

If necessary, that is. Both sides say they don’t want any military confrontation on China’s extensive coastal waters, but both are acting as if a military conflict is increasingly likely.

Optimists say that a peaceful resolution of China’s rise as a great power is achievable. The economies of the two powers are so enmeshed that a war sounds unthinkable.

Such is the thesis of an important new book just out, “The China Dream,’ by Professor General Liu Mingfu, a leading Chinese military thinker and commentator who speaks with the voice of China’s military.

US-China trade accounted for $579 billion last year. Beijing holds $1.2 trillion of US Treasury securities, thus financing a big part of America’s massive trade deficit. China claims its low-cost exports to the US saved American consumers $600 billion in recent years.

China only wants its place in the sun, say its strategists, using the same words as German strategists did before World War I. It’s time for a multi-polar world. The age of American world empire is over, writes Liu Mingfu, words that will not endear him to Republican hawks and neoconservatives.

Pessimists retort that Britain and Germany fought two world wars even though they were major trading partners. History is replete with examples of rising powers eventually going to war with the status quo powers resisting their rival’s economic and military growth. The Franco-British-Russian alliance against Germany prior to World War I is a perfect example.

One need not be a swami to see that China’s surging power will soon clash with that of the American hegemon. The battle lines are already drawn: China’s aggressive claims to the South China Sea – viewed by the US Navy as an American lake. Taiwan. Tensions over Burma. Korea. China’s access to the open seas.

According to Prof. General Liu, the days of America’s world domination, or hegemony, as he terms it, are just about over. By 2030, China will be the world’s largest economy in absolute terms (today it rivals the US in purchasing power parity), regaining the geopolitical primacy it formerly enjoyed until the 1500’s when it was the world’s leading economic power.

The US must find a way to accommodate China’s growing power, a point also made for many years by this writer. A policy of containment is not likely to work unless India becomes a principal participant. My first book “War at the Top of the World” deals with the scenario of a future India-China war in the Himalayas, Karakoram and Burma. India has been very cautious in joining any American-sponsored alliance against China.

Liu writes that America must quietly cede some of its power to China in the same manner that the British Empire did to the United States after 1900. The United States and China must share power and jointly rule the world as benign hegemons.

He insists that China has no territorial ambitions and never will. “China suffered 470 foreign invasions within 65 years from 1840 to 1905,” asserts Liu, though incursions would be a more accurate term. During this period, China was raped and pillaged by the western colonial powers and Japan. Hatred of Japan seethes throughout Liu’s book, as it does among most Chinese.

One could argue that China’s annexation or ‘reunification’ of Tibet and Sinkiang were aggressions. China considers them part of historical China, along with truant province Taiwan.

Liu points out that China never invaded or seized its smaller neighbors Korea, Burma, Thailand, or Laos.

Instead, China’s emperors always preferred to dominate without aggression so that its smaller neighbors respected the will of China and acted respectfully – rather as the United States in the 20 th century with Latin America. China, writes Liu, wants peace and prosperity in order to keep growing its economy. China remains an inward-looking colossus, content to be the Middle Kingdom.

America, according to the undiplomatic Liu, is a paranoid giant, afraid of the outside world and addicted to the need for enemies abroad. “Americans feel lost without any enemy.” Washington’s occupation and despoliation of so many countries, notably in the Muslim world, generates endless enemies and a war psychosis. America, he claims, is a half-democracy: democratic at home but promoting dictatorships abroad. He seems to believe that China is as democratic at home as the US – a claim that defies reality.

Liu asserts that China is devoted to peaceful relations, non-interference in other nations, and the desire to help build world prosperity, not just its own power or political system. What’s more, Liu modestly asserts, China should lead world development since Chinese are more intelligent and cultured than any other people and heirs to a 5,000-year history!

Interestingly, Liu depicts the 1950 Korean War as a major victory for China because it showed that an Asian nation could fight off the world’s greatest military power. He claims that the US did not invade North Vietnam out of fear of the Chinese People’s Liberation Army after its bloody experience in Korea.

Will Washington back off and allow China to be the master of Asia? It seems highly doubtful. But unless some kind of modus vivendi is found, a military confrontation is likely to follow, one that the US might very well lose. China would be fighting virtually at home or just off its coast. The US, by contrast, would fight thousands of miles across the Pacific from its distant bases. The US might even win, but China would undoubtedly come back for more.

The “China Dream” thesis has been actively taken up by China’s communist leadership. But two things might derail China’s rise to world domination. First, China’s history is replete with example of internal strife, civil wars, and regionalism. This “Chinese curse” could come back to haunt Beijing.

Second, as I read Liu’s panegyric to Chinese greatness and peaceful humanism, I kept recalling Lord Acton’s wise maxim about absolute power corrupting absolutely. It happened in Washington, and there’s no reason why it might not occur in Beijing.


(Reprinted from EricMargolis.com by permission of author or representative)

http://www.unz.com/emargolis/chinas-plan-to-lead-the-globe/

[BIT-Sharon]

AIIB – It Just Happened: “The Moment The United States Lost Its Role . . .”

April 6, 2015

Santiago, Chile

Last week, the government of China closed the enrollment window to join its new Asian Infrastructure Investment Bank (AIIB) as a ‘founding member’.

The AIIB, if you haven’t heard of this yet, is designed to essentially displace the Western-controlled IMF and World Bank.

And prior to last Tuesday’s deadline, dozens of nations around the world from New Zealand to Denmark signed up to join.

Even staunch US allies like the United Kingdom and Israel agreed to be part of AIIB.

This is a huge coup for China, and probably the most obvious sign yet that the global financial system is in for a giant reset.

Under the weight of nearly incalculable debt and liabilities, the United States is in terminal decline as the dominant superpower.

From Ancient Rome to the British Empire, this has happened many other times in history.

This time is not different. And everyone else in the world seems to get it. . . except for the US government.

They act as if the financial universe will revolve around America forever—that they can print money, indebt future generations, and wage war as much as they want without consequence.

But they’re completely blind.

Practically the entire world is lining up against them to form a brand new financial system that is no longer controlled by the US government.
 
In an editorial published in the Financial Times, former US Treasury Secretary Larry Summers summed it up plainly saying that this “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”

The consequences of this shift away from a US-controlled financial system cannot be understated.

No more endless spending. No more solving problems with more debt and more money printing.

Suddenly it will be time for painful decisions in the US—like slashing Social Security benefits, drastically scaling back the military, and selectively defaulting on the debt.

Make no mistake, this transition is going to be bumpy.

China may already be the largest economy in the world by many measurements. But the Chinese economy is in for some serious strain over the coming months and years as its massive credit bubble bursts.

So in addition to America’s fiscal and monetary challenges, the world is going to have to suffer through a potential Chinese crisis as well.

But this does not affect the long-term story. Remember, nothing goes up or down in a straight line.

On its road to becoming the global superpower in the 20th century, the United States suffered its own series of deep economic setbacks—from the Panic of 1907 to the Great Depression, and several recessions in between.

China’s path will likely be similar.

This is one of the most important trends of our time. And it’s happening right in front of our eyes.

The world is rapidly throwing off US financial domination. The global financial system is starting to reset. Global financial and political dominance is shifting.

As with any great change, there are going to be people who get completely wiped out—primarily, people who didn’t see the change coming or chose to ignore the trend.

The flip side of this is that, for anyone with the intellectual courage and independence of mind to be paying attention, this is a time of extraordinary opportunity.

Some of the wealthiest people in Europe were minted in just a few years during the Weimar hyperinflation of the 1920s.

And some of the greatest fortunes in the world (some of which still exist today) were made in the early days of the United States as the country rose to dominance.

That’s ultimately the opportunity we have today. We can’t do anything about the trend. It’s happening.

What we can control is how we react to it: ignore it at our own peril, or seize the opportunities that come from it.

http://www.valuewalk.com/2015/04/aiib-dollar/

Under the weight of nearly incalculable debt and liabilities, the United States is in terminal decline as the dominant superpower. Practically the entire world is lining up against them to form a brand new financial system that is no longer controlled by the US government.China may already be the largest economy in the world by many measurements. But the Chinese economy is in for some serious strain over the coming months and years as its massive credit bubble bursts.Where's the end of China’s path? Let's wait and see.

[galdur]

US-China war 'inevitable' unless Washington drops demands over South China Sea

Warning from state-run China newspaper as Beijing reveals plans for development of disputed South China Sea islands

By Julian Ryall, Tokyo3:35PM BST 26 May 2015
China’s armed forces are to extend their operations and its air force will become an offensive as well as defensive force for the first time, in a major shift in policy that will strengthen fears of accidental conflict.
A policy document by the state council, or cabinet, said China faced a “grave and complex array of security threats”, justifying the change.
The People’s Liberation Army, including its navy and air force, will be allowed to “project power” further beyond its borders at sea and more assertively in the air in order to safeguard its maritime possessions, the white paper stated.

The navy will add “open seas protection” to a traditional remit of “offshore waters defence”, it said.
The posture risks escalating the tension over disputed islands in the South China Sea and elsewhere in the Pacific, where the United States is determined to protect the interests of allies like Taiwan and the Philippines.
Only last week, a US aircraft ignored repeated warnings from the Chinese military to fly a reconnaissance mission over the islands.

Global Times, a tabloid newspaper run by the Communist Party, said that China might have to “accept” there would be conflict with the United States.
“If the United States’ bottom line is that China has to halt its activities, then a US-China war is inevitable in the South China Sea”, said the paper, which is often seen as a mouth-piece of hardline nationalists in the government in Beijing.

State media reported on Tuesday that Beijing had begun building two lighthouses on reefs in the Spratly Islands, a smattering of outcrops that are claimed by an array of countries including not only China but also Vietnam and the Philippines.
Last month, satellite imagery revealed the Chinese had almost completed an air strip on another reef - Fiery Cross - while they are turning another rock, Mischief Reef, into a full island through land reclamation.

The Global Times article described the construction of runways, harbour facilities and buildings on the disputed Spratly Islands as the nation’s “most important bottom line”.
Speaking at a press conference in Beijing, Yang Yujun, a spokesman for the Defence Ministry, dismissed international criticism of China’s policies in the South China Sea, claiming the work was the same as building roads and homes on mainland China and that it would benefit “the whole of international society”.
“From the perspective of sovereignty, there is absolutely no difference”, he said, adding that “some external countries are also busy meddling in South China Sea affairs”.

Analysts say neither Washington nor Beijing appear to be in the mood to back down and that there is a serious risk of a minor incident in airspace around the islands escalating rapidly.
“I think the concern has to be that China misjudges the situation”, said Robert Dujarric, director of the Institute of Contemporary Asian Studies at the Japan campus of Temple University.
“Neither party wants a war if it can be avoided, but there are red lines for both sides”, he said. “I worry whether Beijing considers the US to be a declining power and assumes that Washington will back down if it shoots down a US observation aircraft”.

Washington chose to “de-escalate” a major crisis that blew up after a Chinese fighter collided with a US Navy intelligence-gathering aircraft off Hainan Island in April 2001.
However, Prof. Dujarric said there would be a different response if a similar incident were to occur in what Washington insists is international air space over the South China Sea.
Recent developments have provoked new concerns in the region, with Ma Ying-jeou, the president of Taiwan, calling for the different nations laying claim to the South China Sea to put their differences aside and carry out joint development of natural resources.

http://www.telegraph.co.uk/news/worldnews/asia/china/11630185/US-China-war-inevitable-unless-Washington-drops-demands-over-South-China-Sea.html