November 1992 (vol. 9, #1) 1601 N Tucson Blvd #9, Tucson AZ 85716 c 1992 Physicians for Civil Defense

In the judgment of Fumiaki Fujino, chief of the China division of the giant Japanese trading firm ITOCHU Corp., the world's top economic power in the year 2030 will be China.

In October, 1992, Emperor Akihito visited China the first Japanese emperor in history to do so.

The Japanese government is encouraging investment in China more than in any other single country. In the year ending in March, 1992, investments reached $579 million, almost twice the amount of the previous year, and are expected to double again in the coming year. Major Japanese investments are expected in steel, non-ferrous metals, and petrochemicals, in contrast to the mostly short-term property and stock investments by Taiwan and Hong Kong.

Industrial projects valued at $185 billion are under construction in the state sector in China, a figure equal to about one-half of the nation's annual gross national product.

This rapid growth is not without its problems. Inflation in some big cities is in double figures (although 5% is cited as the nationwide average) and could increase dramatically if Chinese citizens use their $200 billion in bank savings to go on a buying binge.

Under Deng Xiaoping's economic reforms, the central government is to withdraw from day-to-day running of the economy. To counter the resulting dilution of central power, Beijing is implementing reforms that will increase central controls over the military. Japan favors such reforms, believing that the military plays a crucial role as the ``armed escort'' of economic reform. Japan is openly urging the US to be less demanding of China on human-rights issues.

``China has taken to heart many of the lessons of Gorbachev's attempt to reform the Soviet Union, and it will not be repeating the same mistakes,'' according to Intelligence Digest.

``China's communist establishment saw from Moscow's experience that political reform would be fatal to communist rule. The Tiananmen Square massacre was not a mistake, or a one-off, it was a show of determination that the Chinese people were intended to remember for a very long time to come.''

Although the People's Liberation Army is to be reduced to 3 million men (from 4.5 million in 1985), the intention is to increase its strength through technologic advancement. The seven military regions will be removed in order to ``rid the emperor of evil ministers'' and consolidate the power of the supreme command.

In addition to a rapid build-up of its own strategic triad (see CDP Sept. 1992), China is building a thriving export business in nuclear technology and armaments. Reportedly, China has sold Iran a calutron for concentrating uranium-235. A planned Chinese 300-million-watt nuclear reactor in Iran could produce enough plutonium for two to three nuclear warheads per year (Jastrow and Kampelman, Commentary, Nov. 1992). China is also to provide Iran with 38 warplanes, 10 ballistic missile systems, 400 tanks, 400 medium-range artillery pieces, shoulder-held armor-piercing missiles, radars, and other surveillance systems. Other customers include Syria, Pakistan, Algeria, and Bangladesh.

Meanwhile, both the Western bloc and the former Soviet Union face increasing economic gloom.

The Russian GNP will shrink by about 25% in 1992, with an inflation rate of 1,000%. Industrial production fell about 14% in the first half of the year and was 27% lower in August, 1992, compared with the same month in 1991. As Moscow begins the process of reneging on its existing foreign debt of $70 billion, Japanese and Western investors are steering clear. The economic debacle threatens Yeltsin's reforms; some say he could be ousted from power as early as December 1 (Washington Inquirer 11/6/92).

Germany, which dominates the European Community, holds half the Russian foreign debt. The East German debt of about $250 billion will start maturing in 1995. The 1993 German federal deficit is projected to be over $27 billion.

The US is beginning to awaken to the implications of its own monstrous national debt. The word ``deflation'' has appeared on the front pages of mainstream newspapers and not just in hard-money newsletters.

When Francis Fukayama spoke of ``the end of history,'' did he mean the end of Western history?

[REF: Intelligence Digest, 17 Rodney Road, Cheltenham, Glos, GL50 1HX, United Kingdom, 9/30/92-11/13/92.]

Non-Disarmament and Proliferation

CIS. Instead of destroying all the known 308 SS-18 ballistic missiles as required by a joint understanding to the START-2 agreement, military officials state they will keep 154 of them. The US suspects that an improved model is still in production. Also, Russia refuses to honor its agreement to sell nuclear fuel to the US. It is believed to be selling the fuel to Iran instead for a higher price. Troops are not being withdrawn from the Baltic states (Washington Inquirer 11/6/92).

No one knows the extent of leakage of nuclear material from the CIS. Three Poles were arrested in Germany when they offered a nuclear warhead for sale. Weapons-grade uranium has been found in Munich and Vienna. An Iranian dissident group claimed that Iran has purchased four nuclear warheads from Kazakhstan (Intelligence Digest).

Iran. Besides the war materiel listed above, Iran plans to acquire 2,000 ballistic missiles (Scuds and Chinese Silkworms) and to build a force of diesel submarines of Soviet manufacture. Iran has effectively annexed the island of Abu Musa and aims to control access to the Persian Gulf through the straits of Hormuz. Perhaps more ominously, Iran now has access to the Red Sea via Port Sudan and has four army bases to the north of Khartoum, used for training Hezbollah guerrillas from Lebanon and Islamist extremists from Egypt.

A developing Libya/Ethiopia/Iran triangle threatens both Egypt and Israel (Intelligence Digest).