There is a critical issue which seldom gets addressed. What to do about China? China was long considered the evil empire by the West. It had a number of unsavory features we associate with collectivist regimes:
1. State funded activity
2. State coercion
3. State sponsored tyranny against foreign nations like Nepal, Taiwan
4. Abuse of human rights
In the 'modern era' it is apparent that China appears to be embracing capitalism. At the same time the West seems to be moving more and more towards fascism. Is this a happy marriage?
In this interesting article Professor Usha Haley highlights some of the risks of doing business with China, as well as quashing a popular notion that China is only good at labour-intensive activities. In fact there are several risks posed by China:
1. The lack of high level conceptual thinking in the realm of philosophical values. Hopefully that conundrum will be resolved in the West soon enough to prevent chaos in China.
2. The prospect of Chinese business and public enterprises stealing Western technology. Even if one company buys it, rest assured that their competitors will be stealing.
3. The cultural legacy of Chinese people repudiating state intervention into their lives, and thus tending to act with little regard for the law, whether near-objective (common law) or statutory (mostly arbitrary) impositions.
This all poses a risk to the West because it is destined to result in arbitrary politics which will either result in civil war in China, as competing interests seek personal or "social" justice, or trade wars, and the like with the West. All these issues are not new. They were placed out on a smaller stage in the 1960s to 1980s. The difference is that the USA carried the burden because of the Cold War, and then finally Japan came around as North Korea and China looked more difficult.
What is one to make of India and Pakistan? Well these countries make an interesting counter-punch to any Chinese belligerence. They give one the confidence that some global balance will be struck, that all the collectivist countries in the world will be cancelled out. This will mean war of course rather than any respect for human nature.
Back to the issue of Chinese 'core capabilities'. China is a huge melting pot of interests. It is a very large market. It is capable of a great deal of things. It will play a role in almost every sector. The notion that they can only build cheap, widgets is nonsense. They actually supply a lot of sophisticated technology already to certain sectors like mining, metallurgy, and other industrial technology. The same can be said for India. They are big countries with a lot of resources. Those resources have only ballooned with all the foreign investment and export surpluses. The fact that state enterprises are able to throw money at opportunities might result in failings, but it might also result in new discoveries, and more importantly a more rapacious development.