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October 10, 2013
Notes from the Pentagon

China fears U.S. financial default
U.S. officials say recent statements by Chinese authorities indicate fear in Beijing that a U.S. government default would endanger China’s $1.3 trillion worth of investments in the United States.

State-controlled Chinese press accounts, a barometer for official government policies, presented limited coverage of the partial U.S. government shutdown and pending default in the debt ceiling debate.

Chinese Vice Finance Minister Zhu Guangyo said at a news conference Monday that the U.S. — as the world’s largest economy and a major supplier of reserve currency — needs to make sure creditors are protected.

“Safeguarding the debt is of vital importance to the economy of the U.S. and the world,” he told reporters in Beijing.

“This is the United States’ responsibility,” Mr. Zhu said, adding that resolving the issue is critical as the Oct. 17 deadline for raising the debt ceiling nears.

President Obama was asked this week about the worries of creditors like China and Japan, which has $1.1 trillion in U.S. debt holdings.

“I won’t disclose any specific conversations, but obviously my message to the world is the United States always has paid its bills, and it will do so again,” Mr. Obama said.

“But I think they’re not just looking at what I say. They’re looking at what Congress does, and that ultimately is up to” House Speaker JohnA. Boehner.

Mr. Obama dismissed foreign concerns, noting that democracies frequently have “tussles over the budget.”

Chinese press commentary on the financial crisis has included an Oct. 2 report that called the impasse a major worry and criticized the United States for years of “irresponsible spending.”

Another Chinese article said a U.S. default would pose a systemic risk to the financial system and produce volatility in world financial markets.

Most of China’s ruling elite, including government officials and state industrialists, has invested billions in U.S. markets, which they view as a secure financial oasis.

Chinese government concerns contrast with recent unofficial news outlets in China that view the U.S. government shutdown as an element of a desired democratic system.

The daily newspaper Nanfang Dushi Bao last week noted the “powerful society of the United States” for guaranteeing normality “even without the government.”

It said the shutdown is an extreme example of an inefficient two-party political system but said that was better than communist China’s “nontransparent government.”

One Chinese blogger said the Chinese should be ashamed because in the United States “every penny of the public’s money must be spent with the people’s consent.”

By contrast, China’s collective dictatorship controls all financial decisions.

A senior Obama administration said Secretary of State John F. Kerry will raise China’s theft of U.S. technology through cyberattacks during a meeting scheduled Thursday in Brunei with Chinese Prime Minister Li Keqiang.

“The cyberissue falls very squarely into economic agenda because, as we have pointed out repeatedly, the use of cyber as a means of theft of American commercial technology and intellectual property represents a significant problem in our economic relationship,” the senior official told reporters traveling with Mr. Kerry to dual meetings of the Association of Southeast Asian Nations and the East Asia Summit.

China’s cyberattacks against U.S. government and corporate targets has cost the United States an estimated $140 billion in lost data, according to government and industry estimates.

The U.S. official also said another key topic will be Chinese encroachment in the South China Sea, which has rattled Vietnam, the Philippines, Malaysia and other states in the region that fear growing Chinese hegemony.

The 18 ASEAN member states will discuss resolving disputes in the South China Sea, including “the role of the United States as a long-standing champion of security and stability in the region and as an advocate for the rule of law, peaceful resolution of disputes, freedom of navigation, and the principle of unimpeded lawful commerce,” the official said.

“Now this is an area of, by and large, violent agreement between ASEAN and the United States,” the official said, later clarifying that use of the term “violent” means “strong.”

Al Qaeda’s Arabian Peninsula affiliate plans to launch a cartoon as a way to recruit jihadists and promote terrorist propaganda.

The announcement of the cartoon was posted on a website Saturday announcing that the production will be produced by Al Qaeda in the Arabian Peninsula, the terrorist group now operating in Saudi Arabia and Yemen that is viewed by U.S. officials as one of the most dangerous al Qaeda offshoots vying for power in the Middle East.

The launching of the cartoon shows that the Islamist group is continuing to seek recruits and spread its propaganda, especially among young people.

The cartoon announcement appears on the Al-Minbar al-Ilami Jihadist Forum. The posting stated in Arabic: “Soon: Large Scale Cartoon Production — The Al Qaeda in the Arabian Peninsula.”

It includes images showing the black al Qaeda flag and masked cartoon characters firing AK-47 assault rifles and rocket-propelled grenades.

“The production exposes the defeatists who do not support the religion and the prophet as well as the collaborationism of rulers with the West,” the posting said.

An Army plan to close Reserve Officer Training Courses in traditionally conservative Southern and rural universities is raising concerns that the service is social-engineering the officer corps by shifting their education from conservative to liberal regions.

The Army announced Oct. 2 that, after a “comprehensive review,” 13 ROTC programs will be closed next year. The programs pay for scholarships for students who join the Army after graduation.

“The decision to close the 13 ROTC programs is not a reflection on the quality of those academic institutions or the outstanding officers produced at those schools,” said Karl F. Schneider, acting assistant secretary of the Army for Manpower and Reserve Affairs.

Mr. Schneider said in a statement that the closures were an efficiency measure and designed to maintain “a presence in all 50 states.”

The Army said a decline in the number of lieutenants produced by the 12 mostly rural and Southern colleges was a factor, along with “shifting demographics across the country.”

Seven of the 12 programs closed were at schools in Alabama, Arkansas, Georgia, Kentucky, Mississippi and Tennessee.

William Cole, president of the University of North Alabama, said he was surprised by the decision.

“We were shocked to learn of this decision, which was made without consultation and came without warning. ROTC has been a proud part of the tradition of UNA for 65 years, and has produced many fine officers,” he said.

Outside the South, five programs were closed in California, Michigan, North Dakota, South Dakota and Wisconsin.

A defense official critical of the policy said it appears to be a subtle move by the administration to change the political character of the officer corps.

“Politically stealing scholarships away from historically Southern conservative universities and placing them in liberal, progressive locations like New York and Chicago seems to be pretty clear gerrymandering of the Army’s officer corps,” the official said.

A spokesman for the Army Cadet Command could not be reached for comment.v

  • Bill Gertz can be reached at @BillGertz.

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