The Shanghai-La Dialogue was first conceived by the Director-General and Chief Executive Director, Sir John Chipman, of the International Institute of Strategic Security in 2001 to provide a forum for the defense officials and military chiefs to discuss world issues on strategic strategy. The first Summit was held at the Shanghai-La hotel in Singapore in 2002 and followed annually ever since thus known as Shangri-La Dialogue (SLD).  The first meeting was attended by 12 countries and it grew gradually with attendees moving up in official positions, first to vice ministers level then minister level and then included keynote speakers of head of state in addition to that of the host country, Singapore. 

It was in 2007, China first sent a delegation headed by Lieutenant-General Zhang Qinsheng of the People’s Liberation Army with ranking equivalent to vice-minister level. In 2009, the Prime Minister of Australia, Kevin Rudd, gave a keynote speech at SLD and opened the precedence of sideline bilateral meetings between defense ministers to conclude agreements. That year in SLD, Australia and Singapore agreed allowing Singapore’s army to use Australia’s military training facilities for another decade. In 2010, the President of the Republic of Korea, Lee Myung-Bak was the invited keynote speaker. In 2011, it is notable that the discussion topics expanded beyond military matters and for the first time focused on the South China Sea (SCS) Issue. The U.S. defense Minister, Robert Gates, reiterated at SLD the commitment of the U.S. to the Asia Pacific (AP) region. As an outgoing defense minister, he raised a bet of $100 with anyone to proclaim that he predicts the influence of the U.S. would be stronger than today in the next five years. Of course $100 is a joke, so insignificant, considering the U.S. strategy in the AP region. Today, the attending countries of SLD grew to 28 nations. The agenda has elevated far beyond talks of military weapon development and sales. In a White Paper issued by China in 2010, it has cited SLD as one of her avenues to participate in regional security cooperation.
This year’s Shangri-La Dialogue was held from May 31-June 2 with 28 country delegates and 16 keynoters, including Singapore Prime Minister Lee and 15 Defense Ministers or Secretary or Representatives, Patrick M. Shanahan (US), Wei Fenghe (China), Jeong Kyeon-Doo (SK), Takeshi Iwaya (Japan), Federica Magherini (EU), Haji Mohamad Sabu (Malaysia), Penny Mordaunt (UK), Florence Parly (France), Hariton Singh Sajjan (Canada), Ngo Xuan Lich (Vietnam), Delfin Lorenzana (Philippine), Linda Reynolds (Australia), Ryanizard Ryacudu (Indonesia), Ron Mark (NZ), and Eng Hen Ng (Singapore). Observing the 18th Shangri-La Dialogue, it is significant to point out that four of the above 16 keynoters are female, hopefully signifying more peaceful cooperation in the future. 

In examining the speeches delivered at the SLD, one does find a change of tone, perhaps a more explicit expression of sentiments on the security issue. First of all, Singapore’s President Lee Xian Long, made an excellent speech tracing from the history to today’s international relations. He emphasized that it was the openness in trade and interaction that had brought prosperity to the region, not just Singapore as a free trade port but also to the entire Asia Pacific. He made observations on the US-China Trade War and implied its ill consequences. He warned to avoid hardened attitudes and pled for peaceful discussion and resolution on the trade issues. He expressed the wishes of not only Singapore, the ASEAN countries, but also the entire Asia that their desire is to pursue continued globalization, respecting multilateralism rather than being pressured to take sides on any conflict between great nations. His implication was clear, although Singapore is an ally of the U.S., he does not wish to see the U.S. and China prolonging their trade conflicts and expanding into other domains. His tone and of others are that competition is unavoidable among nations but it must be maintained as healthy competition.

The speech delivered by Patrick Shanahan, the new Defense Minister of the U.S., was a prepared speech emphasizing the wish of the U.S. to project her presence in Indo-Pacific Ocean. His speech although not naming names was clearly targeting China and calling her allies in the region to side with the U.S. to stop the rise of China however with little legitimate reasons. Shanahan did not modify his speech after hearing President Lee’s keynote speech which contained an obvious purpose to moderate any hostility between the U.S. and China and any conflicts in SCS. China’s Representative, General Wei Feng He, delivered his prepared speech defending China’s peaceful rise policy and her pursuit of globalization and multilateralism. Wei responded to President Lee and Mr. Shanahan’s speeches and inserted his comments which was not shy to hint that the U.S. intrusion under the name of “Freedom of Navigation” in the Indo-Pacific especially the SCS was the cause of instability of security in the region. Wei stressed that China will seriously defend her sovereignty rights and she has rights to strengthen her defense in SCS or elsewhere especially when facing threat.
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Overall the other speeches were moderate containing a few echoes from official ally’s position stressing the desire to maintain stability and willingness to cooperate in maintaining the regional security. If one had to draw a conclusion, it might be said that there was no clear signal in taking sides or making threats in the speeches other than the U.S. and China exchanging a few barbs. Hopefully, when the delegates at SLD return to their countries that they will convey the genuine tone of the 2019 SLD - it is the region’s wish that the two great nations, the U.S. and China, will soften their hostile attitudes and carry on a healthy competition benefitting the world. It has been said clearly, confrontation between the U.S. and China will lead to instability and no country in the region wishes to see it happen. The Asian countries do not wish nor have the will to form a NATO-like alliance to replicate another Cold War!
 

 
The title subject is a very tough question to answer, particularly when China is in the midst of the U.S. initiated trade war. The tariff war has been going on over 18 months with obvious signs that the war is stuck and extended beyond trade to technology competition and financial arena involving debt and currency issues. In addition, the Hong Kong (HK) unrest, seemingly triggered by a simple legitimate extradition law revision, has further been agitated and fueled by HK elites/media and foreign influence. HK is also used by the U.S. to exert pressure on China, mostly through media, to accept the U.S. ‘trade’ demands.  HK as a world financial center is too important to China as well as to the World to get messed up. Understandably, China has been extremely patient and careful in handling the HK Crisis. The U.S. has also been constrained so not to push HK over the cliff, which, if happened, will likely bring down the world economy through a domino effect.
 
As the stock market is swaying wildly up and down following news tidbits and tweets related to trade war, HK protest activities, and other economic reports, the main question on Wall-Streeters and economists mind is, ‘Will China’s Economy Collapse into a World Financial Crisis?’. The health of China’s economy has been begging for an answer since 1990. Amazingly, many Economics authorities have predicted that China’s economy would crash soon for the past 30 years. In this article, I choose to search on the Internet the articles addressing China’s Economy and listing them chronologically below from 1990 to 2019 which predicted the collapse of China’s economy. Since the Chinese Economy has not collapsed yet, I think these wrong predictions ought to give us information and answer - why the Chinese Economy has strived for three decades without failing? 
 
The following list contains the articles predicting the collapse of China’s Economy from 1990 to 2019:
1990, China's economy has come to a halt. The Economist
1996, China’s Economy has come to a halt. The Economist
1998, China's Economy will face a hard landing. The Economist
1999, China's Economy Entering a Dangerous Period of Sluggish Growth. The Economist
2000, China Currency Move Nails Hard Landing Risk Coffin. Chicago Tribune 2012 Reuter Nick Edwards
2001, A Hard Landing in China. Wilbanks Smith & Thomas
2003, Banking Crisis Imperils China. New York Times Opinion 06/19/2013
2003, How to Find a Soft Landing if China.. KWR International
2004, The Great Fall of China? The Economist
https://www.economist.com/leaders/2004/05/13/the-great-fall-of-china
2005, The Risk of a Hard Landing in China. Nouriel Roubini
2005, Hard Landing Heresy - Economics Focus. The Economist https://www.economist.com/finance-and-economics/2005/09/08/hard-landing-heresy
2006, Can China Achieve a Soft Landing? International Economy
2007, Is China’s Economy Overheating? Can China Avoid a Hard Landing? TIME 4/19/2007
2008, Hard Landing in China? Forbes 11/5/2008
2009, China's Hard Landing. China must find a way to recover. Fortune 3/5/2009
2010, Hard Landing Coming in China. Nouriel Roubini
2011, Why A Chinese Hard Landing May Be Closer Than You Think. Business Insider 7/14/’11 9/12/’12
2011, Dismantling the China Hard Landing Narrative. Forbes 
https://www.forbes.com/sites/kenrapoza/2011/11/08/dismantling-the-china-hard-landing-narrative/
2012, Economic News from China: Hard Landing. American Interest
2012, Should China Be Braced Itself for a Hard Landing, The Guardian 
https://www.theguardian.com/world/2012/mar/22/china-economy-hard-landing
2012, Chinese Hard Landing. Business Insider https://www.businessinsider.com/chinese-hard-landing-2012-9
2013, A Hard Landing In China. Zero Hedge
2014, A hard landing in China. CNBC https://www.cnbc.com/2014/01/31/a-hard-landing-in-china-the-risks-in-one-graphic.html
2015, Towards Recoupling? Assessing the Global Impact of a Chinese Hard Landing through the Trade and Commodity Price Channels. Bank of Canada L. Gauvin
2015, Congratulations, You Got Yourself A Chinese Hard Landing. Forbes
 https://www.forbes.com/sites/kenrapoza/2015/09/03/congratulations-you-got-yourself-a-chinese-hard-landing/
2015, Coming down to Earth - China’s Economy The Economist
https://www.economist.com/briefing/2015/04/18/coming-down-to-earth
2015, Taking a Tumble - China and World’s Economy The Economist 
https://www.economist.com/briefing/2015/08/29/taking-a-tumble
2016, Hard Landing Looms for China. The Economist 
http://www.eiu.com/industry/article/814708465/hard-landing-looms-in-china/2016-10-14
2016,When China Stumbles The NY Times Opinion https://www.nytimes.com/2016/01/08/opinion/when-china-stumbles.html
2017, Is China's Economy Going To Crash? National Interest
 https://nationalinterest.org/feature/mountain-debt-chinas-economy-going-crash-19770
2018, China's Coming Financial Meltdown. The Daily Reckoning 
https://dailyreckoning.com/chinas-coming-financial-meltdown/
2019, What is Causing China’s Economy to Slow Down? Foreign Affairs 
https://www.foreignaffairs.com/articles/china/2019-03-11/whats-causing-chinas-economic-slowdown
2019, If China's Economy Crashes Australia Will Be Hit Hard. The Guardian
https://www.theguardian.com/world/2019/aug/29/coalition-must-give-up-dream-of-budget-surplus-if-china-crashes-report-says
2019 The World Is Moving Closer to Another Hard Landing. Live Mint Opinion
https://www.livemint.com/opinion/columns/opinion-the-world-economy-is-moving-closer-to-another-hard-landing-1555926579873.html
2019 Is China About to Cause Another Asian Economic Crisis?  Real Clear Politics  
https://www.realclearpolitics.com/articles/2019/08/13/is_china_about_to_cause_the_next_asian_economic_crisis_140996.html
 
Last year ended in panic for financial markets and 2019 started with uncertainty, the reason was that people were worrying about a long overdue recession which may be triggered by a crisis in 2019. Ten years after the world financial crisis in 2008, the financial market has accumulated enough excesses for correction. The trade war began in January 2018 added further concern about the world economy. The question is where will be the burst point of a financial crisis? Asia (China), EU (which country) or the U.S.? Tom Holland, a staff writer for South China Morning Post, has written an article, entitled, Look to US not China 2019 for Financial Crisis. Here’s Why.
( https://www.scmp.com/week-asia/economics/article/2181593/look-us-not-china-2019-financial-crisis-heres-why). This article is in contrast to most articles concerned with predicting China’s economic crash or hard landing. Holland argues that although the three largest economies all have debt issues, the crisis may not be triggered by EU, China but by the U.S. 
 
EU after its debt crisis peaked in 2012, its central bank ‘pledged’ (ECB) to defend its currency no matter what. While Italy or Germany or any EU member may get into a new recession; the ECB will come to the rescue by opening the funding taps to avoid or delay the disaster until EU adopts some structural reforms of EU’s economic governance. China’s debt has risen to a dangerous point (in just 10 years her debt has soared from 150% to 250% of GDP), the slowing economic growth will reduce borrowers’ ability to service their debt. But in China, the state essentially owns and controls the banking system, thus the government officials can do whatever necessary to ensure plentiful supplies of liquidity in case of an emergency. In financial crisis, it’s the liquidity not solvency as the real issue.
 
Why is the next financial crisis likely to originate in the U.S.? We may look for the similarities between the 2008-9 crisis and the coming one. In 2008, it was ramped-up lending to low-credit borrowers (subprime homebuyers) and repackaged their loans and sold to greedy investors. The new crisis would be caused by American companies who took advantage of near zero interest rate to load up debt, bought back stock shares to jack up stock prices, and issued executives fat bonuses or dividends rather than investing in productive factories or assets. Over the past 10 years, the total value of US corporate bonds outstanding has tripled from ~US$2.5 trillion to US$7.5 trillion with nearly half being one grade above junk (BBB). In addition, there has also been a boom in so-called leveraged loans (loans to high-risk corporate borrowers), doubling from US$550 billion to around US$1.1 trillion. These “collateralized debt obligations” (CDO) loans have been repackaged and sold to yield-hungry investors similar to the subprime mortgages prior to 2008.
 
The new regulations forbid the trading houses to trade the CDOs in their own accounts. The external CDO holders (ETFs or foreign institution investors) are forbidden to own junk bonds but free to sell CDOs at any time. When the US economy slows for trade war or other reasons, the US companies will face tightening margins, unable to service their debts and some BBB-rated borrowers will get downgraded to junk status. Then the ETFs and institutional investors will rush-sell their bond holdings at fast sliding down prices. Investors become panic and US Corporate Bonds will collapse, bam, a repeat of 2008 crisis. Will China be well enough to come to rescue the world this time like in 2009? One wonders why the U.S. wants to wage trade war with China rather than collaboration?!
 


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The U.S. has identified China as a competitor with a drastic change in her China policy from friendly engagement to targeting China as a threatening competitor. This shift has resulted in today’s trade war and technology sanctions, neither one of which is guaranteeing a clear benefit to the U.S. The fundamental reason is that the current Administration is defining her China policy based on legacy views which are outdated and lack of scientific in-depth economic analysis. Ironically, old book such as Death by China by Peter Navarro (Director of White House Trade Council) is floating in the White House influencing our China policy. Such a book may fit for a movie script but it can hardly stand the test of a rigorous economic analysis on US-China competition. Only a serious analysis should be the basis for defining a reasonable and beneficial China policy facing the ‘China’ competition.

This author is not an economist, but as a scientist trained with an analytical mind, he can see that there is a terrible misunderstanding of the competition between the U.S. and China. Unfortunately this misunderstanding is driving a wrong China policy hurting both nations with no benefits to the entire world. In this article, we shall point out the obvious and urge our economists to follow up with a serious analysis to understand the real cause of competition between the two countries and to formulate a sound strategy and policy to deal with the Competition.

The U.S. China experts tend to interpret the issues between the two nations being the result of our ideological and political structural differences. I would suggest that the root cause for China’s rise and competition is not due to political forces but due to natural factors, such as human population, geological resources and historical culture. These factors influence China’s development regardless of her political system whether or not embracing communism, capitalism or socialism. It happens that these three basic natural factors are so different between the U.S. and China so the two countries followed different development paths. For anyone to wish the other to change and conform to a same system is illogical and unreasonable.

China has a population of four times that of the U.S., she has always been the biggest nation in the world for thousands of years with a large portion of her population being peasants working on very limited arable land. Hence land and earth resources are valued highly by the Chinese. Historically, all Chinese governing systems must accept this fact that China has more peasants for their arable land and unfortunately most arable land are hills and valleys not like the great plains of the U.S. These natural factors made Chinese a peace loving and home bound people. History has shown that Chinese (other than the Mongolian horsemen) had never waged a war invading others nor occupied any colony even when Ming Emperor made seven successful sea explorations with world’s most advanced maritime fleet in the 15th century. Chinese peasants are hard working people but they operate as small entities, never was industrialized. 

For example, tea is a famous highly-demanded agricultural product of China but the Chinese never monopolized the tea industry worldwide. It was the West eventually had control over the international trade of tea. The communist government in China today, although made a drastic land reform to make the government the only land owner, it still has to accept the fact that China has hundreds of millions of peasants working on small plots to produce crops. Therefore, China is an agricultural importer to provide sufficient food on her citizens’ tables. Her dependence on U.S. soy bean, corn and cattle meats were clear evidence that Chinese people have to work very hard in agricultural and other industrial areas. To put it simply, a large population and limited arable land and resources force them to work hard to compete – this is the source of competition.

The communist government experimented with communism and failed now they are embracing capitalism gingerly to make China as a hard working world factory making small profits (the assembly factory of Apple’s phones makes $10 out of a phone selling for $500 to 1000, a similar situation like Chinese farmers selling teas to East Indies). The Chinese government realized that it could not organize the Chinese farmers to a few farm corporations to compete in production efficiency (compared to U.S. farmers) due to the natural limitations. They cannot even manage food standard with millions of peasants like the USFA can on American food producers. Therefore, the government is focusing on manufacturing and export initially leveraging on inexpensive labor force, then gradually elevating in technology and eventually making industry transformation and stimulating domestic consumption. 

The U.S. is very different from China; she has less population and vast areas of arable land and rich resources. Americans do not have to work as hard as Chinese to have food on the table. These natural factors have made the government and Americans moving away from manufacturing to financial industries, a blue collar to white collar shift (whereas China has a grey collar to blue collar shift poised to shift to white collar). This transformation has been successful as the U.S. has dominated the finance, banking, investment and insurance industries but the transition created an ‘unemployment problem’. While the U.S. can depend on cheap products imported from the world, she cannot offer enough meaningful jobs to the deposed workers. Blaming this problem to China and other importers (claiming dumping or stealing technologies and drumming up national security threat) are all excuses for government not able to have right economic policies.

China has a far worse problem and a bigger challenge to manage her industrial transformation than the U.S. does. China would like to see the U.S. staying strong in her economy since she depends on the U.S. in agricultural products and advanced luxury goods and as a market for importing Chinese goods. (Note though the Chinese export to the U.S. is only about 4% of her total export to the world) The U.S. has a challenge to manage her economical transformation but in a lesser degree compared to China’s. The competition between the U.S. and China really is: Which country can manage her economy and industrial transformation better.

The current tariff war and technology sanction seemed to hinge on a strategy of slowing down China’s economical and industry transformation, however, no assurance of success for U.S. economical development. First, the trade war has forced China to stop buying U.S. agriculture products hurting the U.S. farmers. China may have to push back more workers to agricultural industry, but the outcome may be more advanced agricultural solutions such as making huge desert and salt water land arable for producing crops than returning workers back to small farms. In contrast, the U.S. may lose the agriculture market permanently further hurting the U.S. economy.

The technology sanction measures are also ill-thought-out plans. This not only disrupts the supply chain that the U.S. needed (such as Apple phone) but it also forces China to accelerate her industry upgrade and transformation to be self sufficient. On the other hand, the U.S. must recreate her own supply chain which may generate some jobs but it is a reverse technological movement nevertheless. This may damage  the U.S. lead in advanced technology. These policies do push each country to move closer to isolationism. Granted the U.S. has less population, more arable land and resources, thus she may survive as an isolationist. However, standing on the trajectory of civilization in 21st century, it is almost certain that the U.S. may be left behind as a weakening giant if the Asian nations continue to thrust on their progressive, collaborative but competitive development.



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