China-Japan rearmament is Keynesian stimulus, if it doesn't go horribly wrong. The escalating clash between China and its neighbours has reached a threshold and Asia is on the cusp of a full-blown arms race. Beijing's threat to shoot down any aircraft that fails to adhere to its new air control zone in the East China Sea is a watershed moment for the world. Somebody has to back down. Japan's foreign minister, Fumio Kishida, accused China of profoundly dangerous acts that unilaterally change the status quo. The US defence secretary Chuck Hagel called it a destabilising attempt to alter the status quo in the region and warned that the US would defy the order and stand behind its alliance with Japan. The Pentagon has since stated that US pilots will not comply, and will defend themselves if attacked. Are we slipping into a new Cold War? (VIEW LINK)
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