With American domestic energy costs falling as supplies surge due to the boom in fracking for shale oil and gas, Chinese manufacturers are becoming economically uncompetitive on a cost basis compared to the U.S. producers. With China, Japan, Taiwan, and South Korea equally desperate to save jobs by exploiting potentially cheap and abundant off-shore oil, energy economics will drive military confrontations in Asia
No country has more risk from high energy prices than China, which passed the U.S. in 2010 as the world’s largest manufacturer. China passed Russia to grab the number two spot behind the U.S. in defense spending. Fearing the Peoples’ Liberation Army would become the dominant military power in East Asia, Japan has launched a crash rearmliment drive that by next year will have ballooned defense outlays passed France and U.K. to the number four spot, just behind Russia.