Asia-Pacific Perspective

Obama In Vietnam: Only Permanent Interests – Analysis

noreply@blogger.com (Broc West) — Tue, 31 May 2016 00:25:00 +0000

Written by Amruta Karambelkar / Eurasia Review: The US and Vietnam are the strangest bedfellows in the Asia Pacific. US President Barack Obama’s visit to Vietnam received wide attention, particularly because of the lifting of the embargo on the sale of lethal weapons to Vietnam. The ban was eventually expected to ease but it seems to have happened much sooner. This appears to be one of the significant measures undertaken within the so-called US ‘rebalance’. Both the presidents have stated – Obama more clearly – that the elevated bilateral ties are not aimed against Beijing. At the same time, however, both have also expressed concern regarding developments in the South China Sea and freedom of navigation. The US ‘rebalancing’ is tangible through this visit, along with other recent US visits and initiatives in the region.

The US and Vietnam have been gradually striving to normalise their relationship. The process started after the end of the Cold War and the landmark visit to Vietnam in 2000 by then President Bill Clinton with the aim of reconciliation. Just like Clinton’s, Obama’s Vietnam trip has happened towards the end of his presidency. Sixteen years since Clinton’s historic visit, a lot has changed between the former enemies. Most of the present Vietnamese population was born after the war, and the negative psychological cloud of the war has passed. The enthusiastic welcome that Obama received from the civilian community is an indicator of the changing times.

The US-Vietnam joint statement specifies their commitment to respecting their “respective political systems.” This could be a reference to how many in Vietnam see the US’ insistence on human rights and political freedom as an attempt to destabilise the communist regime. Those specific words in the joint statement should therefore help assure the Vietnamese regime and sceptics of US-Vietnam rapprochement. It also indicates a mutual understanding between the two – that the Vietnamese cannot be pushed against the wall over the issue of human rights. Both are different political systems are bound to have differing perspectives regarding governance. Indeed, President Obama admitted that both sides have differences, which may indicate that it would not be as contentious an issue in bilateral relations as before.

Since the end of the Cold War, Vietnam has recalibrated its foreign policy to establish relations with the Western world. Since its domestic restructuring programme of the ‘90s called Doi Moi, and after joining the WTO in 2007, Vietnam’s economy attracted investments from across the spectrum. The US today is the seventh largest investor in Vietnam, and in the words of Obama, “…the single largest market for Vietnam’s exports.” Vietnam is also a part of the US-led Trans-Pacific Partnership (TPP), which could potentially challenge Chinese economic preponderance in Southeast Asia. In recent years, Vietnam has been consciously trying to diversify its FDI sources so as to reduce reliance on any one country.

Obama’s visit dropped other goodies in the Vietnamese kitty. A Fulbright University will be set up with the aim of making it a world-class university in Vietnam. That scores brownie points with the youth, and serves as a soft power instrument to iron out remaining historical tensions. The US and Vietnam also expanded the civil nuclear partnership that would aid the energy starved, rapidly industrialising, Vietnam. A joint commission on civil nuclear cooperation will be set up to implement the 123 Agreement.

The highlight of the visit is the lifting of sale of lethal arms to Vietnam. It is a bold move. The ban on non-lethal weapons was lifted in 2013. Now that the embargo is completely done away with Vietnam can purchase hardware as per its requirements and from wider sources. Vietnam has been modernising its military over the past few years, and particularly building its navy towards sea denial capabilities. In the process, it has largely relied on traditional security partners such as Russia and India, but has gradually turned to Western suppliers also. The US has been strengthening Vietnam’s coast guard. A quid pro quo, one can imagine, is the possibility of greater US access to the strategic Cam Ranh Bay in the future. Importantly, the US is already taking advantage of the commercial facilities at the Bay.

The lifting of the arms embargo is significant for another reason. There have been doubts over US’ commitment to Southeast Asia within the region. In his joint press conference with President Quang, Obama reiterated US’ priority to the Asia-Pacific, and how its comprehensive relations with Vietnam are in sync with its broader strategy.

In 2015, the Pentagon launched the Maritime Security Initiative (MSI) for Southeast Asia. The MSI, a part of the Department of Defense’s (DoD) Asia Pacific strategy, aims at improving maritime domain awareness, enhancing capabilities, and creating “strong, independent partners in the region.” Accordingly, the plans for Vietnam include assistance in vessel modernisation, maritime patrol aircraft, support for C3 systems in search and rescue operations, and training, although the funds for Vietnam are only US$2 million whereas Philippines gets US$41 million. The ‘rebalancing’ to Asia, the MSI and the lifting of the embargo – it all adds up. The course is set, although it is a long way yet for bilateral security cooperation. Nonetheless, the increasing ease between US and Vietnam, which transcends history and ideology, reflects the realpolitik of Asia Pacific security. Because there are only permanent interests.

Amruta Karambelkar
Provisional PhD scholar, Centre for Indo-Pacific Studies, JNU

SOURCE: Eurasia Review

Malaysia and China agree to settle South China Sea issues via DOC

noreply@blogger.com (Broc West) — Thu, 12 May 2016 23:28:00 +0000

via New Straits Times Online: Malaysia and China have agreed to settle South China Sea-related issues through the Declaration on the Conduct of Parties in the South China Sea (DOC) and to speed up the completion of the Code of Conduct in the South China Sea (COC).

Malaysian Foreign Minister Datuk Seri Anifah Aman said the agreement was reached at his meeting with visiting China State Councillor Yang Jiechi after the latter called on him at Wisma Putra here today.

Speaking to reporters after the meeting, Anifah said the issues discussed at their meeting included the encroachment of Chinese fishermen into Malaysian waters. “We raised our concern and he (Yang) said he will look into it. We believe that between friends we should be able to find solutions.

“We (Malaysia and China) are not exactly neighbours but we share the same South China Sea. So we are bound to have that kind of problems,” he said. Anifah said Malaysia faced the problem of fishermen encroaching into its waters even with Indonesia because of overlapping areas.

“Therefore, what we (Malaysia and China) have promised is to settle all issues through the DOC and speed up the completion of the COC,” he added. In March this year, it was reported that about 100 China-registered boats and vessels had been detected encroaching into Malaysian waters near Beting Patinggi Ali in the South China Sea.

CONTINUE @ SOURCE

Fukushima 5 Years Later: "The Fuel Rods Melted Through Containment And Nobody Knows Where They Are Now"

noreply@blogger.com (Broc West) — Mon, 14 Mar 2016 00:48:00 +0000

via Zero Hedge:

Today (March 11, 2016), Japan marks the fifth anniversary of the tragic and catastrophic meltdown of the Fukushima nuclear plant. On March 11, 2011, a massive earthquake and tsunami hit the northeast coast of Japan, killing 20,000 people. Another 160,000 then fled the radiation in Fukushima. It was the world’s worst nuclear disaster since Chernobyl, and according to some it would be far worse, if the Japanese government did not cover up the true severity of the devastation.

At least 100,000 people from the region have not yet returned to their homes. A full cleanup of the site is expected to take at least 40 years. Representative of the families of the victims spoke during Friday’s memorial ceremony in Tokyo. This is what Kuniyuki Sakuma, a former resident of Fukushima Province said:

For those who remain, we are seized with anxieties and uncertainties that are beyond words. We spend life away from our homes. Families are divided and scattered. As our experiences continue into another year, we wonder: 'When will we be able to return to our homes? Will a day come when our families are united again?'

There are many problems in areas affected by the disaster, such as high radiation levels in parts of Fukushima Prefecture that need to be overcome. Even so, as a representative of the families that survived the disaster, I make a vow once more to the souls and spirits of the victims of the great disaster; I vow that we will make the utmost efforts to continue to promote the recovery and reconstruction of our hometowns.

Sadly, the 2011 disaster will be repeated. After the Fukushima nuclear meltdown, Japan was flooded with massive anti-nuclear protests which led to a four-year nationwide moratorium on nuclear plants. The moratorium was lifted, despite sweeping opposition, last August and nuclear plants are being restarted.

Meanwhile, while we await more tragedy out of the demographically-doomed nation, this is what Fukushima's ground zero looks like five years later. As Reuters sums it up best, "no place for man, or robot."

The robots sent in to find highly radioactive fuel at Fukushima's nuclear reactors have “died”; a subterranean "ice wall" around the crippled plant meant to stop groundwater from becoming contaminated has yet to be finished. And authorities still don’t know how to dispose of highly radioactive water stored in an ever mounting number of tanks around the site.

Five years ago, one of the worst earthquakes in history triggered a 10-metre high tsunami that crashed into the Fukushima Daiichi nuclear power station causing multiple meltdowns. Nearly 19,000 people were killed or left missing and 160,000 lost their homes and livelihoods.

Today, the radiation at the Fukushima plant is still so powerful it has proven impossible to get into its bowels to find and remove the extremely dangerous blobs of melted fuel rods.

The plant's operator, Tokyo Electric Power has made some progress, such as removing hundreds of spent fuel roads in one damaged building. But the technology needed to establish the location of the melted fuel rods in the other three reactors at the plant has not been developed.

“It is extremely difficult to access the inside of the nuclear plant," Naohiro Masuda, TEPCO's head of decommissioning said in an interview. "The biggest obstacle is the radiation.”

The fuel rods melted through their containment vessels in the reactors, and no one knows exactly where they are now. This part of the plant is so dangerous to humans, TEPCO has been developing robots, which can swim under water and negotiate obstacles in damaged tunnels and piping to search for the melted fuel rods.

But as soon as they get close to the reactors, the radiation destroys their wiring and renders them useless, causing long delays, Masuda said.

Each robot has to be custom-built for each building.“It takes two years to develop a single-function robot,” Masuda said.

IRRADIATED WATER

TEPCO, which was fiercely criticized for its handling of the disaster, says conditions at the Fukushima power station, site of the worst nuclear disaster since Chernobyl in Ukraine 30 years ago, have improved dramatically. Radiation levels in many places at the site are now as low as those in Tokyo.

More than 8,000 workers are at the plant at any one time, according to officials on a recent tour. Traffic is constant as they spread across the site, removing debris, building storage tanks, laying piping and preparing to dismantle parts of the plant.

Much of the work involves pumping a steady torrent of water into the wrecked and highly radiated reactors to cool them down. Afterward, the radiated water is then pumped out of the plant and stored in tanks that are proliferating around the site.

What to do with the nearly million tonnes of radioactive water is one of the biggest challenges, said Akira Ono, the site manager. Ono said he is “deeply worried” the storage tanks will leak radioactive water in the sea - as they have done several times before - prompting strong criticism for the government.

The utility has so far failed to get the backing of local fishermen to release water it has treated into the ocean.

Ono estimates that TEPCO has completed around 10 percent of the work to clear the site up - the decommissioning process could take 30 to 40 years. But until the company locates the fuel, it won’t be able to assess progress and final costs, experts say.

The much touted use of X-ray like muon rays has yielded little information about the location of the melted fuel and the last robot inserted into one of the reactors sent only grainy images before breaking down.

ICE WALL

TEPCO is building the world’s biggest ice wall to keep groundwater from flowing into the basements of the damaged reactors and getting contaminated.

First suggested in 2013 and strongly backed by the government, the wall was completed in February, after months of delays and questions surrounding its effectiveness. Later this year, TEPCO plans to pump water into the wall - which looks a bit like the piping behind a refrigerator - to start the freezing process.

Stopping the ground water intrusion into the plant is critical, said Arnie Gunderson, a former nuclear engineer.

“The reactors continue to bleed radiation into the ground water and thence into the Pacific Ocean,” Gunderson said. "When TEPCO finally stops the groundwater, that will be the end of the beginning.”

While he would not rule out the possibility that small amounts of radiation are reaching the ocean, Masuda, the head of decommissioning, said the leaks have ended after the company built a wall along the shoreline near the reactors whose depth goes to below the seabed.

“I am not about to say that it is absolutely zero, but because of this wall the amount of release has dramatically dropped,” he said.

SOURCE: Zero Hedge

Australia and China: Do Bitlateral Relations Get Even More Complicated?

noreply@blogger.com (Nick Hopkins) — Wed, 09 Mar 2016 22:47:00 +0000

from New Eastern Outlook: Australia and China have a long history of mutually beneficial cooperation. Over the past five years, bilateral trade volume has grown by about fifty percent, and that was before signing the Free Trade Agreement between the countries, which took place in June 2015. Both countries make their respective mutual investments, Australian companies are widely represented on the Chinese market, student exchange and tourism programs are developing. In October 2015, Australia’s Prime Minister Malcolm Turnbull has announced the upcoming ‘golden age’ of Australian-Chinese relations. Recently, however, this harmony was broken. The fly in the ointment was added by the aggravation of confrontation between China and other Asia-Pacific countries for control over the South China Sea.

Recent news on the start of construction of Chinese military bases on the Paracel and Spratly Islands, as well as on the stationing of ground-to-air missiles on one of the islands, perturbed Australian Authorities. Australia addressed all countries involved in the conflict, calling for the termination of the militarization of the South China Sea, in which it sees a threat to the security of the region, as well as to economic development due to possible restrictions for sea and air traffic. Australia has also demanded that China stop the construction of artificial islands and has expressed its support to the Philippines, which appealed to the International Court of Arbitration in The Hague to challenge China’s claims.

In mid-February an official visit to China was held by Julie Bishop, Minister for Foreign Affairs of Australia, during which the situation in the South China Sea was one of the main issues. Julie Bishop brought up Xi Jinping’s statement from the previous year, that China does not want to militarize the challenged islands. The media first informed that the Chinese side has denied the statement of the Ministry of Defense of Taiwan that a missile defense system was stationed on one of the Spratly Islands. However, later, February 17, 2016, at the joint press conference with his Australian counterpart, Wang Yi, Chinese Foreign Minister, said that there is a legal construction of the military infrastructure on the islands under the state’s right to self-defense.

Simultaneously, Hong Lei, Chinese Foreign Ministry Spokesperson, made a number of statements, in which he urged Australian leadership to make an objective and unbiased assessment of what is happening and to avoid rash statements. He also said that the islands in the South China Sea are the primordial Chinese territory in which China has a right to station defensive targets, and has been doing so for the last decade and that it is not related to the ‘militarization’ of the region, and does not harm the free sea and air transportation in the region.

Despite the differences, the development of economic relations continues. During Julie Bishop’s visit to China, an agreement was reached on expanding cooperation between Australia and China. Commenting on the visit of the Australian colleague, Wang Yi, Chinese Foreign Minister, said that the two countries reached a ‘comprehensive strategic partnership’.

He mentioned agriculture, education, tourism, energy, and strengthening the maritime traffic between the countries among the most promising areas of the Australian-Chinese cooperation. The latter should be specially stressed as it implies Australia’s involvement in the ‘New Silk Road’, the most important project for China at the moment. In his speech, Wang Yi said that the issue has already been given to discussion.

In turn, Julie Bishop said that China and Australia have been successfully cooperating in the spheres of trade and security, and that the two countries plan to run joint military exercises. However, just a week later the Australian leadership made statements, to which China reacted negatively. Thus, February 25, 2016 Malcolm Turnbull shared that Australia was planning to significantly increase its military budget and to strengthen the combat capabilities of the Navy to protect its interests in the Asia-Pacific region. It was openly said that this is due to the increase in military power of China. In addition, Malcolm Turnbull expressed support from the part of Australia to the military presence of US in the Asia-Pacific that Australian Prime Minister called “the most important strategic partner of Australia.” According to him, the US military maintains stability in the region. It is difficult to say how much current stability in the region depends on the United States, whose influence there is weakening with each year. However, the Australian leadership clearly designated its position. Perhaps, Australia wants to reinforce its own armed forces because of this weakening of the US presence. Also, Canberra has again negatively reacted to the Chinese actions in the South China Sea.

At the same time, Marise Payne, Australian Minister for Defense, said that Australia plans on military cooperation with China, which Julie Bishop talked about; however, on some issues related to security in the Asia-Pacific region, the views of countries may not coincide, and Australia will increase its presence in the region. Beijing criticized Canberra’s plans to reinforce its military capabilities. Besides, Australia has recently expressed a desire to participate in future naval exercise ‘Malabar’, which has been carried out by the United States and India since Year 1992, and in which Japan took part in Year 2015. These exercises have caused repeated protests from the part of the Chinese government.

In response, a statement of the Chinese Foreign Ministry expressed the hope that Canberra would change its position and reconsider its views on the Chinese policy.

To summarize, it may be said that the Australian-Chinese relations are going through hard times. Both countries are strong players in the Asia-Pacific region and have their own interests. However, in order to maximize the implementation of its interests, Australia tries to maintain relations both with the United States and with China, despite their competition for influence in the region. We must not forget, in particular, that Australia is one of the founders of the Asian Infrastructure Investment Bank launched by the Chinese initiative to finance the ‘New Silk Road’ project. Thus, we may assume that, in spite of the current differences, Australia and China would unlikely opt for the critical exacerbation of relations in the near future.

SOURCE: New Eastern Outlook

Have We Witnessed a Dramatic Change in the Military Doctrine of the DPRK?

noreply@blogger.com (Broc West) — Tue, 08 Mar 2016 20:50:00 +0000

via New Eastern Outlook:

As it was reported on Friday by the KCNA, during a visit to a closed firing range where advanced multiple rocket launchers were tested, North Korean leader Kim Jong-un announced that the country should be prepared to use its nuclear weapons at any moment to ensure its self-defense. The North Korean supreme leader has also underlined that he perceives the upcoming South Korean-US maneuvers as a dangerous gamble that could lead to disastrous consequences, so he ordered the North Korean army to raise all forces to high alert. The KCNA has also noted that “hostile forces led by the United States,” adopted a resolution that is “undermining the rights of the DPRK as a sovereign state.”

The part that one can consider to be crucial in all this information warfare is the fact that in the same speech, Kim Jong-un announced that Pyongyang would reconsider its military doctrine to allow the possibility of preemptive strikes being launched in connection with the dangerous situation on the Korean Peninsula. On March 4, a statement issued by the DPRK government stated that in circumstances when the United States and its satellites have openly challenged North Korea’s sovereignty and have endangered its right to existence, any hostile actions would lead to a decisive response. The statement has also added that should some disastrous event occur on the Korean Peninsula or in the region adjacent to it, the entire responsibility will lie on the United States and its collaborators.

Later, the same notion was repeated in an official statement of the DPRK National Defense Commission that was released by the KCNA on March 7. The statement announced that due to the joint military exercises of the United States and South Korea labeled as “training for a nuclear war,” any hostile military act would lead to a preemptive nuclear strike launched in accordance with the procedure established by the high command of the Korean People’s Army.

It’s only natural that such statements aroused suspicion. Moscow has expressed serious concern over the entire situation. On March 4, Vladimir Putin’s spokesman Dmitry Peskov expressed the hope that all the parties involved will exercise restraint. The United States urged North Korean leaders to refrain from provocative statements and actions and focus on the fulfillment of DPRK’s international obligations. A Pentagon spokesman said the US is prepared to destroy North Korea’s nuclear arsenals if North Korea poses a threat to the US, while noting that he had no evidence that the DPRK conducted test launches of intercontinental ballistic missile armed with nuclear warheads. In turn, the press secretary of the South Korean Ministry of Defence announced that North Korea must put an end to its defiant and destructive comments and actions, noting that Seoul will mercilessly respond to any provocation made by North Korea.

Such crises are truly alarming for a number of reasons. Firstly, it is necessary to take into account the context in which that decision is taken. While traditional news coverage of North Korea’s actions has been reduced long ago to suggesting Pyongyang’s actions are irrational and unprovoked, in fact we are witnessing a response to upcoming US-South Korean exercises “Key Resolve” and “Foal Eagle,” which will be held on the peninsula in the next two months. It’s reported that more than 300,000 South Korean and 15,000 US troops, including US nuclear aircraft carrier USS John Stennis will be participating in these exercises. And there’s little doubt in anyone’s mind that those will mimic an invasion of North Korea, especially when it’s stated as an official goal.

Each military exercise in the immediate vicinity of DPRK’s border understandably affects the nerves of North Korea’s military commanders. There is absolutely no certainty that during such exercises due to some mysterious incident, they will not transform into a full-scale invasion. This can happen as a result of a deliberate provocation by the South, or when some North Korean officer loses his nerve. Yet, there’s a possibility that we will witness the repetition of the situation that occurred back in 2015, when South Korean officers were reluctant to investigate their own criminal carelessness so they decided to push all blame instead on the North for an accident that occurred with their own soldiers.

In such a situation, Pyongyang is trying to look as vicious and dangerous as it possibly can. It doesn’t stand a chance in a fight against South Korea, supported by the United States. However, the North could inflict so much damage on the South that a military victory against it will become meaningless. Such a threat works like a tub of cold water on hot heads: understanding that the North will “die singing” doesn’t make anyone all too willing to fight.

A similar situation occurred during the previous round of nuclear crisis on the peninsula back in 2013. At that time the sitting President of South Korea, Park Geun-hye, just came to power, and there was a possibility that supporters of the former president or young officers bewildered with revanchist ideas might try to escalate the situation. They were consumed by the idea that if politicians did not interfere with their actions, they could destroy the Pyongyang government in 90 hours. Then, in 2013, the DPRK also made a number of risky statements against the background of the upcoming exercise. Although the headlines once again shouted that the Korean peninsula is on the brink of war, no one decided to jump the gun. However, the situation today is somewhat more complicated. Park Geun-hye has deviated from her initially moderate positions becoming conservative, and former young majors have now become colonels. In this situation, Pyongyang raises the stakes higher than three years ago.

However, this leads to a new round amid the ongoing security dilemma of North Korea, since the statements made by Kim Jong-un can be interpreted as changes in North Korean military doctrine. Until recently, Pyongyang has positioned its missile and nuclear program solely as a self-defense option, and all the promises of drowning Seoul in a sea of fire were made in the wake of possible provocations. And now the DPRK is talking about America’s all time favorite ‘preemptive strikes’ that can be unleashed by somewhat more uncertain provocations. That’s a truly dangerous dilemma. Firstly, this level of military readiness can not but seen without concern by others in the region, a readiness to take action in response to a possibility of such a strike being launched against them, which clearly raises tensions. Secondly, in the fight of the weak against the strong, the weak striking first is a good way to increase one’s chances of prevailing. But this can only be said about an inevitable fight, while a preemptive strike destroys all chances for a peaceful resolution of the conflict.

Three years ago I noted in one of my articles that the path chosen by the DPRK provides it a tactical advantage, but may lead it to a dead end on the strategic level. In response to ever increasing pressure of new sanctions, North Korea will become more heavily involved in the arms race, and the vicious circle will be tightening at every turn with ever increasing speed. Yet, North Korea’s problems, like its security dilemma or the tensions between Pyongyang on one side and Beijing and Moscow on the other, are not going anywhere. At the same time Washington keeps exploiting the North Korean threat for its own ends.

This vicious circle has yet another drawback, since there’s few exit strategies one can find in it. Although North Korea believes that its nuclear program provides it with independence, in fact it makes the actions of its government more predictable.The DPRK has now lost any strategic initiative and is now acting “reactively,” which makes it even more dependent on external factors. So it’s not rocket science at this point to get a certain reaction from the government of North Korea once one has applied pressure from a certain angle. Let’s hope no one will take advantage of this fact to launch additional provocations.

Konstantin Asmolov, Ph.D, Chief Research Fellow of the Center for Korean Studies, Institute of Far Eastern Studies, Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.
http://journal-neo.org/2016/03/08/have-we-witnessed-a-dramatic-change-in-the-military-doctrine-of-the-dprk/

World War Games & Massive Military Drills; Countries Threaten Posture & Practice Nuclear Strikes

noreply@blogger.com (Broc West) — Tue, 08 Mar 2016 20:40:00 +0000

from Spiro: The U.S. and South Korea are set to begin their largest ever joint military exercises amid high tensions on the Korean peninsula.

More than 300,000 South Korean and 15,000 US troops will take part in the drills

North Korea threatens 'pre-emptive nuclear strike of justice' against the South and the U.S. mainland if planned military drills go ahead on Monday

Large-scale NATO military exercises in Norway has three strategic bombers B-52 that will practise applying simulated, as they call it, nuclear strikes against ground targets.

CLICK HERE FOR SOURCES

China’s Trillion Dollar Gamble: The New Silk Road

noreply@blogger.com (Broc West) — Sun, 06 Mar 2016 01:48:00 +0000

Written by James Corbett

The Corbett Report / The International Forecaster

Two weeks ago a train carrying 32 containers of cargo arrived in Tehran. Although you probably didn’t hear about it, this rail shipment changed the face of global geopolitics.

Well, OK, not that particular train itself. But what it represents. You see, this was the first ever shipment of cargo between Wuyi, China and Tehran, Iran, and it only took 14 days to travel the 6,462 miles between the two cities. Compare that to the traditional method of shipment between China and Iran. Those containers would generally be loaded onto ships in Shanghai and travel to the Iranian port of Bandar Abbas. Total journey time: 44 days. They just shaved a month off the trip.

Again, the significance of this is not the connection between China and Iran, per se. It is that this new rail line represents only one part of a much, much, much more ambitious project: China’s “One Belt, One Road” plan to build a vast transportation infrastructure connecting the “middle kingdom” to destinations all throughout Central and South Asia, Eurasia, and even Europe. The plan is as ambitious as it is comprehensive; consisting of a “Silk Road Economic Belt” and a “21st-Century Maritime Silk Road,” the aim is to link China to 65 countries with a combined population of 4.4 billion people, or more than half the population of the planet.

In an official news release from the Ministry of Foreign Affairs outlining the project, the Chinese government explains:

“More than two millennia ago the diligent and courageous people of Eurasia explored and opened up several routes of trade and cultural exchanges that linked the major civilizations of Asia, Europe and Africa, collectively called the Silk Road by later generations. For thousands of years, the Silk Road Spirit – ‘peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit’ – has been passed from generation to generation, promoted the progress of human civilization, and contributed greatly to the prosperity and development of the countries along the Silk Road. Symbolizing communication and cooperation between the East and the West, the Silk Road Spirit is a historic and cultural heritage shared by all countries around the world.”

The new silk road, then, is intended to be the 21st century equivalent of this millennia-old idea. But it is about so much more than mere transportation infrastructure.

The government document outlining this vision references a number of projects that China plans to undertake with its partner countries throughout the region: promoting cross-border energy infrastructure connectivity and oil and gas pipeline security; sharing government data and statistics on issues of mutual concern; harmonizing regulations; fostering cross-border cooperation in law enforcement; jointly investing in next generation technologies in materials science, biotech, IT, and other emerging industries; spearheading joint R&D efforts in production and marketing systems; increasing cooperation of financial institutions and even attempting to integrate financial systems; expanding the scale and scope of existing regional organizations like APEC, the SCO and ASEAN; establishing international fora and exhibitions to promote cross-border trade and cultural exchange; and on and on and on.

If the plan is sounding more like a nascent attempt at forming a regional government than a mere attempt to build a few new rail lines, that’s because it is. Or, more precisely, it is China’s attempt to convert some of its growing economic clout into geopolitical clout.

No one can accuse the Chinese government of holding back in this quest, either. The China Development Bank has so far pledged to commit $890 billion to over 900 projects in 60 different countries to help make this vision come true. Just to get a sense of what that number means, that is nearly seven times the size of the Marshall Plan (even adjusted for inflation).

In true Chinese style, the project amounts to a series of quid pro quo understandings with China’s neighbors; you scratch the dragon’s back, it will scratch yours.

China spends over $1.1 billion (in export credits) building a railway link from Khartoum to Port Sudan. Sudan restores key economic infrastructure and China improves its access to Sudanese oil.

China then pours $46 billion into energy infrastructure projects in Pakistan. In return, it gets access to Pakistan’s port of Gwadar, a convenient point for shipping Chinese goods out to the world and bringing African resources in to China…through Port Sudan.

Much of the infrastructure investment is this way. Taken singly, the projects may seem random or haphazard. Taken together they are a brilliant way of playing win-win politics with China’s neighbors and trading partners. China gets to increase markets and stabilize shaky trading partners and the recipients of China’s largesse get a multi-billion dollar shot in the arm that comes without the usual burden of IMF debt conditions.

So we have a happy and prosperous China recognizing that its long term interest lays in spreading some of that wealth around to help prop up its neighbors. Rather than seeing other countries as competitors in a cutthroat dog-eat-dog world, China is treating its One Road, One Belt collaborators as partners whose rising tide will help lift the Chinese dragon boat. What could possibly go wrong?
Three things.

Firstly, the Chinese miracle is not looking so miraculous anymore. With global trade falling off the cliff, unsustainable ponzi debt schemes taking over from manufacturing as drivers of domestic growth, and more currency devaluation in the cards this year, there is no guarantee that China will be able to continue doling out this kind of cash in maintaining its growing trade empire, let alone expanding it. $890 billion is an impressive sounding pledge, but actually delivering on those promises will be infinitely more impressive.

Secondly, the US (or, more accurately the financial oligarchs who largely inhabit the US at this stage of history) might decide that the phony rivalry with China is no longer in their best interests and simply put a stop to it…militarily or otherwise.

And thirdly, China is not alone in its quest for dominance in Central Asia, Eurasia, and the Caucasus. For all of their overlapping interests, Russia and China’s designs on the region are more rivalrous than cooperative, and Russia’s own Eurasian Economic Union is a stark example of how Moscow’s idea of development in Central Asia is going to come into conflict with Beijing’s sooner or later.
With all of these pressures, it remains to be seen if the “One Belt, One Road” dream will ever become reality, or merely a series of empty promises. But one thing’s for sure: a cargo train just rolled into Tehran from China, and the world is slowly re-orienting toward Beijing.

SOURCE: The Corbett Report Subscriber Newsletter and The International Forecaster

China Presses Its Maritime Luck, Blocks Access To Fishing Lanes

noreply@blogger.com (Nick Hopkins) — Wed, 02 Mar 2016 23:24:00 +0000

from Zero Hedge:

“No fishing for you!”

We suppose it was only a matter of time, but Beijing has now escalated the South China Sea dispute.

The waters around the Spratlys have become the subject of international diplomacy after China decided to dredge up 3,000 acres of new sovereign territory in what amounts to the most epic sand castle building exercise in maritime history.

The world first caught on to what China was up to (and no, that’s not derogatory because they were literally “up to something”), early last year when satellite images depicted rapid construction on Fiery Cross Reef. The situation escalated quickly and before you knew it, the PLA was warning a Poseidon spy plane with a CNN crew aboard to “go now” in a move that pretty clearly indicated China intended to establish a no-fly zone over its new islands.

Finally, in late October, the Obama administration decided to conduct a freedom of

navigation “exercise” near China’s new islands, an effort The Pentagon says was designed to establish security in a corridor through which $5 trillion in global trade flows.

Earlier this month, China send warplanes to an airstrip on one of its islands. That move came on the heels of the deployment of HQ-9 surface-to-air missiles to Woody island.

On Wednesday, Philippine officials say Chinese ships are blocking access to fishing lanes at the Jackson Atoll where in 2011, PLA warships fired "warning shots" at fisherman.

"We know there are Chinese ships moving around the Spratly area," spokesman Brigadier-General Restituto Padilla told Reuters. "There are also ships around Second Thomas Shoal, so we want to make sure if the presence is permanent."

Trust us General, the "presence" is indeed permanent.

"Second Thomas Shoal is where the Philippine navy has been occupying and reinforcing a rusting ship that it ran aground in 1999 to bolster its claims to the disputed reef," Reuters goes on to note. "In Beijing, Foreign Ministry spokesman Hong Lei said China's Ministry of Transport had sent vessels to tow the grounded ship and they had since left the surrounding waters."

The PLA says it needed to "urge fishing vessels to leave" in order to "guarantee safety of navigation and of working conditions."

The worry here, apparently, is that China is trying to construct another island.

Apparently, a surveillance plane spotted "four or five" ships near the atoll last week and it wasn't immediately clear what they were doing.

"I’m alarmed because we frequently pass by that atoll on our way to Pag-asa,” the mayor of the Kalayaan region in the Spratly Islands said. “What will happen now if we sail close with all those Chinese ships?” Well, you may well get shot at and that, in turn has the potential to spark a global conflict.

"There are no indications China will build structures or develop it into an island," a source said, but an unidentifired fisherman who spoke to The Philippines Star said "gray and white Chinese ships, around four of them inside the lagoon, prevented us from entering our traditional fishing ground."

Now obviously, China has no desire or interest in keeping Filipinos from fishing. In other words, it seems highly likely that Beijing has designs on building another island and the PLA isn't interested in explaining that to any fishermen.

Not to put too fine a point on it, but if China starts firing on Filipino fishermen again, Washington will simply put warships in the fishing lanes. We're all for the emergence of a multipolar world, a reshaping of the entrenched geopolitical order, and the decline of US hegemony but it certainly seems as though China is angling for a maritime escalation. We're not saying they don't have a right to assert their territorial claims, but they are pushing their luck.

Whether or not the Obama administration or Shinzo Abe will call their bluff is an open question.

Full Philippine Star article

The Chinese have taken over another traditional Filipino fishing ground near Palawan where they have stationed up to five ships to keep local fishermen at bay, sources said.

Now effectively under Chinese control is Quirino or Jackson Atoll, which has been a rich source of catch for a long time for fishermen from Palawan, Southern Luzon, Western Visayas and even Manila.

Gray and white Chinese vessels have not left the atoll, which Filipino fishermen also call Jackson Five, because of the existence of five lagoons in the area.

The Chinese are claiming almost the entire South China Sea, including the West Philippine Sea. Manila is contesting Beijing’s claim before an international arbitral court based in The Hague.

Filipino fishermen lamented the Chinese vessels would not allow them to come near or linger in the Quirino Atoll.

The area is between the Philippine-occupied Lawak Island and the Chinese-occupied Panganiban (Mischief) Reef.

Fishermen from Mindoro Occidental who asked not to be named said Chinese boats chased them away when they tried to enter the area last week.

“These gray and white Chinese ships, around four of them inside the lagoon, prevented us from entering our traditional fishing ground,” one of the fishermen said.

Kalayaan Mayor Eugenio Bito-onon Jr. said the Chinese ships have been staying in Quirino Atoll for more than a month now. “They have many ships there,” he said, without elaborating.

Philippine air patrol has confirmed the presence of at least four Chinese coast guard ships in the Jackson lagoons.

A Palawan-based fishing operator said the Chinese began deploying ships to Quirino Atoll after a Manila-based fishing carrier boat ran aground in the area due to bad weather.

The fishing operator said his boats have since been avoiding the area due to the menacing presence of presumably armed Chinese ships. “We can’t enter the area anymore,” he bewailed.

Early last month, Chinese gray and white ships – presumably naval and maritime surveillance vessels – harassed Philippine Navy logistic ship BRP Laguna near Hasa-Hasa (Half Moon) Shoal, another Filipino fishing ground in the West Philippine Sea just 60 nautical miles from the southern tip of Palawan.

In 2012, the Chinese took control of Panatag (Scarborough) Shoal after a brief standoff with a Philippine Navy vessel whose crew had tried to arrest Chinese poachers.

Outnumbered and outgunned by the Chinese, the Filipinos were forced to release the poachers along with their illegal cargo of live baby sharks, giant clams and endangered corals. The Chinese have never left the shoal since then.

SOURCE: Zero Hedge

Japanese Bracing For Negative Interest

noreply@blogger.com (Broc West) — Sun, 28 Feb 2016 06:53:00 +0000

from Corbett Report Extras: James Corbett joins Jim Goddard for his regular bi-monthly appearance on HoweStreet.com. This week they discuss how the Japanese are preparing for the new normal of negative interest, the ongoing oil glut, Zika hype and the state of the global markets.

Chinese Environmental Issues: Is There a Way Out?

noreply@blogger.com (Nick Hopkins) — Sat, 27 Feb 2016 00:08:00 +0000

from New Eastern Outlook: In recent years, the difficult ecologic situation in China has become an international issue. Decades of industrial and agricultural development, with no attention paid to environmental issues, have driven some regions to the brink of an ecological catastrophe. For a long time the Chinese Government has concealed the true scale of the threat, but recently it has become impossible to conceal, and Chinese leadership had to implement a policy to save the environment.

Other states also suffer from the contamination produced by China. These are primarily countries bordering its northern-eastern regions, which are the most industrialized and, consequently, the most polluted. These are North and South Korea, Mongolia, Russia and Japan. The damage that China causes to these countries invariably influences their relations. Obviously, recovering from crisis will require joint efforts of the mentioned countries. Virtually, however, the key part in resolving the Chinese issue belongs to China, and there is little that neighboring countries can do without its wish. China signed agreements on joint efforts to protect the environment in 1990s-2000s. The agreements stipulated reduction of water contamination by industrial waste, air pollution by coal combustion products, petroleum products, prevention of soil degradation as a result of uncontrolled farming and cattle grazing, cease of deforestation and joint ecological monitoring. China, however, was not eager to make ecological issues one of its priorities, and, as it is clear now, the agreement did not bring about any tangible results.

The most noteworthy is the cooperation in the field of environmental protection between China and Japan. As is known, for a few decades Japan through its Overseas Economic Cooperation Fund extended more loans on favorable terms to China than any other country within the framework of official development assistance. A substantial part of this money was directed to the implementation of Chinese environmental protection projects. Cooperation was ensured on multiple levels – interstate, inter-regional, and even at the level of management of cities and individual enterprises. The two countries carried out a joint research of river and sea water, Japanese experts helped constricting water treatment plants for factories; Japan also supplied special equipment for factories. The Japanese paid most attention to the above mentioned northern-eastern regions of China, especially the province of Liaoning, where the majority of facilities, which contaminate the environment, are situated. From the mid-1990s to the 2000s it received from Japan a grant amounting to about 100 million yens, and loans of more than 100 billion yens for the implementation of environmental projects.

Another example of Japan’s significant contribution to Chinese ecology is the Liao and Songhua rivers contamination reduction project for which China received about 13 billion yens from Economic Cooperation Fund of Japan.

In 2007, the parties singed Joint Statement by Japan and the People’s Republic of China on the Further Enhancement of Cooperation for Environmental Protection. Apart from other tasks, this statement stipulated a separate program of the Yellow Sea monitoring.

Being China’s neighbor in the region with shared naval borders, Japan pays special attention to the state of seas, which surround it. Much finance was directed at the purification of the rivers, which flow into the Sea of Japan. From 1979 to 2009 China received a total of more than 1 trillion yens from Japan to implement its environmental programs. However the environmental issue in the PRC had been deteriorating year by year as the same old reckless policy of industrialization and economic growth had still been carried out at the state level.

After 2008, Japan ceased giving China low-interest loans including for the environmental projects. It was caused by both global financial crisis and the growth of China’s GDP that started to outpace the Japan’s GDP by 2010, thus the Japanese side saw no reason to further support of China.

Nevertheless it did not lead to the termination of Chinese environmental programs. It was in the year 2010 when Chinese authorities started to talk about the need to change the environmental policies of the country and to make the protection of its environment one of the PRC’s priorities.

The APEC summit in 2014 saw the announcement of China’s plans to decrease the damage done to the atmosphere and to move the energy consumption onto renewable resources.

In particular, a key part of the Chinese environmental program consists of pushing for the production of electric cars, which do not pollute the environment. In March 2015, the Ministry for Transportation of China announced a plan, which stipulated, that the number of electric cars should equal 300,000, buses powered by electricity: 200,000, and taxis: 100,000. There are built charging stations in the cities already. All these steps are followed by taxation measures, which stimulate citizens to purchase environmentally-friendly cars. Chinese government bodies and enterprises received an instruction to use green cars for their needs as much as possible. At the same time the subsidies on carbon fuel they were entitled to were reduced. According to the Ministry of Industry and Information Technology of China, the production of cars, which run on alternative fuels, had increased by three times in the first half of 2015. The China Association of Automobile Manufacturers predicted that there would be sold 250,000 electric cars in China in 2015, which is more than in any other country in the world.

In this regard certain attention should be paid to a recent decision of the Japanese Panasonic Corporation, one of the major manufacturers of electronics and domestic equipment, to build the first factory in China for producing batteries for electric and hybrid vehicles. This company is already one of the key suppliers of batteries for hybrid automobiles. The production of electric cars and spare parts has been growing in volume and becomes an important market sector, 45% of which is already taken by Panasonic. The company however is set on increasing its share. It was decided to construct it in the Dalian city in the most polluted Liaoning province in northeastern China, which has been already mentioned above. The plant is planned to start operating in 2017. According to preliminary estimates, it will be producing batteries for 200,000 vehicles annually. The project cost is going to amount to 50 billion yens, or 412 million dollars.

The time will tell to what extent the benefit of using electric engines is going to compensate for the environmental pollution done by plants, which produce them.

Nevertheless, there is always an alternative way to solve any problem: a completely new market sector is emerging now, which is selling of fresh air to the Chinese, the air from environmentally pristine regions of Canada, Latin America, and Great Britain that skillful entrepreneurs ship in bottles. Bottled air is in relatively high demand in the regions which suffer most severely from smog.

SOURCE: New Eastern Outlook

China Island-Building Fuels Patrol Aircraft Market

noreply@blogger.com (Broc West) — Sun, 21 Feb 2016 23:23:00 +0000

from DefenseNews.com: Last week’s revelation that China appears to have deployed an air defense system on a disputed island in the South China Sea might as well have been part of the sales pitch for maritime patrol aircraft builders at the Singapore Airshow this week.

For alarmed neighbors in the region, it just might be the push for them to finally open their purse strings and invest in the maritime patrol aircraft as a means of keeping an eye on Beijing’s territorial claims.

“Even countries like Malaysia, which generally has warm relations with Beijing, have become alarmed by China’s ever-broadening claims to the South China Sea,” said Dan Darling, a regional analyst at Forecast International, market analysis company. “The need to acquire intelligence-gathering, surveillance and early-warning assets in order to exercise control over each nation's own economic, security and territorial interests has now become paramount in countries like the Philippines."

China and it’s neighbors in the South China Sea have been squabbling over disputed islands for decades, but Beijing’s recent island building strategy in the Spratleys, and now the discovery of air defense missiles on the Paracels, has ratcheted up tension in a region where maritime patrol capabilities are often old, limited in capability or sometimes non-existent.

Armed forces around the region have been trying to close the capability gap for a while but have been hampered by lack of funds. According to Forecast International, the current environment has fueled demand in the region, but funding remains an issue.

”Demand and funding commitments represent two opposite ends of the same pole,” they said.

The growing tensions with China may change that thinking, as executives here report a significant number of requests for information floating around the region.

The Philippines, Vietnam, Malaysia, Indonesia, Brunei and Taiwan are all involved in territorial disputes with China in the South China Sea. Most, if not all, have MPA procurement plans.

Singapore, which operates old Fokker 50’s, also can’t be ruled out from a possible buy, said Forecast International.

The city state might even be a candidate for the P-8.

Saab also reckons submarines are posing a growing threat and estimates the Asia Pacific region will be home to more than 100 boats by 2020.

With the potential flashpoint with the Chinese as the backdrop, it’s hardly surprising that much of the talk at the air show was about maritime patrol and anti-submarine warfare aircraft.

As ever, most of the talk went on behind closed doors, although Saab made a public splash by launching two new programs.

The Swedish company chose Singapore to announce it was taking a tilt at becoming a major league MPA player with the launch of turboprop and jet MPA platforms, both using its Swordfish mission system installed on modified versions of the Q400 airliner and Global 6000 business jet.

Armed with sonobuoys, Saab’s RBS-15 anti-ship missile and a lightweight torpedo, the Global 6000 will be like a mini version of Boeing’s 737-based P-8.

The company also gave more details about a new Global 6000 airborne early warning and control (AEW) aircraft product, which was part of a launch deal with the United Arab Emirates late last year. Aside from AEW, the system, known as GlobalEye, can simultaneously undertake land and maritime surveillance.

GlobalEye is a sign of the times. Many of the programs are coming in the shape of multi-mission aircraft as industry looks to meet customer demands to squeeze as much capability from a single platform as possible.

Previously the Swedish company has focused it’s main sales efforts in the MPA and AEW sectors on second-hand Saab 340 and Saab 2000 turboprops, both of which have been out production for years.

“Most customers in the MPA field have a preference toward new-build, in-production aircraft, and that is something we are addressing in this program. Also, we were looking for additional space and size of aircraft in order to fulfill all operational requirements,” said Joakim Mevius, the head of Saab’s Airborne ISR business unit.

“This is a significant step for us. We are sure [with the new platforms and Swordfish] we are able to provide high end strategic capability which is affordable,” he said.

Boeing had a big MPA presence here as well. Having already sold the P-8 jet to the US, Britain, Australia and India, Boeing had a machine at the show as it looks for regional customers that have the requirement and cash to buy such a high-end performer.

Competition is intense and rivals are numerous elsewhere in the MPA sector. For example, Elbit and L-3 both have Q400 developments of their own underway.

In addition to it’s Q400 work Israel’s Elbit, is developing a Bombardier Global 5000 MPA, pretty much going head-to-head with Saab’s product line-up.

From industry giants like Boeing, to Airbus with its CN-235 and C295 turboprops, through to industry minnows like RUAG, with the Dornier 228, companies have been here trying to drum up MPA business.

It’s a fragmented market and becoming more so as turboprop products are challenged by modified business jets to meet requirements.

So is this the beginning of the end for the maritime turboprop? Fernando Ciria, the marketing director for military aircraft at Airbus Defence & Space says not.

“We are keeping going with the C295 and CN235 turboprops. We think turboprops remain valid in most markets, offering a compromise of good transit speeds and good capability for loitering operations at low altitude ,low speed and low cost,” he said.

“Airbus is sticking with it’s turboprop maritime aircraft line while continuing to look at proposing the A320 family of jets on a case-by-case basis”, he said.

Mevius said interests vary according to the customers' needs.

“We have seen two distinct differences in our discussions with potential customers. There are those who prefer a jet solution and having the capability and performance to operate further out as well as closer to their shores. There are others who prefer a turboprop solution more focused towards operation closer to the coastline,” he said.

SOURCE: Defense News

China voices opposition to S. Korea's THAAD deployment plan

noreply@blogger.com (Broc West) — Sun, 21 Feb 2016 23:17:00 +0000

from Asia-Pacific Daily: Chinese Vice Foreign Minister Zhang Yesui on Tuesday expressed opposition to South Korea's plan to deploy a sophisticated U.S. missile defense system after a meeting here with his South Korean counterpart. Zhang met in Seoul with South Korean First Vice Foreign Minister Lim Sung-nam to co-chair the seventh China-S. Korea high- level strategic dialogue between foreign ministries.

The senior-level dialogue came after South Korea and the United States agreed to begin talks about deploying the Terminal High-Altitude Area Defense (THAAD) in the South Korean territory in response to the Democratic People's Republic of Korea (DPRK)'s nuclear and missile threats.

Pyongyang launched a long-range rocket, which some see as a test of banned ballistic missile technology, on Feb. 7 following its fourth nuclear test on Jan. 6.

Zhang told reporters after the meeting in Seoul that he exchanged views with Lim about the THAAD issue, among other issues, and said China expressed oppositions to the THAAD deployment.

Zhang said China attaches great importance to ties with South Korea, and is ready to work along with the country to boost the sound development of bilateral relations, noting that China is firmly committed to the denuclearization of the Korean peninsula, which conforms to the common interests of China and South Korea.

CONTINUE @ SOURCE

Thousands surround Japan parliament in protest at US base plan

noreply@blogger.com (Broc West) — Sun, 21 Feb 2016 23:11:00 +0000

from Channel News Asia: Thousands of protesters formed a human chain around Japan's parliament

Sunday (Feb 21) in protest at the planned construction of a new US base on the southern island of Okinawa.

Some 28,000 people, according to local media, surrounded the building holding banners reading "No more US bases in Okinawa" and "Follow the will of Okinawa". Many wore blue, the colour symbolising support for the island.

Police did not give an estimate of the number taking part in rhe rally, the latest in a long series of protests. The dispute has intensified mistrust between the central government and the southern island chain.

Okinawa accounts for less than one per cent of Japan's total land area but hosts about 75 percent of US military facilities in the country.

The central government wants to construct a new US Marine air base in a remote part of the island to replace the existing US Futenma air base in heavily populated Ginowan, where it is widely seen as a potential danger to residents.

CONTINUE @ SOURCE

Beijing's Missile Move in South China Sea Could Make US Think Twice About Getting Too Close

noreply@blogger.com (Nick Hopkins) — Wed, 17 Feb 2016 06:29:00 +0000

from The Guardian:

Satellite imagery, confirmed today by US and Taiwanese officials, appears to show two batteries of HQ-9 surface-to-air missile (SAM) launchers on Woody Island, a Chinese occupied feature in Paracel Islands, in the South China Sea.

The HQ-9 is a Chinese-made mobile air defence system, comparable to Russia’s S-300 SAM, with a reported range of 125 miles.

It is not clear whether this is a temporary detachment or an open-ended deployment, which would require more supporting infrastructure than has yet been observed on Woody Island. However, assuming the HQ-9 becomes operational it would provide coverage for Woody Island and the whole Paracel group, as well as the southern approaches to Hainan island, where China’s main South China Sea naval bases are located.

Beginning last November, China began deploying J-11 fighters on detachment to Woody Island. So, from a military point of view, it should come as no surprise that China has chosen Woody island to project its air defence further out into the South China Sea.

This marks a step up the ladder to China’s progressive “militarisation” of the South China Sea, but it is also calibrated. If China’s long-term strategy seeks military pre-dominance in the South China Sea, one near-term motivation for the missile deployment could be to deter the US from mounting an overflight operation close to the Paracel Islands.

The most recent US freedom of navigation operation (FONOP), in late January, was conducted at the outer Paracels’ edge, at some distance from Woody Island. The US Navy achieved a degree of surprise that time which will be difficult to repeat, by surface or air.

Such are the risks for China, it is improbable that Chinese forces would engage an approaching US aircraft in peacetime. But the added risk of having to deal with a Chinese SAM system may lead the US to think twice about overflight operations in the area.

This is no “missile crisis” in the Cuban sense therefore. Rather what we are seeing is a conscious effort by China to progressively extend its strategic footprint in the South China Sea.

When President Xi gave a vague undertaking in Washington last September that China “does not intend to pursue militarization” he was referring to the Spratly Islands.

China may therefore feel more confident in pressing ahead with the air defence of the Paracels. It is also a way of testing international reaction as a potential precursor to the militarisation of its artificial structures in the Spratlys, or the even declaration of an Air Defence Identification Zone in the South China Sea.

When China’s naval chief spoke recently with his US counterpart, he left the door ajar to the militarisation of the Spratlys, saying that the extent of China’s “defences completely depends on the level of threat we face”.

This may be the military next step, which the US Navy is already anticipating. Earlier this week, Vice Admiral Joseph Aucoin, commander of the U.S. Navy’s Seventh Fleet, warned that a move by China to start flying jet fighters from its man-made islands in the Spratlys would be destabilizing, and would not deter the US from continuing to fly in international airspace over the South China Sea.

In a political context, China’s latest move in the Paracels coincides with the Sunnylands summit for ASEAN leaders being hosted by President Obama. The appearance of the HQ-9 missiles could be interpreted as a warning to Southeast Asian leaders not to tack too close to the US in the South China Sea.

It will also have tested Australian foreign minister Julie Bishop’s mettle when she met today with her Chinese counterpart, Wang Yi, in Beijing. Ms Bishop said last October that Australia and the US will hold China to President Xi’s statement on militarising the Spratly Islands. That may be put to the test sooner than expected.

SOURCE: The Guardian

North Korea to shut down Kaesong complex, cut off communications with South Korea

noreply@blogger.com (Broc West) — Fri, 12 Feb 2016 00:21:00 +0000

from xinhuanet.com: The Democratic People's Republic of Korea (DPRK) has decided to shut down a jointly-run factory park with South Korea, following Seoul's decision to stop operations at the Kaesong Industrial Complex, South Korea's Yonhap news agency reported Thursday.

The DPRK said it will deport all of South Korean residents staying at the inter-Korean industrial zone in the DPRK's border city of Kaesong by 5:30 p.m. local time, declaring the factory park as a military-controled area.

Pyongyang will cut off military communication lines with South Korea, and close off inter-Korean communication channels at the border village of Panmunjom, Yonhap reported, citing a statement from the DPRK's Committee for the Peaceful Reunification of the Fatherland.

Is China Being Wooed by Fantasies of Western ‘Acceptance’?

noreply@blogger.com (Nick Hopkins) — Mon, 08 Feb 2016 11:30:00 +0000

from New Eastern Outlook: In the area of finance and creation of new financial institutions much hope of many nations has been placed on China. Last year China played a catalytic role in helping establish a new BRICS Infrastructure Development Bank to finance infrastructure projects in select emerging economies. Soon after Beijing announced it was creating another Asian Infrastructure Investment Bank (AIIB) to finance a part of Asia’s huge infrastructure deficit. Now as the details of the just-launched AIIB become clearer, and as the Washington-based IMF appears finally eager to embrace China with larger voting rights, the question is whether Beijing is being seduced by a desire to be included in the “family” of the Western hegemon powers, the USA and the EU, the “Great White Masters.”

The Asian Development Bank (ADB) estimates that Asia will need $8 trillion over the next decade for energy, transportation, telecommunication and water sanitation. Now private investment in infrastructure runs a mere $13 billion a year, most in low-risk projects. Official development assistance adds another $11 billion a year, a shortfall exceeding $700 billion a year.

Early this year, China announced it was turning from the US-dominated IMF and its sister, the World Bank, and creating a new alternative that would presumably operate to address that $8 trillion infrastructure deficit across Asia and Eurasia. Washington was furious. The Obama Administration urged Britain and Germany, France and other major EU Western “allies” to boycott the new bank, to no avail. Washington then, like a petulant school bullyboy, arm-twisted loyal vassal Japan to boycott the membership in the Asian Infrastructure Development Bank. Where do we stand today, some eight months later, as Beijing celebrates the official opening of the AIIB?

Fuzzy Ideas

On December 4, at an annual China-South Korea Banking Development Forum in Shanghai, Chen Huan, head of the AIIB’s Multilateral Interim Secretariat, announced that when it begins raising capital on international bond markets beginning January, 2016, the new bank will concentrate on energy, transportation, rural development, urban development and logistics. So far, so good. He added that in the first year of operation AIIB will move cautiously, issuing between $100 million and $500 million of non-rated infrastructure bonds, which is pretty timid to say the least. Jin Liqun, the president-designate of the AIIB, has stated that the AIIB plans to lend $10 billion to $15 billion a year for the first five or six years, a modest contribution to an $8 trillion infrastructure deficit.

Mr. Jin, former Chinese Vice Finance Minister, was also China’s Alternative Executive Director of China to the World Bank and the Vice-President of the Asian Development Bank, a Japan-led affiliate of the World Bank. Alright, that just means the new President-designate of the AIIB is thoroughly grounded in the alternative US-dominated World Bank model and knows all that is wrong with it. Or is the Boston University-educated Mr Jin Beijing’s selection in order to win approval of its AIIB by the “Great White Msdters” of Wall Street and the City of London?

Then it begins to get pretty fuzzy. At the same Shanghai forum, Yang Zaiping, executive vice-president of the China Banking Association (CBA), announced that the CBA has been authorized to lead the founding of the Asian financial cooperation association, “in the hope that Asia will have a bigger say and greater influence in global finance.”

This starts to sound strange. China, South Korea, Malaysia, India, Indonesia are resource-rich and economically formidable Asian founding members of AIIB. China itself will subscribe 30% of the new bank’s initial $100 billion share capital. In addition, Germany has just formally informed the AIIB that it will contribute $4.5 billion to become the fourth largest capital provider for the AIIB globally and the largest one outside Asia. On December 25, the AIIB announced that 17 of the initial founding AIIB member countries had formally ratified their funding participation in the bank, giving a total 50.1% of all potential member countries, allowing the AIIB to formally open its doors at a formal meeting January 16 in Beijing, according to its Articles of Agreement. China’s Finance Minister, Lou Jiwei, stated, “The AIIB is legally established as the Articles of Agreement take effect today. The establishment of the AIIB marks a milestone in the reform of global economic governance system.”

But does it, or is it becoming just another member of the Bretton Woods institutional system that has allowed Wall Street, the US Treasury and the Dollar System to dominate post-1945 world finance and investment? This is the decisive question. The preliminary answers seem disappointing.

A place at the Masters’ Table?

One of the architects of the AIIB, Zheng Yongnian, director of the East Asia Institute of National University of Singapore, told a local Singapore newspaper that what China has sought is the improvement of the existing international framework instead of radical revolution of the system. China has implemented its “reform and opening up” policy to blend into the US-defined international order, Zheng said, adding that the East Asian nation has played an increasingly important role in it. Zheng, who is a well-known China authority, added that the AIIB, since its founding, assumed duties that are impossible for the World Bank and Asian Development Bank given the limits of their mandate. Zheng’s remarks were covered in the official China state news agency, Xinhua.

On December 18, after exactly five years stall, the US Congress approved a 2010 IMF reform of the Fund’s quotas and governance. Now the IMF will double its available resources to $660 billion. Some 6% of quota shares will shift to “dynamic emerging market and developing countries” and also from over-represented to under-represented members. Four emerging market countries–Brazil, China, India, and Russia– will for the first time since 1944 be among the ten largest members of the IMF. Other top 10 members include the United States, Japan, France, Germany, Italy, and the UK.

Is this long-awaited and little-expected change of heart from Washington a major concession to China and the BRICS countries? It would seem not on careful reading of the fine print of the IMF Reform agreement. Since it drafted the IMF bylaws in Bretton Woods New Hampshire at the international monetary talks, Washington and Wall Street banks made certain the IMF would be a US institution controlled by the US Treasury and no “democratic” body. For a major policy change in the IMF operations, a majority not of 50.1% is required but of 85%. That insures that the USA, with a voting share of 17.4% can still block anything it doesn’t like. The US voting share under the new reforms remains precisely 17.4%, a blocking vote as before.

Under the new IMF “reform,” little changes. Yes China is in the “top ten” for voting share, but going from 3% before to 8% today, for the world’s second largest economy. That and a dime will buy nothing today. Japan, a loyal US vassal stays at 6%, Germany another quasi US vassal, loses a mere 0.4% to 5.6%. UK, which since decades is scarcely anymore an economy worth noting beyond its bankrupt banks, drops a mere 1% to 4% as does France.

That December 18 US approval of the long-awaited IMF “reforms” followed another decision of Washington to vote in favor of China membership in the select IMF basket of currencies called Special Drawing Rights. The IMF official statement then declared, “The Board today decided that the RMB met all existing criteria and, effective October 1, 2016 the RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound.”

In brief, the US unblocked the IMF reforms as well as opening admission of China’s Renminbi currency into the IMF SDR basket to further seduce China into being a polite, well-behaved junior member of the club of the “Rich White Masters.” Unless Beijing is playing a far more subtle and sophisticated game of deception on the tradition of the great Chinese strategist Sun Tzu, Beijing is locking its horse to the dollar wagon rather than pursuing the urgently-needed end of the tyranny of the Dollar System in the world economy. China’s leaders, including President Xi Jinping, appear to have a clear vision. It’s looking more and more, however, that it is a clearly mistaken vision, assuming the Club of the Rich White Masters is worth seeking a place at the table anymore. Let’s hope not.

SOURCE: New Eastern Outlook

TPP Protesters Vow to Keep Fighting

noreply@blogger.com (Nick Hopkins) — Fri, 05 Feb 2016 03:27:00 +0000

from SBS: Protesters of the Trans-Pacific Partnership trade deal say Thursday's signing of the document won't stop them from trying to stop it.

Protesters opposing the Trans-Pacific Partnership trade deal have vowed to keep fighting despite a crowd of thousands being unable to stop the signing of the controversial agreement.

Hundreds of protesters bearing flags set up camp outside the SkyCity Convention Centre in Auckland where trade ministers from 12 nations signed the deal late on Thursday morning.

As the boisterous crowds grew, they blocked access to nearby streets, hoping to shut the signing down, while a police line guarded the entrances.

Hundreds were still occupying the area in the afternoon amid chants and booming music, despite pleas from organisers to leave.

Earlier, groups temporarily prevented cars from accessing several motorway on-ramps and off-ramps around central Auckland, causing traffic chaos in the city and leading to scuffles with police on an otherwise peaceful day.

Police said there had been no arrests, despite the force needed to move the demonstrators off the highway.

Detective Superintendent Richard Chambers says those at the off-ramps had been treated appropriately given the safety risks.

"There were attempts to run in front of vehicles," he said in reply to a photo of a woman having her hair pulled by police.

"I'm comfortable [officers] took the action necessary."

A larger protest march, several thousand strong, left Aotea Square at midday and walked down Queen Street - avoiding the convention centre but bringing traffic in the central city to a standstill.

Organiser Barry Coates says an estimated 15,000 people turned out.

Speaking to the marchers at Britomart, vocal TPP opponent and professor Jane Kelsey said the signing would not be the end of the fight.

"We need to make sure every step we are there having our voices heard," she said.

She called on opponents to voice their concerns to politicians to sway them from passing the laws required to ratify the deal.

Another of the marchers, former MP Hone Harawira, said there was no choice but to be keep battling to prevent the deal from being approved by parliament.

"We can't afford not to send a signal on this day, the day of the signing, and keep sending it day in and day out," he said.

The signing took place just before noon.

Prime Minister John Key said he was unfazed by the demonstrations.

"In the end there's nothing we have seen today that would indicate we have any issues," he said.

He said the government would table the text of the TPP and the National Interest Analysis to parliament next week.

Much of the opposition to the major global trade deal has been centred around the investor-state dispute settlement mechanism, which allows companies to sue governments over laws that harm their investments.

There are also fears the deal could undermine rights under the Treaty of Waitangi.

But the Ministry of Foreign Affairs and Trade says the Treaty is exempt and the deal will not threaten New Zealand's sovereignty or ability to pass laws, especially in policy areas such as health, the environment and taxation.

SOURCE: SBS

Beijing Vs DC: The Battle for Southeast Asia

noreply@blogger.com (Nick Hopkins) — Fri, 05 Feb 2016 03:17:00 +0000

from New Eastern Outlook: The Strait Times published an opinion piece by the London-based Rob Edens.

Wishfully titled, “South-east Asia fast becoming unfriendly territory for China,” it attempts to portray Southeast Asia as increasingly pivoting West toward Washington, coincidentally just as Washington was “pivoting” East toward Asia.

Edens’ attempts to outline Beijing and Washington’s respective strategies in the region by stating:

On the one hand, China’s “One Belt One Road” initiative, for instance, is focused on physical infrastructure; improving road, rail and air networks overland between neighbouring states as a means to oil the cogs of commerce and bring new customers into China’s fold. On the other hand, the US-led Trans Pacific Partnership (TPP) maintains a discourse of freer trade in the Pacific region, opening up new markets overseas by relaxing tariffs and increasing various standards relating to the process of manufacture.

Lost on Edens appears to be the fact that physical infrastructure built beyond China’s borders becomes a long-term asset for those who cooperate in its construction, while Western “free trade” is in all reality, submission to foreign economic hegemony. Many aspects of “free trade” agreements are in fact, stripped verbatim from treaties that defined Colonial Europe and its subjugation of Southeast Asia.

“Free Trade” is Code for Economic Hegemony

Edens seems to believe that “free trade” is a viable incentive to lure Southeast Asia away from China. However, upon historical examination, it is more a means to coerce it away.

Thailand in the 1800’s, then the Kingdom of Siam, was surrounded on all sides by colonized nations. Gunboats would eventually turn up off the coast of Siam’s capital and the Kingdom made to concede to the British 1855 Bowring Treaty. Upon examining these terms imposed via “gunboat policy,” how many of them echo verbatim the terms found among modern “free trade” economic liberalization?

Siam granted extraterritoriality to British subjects.
British could trade freely in all seaports and reside permanently in Bangkok.
British could buy and rent property in Bangkok.
British subjects could travel freely in the interior with passes provided by the consul.
Import and export duties were capped at 3%, except the duty-free opium and bullion.
British merchants were to be allowed to buy and sell directly with individual Siamese.

Compared to modern day examples of “free trade,” and in Iraq’s case, free trade imposed once again by the barrel of a gun, it is nearly impossible to distinguish any difference.

The Economist would enthusiastically enumerate the conditions of “economic liberalization” imposed upon Iraq in the wake of the 2003 US invasion in a piece titled “Let’s all go to the yard sale: If it all works out, Iraq will be a capitalist’s dream.” They are as follows:

100% ownership of Iraqi assets.
Full repatriation of profits.
Equal legal standing with local firms.
Foreign banks allowed to operate or buy into local banks.
Income and corporate taxes capped at 15%.
Universal tariffs slashed to 5%.

Iraq is a perfect modern day example of a nation overrun by brute force and made to concede to an entire restructuring of its economy, giving foreign powers not only access to their natural resources, markets, and population, but uncontested domination over them as well. It was absolute subjugation, both militarily and economically. It was modern day conquest. And it is something Washington seeks to repeat elsewhere, including Southeast Asia.

It’s America’s “Island Dispute” with China, Not Southeast Asia’s

Edens would continue claiming:

However, regional attitudes are changing, largely as a result of the bullish stance China has taken in recent years over territorial disputes. The nations of South-east Asia are increasingly reluctant to accept any threats to their sovereignty in the form of Beijing’s repeated incursions into their exclusive economic zones.

However, it should be noted that the US itself in its own policy papers has noted that these “disputes” are being intentionally provoked by Washington itself, often with ambassadors and envoys repeatedly finding themselves attempting to pressure nations across Southeast Asia to “join” the dispute. The goal of using Southeast Asia as a collective Western-dominated bloc to encircle and contain China with has been stated US policy since the release of the Pentagon Papers in 1971.

A relatively recent example of this can be seen when US Ambassador to Thailand Glyn Davies berated the Thai government for not “adding its voice” to calls for China to “peacefully resolve conflicts over its appropriation of islands in the South China Sea.” Similar messages and accompanying political and economic threats, have been delivered to other capitals across Southeast Asia.

Edens doesn’t seem to understand that what he is watching is a dispute created by Washington, and a confrontational reaction from across Southeast Asia extorted out of each respective nation by Washington.

Edens mentions the Philippines and their legal dispute with China brought before the Hague. He fails to mention that the legal team representing the Philippines is in fact headed by Washington-based law firm Foley Hoag and that their representative is in fact an American.

The New York Times would reveal this in their report, “In Victory for Philippines, Hague Court to Hear Dispute Over South China Sea,” as well as reveal one of the “incentives” likely being used to encourage the Philippines to continue participating in what is mainly Washington’s confrontation with Beijing:

The Philippines — represented by an American lawyer, Paul Reichler, of the Washington law firm Foley Hoag — contends that it has the right to exploit oil and gas in waters in a 200-nautical-mile exclusive economic zone extending from territory that it claims in the South China Sea.

Dangling the spoils of victory over the government in Manila – in this case, oil – along with less public threats over what will happen if Manila does not cooperate, is likely what has caused the Philippines to squander diplomatic currency with Beijing, money in unnecessary military expenditures, and both time and energy that could be better spent invested in its own future in Asia Pacific, rather than Washington’s.

Nations Not Cooperating Will Suffer Washington’s Wrath

Edens then turns his attention toward Thailand, claiming:

In the grip of a military junta since last year, the former Land of Smiles is slowly being turned into some southern version of a North Korea.

One might forgive the London-based writer for thinking so, apparently having never set foot in Thailand before or after the coup, and apparently only reading what he sees in the British papers.

In reality, up to and including the day before the coup, US-backed dictator Thaksin Shinawatra was mass murdering his opponents in the streets with a paramilitary political front known as the “red shirts,” all while building a hereditary dictatorship that saw not only himself as prime minister, but also his brother-in-law and sister as well.

More relevant is the fact that during Shinawatra’s decade plus grip on power, he capitulated to every demand made by Washington, including sending troops to Iraq, hosting the CIA’s abhorrent rendition program, and attempting to illegally pass a US-Thai free trade agreement without parliamentary approval.

Since Shinawatra’s ouster from power in 2006, and more recently his sister’s ouster from power in 2014, he and his political dynasty have received unswerving support from the West, seeking to undermine Thailand’s existing political institutions, and reinstall the Shinawatras back into power.

These facts are never mentioned by Edens, nor is it explained how Thailand is being turned into “North Korea” by the military simply for intervening and putting a stop to obvious abuses of both power and human rights, or subsequently arresting members of this political group – a group that has employed terrorism and pursued open, armed insurrection.

Edens is making it clear, intentionally or not, that nations failing to heed the demands of Washington will be isolated and undermined, rhetorically, politically, economically, and even militarily, just as it is doing to China.

China Seeks Collaborators, Washington Seeks Colonies

Edens claims that Thailand has become a “prime breeding ground for Chinese foreign policy.” In some respects that is true. Thailand seeks a regional partner, not a foreign master. China has not placed any preconditions on Thailand regarding its internal politics in exchange for regional political and military cooperation or joint economic expansion.

In reality, it is likely Southeast Asia collectively prefers this arrangement with Beijing, over the preconditions and client regime status mandated by Washington. What Edens and others in the West attempt to hold up as “evidence” of growing tension in Southeast Asia is more likely the result of backdoor meetings and insinuated threats prodding weaker capitals in the region continuously toward wider confrontation with China. However, none of this is sustainable.

Even as Edens and others hold up evidence that their strategy of tension is working, those on the ground in Southeast Asia can see the waning influence of the West, increasing awareness of the poorly hidden coercion used by the West to cling to the influence it has remaining, and the slow and steady influence of China.

China is a regional neighbor, unlike Washington who attempts to impose its agenda from the other side of the planet. China benefits from a stronger Asia, while Washington sees any rising power or region as a threat that must be controlled, and failing that, divided and destroyed.

It would be wrong to say the rest of Asia is not watching China’s rise with caution. It would also be wrong to say that China does not possess the potential to some day equal or exceed the unwarranted power and influence Washington has wielded in the region. But it would be equally wrong to say that Asia prefers very real Western subjugation to a potential Chinese variety. It seeks a multipolar region where all nations rise together and a balance of power and a respect for national sovereignty is maintained. That is a balance collaboration with the West simply will not yield.

So despite Edens optimistically claiming the “ball” is “squarely in Washington’s court,” the truth is after centuries of the West using and abusing Asia, Asia now is using the West, to raise itself up before pushing it out.

SOURCE: New Eastern Outlook

Xi Jinping's Middle East Tour - The Asia-Pacific Perspective

noreply@blogger.com (Broc West) — Fri, 29 Jan 2016 23:07:00 +0000

On this edition of The Asia-Pacific Perspective: China goes on a Middle East tour as the Asia-Pacific gears up for more military drills; Australia goes for cashless welfare; and the Malaysian PM receives a $681 million "gift" from his Saudi friends.

SHOW NOTES AND MP3: https://www.corbettreport.com/?p=17599

Silk Dragon Takes Persian Road

noreply@blogger.com (Nick Hopkins) — Thu, 28 Jan 2016 21:50:00 +0000

from Counterpunch: He came, he saw, and he pocketed all the deals that matter. Chinese President Xi Jinping’s tour of Southwest Asia – Saudi Arabia, Iran and Egypt – could easily be sold anywhere as your typical Chinese-style win-win.

On the PR arena, Xi did a sterling job polishing China’s image as a global power. Beijing scored diplomatically on all counts, obtaining several more layers of energy security (over half of China’s oil come from the Persian Gulf) while expanding its export markets and trade relations overall.

In Iran, Xi oversaw the signing of 17 politico-economic agreements alongside Iran’s President Hassan Rouhani. Yet another diplomatic coup: Xi was the second leader of a UN Security Council member country to visit Tehran after the nuclear deal struck in Vienna last summer; the first was President Putin, in November. Note the crucial Russia-China-Iran interaction.

To make it absolutely clear, Xi issued a statement just before arriving in Tehran, confirming Beijing’s support for Iran to join the Shanghai Cooperation Organization (SCO). That will solidify for good the key strategic partnership trio working for future Eurasia integration.

Of course, this whole process revolves around One Belt, One Road – the official Chinese denomination of the larger-than-life New Silk Road vision. No other nucleus, apart from Russia-China, offers so much potential in terms of bilateral cooperation; Iran, as much as during the ancient Silk Road uniting imperial China and imperial Persia, is the ultimate hub uniting Asia with Europe.

Xi’s high-tech caravan stopped first in Saudi Arabia and Egypt – the Arab world. Xi’s message could not be more crystal-clear: “Instead of looking for a proxy in the Middle East, we promote peace talks; instead of seeking any sphere of influence, we call on all parties to join the circle of friends for the Belt and Road initiative”.

As Xi was still in Arab land, Beijing officially issued an “Arab policy paper”; a first, tracing the history of China-Arab world interaction from the ancient Silk Road up to the founding of the Sino-Arab State Cooperation Forum in 2004. And even before addressing the – fractured – Arab League in Cairo, Xi emphasized it once again; what matters for China is «win-win» cooperation all around.

Translation: business, business, business. And no Chinese interference in fractured Middle East politics.

Xi’s diplomatic offensive, a spin-off of One Belt, One Road, seeks no less than reconfigure the Non-Aligned Movement (NAM) – for which China is a global champion – in the context of emerging new financial architecture, centered on the globalization of the yuan.

That includes the push for the yuan to become one of the world’s reserve currencies; and mechanisms such as the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund, much more attuned to the needs of the developing world than the IMF, the World Bank and even the Asian Development Bank (ADB).

A win-win for China as far as the Arab Middle East is concerned implies the pricing of key commodities in yuan – a long-term but essentially inevitable development. And Beijing is eyeing not only Saudi Arabia but the whole GCC (Gulf Cooperation Council) – which happens to be a de facto financial centre for Africa, where China has a massive presence, with Eastern Africa on top of it being linked to the Maritime Silk Road.

The boom, and its drawbacks

Post-sanctions Iran, already in overdrive, is all about (re)integration into large swathes of the global economy. Yet China was already in Iran even before the lifting of sanctions.

Iran wants to increase its petrochemical output, by 2025, to 180 million tons. Chinese investment will be key. According to a recent report by global energy, metals, and mining research and consultancy Scottish group Wood Mackenzie, Iran may attract as much as $70 billion for its petrochemical projects.

On the alternative energy front, Iran has the capacity to generate 40,000 megawatts (MW) of electricity from solar and wind resources. Chinese companies will definitely be on it.

As an NPT member state, Iran will continue to use nuclear energy for peaceful purposes. Chinese companies are already a player in the redesigning of the Arak heavy water reactor, and will be involved in producing isotopes for medical purposes and desalinating seawater.

Investment in mining is also a certainty. According to the World Mining Congress (WMC), China and Iran were the 1st and 10th largest minerals producers in the world in 2013. Iran holds more than 7% of the world’s proven mineral reserves, but only 20% of these have been developed. Foreigners are now allowed to operate Iranian mines for 25 years – and China will be on it.

One Belt, One Road is mostly about high-speed rail. So no wonder upgrading and expanding Iran’s railway network is a key plank in the Joint Statement on Comprehensive Strategic Partnership between Iran and China.

Of course progress along the New Silk Road(s) will face numerous pitfalls.

No one yet knows the full details about the Iran-China strategic partnership; Tehran won’t be content with being just a transit route for China’s exports; it aims at being a key trans-Eurasian partner. China is a WTO member; Iran is not a full member yet. China is at the center of multiple trade agreements while Iran is a partner in only a few.

Cooperation with the Central Asian «stans» may be quite a feat – as some, like Uzbekistan, are quite jealous of their economic practices. And a multi-vector, complex relationship between Tehran and Ankara is still a work in progress; Turkey after all physically connects Asia to Europe.

A geostrategic master class

Geopolitically, Iran’s Supreme Leader Ayatollah Khamenei unambiguously set the tone as he met Xi. China, said the Supreme Leader, is a “trustworthy” country; the establishment of a “25-year strategic relation is completely correct and wise; and last but not least, …The Islamic Republic of Iran will never forget China’s cooperation during the time of sanctions”.

Subtle but firm, Ayatollah Khamenei could not but refer to the stark difference between Iran and Saudi Arabia in the absolutely crucial – for China – area of energy security: “Iran is the only independent country in the region that can be trusted in the area of energy because unlike many regional countries, the energy policy of Iran is not influenced by any non-Iranian factor”.

The bottom line is that for Beijing, a strategic partnership with Iran is a matter of vital national security. Moreover, geostrategically, Beijing sees Iran as an essential hub, in Southwest Asia and Eurasia for that matter, counterpunching Washington’s much-advertised “pivot” and US naval hegemony. That implies Beijing’s full support for a powerful Iran in the arc spanning the Persian Gulf to the Caspian; all these maritime and land routes – New Silk Road-wise – are vitally important to China.

There is no fulfillment of the New Silk Road vision without a comprehensive Iran-China strategic partnership. Xi and the Beijing leadership not only solidified it; in a sweeping move, they sort of upgraded what some Iranian analysts define as Khamenei’s «defensive realism» theory of international relations to a de facto protection ring of China’s geostrategic interests.

A master class. And it’s all going according to (Beijing’s) plan. Next step is Iran as a full SCO member. Eurasian integration, here we come.

SOURCE: Counterpunch

China's ICBC Launches Second Branch in Belgium

noreply@blogger.com (Broc West) — Wed, 27 Jan 2016 22:50:00 +0000

from chinadaily.com: Industrial and Commercial Bank of China (ICBC) officially launched its second branch in Belgium on Tuesday, 26th January in Antwerp.

In early 2011, ICBC set up Brussels branch in Belgium. After 5 years of development, ICBC has built up a trustworthy reputation in Belgium with total asset of 1.2 billion US Dollars as a provider of various specific financial services, such as oversea loans against domestic guarantee, ship financing, cross-border RMB business, and UCITS SICAV, among others.

Since the first European branch ever was established in London in 1995, ICBC's business has been expanded in 19 cities of 12 major countries in Europe, including UK, Germany, Luxemburg, Holland, France, Italy and Belgium, building a complete financial service network across Europe.

"Antwerp is the financial and cultural capital of Belgium, as well as one of the biggest ports in the world. Apart from that, it also plays an essential role in China's‘One Belt One Road' initiative,"said Jiang Jianqing, Chairman of ICBC ltd.

He said that the trade between China and Belgium has been growing steadily ever since the two countries established their diplomatic relationship in 1971. Belgium remains an important trade partner within EU for China and China has become the biggest Asian invest partner of Belgium.

"This year marks the 45th anniversary of China-Belgium diplomatic relationship. The establishment of Antwerp branch is hence of huge significance. It indicates that ICBC is determined to invest more in Belgium, and to deepen our financial cooperation. Besides, it is also a strategic move to promote ‘One Belt One Road' initiative," added him.

Ambassador Yang Yanyi, head of the Mission of China to the EU, said that ICBC has not been only serving the wellbeing of Chinese and Europeans respectively, but has also been forging stronger economic, trade and investment relations between China and EU.

She said that giving the background of China's new concept of development and EU's integrating process, China and EU are joining hands to strengthen their comprehensive strategic partnership to promote, peace, growth, reform and civilization.

"We are fully confident that the ICBC Antwerp Branch will go all out to offer the best possible financial services and contribute to the enhancement of mutually beneficial and mutually reinforcing partnership between China and the EU and China and Belgium，" stressed Yang.

Jiang also said that the visit of King Philippe to China last June put extra accent on the determination of promoting China-Belgium economic tie from both sides.

On June 23, 2015, witnessed by President Xi Jinping and King Philippe of Belgium, ICBC signed an export buyer's credit agreement with Exmar. ICBC also signed a strategic cooperation memorandum with KBC Bank and a financial lease agreement with the Seatrade Group, which was witnessed by the Chinese Premier Li Keqiang and the Belgian Prime Minister Charles Michel.

To contact the reporter: fujing@chinadaily.com.cn

SOUCE: China Daily

As Myanmar Enters a New Era, Washington and Beijing Vie for Influence

noreply@blogger.com (Broc West) — Wed, 27 Jan 2016 21:52:00 +0000

Written by Nile Bowie
via New Eastern Outlook:

Myanmar is a country rapidly moving toward uncharted political terrain. By March 2016, the National League for Democracy (NLD) will take power for the first time in history, bringing an end to five decades of rule by the military establishment. Once suppressed by the military junta, the NLD – led by longtime dissident and Nobel laureate Aung San Suu Kyi (pictured) – has secured an indisputable victory during the country’s November 2015 elections, winning a majority in both houses of Parliament.

The ascent of the NLD comes at a time when Myanmar finds itself at a new strategic crossroads, pulled toward the geopolitical orbit of major powers: the United States and China, as well as India. Since the outgoing military-backed government opened the country to Western investment in 2011, the US has prioritised its relationship with Myanmar as part of its strategy to reassert influence in the Asia-Pacific region. The country has received numerous visits by US high-ranking leaders, including President Obama on two occasions.

China, the country’s neighbour and largest trading partner, has long suspected Washington of seeking to influence Myanmar’s opening to nurture a regime with an antagonistic position toward Beijing. While the NLD positions itself to form a new government, the rise of this political force with a thoroughly pro-Western orientation, which has long anchored itself as a pro-democracy movement lauded throughout the West, begs the question of Myanmar’s place in the current geopolitical scenario.

RELATED:
Aung San Suu Kyi & Military Chief Discuss New Myanmar Gov't Formation

The Constitutional Question

As the military-backed Union Solidarity and Development Party (USDP) prepares to handover power to the NLD, it appears that the political dynamics of the ongoing transition are based around pragmatism between the military establishment and the pro-democracy camp, both of whom harbour old enmities. The military issued a conciliatory response and expressed interest in working together with the NLD, signalling a desire to peacefully transfer power.

Under the current constitution, drafted by the military in 2008, Aung San Suu Kyi is ineligible to become president due to her children holding foreign (British) citizenship. Despite widespread NLD opposition to the constitution, Suu Kyi will be effectively appointing the next president to avoid any clashes with the military, signalling that the party is not looking to rustle feathers by pushing for constitutional change in the near-term.

The military is the most powerful institution in the country, both de facto and constitutionally. Under the terms of the military-drafted constitution, 25 percent of the parliament is allotted to unelected military representatives, while a powerful part of the bureaucracy will remain under the direct control of the military, including control over the police, military, and domestic security apparatus, and the power to issue passports.

After the NLD’s sweeping victory, Suu Kyi took aim at the military-drafted constitution by saying she would serve above the president, who she described as being subservient to her as party president. Despite this rhetoric, there are many indications that the NLD understands that the key to a functioning government involves cooperation with the military. It would simply be impossible to administer the country without having the support of the home ministry and Myanmar’s generals, and the NLD is not prepared to mount a direct challenge to the military.

The extent of this cooperation remains to be seen. Despite the NLD formally taking over the executive, it should be understood that the military’s acquiescence to peacefully transfer power implies that the new political arrangement is a de facto power-sharing arrangement between Suu Kyi and the military. Despite a contentious past that saw the violent suppression of the NLD and its leader condemned to two decades of house arrest, Suu Kyi is now in some dimension aligned with her former captors.

The Question of Development

The degree to which the NLD and the military have today found common ground on a wide range of positions has spurred disappointment from Western rights advocates who view her pragmatic political conservatism as a retreat from defending human rights. Most notably, Suu Kyi has kept silent on the official discrimination of Rohingya Muslims across displacement camps in western Myanmar, as well as the current government’s attacks against ethnic minorities in various parts of the country.

On developmental matters, the NLD have failed to articulate a detailed strategy and there is reason to believe that Suu Kyi’s stewardship over the economy will be an extension of the status quo, characterised by an upending of human rights concerns by the enormous bargaining power of global investment capital. Myanmar’s rapidly liberalising economy – brought about by reforms that have driven displacement, human rights abuses, and social unrest – have given a boost to a growing urban middle class at the expense of an exploited underclass.

In recent years, Suu Kyi has collaborated closely with the USDP government by courting foreign investment and encouraging closer diplomatic ties with the US and its allies. Myanmar owes its investment boom in no small part to the personality of Suu Kyi, who leveraged her close ties with the West to end US sanctions and open the floodgates of foreign capital, bringing with it poverty wages, gruelling hours, and unsafe working conditions for a large segment of the domestic labour market.

The NLD and the USDP see eye-to-eye on pro-market restructuring to encourage multinational investment and an export-oriented industrialisation strategy, which has thus far not been offset by increased expenditure on basic services. Suu Kyi’s embrace of neoliberalism and reluctance to advocate for human rights since entering politics signals that the NLD will put the bottom line of foreign investors before the rights and general welfare of labourers and ethnic minorities.

The Question of Federalism

The NLD has long garnered support across ethnic lines, from rural villages and urbanites alike, though its leadership represents sections of the majority ethnic Burman elite whose interests were undermined for decades by the military’s monopoly over important sectors of the economy. Despite capturing a larger-than-expected segment of the ethnic minority vote, Suu Kyi carefully avoided rhetoric during her campaign that would upset ethno-nationalist and Burman chauvinist sentiment.

Myanmar is one of the most ethnically diverse countries on the planet, with over 100 ethnic minorities and sub-groups, each with separate languages, culture and customs. Armed conflicts between rebel groups have continued unabated in the nearly seven decades since Myanmar’s independence, and the question of federalism is one of the largest political challenges the incoming government must face. Attempts to broker a nationwide ceasefire have been unsuccessful in recent years, despite active engagement between the USDP government and ethnic leaders in multiple rounds of negotiations.

In recent times ethnic parties have begun to call more forcefully for a federal structure comprised of politically autonomous ethnic states, as well as greater self-government in regards to administration, culture, education, and the management of natural resources. The NLD has voiced a public commitment to bringing about a federal system but has offered few specifics, though it is still widely seen by ethnic minorities as being more amenable to making concessions in contrast to the military.

President Thein Sein has expressed support for a federal system in theory, but top military leaders oppose a central demand of many of ethnic leaders: the integration of ethnic militias into a federal army. The USDP government has also failed to integrate some of the most powerful and influential armed groups into ceasefire negotiations, such as the ethnic Chinese separatist guerrillas that operate in the remote Kokang region on the border with China’s Yunnan province, as well as the Kachin Independence Army and Shan State Army.

Kokang guerrillas clashed with the military for four months during 2015 in one of the most intense standoffs in decades prior to declaring a unilateral ceasefire after coming under pressure from Beijing. The military incurred hundreds of causalities and failed to make much headway against the Kokang forces, despite sending tens of thousands of troops into the mountainous region supported by aircraft and artillery.

During an offensive last March against the Kokang rebels, Myanmar mistakenly dropped a bomb on the Chinese side of the border, killing five Chinese farmers working in a sugar-cane field. Beijing responded angrily and called on the USDP government to open peace negotiations with the Kokang, which government officials refused. The issue of federalism and a national ceasefire between the government and all armed groups is central not only to promoting development and national coherence, but also to China’s strategic interests in Myanmar and its own landlocked southwestern Yunnan region.

As the daughter of Myanmar’s independence hero, Aung San (who promoted a federalist system before his assassination in 1947), Suu Kyi and the NLD are uniquely positioned to lead the peace process. Her failure to break the impasse and achieve an outcome on federalism that is agreeable to powerful ethnic minorities could deepen racial friction and instil the perception that she has become co-opted by her alliance with the military.

The Question of China

Myanmar’s landmark election was watched closely from Beijing, which publicly welcomed the results but nonetheless holds concerns about the orientation of the incoming NLD government. As Myanmar’s largest trading partner and neighbour, China wields irreplaceable influence over the country’s geopolitical and economic development. Since the 2011 policy shift, however, Naypyidaw has drawn closer to Washington, effectively downgrading its relationship with Beijing.

China was the main backer of Myanmar’s military junta and largest investor during years of international seclusion, spending billions on infrastructure such as pipelines, ports, and dams. Despite major investments, anti-Chinese sentiment is rife throughout Myanmar due to the controversial implementation of large-scale projects, which saw populations forcibly relocated by the army and major land confiscations. Since the relaxation on censorship laws, public criticism of China is now commonplace in local-language media.

Though there is no overt signs of hostility between Beijing and Naypyidaw, a gradual deterioration of relations has taken place in recent years, evidenced by China’s foreign direct investment having dropped from $8.2 billion in the peak year of 2010/11 to merely $56 million in 2013/14. China-backed projects such as the Myitsone dam and the Letpadaung copper mine have been the subject of protests, spurred on by US-funded NGOs and media outlets.

Beijing has taken a pragmatic approach to the rise of Aung San Suu Kyi and the NLD, and appears willing to accommodate with her. There is, however, deep skepticism toward Suu Kyi and concerns that she could pursue policies that undermine China’s interests. In a rare occasion of state-level interaction with an opposition leader, China invited Suu Kyi to Beijing last June, where she met with President Xi Jinping.

Beijing was clearly anticipating an NLD victory and moved proactively to open dialogue with Suu Kyi to promote the development of relations. To offset any antagonism between China and the NLD, its likely that Beijing will offer its financial muscle in various aid projects and assistance as a mediator in the domestic peace process when the new government takes over.

China would seek the re-opening of the now-suspended suspended Myitsone dam project, as well as resolutions to numerous economic initiatives, such as the Kyaukphyu special economic zone, plans to construct a Sino-Myanmar highway, and various joint transportation initiatives. Despite attempts by civil society in Myanmar to disseminate hostility against China, the NLD appears cognisant that a constructive relationship with Beijing is essential to ensuring investment for major capital-intensive development projects.

India has taken notice of China’s presence on the Indian Ocean, where Chinese state-owned firms manage Myanmar’s Kyaukphyu port and Pakistan’s Gwadar port. Delhi’s response has been to develop a port in Sittwe, on Myanmar’s western coast, which is currently in the final stages of construction. Myanmar’s political establishment are favourably disposed toward India and have maintained excellent bilateral relations, though Delhi is widely seen as being unable to match the level of financing that Beijing has shown a willingness to put forward.

Suu Kyi’s visit to China underscores how there will not be a wholesale rejection of Chinese investment and assistance, despite Beijing’s mishandling of past projects with Myanmar’s military and the neglect of Myanmar’s pro-democracy camp. China has an important stake in Myanmar’s stability because military conflicts inside the country are impediments to it’s own economic and strategic programs. Furthermore, Beijing is by far the most qualified candidate to monitor Myanmar’s peace process given its geographic position and familiarity with the region’s internal dynamics.

It is in China’s interests to revaluate its economic cooperation with Myanmar to ensure the welfare and interests of local people through grass-roots communication with communities in areas marked for development. Beijing should better regulate the performance of Chinese enterprises that have garnered contentious reputations in Myanmar while doing more to ensure Chinese investors comply with the rule of law.

The Question of Washington’s Pivot to Asia

Since 2011, the large-scale refocusing of American corporate and military muscle to the Asia-Pacific region has been a key foreign policy objective in Washington. Naypyidaw’s opening to the United States is one component of an over-arching policy to harness the power of developing nations throughout the ASEAN region to serve as an economic counterweight to Beijing.

The United States is attempting to realise this goal through instruments like the Trans-Pacific Partnership (TPP) agreement – a sweeping trade deal that includes a number of Pacific Rim nations but excludes China – which aims to formulate new rules for international trade around core US strategic interests. Though Myanmar is not part of the TPP, it was once firmly in Beijing’s orbit but has now realigned itself to Washington.

Naypyidaw’s policy shift and the subsequent triumph of Aung San Suu Kyi will surely be utilised as a vehicle for US interests in the region, under the guise of promoting the universality of Western democracy. Though the NLD has indicated its penchant for pragmatism with its approach to Beijing, it remains to be seen to what extent Suu Kyi would acquiesce to attempts by the West to drive a wedge between China and Myanmar.

Moreover, she may deicide demonstrate support for pro-democracy movements in China or Nobel laureates like the Dalai Lama or activist Liu Xiaobo of her own accord. In the past, Suu Kyi has selectively criticised the practices of Chinese state-enterprises while applauding the conduct of Western energy firms like Total, despite its controversial history of collaborating with the military junta.

Though she may be predisposed to give preferential treatment to Western investment, she notably endorsed the China-backed Letpadaung copper mine project as leader of an investigative committee tasked with evaluating the project. Despite considerable opposition from local residents and Myanmar society in general, she displayed pragmatism in handling a major Chinese project in this instance even at the cost of alienating her own supporters.

Despite being ideologically aligned with the West, the NLD appears to understand that balanced relations with China and other Asian countries are the surest means of securing investment for large-scale infrastructure, while American companies are only just testing the waters and expanding their business relationships in Myanmar in areas such as tourism, energy, and telecommunications.

Military ties between Washington and Naypyidaw have been modest at this stage, with the inclusion of observers from Myanmar’s military during the annual Cobra Gold regional military exercises led by the US and Thailand. There remains a high degree of distrust between members of the US Congress and Myanmar’s generals, but these misgivings could quickly give way if the military maintains a conciliatory approach to the NLD. Increased US military presence in Myanmar will be unfavourably perceived in Beijing.

As the NLD prepares to lead the next government, there are enormous expectations for Suu Kyi to clean up corruption and improve the effectiveness of long-neglected and underfunded government services. Myanmar is now emerging from six decades of isolation, and political stability is crucial to allowing the country to rebuild its economic and social institutions to reverse the severe underinvestment in education and infrastructure it suffers from.

Unfortunately, the NLD has yet to articulate policy specifics and a strategy for the future of the country. Much of the incoming government’s focus is on manoeuvring through a political landscape still shaped by the military. Myanmar’s generals made a bargain on the West and have gotten what they came for: a huge influx of foreign capital and a secure inroad to the global economy. If Suu Kyi can promise the generals that they need not fear reprisals under an NLD government, perhaps only then would the military consent to constitutional reform, allowing her to hold the presidency.

* * * * * *

Nile Bowie is a political analyst based in Malaysia who has written for a number of publications, his expertise lies in a number of areas, with a particular focus on Asian politics and geopolitics, especially for the online magazine “New Eastern Outlook”.

First appeared: http://journal-neo.org/2016/01/25/as-myanmar-enters-a-new-era-washington-and-beijing-vie-for-influence/

Political Corruption Alive and Well in Malaysia

noreply@blogger.com (Broc West) — Wed, 27 Jan 2016 21:39:00 +0000

Outrage and New Questions After Malaysia PM Cleared in Scandal

from thepennisulaqatar.com: Malaysia's official explanation of the $681 million that ended up in Prime Minister Najib Razak's personal bank account -- it was an entirely proper gift from friends -- has triggered derision and fresh questions in a country already well-used to allegations of graft.

On Tuesday, Malaysia's Najib-appointed attorney-general cleared the premier of wrongdoing in a scandal that has gripped the nation, declaring that the money was a "personal donation" from the Saudi royal family.

The announcement capped months of evasion by Najib on the source of the money and apparently laid to rest any threat of prosecution by Malaysian authorities.

But Malaysia's opposition, anti-graft activists and social media users pounced on the perceived implausibility of the unexplained Saudi largesse and alleged a government whitewash.

The Saudis themselves have not helped the situation, with The Wall Street Journal quoting a Saudi official saying the kingdom's government had no knowledge of the donation, adding such a royal gift would be "unprecedented".

Senior opposition figure Lim Kit Siang called the episode a "high-water mark" in Malaysia's well-documented history of government corruption and impunity.

"I cannot think of another case in the nation's history where the attorney-general's decision... has been greeted with more scepticism, outrage and scorn," he said.

CONTINUE @ SOURCE

Big Bad China

noreply@blogger.com (Broc West) — Mon, 25 Jan 2016 10:48:00 +0000

from Zero Hedge: It seems like every day we are inundated with news out of China. Investors are already concerned. The offshore renminbi (CNH) is more international than the onshore one (CNY), which is tightly managed by the government. As such, the rising spread (CNH-CNY) between the two may be indicative of mounting skepticism about China’s economy and its markets. Likewise, capital is fleeing the country as hot money flows have accelerated:

In the following sections we will attempt to analyze China’s markets and determine the biggest risks facing its economy. Lastly, we will try to answer the following question: does it matter to us?

Markets

As the first week of trading in 2016 came to an end, the Chinese markets had already been halted twice. Newly minted circuit breakers, which have since been suspended, were triggered when China’s main equity index, the CSI 300, fell 7% on two separate occasions. The first selloff was triggered by a rumor that the China Securities Regulatory Commission (CSRC) was planning to suspend a short sale ban that has kept a reported ~$185 billion off the market. Subsequently, the CSRC decided to extend the ban in order to calm the markets. The second drop followed a significant devaluation of yuan by the People’s Bank of China (PBOC). China has also backtracked on that move. Basically, the Chinese markets are confusing…

That said, the volatility is not surprising considering how unsophisticated China’s market is. One university study found that 2/3 of the new investors at the end of 2014 did not have a high school diploma:

source: Bloomberg Brief

Along the same lines, individuals account for at least 80% of trading on the mainland exchanges. In other words, there are many speculators and few investors. China’s markets are undeveloped and relatively unimportant. Nonetheless, they may offer some clues into consumer sentiment and the government’s ability (or inability) to control the economy.

Economy

It is hard to determine whether China is more capitalist or communism. Either way, it remains an indispensable part of the global economy. In nominal terms, China is the world’s second biggest economy with a GDP of ~$10.3 trillion. However, in terms of Purchasing Power Parity-adjusted GDP (PPP), it has surpassed the US. Moreover, it accounts for ~40% of global PPP-adjusted GDP growth:

source: The Economist

In regards to trade, China is the world’s biggest player. In 2013, it led the world in exports ($2,209 billion) and was the number two country for imports ($1,950). The combined value of its trading amounted to $4,159 billion, marginally higher than the US’ $3,909 billion.

Debt

China’s aggregate debt level is one of the highest in the world, although it may not seem to be at first glance. China’s government debt-to-GDP ratio is 55%. To put that in perspective, the US and Japan are at 89% & 234%, respectively. Even so, it is always prudent to consider a country’s debt composition. China’s mounting debt comes into focus when we account for non-financial corporate debt (125% of GDP), financial institution debt (65%) and household debt (38%). The grand total is an astounding 282% of GDP, or $28.2 trillion:

source: McKinsey

The rate of debt growth is also a concern. Non-financial corporate debt, increased from 72% to 125% of GDP from 2007 to 2Q14, a 73.6% increase.

China’s debt load is a global risk because of how tightly managed its economy is. The government has allowed unprofitable companies to stay in business. Though defaults have been very limited, China must allow these companies to fail eventually. Otherwise, it will continue to suffer from high debt servicing costs ( ~30% of GDP).

Overcapacity

Government investment has been a big part of China’s economy. Massive amounts of stimulus went into factories, leading to overcapacity in sectors such as coal and steel. This is making it very difficult for companies that operate within those sectors to make profits – both domestically and abroad. Fiscal stimulus also went into housing and infrastructure, which are both clearly overbuilt. Despite the overcapacity, gross capital formation still represents ~45% of GDP:

source: Gordon T. Long

That is more than twice as high as it is in both the US and the European Union.

Monetary Policy & FX

The PBOC has been very active trying to support the economy. It has cut rates 6 times since November of 2014. Likewise, it has been lowering its Reserve Requirement Ratio and selling its foreign reserves in an attempt to prevent excessive devaluation of the yuan (CNY). They are down more than $400 billion (from a peak of ~$4 trillion) since mid-2014:

source: @TomOrlik

FX is also a risk because China has a lot of USD-denominated debt. In mid-2015, non-bank borrowers held ~$1.2 trillion worth of it. This is an issue because Dollar debt becomes more expensive when USDCNY rises, which is exactly what the markets expect to happen.

Corruption Crackdown

China’s anti-corruption campaign is a step in the right direction. That said, it is a big political risk for foreign investors. High profile businessmen and officials have been disappearing while others are being investigated. Moreover, securities regulators have been cracking down on market manipulators, “ensnaring some of the nation’s most high-profile money managers and announcing more than 2 billion yuan of fines and confiscated gains” (source: BBG Brief). Critics of the campaign suggest that it may deter business while failing to address the corruption that exists amongst the ruling party.

Implications

As investors, we should be concerned because China is one of the biggest economies and the world’s leading trader. Therefore, if it slows down then so will global growth:

source: $GS

China is also important because it is a massive source of demand for many commodities. Thus, its weakness is spreading to undiversified economies such as Russia, Brazil and South Africa. Recessions in those countries might not carry over to the rest of the world. Nevertheless, it is important to consider the amount of debt they have taken on since the financial crisis. In the US, credit is already tightening. If borrowing costs rise for the emerging markets, especially China, then we may see a wave of defaults with untold consequences.

SOURCE: Zero Hedge

Xi Jinping Opens Refinery With Saudi King Salman

noreply@blogger.com (Broc West) — Wed, 20 Jan 2016 23:47:00 +0000

from Channel News Asia: Chinese President Xi Jinping and Saudi King Salman on Wednesday (Jan 20) inaugurated a joint-venture refinery, symbolising Beijing's deepening involvement in the Middle East and Riyadh's need for economic diversification.

The event took place in the Saudi capital on the second day of Xi's first visit to the region. He later left for Cairo and will also travel to Saudi Arabia's rival Iran.

The YASREF refinery, in Yanbu Industrial City on the Red Sea, is 62.5-per cent held by Saudi oil giant Aramco, while China Petroleum & Chemical Corp (Sinopec) holds the balance. "YASREF represents both companies' focus on driving downstream growth," the refinery said in a statement.

Billboards on a highway outside the ceremony showed Xi and Salman waving against a backdrop of the refinery.

Saudi Arabia is China's biggest global supplier of crude, and state-owned Saudi Aramco says expansion into refining and chemicals fits the kingdom's goal of economic diversification. The policy has been given added urgency by a plunge in the kingdom's oil revenues.

YASREF is one of five joint-venture refineries in Saudi Arabia. Another four are overseas, including one in Fujian, China. The YASREF refinery shipped its first diesel one year ago and has a capacity to refine 400,000 barrels of Arabian crude per day.

Saudi Aramco and Sinopec also signed a framework agreement on cooperation, reflecting confidence "in the potential opportunities we can create together," said Saudi Aramco president Amin Nasser.

GROWING TRADE

Sinopec's strengths in refinery and chemical technology would support the kingdom's drive to diversify its petroleum sector, said the company's chairman Wang Yupu.

The ceremony, accompanied by a Chinese dragon and Arabian sword-dancing, took place in Riyadh at the King Abdullah Petroleum Studies and Research Center (KAPSARC). Salman separately inaugurated that facility, which focuses on energy research and policy.

Oil Minister Ali al-Naimi, who chairs KAPSARC's board of trustees, told the gathering the centre would "contribute to the diversification and expansion of the Saudi economy".

Salman in December said he had ordered economic reforms to diversify sources of income and reduce the kingdom's high dependence on oil. Global crude prices have collapsed from above US$100 a barrel in early 2014 to below US$28 on Wednesday.

To cope with a record budget deficit, the kingdom broke with its decades-old generous welfare system and raised fuel, electricity and other prices in its 2016 budget. Government spending has also been cut, there is talk of a value-added tax in the tax-free nation, and state assets including Saudi Aramco could be privatised.

Trade between the Gulf nations and China, the world's second-largest economy, has been growing. Two-way commerce between China and Saudi Arabia alone reached US$69.1 billion in 2014, according to China's official Xinhua news agency.

Although China depends on the Middle East for its oil supplies, it has long taken a low-profile approach to the region's diplomatic and other disputes, only recently beginning to expand its role, especially in the Syrian crisis.

Before Xi's visit, a Chinese analyst said Beijing would do what it could to ease heightened tensions between Saudi Arabia, the region's main Sunni power, and its Shiite rival Iran.

Later, Xi was welcomed at Cairo airport by his Egyptian counterpart Abdel Fattah al-Sisi, with whom he will hold bilateral talks that focus on the economic sector.

Bilateral trade between China and Egypt amounted to US$11 billion in 2014, the bulk of it being Chinese exports to the biggest Sunni Arab country, state-run Al-Ahram newspaper reported. On Thursday, Xi is to visit Egypt's newly convened parliament, and will address a session of the Cairo-based Arab League.

SOURCE: Channel News Asia / AFP