China’s central bank opens liquidity front in hot money war

100 Yuan notes are seen in this illustration picture in Beijing November 5, 2013. Credit: Reuters/Jason Lee

100 Yuan notes are seen in this illustration picture in Beijing November 5, 2013. Credit: Reuters/Jason Lee

China’s central bank delivered two major surprises to investors this week: it engineered a sharp decline in the yuan against the dollar and at the same time relaxed its tight grip on money markets that had kept interest rates firm.

In effect, the central bank was playing bad cop with speculators in the foreign exchange market to try to shake out one-way appreciation bets, while making nice with money market traders.

That was a marked change from December and January when the regulator appeared deaf to howls of pain emerging from China’s money market as interbank lending rates spiked, rattling both domestic and global investors.

“The PBOC has suddenly become surprisingly soothing, and that has resulted in a great improvement in money market sentiment,” said a trader at a Chinese commercial bank in Shanghai, although he questioned how long the new environment would last.

The central bank’s action was unusual because traders had expected the authority to mop up the extra yuan entering markets as a result of its intervention in order to prevent interest rates from easing. It did drain funds, but not to the extent that the market had expected.

Traders and analysts are divided over what the central bank is trying to achieve.

Some argue the looser rates could be designed to provide a further deterrent to hot money inflows as its tries to battle against speculation that the yuan is a one-way appreciation bet.

Others suspect the change of heart may be designed to offer relief to equities and real estate markets, both of which have shown signs of strain under the tighter credit environment in place since last year. That could boost sentiment during the annual session of parliament that begins next week.

But the relaxation also complicates the central bank’s efforts to maintain pressure on risky shadow banking and encourage heavily indebted Chinese corporations to cut their debt burden.

“The central bank has a difficult task in trying to prevent growth from sliding sharply and avoid a financial crisis, while taming the credit bubble and deleveraging the economy,” wrote Barclays economist Jian Chang in a research note on Friday.


The PBOC has remained rhetorically committed to maintaining adequate liquidity for growth, but in practice that has meant different things at different times.

During dramatic cash crunches in Chinese markets in June, December and January, the central bank declined to act to ease the pressure and instead insisted liquidity was in fact “ample”.

On Wednesday, however, the PBOC announced it had no plans to change monetary policy, adding that stock market investors in particular should not worry about liquidity supply.

Traders usually discount such talk – especially rhetorical attempts to juice stock markets – and instead watch what the central bank actually does. In this case, the central bank put its money where its mouth was by allowing rates to ease.

The average rate for the seven-day bond repurchase contract, considered the most reliable indicator of China’s real-time liquidity conditions, was already easing before Wednesday’s announcement by the PBOC. One transaction was done as low as 1.6 percent on February 21, the lowest rate for that instrument since late 2010.

Market participants who believed the PBOC wanted to keep rates in elevated territory widely expected the PBOC to conduct a major drain of funds during open market operations. While the central bank did indeed drain funds to the tune of 160 billion yuan ($26 billion) for the week, the amount was much less than had been expected.

During the comparable week of 2013, the PBOC pulled a massive 351 billion yuan out of the financial system.


Some traders argue the central bank is only allowing rates to ease in the run-up to the annual meeting of the National People’s Congress starting next Wednesday – hoping to deliver a liquidity-driven stock market rally to give an optimistic backdrop to the event.

However, others wonder if Beijing has lost its will to keep up the pressure on money markets following a run of weak economic indicators.

China’s official manufacturing purchasing managers’ index (PMI) is forecast to slip to 50.1, which would be the lowest level since June last year, a Reuters poll shows. The data is due to be released on Saturday.

PBOC data shows it has been largely successful in its attempts to isolate the money market from its intervention in the currency market, supporting the thesis that the decline in rates is deliberate and not an unintentional side effect of currency meddling.

Bank of America Merrill Lynch economist Lu Ting argued that the combination of falling money rates and a falling yuan shows the PBOC is trying to solve a policy conundrum produced by its campaign to push up money rates, launched in mid-2013.

The rising rates attracted hot money, which in turn put one-way upward pressure on the yuan, which in turn attracted even more hot money.

“The PBOC has been under tremendous pressure to deliver solutions to this dilemma since late 2013, and it has been persistently requesting co-ordination from other government agencies,” he wrote, and argued that it is at long last getting support from other regulators.

“We did not simplistically call the rising rates in 2H13 as the PBOC’s tightening, and we won’t simplistically call the PBOC’s current action as easing.”

Source: Reuters “China’s central bank opens liquidity front in hot money war”

Related post: China’s official PMI seen hitting eight-month low dated February 28, 2014

Japan says puzzled by new China WWII national days

Japan says puzzled by new China WWII national days

Japan says puzzled by new China WWII national days

Tokyo (AFP) – Tokyo on Friday said it was puzzled over why Beijing approved national remembrance days to commemorate the Nanjing Massacre and its defeat in World War II, after decades of Japanese pacifism.

The move is the latest in a vitriolic diplomatic spat between Asia’s two largest economies, who are at loggerheads over disputed territory and differing interpretations of their shared history.

Meanwhile, Tokyo said it was pressing ahead with a controversial plan to re-examine evidence on which a 1993 apology for the system of wartime sex slavery was based, an issue that provokes particularly strong feelings in South Korea.

State media in China reported Thursday that the National People’s Congress, the rubberstamp parliament, had designated September 3 as victory day and December 13 as a day to remember those killed when imperial troops raped and pillaged the then-capital of Nanjing.

Japan invaded China in the 1930s and the two countries fought a full-scale war from 1937 to 1945.

China says more than 300,000 people were slaughtered by Japanese troops in a six-week killing spree in Nanjing, which started on December 13, 1937. Some foreign academics put the figure lower.

It was unclear what significance the formal “national days” will have, although they are not expected to be public holidays.

Japan’s top government spokesman Yoshihide Suga said Friday he could not understand why China had made this change at this point.

“I can’t deny there is a question why they have to set up these commemoration days more than 60 years after the war,” he said.

“But this is a domestic matter for China, so the government declines to comment on it.

“Japan’s position on World War II has not changed a bit, and Japan has followed the path of peaceful nationhood since the end of the war, which has been highly commended by the international community,” he added.

– ‘Re-examine and understand’ –

Tokyo and Beijing are embroiled in a series of rows, including a long-running diplomatic set-to over disputed islands in the East China Sea.

Tensions rose further late last year when Japanese Prime Minister Shinzo Abe visited the Yasukuni shrine, which honours Japan’s war dead, including convicted war criminals.

Abe told the parliament this week he “must make more effort” to get countries such as China and South Korea to understand his pilgrimage.

Suga said Abe “meant to say that his visit was to pledge that Japan would never wage war again, that he would build a peaceful nation”.

At a parliamentary committee, Suga separately said the administration would set up a team to look at the lead-up to the 1993 apology issued to “comfort women”, the euphemism for those forced to work in Japanese military brothels during WWII.

“We’d like to launch a team to re-examine and understand the background (of the statement),” he said, according to Kyodo News. He did not elaborate on any plan to issue a new declaration, a move that would meet with anger from South Korea.

Some on Japan’s right insist comfort women were merely common prostitutes, and that the state had nothing to do with coercion. Most respected historians dispute this view.

China and South Korea often call on Japan to “reflect” on its past, while Tokyo says its neighbours use history as a diplomatic stick to beat it with.

Japan’s official position, one that has been repeatedly endorsed by successive governments, is that it inflicted grievous harm on the populations of countries it invaded, and has offered numerous apologies.

However, comments by senior right wing figures — including those with close connections to Abe — on the veracity of events like the Nanjing Massacre regularly undermine that stance.

Source: The West Australian “Japan says puzzled by new China WWII national days”

Related posts:

  • Chinese sue Japan firms over forced World War Two labour dated February 26, 2014
  • China Gives Order to Commence War with Japan ‘if It Is Appropriate to Fight’ dated February 21, 2014
  • Sino-Japanese War a Reality: Japan to Force down Chinese Fighter, Arrest Its Pilot dated February 21, 2014
  • US Vice President Joe Biden Obviously Is Pro-Beijing and Lacks Trust in Abe dated January 30, 2014
  • Japanese PM Abe, Chinese President Xi Jinping Both Want a War. Can It Be Avoided? dated January 25, 2014
  • China Does Not Budge in its Brink of War Policy on Air Defense Identification Zone dated December 5, 2013
  • The Mystery of What Biden Has Got in His Beijing Visit dated December 6, 2014

More than 1,000 arrested in China for trafficking babies on the internet

Baby trafficking has emerged as a serious social problem on mainland China. Photo: EPA

Baby trafficking has emerged as a serious social problem on mainland China. Photo: EPA

Four trafficking rings smashed and 382 babies rescued, says the Ministry of Public Security

Mainland Chinese police have arrested more than 1,000 people in multiple cities for trafficking babies on the internet, the Ministry of Public Security announced on Friday.

On Feb. 19, authorities rescued 382 infants from trafficking operations conducted in 27 cities, and also smashed four baby-smuggling rings, said a statement released by the ministry on its website.

The crackdowns were launched after police in Beijing and Jiangsu received a tip-off last year that the suspects were engaged in child trafficking by running a website that promoted baby adoption.

Further investigations revealed that the suspects operated four such websites, and used various tools on the internet, such as an instant messaging platform and online bulletin boards, to communicate with potential buyers.

A total of 1,094 suspects were arrested in the clampdown and some of them made confessions, the ministry explained.

One of the suspects, Zhou Daifu, said he had paid up to 3,000 yuan (HK$3,774) to another suspect for procuring government registration certificates for the smuggled babies, reported People’s Daily, the mouthpiece of the Communist Party. Zhou would then re-sell the certificates, it said.

He would also require both the seller and buyer of the registration certificates to make a “donation”, which usually cost up to six per cent of the transaction amount, to his websites. Zhou had even planned to provide surrogacy and foster care services, said the People’s Daily report.

Cyberspace has provided a convenient platform for traffickers, explained Liu Ancheng, the deputy director of the security ministry’s criminal investigation bureau.

“The criminals build up their platforms through the internet, and engage in trafficking activities under the veil of baby adoption. They are operating in secrecy,” he said. “They have no boundaries, and their networks are spreading across the whole nation.”

The public security ministry will ramp up its crackdown on baby trafficking on the internet, Liu added.

Baby trafficking has emerged as a serious social problem on mainland China. Last month, a Shaanxi doctor was found guilty for selling babies from her hospital for as little as 1,000 yuan.

The obstetrician, Zhang Shuxia, was convicted of tricking parents into giving up their babies by changing test results to show that the babies had birth defects. She sold seven babies to a middleman and pocketed more than 100,000 yuan. Six of the seven babies were rescued by police, but a baby girl died.

A court in Shaanxi province gave Zhang a suspended death sentence for what it described as the crime’s negative impact on society.

In Shandong province, two traffickers used online platforms to lure young women who had unplanned pregnancies to give up their babies, reported Shenzhen TV on Monday. The smugglers sold 10 babies over the past three years, earning more than 500,000 yuan.

Source: SCMP “More than 1,000 arrested in China for trafficking babies on the internet”

Related posts:

  • Chinese doctor admits selling patients’ newborns dated January 1, 2014
  • Chinese police rescue 92 abducted children dated September 28, 2013
  • Fujian family planning official selling babies dated January 4, 2013
  • SCMP: Hundreds held for traffic in babies dated July 7, 2012

China’s Secret Reconciliation Proposal to Philippines amid Tension over Fishing Right

A second-hand warship the Philippines bought from France for patrolling the South China Sea

A second-hand warship the Philippines bought from France for patrolling the South China Sea

According to China’s Global Times., regarding the incident of Chinese Coast Guards driving away Philippine fishermen with water cannon, Philippine Secretary of Defense Voltaire Gazmin said, “If Chinese coast guards ships continue to deal with our fishermen with water canon, we will respond by sending Philippine coast gaurds ships.”

Philippine media believe that Gazman does not send navy because of the lesson learnt from the Scarborough Shoal standoff in 2012. At that time, Philippines committed a blunder by sending its navy to deal with Chinese fishermen.

According to Philippine GMA News, Solicitor General Francis Jardeleza, however, thinks such an incident can be used in the memorial the Philippines has to submit to the UN arbitration panel on March 30 as an incident of harassment.

I wonder that was perhaps why Philippine government organized fisherman to provoke China to drive away the fishermen so as to win international sympathy and have something to complain in its memorial.”

Jardeleza is full of confidence that the Philippines will win. GMA news quotes him as saying, “Losing is not an option. We are a small country but we want to win big. Time and history [are] on our side.”

According to him, if the Philippines wins, China will have “to face the wrath of the international community.”

It seems China is already afraid of such wrath.

Global Times says that Philippine rappler website exposed on February 27 that China’s attempt to induce the Philippines to withdraw its application for arbitration by the offer that both sides withdraw their government ships from the Huangyan Island (known also as Scarborough Shoal) and China makes additional investment in the Philippines.

Rappler website says a former national security adviser learnt the information through some secret channels and the information has been confirmed by two government officials. In the last week of January, President Aquino held a secret cabinet meeting to discuss China’s proposal.”

Global Times, however, regard what Rappler says as somewhat abnormal.

I, however, believe that the Chinese proposal, though somewhat abnormal, is quite good for resolving the issue.

China gains instead of loses something if the Philippines accepts the proposal. First, government ships leaving the island is but a return to the status before the Scarborough standoff. That was both China and the Philippines wanted when they signed the Declaration on conduct between China and ASEAN in 2002.

The Philippines will recover its fishing right in the area around the island and get Chinese investment to boost its development.

China will have more opportunities to invest in the Philippines to exploit the cheap labor and rich resources there.

It is indeed a win-win proposal that I do hope is true.

In addition, China may focus on its dispute with Japan while the ease of tension between China and the Philippines will make US pivot to Asia less justified.

However, I do not think that the Philippines will accept the proposal if there is really such a proposal.

They are so confident that they do not consider all the possible outcome. What if the Philippines loses the arbitration? It has to implement it, but if the Philippines wins, China will certainly refuse to implement the award as it rejects the arbitration at the very beginning.

No problem, Philippine President Aquino has already been mentally prepared for the worst: He can accuse the international community of appeasement.

Source: Global Times “Philippines makes a clamor to send coast guards ships to the Huangyan Island but not warships for fear of upsetting China” (summary by Chan Kai Yee based on the report in Chinese)

Source: GMA News “SolGen: Ruling on West PHL Sea claim may be out by 2015”

Related posts:

  • South China Sea Disputes: US Pivot to Asia Has Zero Effect dated February 19, 2014
  • US, China, ASEAN Reached Consensus to Resolve Disputes through Code of Conduct dated February 18, 2014
  • US Not Willing to Be Drawn into War by Japan or Philippines dated February 11, 2014
  • Aquino Desperate in Hinting UN, ASEAN Appeasing China dated February 6, 2014
  • The Mystery of What Biden Has Got in His Beijing Visit dated December 6, 2013

Tentative China pension reforms tackle inequality, but financing issues remain

People rest next to a red wall near Tiananmen Square in Beijing November 22, 2010.  Credit: Reuters/Petar Kujundzic

People rest next to a red wall near Tiananmen Square in Beijing November 22, 2010.
Credit: Reuters/Petar Kujundzic

China’s latest step to overhaul its pension system to even out payments between urban and rural residents is a move experts say is more symbolic than sweeping.

After years of robust growth, China is confronting a growing income gap and unhappiness over economic disadvantages, especially those endured by its millions of migrant workers.

The current system offers vastly different payouts depending on which scheme workers are covered by, a source of much rancor to employees increasingly aware of the unequal nature of development in the world’s second-largest economy.

The country’s fragmented pension system is loosely divided into four categories: civil servants and state officials, private sector workers, non-employed urban residents and rural residents.

The latest reforms, details of which were given on Wednesday, will merge the final two of the four streams. The new fund will be made up of annually paid pension insurance, government subsidies and other contributions, and will pay pensions to residents from the age of 60, the State Council said.

Monthly pensions will only begin after 15 years of payments, and will offer payouts ranging from 100 yuan ($16.32) a year to 2,000 yuan ($330).

Experts cautiously welcomed details of the reform, which is particularly aimed at migrant workers, who were previously unable to transfer money accumulated in one region to another.

“Merging the systems is absolutely essential. But getting so many people under one scheme needs time,” said Lu Xuejing, head of the Labour and Social Security department at the Capital University of Finance and Economics.

Lu also noted that this step would prove relatively easy.

“Even though the names are different, when the system created these two separate (pension schemes) they were already basically the same.”

In October, Reuters reported that China was close to announcing long-awaited pension reforms as it seeks to create a sustainable safety net for a rapidly ageing population.

Economists pointed out that funding issues, which were not mentioned in the reforms, are of greater concern when it comes to how sustainable the pension system is.

Deutsche Bank’s chief economist Ma Jun estimated that China could face a 68 trillion yuan ($11.1 trillion) funding shortage by 2033.

“The No. 1 source of China’s fiscal and debt risk is the financing gap in the pension system,” said Ma, who authored an 80-page report that came up with the figures.

Ma said that if the government transferred 80 percent of listed state-owned enterprise shares to the pension system and raised the retirement age, then the funding deficit problems could largely be addressed.

But these two issues face some opposition, especially from a public that has spoken out strongly against previous proposals to raise the retirement age.

“You have to raise (the retirement age) gradually, not overnight, this is something to do over several years,” Ma said.

The two streams covered by this round of reforms were originally introduced as part of a drive to extend basic social security coverage to all citizens. Both streams offer similar payouts, but they are much lower than other pension streams.

Experts, however, doubt the changes will make a big difference to payouts.

“In terms of the amount of money paid out, this new integration plan won’t really have much difference at all,” said Ka Lin, a professor in Zhejiang University’s School of Public Administration.

China first announced plans to merge the two streams earlier this month, saying the change would improve social security, allow workers to more easily move for the best job prospects and support domestic consumption.

($1 = 6.1266 Chinese yuan)

Source: Reuters “Tentative China pension reforms tackle inequality, but financing issues remain”

Related posts:

  • China points to social welfare reforms needed for urbanization drive dated November 12, 2013
  • China Completes Its Pension System 8 Years Ahead of Schedule dated December 12, 2012

China’s official PMI seen hitting eight-month low

Smoke rises from chimneys of a steel plant next to a viaduct on a hazy day in Tangshan, Hebei province February 18, 2014.  Credit: Reuters/Petar Kujundzic

Smoke rises from chimneys of a steel plant next to a viaduct on a hazy day in Tangshan, Hebei province February 18, 2014.
Credit: Reuters/Petar Kujundzic

China’s factory activity likely expanded only slightly in February, a Reuters poll showed, dropping to an eight-month low that would indicate a modest slowdown is continuing.

China’s official manufacturing purchasing managers’ index (PMI) may slip to 50.1, down from January’s 50.5, according to the median forecast of 12 economists in the poll.

A reading above 50 indicates expanding activity while one below that level points to a contraction.

If February’s reading is below 50.5, it will be the third straight month of decline since November’s 51.4. The last time the index was below 50 was in September 2012, when it was 49.8.

A preliminary survey released last week by HSBC and Markit Economics showed that the factory sector activity hit a seven-month low of 48.3, from 49.5 in January. The index for new orders dropped below 50, and employment reached its lowest point since the global financial crisis.

“Usually we observe if the HSBC PMI has seen such a big decline, then the official one will also see a similar downward trend, but not as bad,” said Wei Yao, China economist at Societe Generale in Hong Kong.

The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit private survey, which focuses more on smaller firms and those in the private sector.

“When the economy slows down, usually the private sector feels the squeeze first,” Yao said.

Analysts cautioned against reading too much into this month’s preliminary Markit/HSBC numbers, given the smaller-than-usual number of work days. The Lunar New Year festival, which began on January 31 and covered early February, likely affected factory output as manufacturers shut for China’s biggest annual holiday.

China’s economic indicators have been mixed of late – weak investment and declining PMI readings have been countered by surprisingly buoyant exports and bank lending. This makes it hard to draw firm conclusions about the economy’s direction.

The government has been trying to reduce the economy’s dependence on exports and enhance the role of domestic consumption, but it is unclear how much growth it might be willing to sacrifice for its goal.

In 2013, China grew 7.7 percent, steady from the previous year and fractionally above market expectations of 7.6 percent, which would have been the slowest since 1999.

Economic growth targets for 2014 have yet to be made public. Government economists have said the official target could again be 7.5 percent, the same as the 2013 target.

The official PMI figures will be released on Saturday, March 1 at 9:00 am (0100 GMT). The final HSBC/Markit PMI is due on March 3 at 9:45 am (0145 GMT).


4CAST 50.1

Barclays 50.3

BBVA 50.3

BOC International 50.0

CA-CIB 49.5

Citi 50.1

Haitong Securities 50.1

Industrial Bank 50.2

ING Financial Markets 50.0

Societe Generale 50.0

Standard Chartered 50.6

Zheshang Securities 50.3

Median 50.1

Highest 50.6

Lowest 49.5

Mean 50.1

Prior 50.5

No. of Forecasts 12

Source: Reuters “China’s official PMI seen hitting eight-month low”

Related posts:

  • Chinese PM Li Keqiang pledges ‘appropriate liquidity’ in 2014 dated December 30, 2013
  • Final China HSBC PMI dips to six-month low in January as new orders weaken dated January 31, 2014

China’s Xi to run Internet security body: state media

China's President Xi Jinping waves from the presidential tribune at the opening ceremony of the 2014 Winter Olympics in Sochi, February 7, 2014.   Credit: Reuters/Lionel Bonaventure/Pool

China’s President Xi Jinping waves from the presidential tribune at the opening ceremony of the 2014 Winter Olympics in Sochi, February 7, 2014.
Credit: Reuters/Lionel Bonaventure/Pool

Chinese President Xi Jinping is to take the reins of a government body for Internet security and aims to turn China into a “cyber power”, official state media reported on Thursday, as the country steadily tightens its grip online.

Since coming to power, Xi has presided over an intensifying online crackdown that has drawn criticism from rights groups and dissidents at home and abroad.

China has also faced growing accusations of carrying out state-sponsored hacking attacks around the world, charges the government strongly denies.

Among the security body’s aims would be to coordinate Internet security among different sectors, and to draft national strategies, development plans and major policies, Xi was quoted as saying by Xinhua.

“Efforts should be made to build our country into a cyber power,” he said, adding that without Internet security, there was no national security.

Last year a secretive Chinese military unit believed to be behind a series of hacking attacks was brought to light by a U.S. security group [ID:nL4N0BJ3QA], and in December another security firm said Chinese hackers had spied on European foreign ministries before a G20 meeting. [ID:nL1N0JP0BY]

Xi also said that working on public opinion online was a long-term responsibility, and the Internet could be used to “spread discipline”.

Laws would be drawn up to “perfect Internet information content management”, to help manage cyberspace and protect people’s legal rights, he said.

Last year, China’s Communist Party renewed a heavy-handed campaign to control online interaction, threatening legal action against people whose perceived rumors on microblogs such as Sina Weibo are reposted more than 500 times or seen by more than 5,000 people.

Rights groups and dissidents have criticized the crackdown as another tool for the party to limit criticism and to further control freedom of expression.

The government says such steps are needed for social stability and says every country in the world seeks to regulate the Internet.

China has the world’s most sophisticated online censorship system, known outside the country as the Great Firewall. It blocks many social media websites, such as Twitter, Facebook, YouTube and others, along with many sites hosted in Taiwan and those of rights groups and some foreign media agencies.

Source: Reuters “China’s Xi to run Internet security body: state media”

  • Related posts:
  • China: One More Popular Public Intellectual Blogger Silenced dated January 1, 2014
  • China holds two bloggers as it expands crackdown on rumors dated October 8, 2013
  • China experimenting with more ‘subtle’ Internet censorship dated June 2, 2013

China paper slams West’s ‘Cold War mentality’ over Ukraine

China’s top newspaper criticized the West on Thursday for remaining locked in a “Cold War mentality” against Russia in the contest for influence over Ukraine, calling for the shackles of such outmoded thinking to be cast off to deal with the crisis.

The commentary published in the People’s Daily, the flagship newspaper of the ruling Communist Party, was the strongest reaction yet in Beijing to the rift between the West and Russia that has been growing since the ouster of Moscow’s ally Viktor Yanukovich as president following weeks of protests.

“The theories related to politics, economics and security during the Cold War period are still influencing many people on their concept of the world, and some Western people are still imbued with resentment towards Russia,” the paper said.

It called on Western countries to “abandon their outdated thinking” and expand cooperation.

“Ridding the shackles of the Cold War mentality will reduce unnecessary confrontation, thereby allowing for a smoother transition in international relations.”

The commentary was published under the pen name “Zhong Sheng”, meaning “Voice of China”, which is often used to give the paper’s view on foreign policy issues.

China and Russia have close ties and see eye-to-eye on many international diplomatic issues, such as the crisis in Syria.

China has so far shown little public interest in participating in any financial aid for Ukraine, or getting involved diplomatically, in line with the low key approach it takes to many international crises.

China’s foreign ministry has said it will not interfere in what it considers an internal affair and that it respects the Ukrainian people’s decisions, adding that it would like to continue to develop “friendly cooperation” with the country.

East-West tensions over Ukraine have risen further since Russian President Vladimir Putin put 150,000 combat troops on high alert for war games near Ukraine, Moscow’s boldest gesture since the ouster of Yanukovich.

The United States warned Russia on Wednesday it would be a “grave mistake” to intervene militarily in Ukraine and said it was considering $1 billion in U.S. loan guarantees and additional funding to help Kiev.

Yanukovich visited China in December in the hope of winning much-needed financial aid, but China did not say it would provide any loans. Yanukovich said deals signed with China may bring Ukraine about $8 billion in investment.

State news agency Xinhua said in December that Western powers should stop meddling in Ukraine’s affairs and manipulating the “opinions of the people” about a trade pact with the European Union, just days after Yanukovich’s visit to China.

Source: Reuters “China paper slams West’s ‘Cold War mentality’ over Ukraine”

Related posts:

  • Ukraine upheaval puts China arms deals in jeopardy dated February 26, 2014
  • New Cold War: Russia Took the Lead Followed by China to Confront the US dated August 6, 2013
  • Breakthrough in the Establishment of Cold War Partnership between China and Russia dated June 26, 2013
  • China-Russia Arms Deals Are Political for Cold War Partnership dated March 31, 2013
  • The emergence of a new Cold War – China and Russia against the US dated March 25, 2013
  • The beginning of a new Cold War: On Putin’s Beijing visit dated June 6, 2012

China Breakthrough in Providing Good Engines for J-20 Stealth Fighter Jet

New version of J-20

New version of J-20

Front part of new J-20

Front part of new J-20

Nose of the new J-20 prototype

Nose of the new J-20 prototype

Engine nozzles of the new J-20

Engine nozzles of the new J-20

I mentioned in my previous posts that engine is the greatest problem for China’s aviation industry so that China has allocated 100 billion yuan ($16 billion) for engine development. That is especially true for China’s J-20 stealth fighter that is designed to counter US F-22.

Military experts pointed out lots of shortcomings when they saw the first two J-20 prototypes and their test flights. However, they say lots of shortcomings have been overcome in the new prototype J-20 no. 2011, test flight of which will soon be carried out. I have already given detailed description of the improvements in the new version of J-21 in my post “Details of New-Version J-20 Stealth Fighter Jet with Lots of Improvement” on January 19.

However, there is the consensus among both Chinese and foreign experts that J-20 can never be a rival to F-22 if it does not have powerful engines to realize its designed maneuverability. But such powerful engine is so far not available for China. So far only the US can produce such powerful engine while the engine for Russian’s T-50 is still at testing stage and even if it proves powerful enough, it is still a question whether Russia is willing to sell the engine to China.

China has to make a breakthrough in its engine development as it has to import engines from Germany for its conventional submarines and frigates and from Ukraine for its light stealth fighters. Its J-10 and J-11B advanced fighters still have to use Russian engines.

On February 25, reports that analysts believe the new version of J-20 uses new China-made engines because:

1. The new version is shorter than the old version i.e. J-20 nos. 2001 and 2002. It must uses a shorter engine;

2. The tail nozzles of the new version are shorter. This improves their undetectability as they are entirely shaded by the ventral fin;

3. There is huge change in the structure of the air inlet of the new J-20 for the new engines; and

4. PLA Senior Colonel Du Wenlong said in an interview with CCTV that the new J-20 must have been installed with new engines. Otherwise, there is no need for the new version to have carried out again high-speed taxi tests as such tests have already been carried out by the old version for the old engines.

Source: “New J-20’s engines are shorter and perhaps made in China” (summary by Chan Kai Yee based on the report in Chinese)

Related posts:

  • China’s Aviation Industry’s Serious Bottleneck: Lack of Powerful Engine dated December 5, 2012
  • China nears approval of $16 billion domestic jet-engine plan: Xinhua dated February 28, 2013
  • China Remains Depending on Russia for Its J-15’s Engines dated November 6, 2013
  • China Buys USD700 Million Russian Aircraft Engines dated November 15, 2013
  • China: Major Breakthrough for Mass Production of J-20 in Developing its Engines dated December 3, 2013
  • Details of New-Version J-20 Stealth Fighter Jet with Lots of Improvement dated January 19, 2014

China sues Ukraine for breach of US$3b loan-for-grain agreement

China sues Ukraine for breach of US$3b loan-for-grain agreement

China sues Ukraine for breach of US$3b loan-for-grain agreement

China is seeking compensation of US$3 billion from Ukraine for the breach of a loans-for-grain contract signed in 2012, Russian media reported yesterday.

Under the deal, the Export-Import Bank of China provided the loan to Kiev in exchange for supplies of grain.

Citing a Ukrainian parliament official, the ITAR-TASS news agency reported that the State Food and Grain Corporation of Ukraine has used part of the US$3 billion Chinese loan to instead provide crops for other countries and parties, including Ethiopia, Iran, Kenya and Syrian opposition groups.

So far, Chinese importers have only received US$153 million worth of Ukrainian grain, or 180,000 tonnes, the report said.

The report was carried by the Chinese-language service of The Voice of Russia radio. There has been no official comment from China Exim Bank on the report.

The Ukrainian parliamentary official said China has already lodged a case against Ukraine at the London Court of International Arbitration. The report did not mention the date or any further details on the case.

In March, the Worldwide News Ukraine news agency reported that the first half of the Chinese loan was delivered to Kiev, and Ukraine planned then to export four million tonnes of grain last year.

The loan contract stipulated the supply of Ukrainian grain over 15 years. The annual volume of grain exports would vary but would not exceed six million tonnes a year.

The Ukrainian parliament would provide state guarantees for the loan-for-grain contract, the report added.

China has stepped up agricultural co-operation with Ukraine in recent years. The Xinjiang Production and Construction Corps said last year it had reached an agreement with KSG Agro, a leading Ukraine agricultural company, on a 50-year programme to secure produce from three million hectares of Ukrainian farmland for Chinese consumers.

But KSG later denied it was “selling” any land to any Chinese companies, and that the agreement was a “letter of intent” concerning a transfer of irrigation technology from Xinjiang.

Source: SCMP “China sues Ukraine for breach of US$3b loan-for-grain agreement”

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