Is That J-20’s Next-generation of Fighter Jet?


People wonder if th戈尸 will be J-20’s next generation of fighter jet

The Military and Civilian Dual Application Intelligent Equipment Forum/Expo 2018 opened in Chongqing on March 28. It is sponsored by China Ordinance Science Research Institute with the coordination of Chongqing Commerce Commission, Chongqing High-tech Zone, China Ordinance Society, China Command and Control Society, China Ordinance Investment and Administration Co., Ltd. and lots of other entities. Lots of well-known generals, military experts and academics have been invited to the forum.

On display at the expo are a large number of major equipment and innovation for making the military powerful including enhanced Beidou Navigation System (China’s GDP), powered exoskeleton, lunar rover, etc. What attracts keenest interest is the above model of a wield fighter jet. People wonder if that will be J-20’s next generation of fighter jet.

Source: mil.huanqiu.com “Is J-20’s next generation of fighter jet like that? It is showcased at Intelligent Equipment Expo 2018” (summary by Chan Kai Yee based on the report in Chinese)


China Developing Strategic Bomber with World Leading Design, Standards


He Shengqian, leader of bomber research and development team, says China’s future bomber will be world leader in design and technological standards. Photo from CCTV footage

In its report “Official again mentions Chinese air forces’ future bomber! Prouder with greater self-confidence this time”, mil.huanqiu.com quotes He Shengqiang, responsible person of China’s bomber research team as saying that China’s future bomber must satisfy the requirements for first-class military and meet the great rejuvenation of the Chinese nation. He believes that the design of China’s future bomber will be leader in its mode of combat application and technological standards.

He said that on TV screen in CCTV’s “Military Report” program on the drill of China’s new H-6K medium-range bombers. The program describes how PLA air force’s Shenwei brigade has overcome jamming, penetrated radar networks, identified decoys and hit its targets in the drill.

On TV screen, Guo Cuangping, a H-6K pilot, says that he used H-6K’s advanced equipment to tell real targets from decoys and effectively hit the targets.,

Then He Shengqiang, the person in charge of the research and development of H-6K was interviewed on H-6K’s characteristics and performance. He says that with H-6K, Chinese air force has initially obtained the long-range strike capabilities that cover China’s entire territories. That is what his team has developed for the air force to obtain integrated space and air capabilities for both attack and defense.

On their continuous efforts for the future, he said the above about China’s future bombers.

That is not the first time China’s future bomber was mentioned. As far back as September 1, 2016, the then air force commander Ma Xiaotian says, “We are now developing a new generation of long-range strike bomber. You will see it in the future”

Chinese air force commander on China’s future bomber. Photo from CCTV footage.

Source: mil.huanqiu.com “Official again mentions Chinese air forces’ future bomber! Prouder with greater self-confidence this time” (summary by Chan Kai Yee based on the report in Chinese).


China’s crude oil futures contract should confound the skeptics: Kemp


Oil tanks are seen at an oil warehouse at Yangshan port in Shanghai, China March 14, 2018. REUTERS/Aly Song

Reuters Staff March 29, 2018

(John Kemp is a Reuters market analyst. The views expressed are his own.)

By John Kemp

LONDON (Reuters) – China’s new crude oil futures contract, which began trading this week, has a good chance of confounding the doubters and becoming a regional benchmark where other contracts have failed.

The history of futures and options trading is littered with new contracts launched amid great fanfare but which subsequently failed to develop sufficient liquidity and have been discontinued or faded into irrelevance.

But the new crude futures contract launched on the Shanghai International Energy Exchange comes after years of meticulous preparation and has many of the ingredients needed to be successful.

Three elements determine the success or failure of a new futures contract, according to an extensive literature review prepared for the Shanghai Futures Exchange three years ago.

The contract must fulfill a commercial need for hedging. It must succeed in attracting a pool of speculators. And public policy must not be too adverse (“Why some futures contracts succeed and others fail”, Till, 2014).

China’s new oil futures contract clearly meets the first two criteria and has a fair chance of succeeding on the third as well.

MEETING A HEDGING NEED

China has already overtaken the United States to become the world’s largest crude importer, so there is a clear need to hedge the resulting price risks.

The need for a new contract and its basic features were showcased two years ago in a presentation by China’s leading crude importer (“Review of current and potential Asian oil benchmarks”, Unipec, 2016).

China’s refiners import mostly medium and heavy sour crudes, which trade at a substantial discount to lighter and sweeter oils.

The two main existing benchmarks, Brent and U.S. light sweet crude, also known as WTI, are based on light low-sulfur crude oils.

In contrast, the new Shanghai futures contract is based on a basket of medium and heavy crudes from the Middle East and China itself with a significantly higher sulfur content.

The new futures contract approximates the sort of crudes that China is importing much more closely than Brent or WTI.

Foreign crudes deliverable against the contract include oils from the United Arab Emirates, Oman and Iraq, which all trade freely.

But they also closely resemble other grades China imports in significant volumes, including crude from Saudi Arabia, Iran and Russia.

The new contract is denominated in yuan rather than U.S. dollars, allowing refiners to manage their price risks more effectively.

ATTRACTING SPECULATORS

The contract should have no difficulty in attracting a pool of speculators to provide liquidity since China has a large number of domestic traders and brokers familiar with commodity markets.

China has already launched several highly successful contracts, including steel, iron ore and copper, all of which have become liquid benchmarks.

There is a large community of domestic speculators and a network of brokerages, which should help the new contract succeed.

China has many of the network characteristics that have made Chicago, New York, London and Singapore successful futures trading hubs.

REGULATORY CONCERNS

The biggest source of uncertainty surrounds the attitude of the government towards price volatility and its willingness to allow fairly unrestricted futures trading.

China’s government has not always been comfortable with extreme price swings and high levels of speculative activity, and has periodically intervened in the markets.

But the same impulses have been seen in other futures trading centers, at least historically, and China’s regulatory interventions have not prevented the successful development of contracts for other commodities.

Given China’s increasing dependence on crude imports and ambition to be a global financial center, the government has a strong strategic interest in ensuring the new contract becomes a successful benchmark.

The new crude contract has some distinctive characteristics and restrictions that have drawn adverse comment (“China aims to challenge Brent, WTI oil with crude futures launch”, Reuters, March 23).

There are strict limits on the number of canceled orders to curb spoofing but which may deter computer-driven high-frequency traders.

Trading is restricted to three distinct periods each day, rather than being nearly continuous, and there will be lengthy non-trading periods during national holidays.

But most of these restrictions have a sound rationale, including concentrating liquidity, and they are likely to be relaxed as the contract becomes more established.

None of them appears likely to deter liquidity.

China’s new crude futures are unlikely to displace the Brent and WTI light sweet benchmarks in the United States and Europe.

But they have a fair chance of successfully becoming a regional benchmark for the medium and heavy sour crudes favored by refiners in Asia (“Shanghai crude futures complete globalization of oil markets”, Reuters, March 28).

Further reading:

“Why some futures contracts succeed and others fail: a survey of relevant research”, Till, 2004

“Futures markets under renewed attack”, Working, 1963

“Economics of futures trading commercial and personal profit”, Hieronymous, 1977

“The role of WTI as a crude oil benchmark”, CME, 2010

“U.S. regulators and speculators: a long history of confrontation”, Lewis, 2009

“Speculation on the stock and produce exchanges of the United States”, Emery, 1896

Editing by Dale Hudson

Source: Reuters “China’s crude oil futures contract should confound the skeptics: Kemp”

Note: This is Reuters’ article I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


North Korea’s Kim Successful with First-Lady Diplomacy?


FILE PHOTO: North Korean leader Kim Jong Un and wife Ri Sol Ju pose for a picture with Chinese President Xi Jinping and wife Peng Liyuan at the Great Hall of the People in Beijing, China in this picture released to Reuters on March 28, 2018. Ju Peng/Xinhua via REUTERS

Ri in another outfit. SCMP photo

Ri in a third outfit. SCMP photo

The above are photos of the three outfits for North Korean leader Kim Jung-un’s wife Ri Sol-ju when she accompanies Kim in his Beijing visit. SCMP says, “North Korea’s first lady has become an instant hit in China with her fashionable looks after accompanying her husband Kim Jong-un in a surprise visit to China” in its report “Kim Jong-un wife’s fashion sense a hit with China’s public” yesterday.

In the report, SCMP says that some Chinese web users “compared Ri’s look with that of South Korean celebrities, saying she was ‘as pretty as Song Hye-kyo’, a popular actress in China”.

Song was chosen as one of the 100 beautiful faces in the world 7 times from 2000 to 2016 with the highest ranking of the 5th.

We post Song’s photo below:

Song Hye Kyo. Wikipedia photo

Comment by Chan Kai Yee on SCMP’s report.


North Korea’s Kim seen building global status in trip to China


FILE PHOTO: North Korean leader Kim Jong Un and wife Ri Sol Ju pose for a picture with Chinese President Xi Jinping and wife Peng Liyuan at the Great Hall of the People in Beijing, China in this picture released to Reuters on March 28, 2018. Ju Peng/Xinhua via REUTERS

Christine Kim, Ben Blanchard March 28, 2018

SEOUL/BEIJING (Reuters) – Accompanied by his wife, greeted by honor guards, and entertained at banquets, Kim Jong Un made his international debut as North Korea’s leader by being wined and dined in the capital of the world’s most populous country.

Kim’s “unofficial” visit to China this week marks his first known trip outside the North since taking power in late 2011, and it helped burnish the image he has recently been cultivating as a leader who has to be shown respect by the world’s most powerful.

Despite recent chilly relations between the neighbors, Chinese President Xi Jinping rolled out an actual red carpet for Kim, who arrived from Pyongyang in a 21-car bulletproof train.

“Just look at Kim’s big smile on his face while he’s shaking hands with Xi,” said Kim Yong-hyun, professor of North Korean studies at South Korea’s Dongguk University. “Although it was Kim’s first trip outside North Korea since he took power, he looked quite confident, posing himself as a world player equal to China’s Xi.”

The surprise visit to Beijing comes as Kim has launched a diplomatic offensive, proposing upcoming summits with South Korean President Moon Jae-in and U.S. President Donald Trump.

LAVISH RECEPTION

In line with the previous three visits by Kim’s father to China, the Chinese government described the trip as unofficial, with no North Korean flags hung around Beijing’s Tiananmen Square as happens with state visits.

But Chinese state television gave similar coverage to Kim’s meetings with Xi as they did to Xi’s meetings with Trump last year, with an unusually long 14-minute report of what Xi and Kim discussed and where and how they met, though the initial secrecy of the trip meant no live coverage of the welcome ceremony.

The images showed the two men chatting in a friendly way, and Xi’s wife Peng Liyuan also greeting Kim’s wife, Ri Sol Ju. Kim and Ri were shown waving out of a window as their car drew away.

In making the trip to Beijing in the customized train, Kim sought to highlight his place as the heir to his father Kim Jong Il, said Aidan Foster-Carter, an honorary senior research fellow at Britain’s Leeds University. His father had also gone to China by train on his visits.

“Ordinary mortals just take the plane,” he said. “The train sets the precedent of following in daddy’s footsteps.”

But by making his wife a key figure in the Beijing trip, Kim parted from his father’s behavior and mirrored the ways of today’s modern country leaders.

Kim Jong Il had never been seen abroad with any of his wives, though he was believed to have been accompanied by the woman suspected of being his fourth wife on visits to China and Russia, yet it was never announced officially.

“Unlike his father, Kim Jong Un presented Ri Sol Ju as first lady of North Korea, emphasizing her status and portraying his image as a normal leader,” said Dongkuk University’s Kim. “It appears to be a well-calculated tactic that would help turn Kim’s hostile and unfavorable image to a gentle and sane one.”

LEGITIMACY AT HOME AND ABROAD

As the leader of a country often called reclusive and strange, Kim is also much younger than many world leaders, a difference that gets additional resonance in Asia, where respectful deference to elders is widely upheld.

Estimated to be 34, Kim is decades younger than 64-year-old Xi, 65-year-old Moon, and Trump, who is 71.

Frosty relations between Beijing and Pyongyang since Kim took office had seen state-to-state relations deteriorate, but the two sides have always maintained party-to-party ceremonies and traditions, such as sending envoys to share the outcomes of key party meetings, according to diplomats.

Kim officially cast his visit in the same light, saying he felt obligated to come congratulate Xi in person on his recent re-appointment as president, according to the Chinese Foreign Ministry’s account of the trip.

China’s most senior party diplomat, Politburo member Yang Jiechi, attended the main meeting between Xi and Kim, along with Wang Huning, the party’s top theoretician. The government’s top diplomat, State Councillor Wang Yi, was also there, though at the far end of the table.

From the North, Kim Jong Un brought with him the country’s most high-profile officials, including vice chairman of the Workers’ Party Central Committee Choe Ryong Hae, Politburo member Ri Su Yong, Foreign Minister Ri Yong Ho, and Kim Yong Chol, a former intelligence chief who now handles inter-Korean affairs.

Taking nearly all of his closest aides highlights the confidence he may be feeling now that he has secured his position, showing that he doesn’t fear there could be a coup against him during his time away, said Yang Moo-jin, professor at the University of North Korean Studies in Seoul.

“We saw many high-ranking officials with Kim, but almost none from the military. One could worry about a military coup, but the fact that he made this trip as he did shows he’s completely in charge of the military as well as all of North Korea’s internal networks,” Yang said.

Reporting by Christine Kim and Heekyong Yang in SEOUL and Ben Blanchard in BEIJING; Additional reporting by Christian Shepherd in BEIJING; Editing by Josh Smith and Martin Howell

Source: Reuters “North Korea’s Kim seen building global status in trip to China”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s Xi affirms friendship with North Korean leader, gets denuclearization pledge


Ben Blanchard, Joyce Lee March 27, 2018

BEIJING/SEOUL (Reuters) – China said on Wednesday it won a pledge from North Korean leader Kim Jong Un to denuclearize the Korean peninsula during a meeting with President Xi Jinping, who pledged in return that China would uphold its friendship with its isolated neighbour.

After two days of speculation, China announced on Wednesday that Kim had visited Beijing and met Xi during what the official Xinhua news agency called an unofficial visit from Sunday to Wednesday.

The trip was Kim’s first known journey abroad since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the United States.

Beijing has traditionally been the closest ally of secretive North Korea, but ties have been frayed by North Korea’s pursuit of nuclear weapons and China’s backing of tough U.N. sanctions in response.

Xinhua cited Kim as telling Xi that the situation on the Korean peninsula is starting to improve because North Korea has taken the initiative to ease tensions and put forward proposals for peace talks.

“It is our consistent stand to be committed to denuclearization on the peninsula, in accordance with the will of late President Kim Il Sung and late General Secretary Kim Jong Il,” Kim Jong Un said, according to Xinhua.

North Korea is willing to talk with the United States and hold a summit between the two countries, he said.

“The issue of denuclearization of the Korean Peninsula can be resolved, if South Korea and the United States respond to our efforts with goodwill, create an atmosphere of peace and stability while taking progressive and synchronous measures for the realisation of peace,” Kim said.

Xi told Kim in return that both sides had stated repeatedly that their traditional friendship should be passed on and developed better.

“This is a strategic choice and the only right choice both sides have made based on history and reality, the international and regional structure and the general situation of China-North Korea ties. This should not and will not change because of any single event at a particular time,” Xi said.

Xinhua published a photograph of Kim and Xi shaking hands in front of the flags of the two nations.

Speculation about a possible visit by Kim to Beijing was rife earlier this week after a train similar to the one used by Kim’s father was seen in the Chinese capital, along with heavy security and a large motorcade.

Kim was accompanied by his wife, Ri Sol Ju, Xinhua said.

Xi had accepted an invitation from Kim to visit North Korea, South Korea’s Yonhap news agency said.

Improving ties between North Korea and China would be a positive sign before planned summits involving the two Koreas and the United States, a senior South Korean official said on Tuesday.

Kim Jong Un’s father, Kim Jong Il, met then-president Jiang Zemin in China in 2000 before a summit between the two Koreas in June that year. That visit was seen at the time as reaffirmation of close ties with Beijing.

Additional reporting by David Stanway in SHANGHAI; Writing by Lincoln Feast; Editing by Paul Tait

Source: Reuters “China’s Xi affirms friendship with North Korean leader, gets denuclearization pledge”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Exclusive: Satellite images reveal show of force by Chinese navy in South China Sea


Satellite photo dated March 26, 2018 shows Chinese ships south of Hainan, China. Planet Labs/Handout via REUTERS

Satellite photo dated March 26, 2018 shows Chinese ships south of Hainan, China. Planet Labs/Handout via REUTERS

James Pearson, Greg Torode March 27, 2018

HANOI/HONG KONG (Reuters) – Dozens of Chinese naval vessels are exercising this week with an aircraft carrier in a large show of force off Hainan island in the South China Sea, satellite images obtained by Reuters show.

The images, provided by Planet Labs Inc, confirm a Chinese carrier group has entered the vital trade waterway as part of what the Chinese navy earlier described as combat drills that were part of routine annual exercises.

The Liaoning carrier group last week traversed the Taiwan Strait, according to the Taiwanese defense ministry.

The photos, taken on Monday, show what appear to be at least 40 ships and submarines flanking the carrier Liaoning in what some analysts described as an unusually large display of the Chinese military’s growing naval might.

Sailing in a line formation more suited to visual propaganda than hard military maneuvers, the flotilla was headed by what appeared to be submarines, with aircraft above.

Jeffrey Lewis, a security expert at the California-based based Middlebury Institute of Strategic Studies, said the images showed the first confirmation that the carrier was joining the drills.

“It’s an incredible picture,” he said. “That’s the big news to me. Confirmation that, yes, the carrier participated in the exercise.”

While the Liaoning has previously entered the South China Sea as part of drills in uncontested training grounds south of Hainan, its annual exercises are closely watched by regional and international powers eyeing Beijing’s growing military might.

It is unclear where the flotilla was headed, or how long operations will last. China’s defense ministry did not immediately respond to a faxed request for comment.

Collin Koh, a security expert at Singapore’s S. Rajaratnam School of International Studies, described the deployment as unusual for its size and scope.

“Judging by the images, it does seem they are keen to show that elements of the South Sea Fleet are able to routinely join up with the carrier strike group from Dalian in the north,” he said.

“It does seem they want to show inter-fleet interoperability – something the (Chinese) navy has been quietly working on for some time.”

Chinese naval and coast guard forces have expanded rapidly in recent years and now patrol the vast swathes of the South China Sea, but little is known about their combat readiness and co-ordination.

Koh said as well as the destroyers, frigates and submarines that would ordinarily support a carrier, the flotilla appeared to include a large oiler for re-supply as well as smaller corvettes and possibly fast attack catamarans.

“While it highlights an extensive ability to deploy, we are still left to guess at the PLAN’s combat readiness,” Koh said.

As well as Vietnam, China’s claims in the South China Sea are disputed by the Philippines, Malaysia and Brunei while Taiwan also has claims.

The exercises come amid fresh signs of tension in the resource-rich waterway, with Vietnam recently halting oil exploration off its coast by Spanish firm Repsol under pressure from Beijing.

Beijing also objected to a so-called freedom of navigation patrol by a U.S. warship last week close to one of its artificial islands in the Spratlys archipelago further south.

Reporting By Greg Torode and James Pearson, additional reporting by Ben Blanchard. Editing by Lincoln Feast.

Source: Reuters “Exclusive: Satellite images reveal show of force by Chinese navy in South China Sea”


China vice premier Liu He says prevention of financial risks a top priority


Reuters Staff March 27, 2018

BEIJING (Reuters) – China’s Vice Premier Liu He, President Xi Jinping’s top economic adviser, said the prevention and resolution of risks in the country’s financial sector is a priority, according to the official Xinhua news agency on Tuesday.

Liu said China also needs to deepen financial reforms and further open up the sector, with market forces providing the cue, Xinhua reported.

Liu, a confidant of Xi, was speaking at a meeting with the central bank and financial regulators, following the appointment of a new People’s Bank of China (PBOC) governor and the head of a merged banking and insurance watchdog.

The widely anticipated merger of the China Banking Regulatory Commission and China Insurance Regulatory Commission was aimed at resolving issues such as unclear responsibilities and cross-regulation.

The move to tighten oversight of China’s $42 trillion banking and insurance sectors comes as Beijing cracks down on riskier lending practices and cut high corporate debt.

China is among global economies seen as most vulnerable to a banking crisis, according to the Bank for International Settlements, though Beijing has maintained that debt risks are under control.

Guo Shuqing has been appointed as the new merged banking and insurance regulator and as a vice governor at PBOC. Guo will work closely with PBOC’s new chief Yi Gang, a protege of China’s longest-serving central banker, the widely respected Zhou Xiaochuan.

“China should quicken the pace of role adjustments for the banking and insurance regulators to strengthen their supervision capabilities,” Liu, a Harvard-trained economist, said.

Liu said China should also keep its monetary policy prudent and neutral.

In Beijing’s reform of its state institutions, it has also launched a campaign to root out officials engaged in corrupt practices in the financial sector.

Xiang Junbo, former chairman of the insurance watchdog, last April became the highest-ranking finance industry official to be investigated for corruption.

“China will also provide a strong political foundation for its financial work by upholding its anti-corruption campaign,” Liu said.

Since his elevation into China’s 25-member Politburo, the second-highest tier in Beijing’s political power structure after the seven-member Politburo Standing Committee, Liu has emerged as an assertive voice in the government on not just the economy, but also trade and finance.

Liu is involved in China’s trade dialogue with the United States, and was the Chinese official that U.S. Secretary Steven Mnuchin spoke with last week as trade tensions between the world’s two biggest economies flared anew.

Reporting by Yawen Chen, Min Zhang, Se Young Lee and Ryan Woo; Editing by Edmund Blair and Alison Williams

Source: Reuters “China vice premier Liu He says prevention of financial risks a top priority”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s premier pledges market opening in bid to avert U.S. trade war


FILE PHOTO – Chinese Premier Li Keqiang speaks at the news conference following the closing session of the National People’s Congress (NPC), at the Great Hall of the People in Beijing, China March 20, 2018. REUTERS/Jason Lee

Reuters Staff March 26, 2018

BEIJING (Reuters) – Premier Li Keqiang said on Monday China and the United States should maintain negotiations and he reiterated pledges to ease access for American businesses, as China scrambles to avert a trade war.

Li told a conference that included global chief executives that China would treat foreign and domestic firms equally, would not force foreign firms to transfer technology and would strengthen intellectual property rights, repeating promises that have failed to placate Washington.

The United States asked China in a letter last week to cut a tariff on U.S. autos, buy more U.S.-made semiconductors and give U.S. firms greater access to the Chinese financial sector, the Wall Street Journal reported on Monday, citing unidentified sources.

Alarm over a possible trade war between the world’s two largest economies has chilled financial markets as investors anticipated dire consequences should trade barriers go up due to President Donald Trump’s bid to cut the U.S. deficit with China.
U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer listed steps they want China to take in a letter to Liu He, a newly appointed vice premier who oversees China’s economy, the Journal said, quoting sources with knowledge of the matter.

The newspaper reported that Mnuchin was considering a visit to Beijing to pursue negotiations.

Despite a steady stream of fierce rhetoric from Chinese state media lambasting the United States for being a “bully” and warning of retaliation, Chinese and U.S. officials are busy negotiating behind the scenes.

“With regard to trade imbalances, China and the United States should adopt a pragmatic and rational attitude, promote balancing through expansion of trade, and stick to negotiations to resolve differences and friction,” Li told the conference in Beijing, state radio reported.

China has offered to buy more U.S. semiconductors by diverting some purchases from South Korea and Taiwan, the Financial Times reported, citing people briefed on the negotiations. China imported $2.6 billion of semiconductors from the United States last year.

Chinese officials are also working to finalise rules by May – instead of the end of June – to allow foreign financial groups to take majority stakes in Chinese securities firms, the Financial Times said.

“I anticipate that for political reason it would be logical for China to respond, because countries do,” Blackstone Group Chief Executive Stephen Schwarzman told Reuters on Monday on the sidelines of the Beijing conference at which Li spoke, the China Development Forum.

“That’s why I view this more as a skirmish, and I think the interests of both countries are served by resolving some of these matters.”

Fears of a trade war mounted this month after Trump imposed tariffs on steel and aluminium imports, and then on Thursday specifically targeted China by announcing plans for tariffs on up to $60 billion of Chinese goods.

On Friday, China responded to the U.S. tariffs on steel and aluminium by declaring plans to levy additional duties on up to $3 billion of U.S. imports. The list of targeted goods contained no mention of soybeans or aircraft, China’s two biggest U.S. import items.

China could also inflict pain on U.S. multinationals that rely on China for a substantial – and growing – portion of their total revenues, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments.

“This could put U.S. companies such as Apple, Microsoft, Starbucks, GM, Nike, etc in the firing line,” Wolf said in a note.

China can increase the regulatory burden on U.S companies through new inspections and rules; ban travel; stop providing export licenses of key intermediate goods; raise the tax burden on U.S. multinationals in China; or block U.S. companies from the government procurement market, he said.

FLOUTED RULES

Trump unveiled the planned tariffs targeting Chinese goods after a U.S. inquiry found China guilty of intellectual property theft and unfair trade, by forcing U.S. investors to turn over key technologies to Chinese firms.

On Saturday, Liu told Mnuchin in a telephone call the U.S. inquiry violated international trade rules and China would defend its interests, the official Xinhua news agency reported.

A U.S. Treasury spokesman confirmed the call, but declined to comment on the content of any letter or on a possible visit by Mnuchin to Beijing.

“Secretary Mnuchin called Liu He to congratulate him on the official announcement of his new role,” the spokesman told Reuters. “They also discussed the trade deficit between our two countries and committed to continuing the dialogue to find a mutually agreeable way to reduce it.”

The Trump administration has demanded that China immediately cut its $375 billion trade surplus with the United States by $100 billion.

“The U.S. has been wielding sticks worldwide over the past year. Washington needs to be taught a real lesson and such a lesson can only be taught by China, the world’s second-largest economy,” China’s Global Times newspaper said in an editorial.

The widely read tabloid is run by the ruling Communist Party’s official People’s Daily, although its stance does not necessarily mirror government policy.

Privately, Liu and Mnuchin exchanged letters in the past week on further opening China’s financial services sector and cutting Chinese tariffs on imported cars, according to the Financial Times.

China has a 25 percent tariff on U.S. cars and has talked recently of lowering it.

China’s imports of U.S. motor vehicles totalled $10.6 billion in 2017, about 8 percent of the country’s overall U.S. imports by value, according to U.S. government data.

On the reported offer to increase U.S. semiconductor imports, it is unclear how U.S. chips would replace South Korean and Taiwanese chips, since there is minimal overlap between U.S. chips and those of the two Asian producers.

China is heavily dependent on foreign semiconductors, one of its biggest import categories by value. That said, the U.S. accounted for just 1 percent of China’s total semiconductor imports last year by value, according to Reuters calculations based on Chinese customs data.

Reporting by Ryan Woo; Additional reporting by David Lawder in Washington and Matthew Miller, Ben Blanchard, Elias Glenn and Stella Qiu in Beijing; Editing by Simon Cameron-Moore and Kim Coghill

Source: Reuters “China’s premier pledges market opening in bid to avert U.S. trade war”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China oil futures launch may threaten primacy of U.S. dollar: UBS


Kate Duguid March 27, 2018

NEW YORK (Reuters) – China’s launch on Monday of its crude futures exchange will improve the clout of the yuan in financial markets and could threaten the international primacy of the dollar, argues a new report by Hayden Briscoe, APAC head of fixed income at UBS Asset Management.

“This is the single biggest change in capital markets, maybe of all time,” Briscoe said in a follow-up telephone interview.

The launch of the oil futures <0#ISC:> denominated in China’s renminbi currency, also known as the yuan, is China’s first commodity derivative open to foreign investors. This marked the culmination of a decade-long push by the Shanghai Futures Exchange (ShFE) to give the world’s largest energy consumer more power in pricing crude sold to Asia.

Already on Monday, Unipec, the trading arm of Asia’s largest refiner Sinopec, has inked a deal with a western oil major to buy Middle East crude priced against the newly-launched Shanghai crude futures contract.

This helps cement the exchange’s viability and challenges the petro-dollar system, in which oil deals are executed in dollars. This would decrease demand for the greenback and boost U.S. inflation.

China surpassed the United States in 2017 to become the world’s largest oil importer. Nevertheless, the existing price benchmarks – Brent and WTI crude – are both in dollars, and importers across the world must buy dollars in order to conduct oil deals.

But the move to trade oil in yuan will diminish the role of the greenback in global financial markets, argues Briscoe.

Pricing oil in renminbi and launching a trading hub will raise China’s prominence and integrate it further in global markets. And demand for yuan from foreign investors eager to participate in the Shanghai International Energy Exchange will boost the currency’s value and divert trading away from the dollar. Appetite for dollars would shrink, driving the price of the currency down.

The renminbi’s prominence will only grow with China’s consumption: demand will increase 30.6 percent to 753 million tons per year in 2040, according to BP. This power will let China bypass the petro-dollar system and demand that its oil purchases be priced in yuan, as seen in Monday morning’s Unipec deal. This may be even more likely in deals in which China has outsized leverage, such as their offer to buy 5 percent of Saudi Aramco.

As it stands, oil exporters store the revenue from their U.S. oil sales in Treasury bonds – a process known as “petro-dollar recycling.” As a result, the rise of the petro-yuan would also jeopardize a key source of financing for U.S. deficit spending.

(This version of the story corrects grammatical error in first sentence)

Reporting by Kate Duguid; Editing by David Gregorio

Source: Reuters “China oil futures launch may threaten primacy of U.S. dollar: UBS”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.