No Worry about China’s Rise if US Gets Its House in Order – Paulson


Paulson meets Chinese Premier Li Keqiang. AFP/Getty Images

Paulson meets Chinese Premier Li Keqiang. AFP/Getty Images

You should be less worried about whether China will overtake us than what we’re going to do [in the United States]. Because if we do the things we need to do to get our house in order and fix our economic problems and restore our economy, we’re going to be the preeminent power for a long time. And if we don’t, we won’t.

Former US Treasury Secretary Hank Paulson

The above is US media Foreign Policy’s quote of Paulson’s advice on US maintaining its no. 1 position.

The media carried a report titled “Xi Jinping’s Problems Are ‘Monumental’” on Paulson’s new book, especially his views on China and its leaders. Due to his experience in doing lots of work along with Chinese leaders when he was first an international banker and then US treasury secretary, Paulson has profound insight in understanding China.

He sees Chinese President Xi Jinping’s charisma as a leader in describing Xi as “a big presence who lit up a room.”

The report quotes Paulson as saying, “I can’t think of a leader in history that is attempting to change so much for so many people on such a massive scale as Xi. He’s got the economy to reboot, he’s got an urbanization model to reboot or change, in addition to the environment to clean up, the corruption problem…. You’re talking about really [deep] reforms.”

Paulson reminded the reporter in the report: While Xi “doesn’t want our values or our form of government,” it’s also true that the problems Xi is “dealing with are very significant; they’re monumental.”

Paulson described how China learnt from the US, which enabled China to rise so drastically.

He believes that the US has to help Xi Jinping’s reform which will benefit the US.

For example, the controversial U.S.-China Bilateral Investment Treaty (BIT). He regards it as a possible agreement to liberalize mutual investment and further open China’s economy to Western competition. The report quotes him as saying, “I’m very positive about the progress so far.” “I think that the Chinese side has crossed a big threshold with their willingness to provide a negative list which essentially says, rather than having to go seek approval for every investment, these are the parts of our economy that are open and these are the parts that aren’t. Now this won’t be easy to get done. And it sure won’t be easy to get done this year. But if this is done properly and it’s a high standard BIT, it can be transformational and help open up more of the Chinese economy to competition and create more opportunities for U.S. businesses and U.S. workers.”

According to Paulson, the US shall support Xi in his reform because the problems Xi is “dealing with are very significant; they’re monumental…” “(I)f he doesn’t (succeed), it’s going to hurt us all.”

Source: Foreign Policy “Xi Jinping’s Problems Are ‘Monumental’”

Full text of the report can be found at https://foreignpolicy.com/2015/04/16/xi-jinpings-problems-are-monumental-henry-paulson-interview/?utm_source=Sailthru&utm_medium=email&utm_term=%2AEditors%20Picks&utm_campaign=Russia_Direct_April_Promo_PowerInboxRS4%2F16

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China Wants to Win Advantages from Both Russia and US


A member of staff from Chinese government adjusts U.S. and Chinese national flags before a news conference for the 6th round of U.S.-China Strategic and Economic Dialogue at the Great Hall of the People in Beijing, July 10, 2014.  Credit: Reuters/Jason Lee

A member of staff from Chinese government adjusts U.S. and Chinese national flags before a news conference for the 6th round of U.S.-China Strategic and Economic Dialogue at the Great Hall of the People in Beijing, July 10, 2014.
Credit: Reuters/Jason Lee

In my post “Chinese-Russian Alliance for Countering the US Only” yesterday, Henry Kissinger’s wise strategy is mentioned in Andranik Migranyan’s article on nationalinterest.org titled “Washington’s Creation: A Russia-China Alliance? article”. Kissinger upheld that American relations with either Russia or China had to be substantially better than the bilateral relations between Russia and China themselves.

China’s leaders also have such wisdom, which is perhaps learnt from Chinese history instead of Henry Kissinger.

In the Warring States Period (476 BC to 221 BC), the State of Qin became the strongest among the seven major states in China due to Shang Yang’s reform. A talented strategist Gongsun Yan in Qin’s close neighbor the State of Wei developed the strategy of horizontal alliance to unite all the states from north to south to counter the State of Qin in the west.

However, Qin adopted its talented advisor Zhang Yi’s strategy of horizontal alliance separately with each and every state to its east. Gongsun’s strategy was quite good and Gongsun was quite talented in establishing the alliance, but each state has its own different interests so that they could not really unite to defeat the State of Qin. As a result, Gongsun failed while Qin succeeded in defeating its neighbors and became increasingly strong.

Later, another talented Qin advisor Fan Sui taught King of Qin not to ally itself with all the six states but only with remote states for attacking neighboring states so that Qin might grow bigger and stronger by annexing areas grabbed from neighboring states. In this way, Qin finally unified China.

Before US pivot to Asia, China had precisely been following Fan Sui’s strategy. It made great efforts to ally itself with remote United States in order to deal with its neighbors in its maritime territorial disputes.

The United States has no conflict of interests with but only jealousy against China. However, unfortunately jealousy prevailed so that the US adopted the strategy of pivot to Asia to contain China.

Chinese leaders Hu Jintao and his successor Xi Jinping countered US pivot to Asia with a horizontal alliance with Russia and some other small countries. With such a dissenting alliance, the US has been unable to impose its leadership on the world and is soon in trouble.

Seeing the US in trouble, China has been trying hard to win over the US as its ally. If the US has China as its ally, it can use Chinese funds and weapon supplies to help defeat the terrorists in Middle East. In addition, with Chinese support, Russia will not be so bold in Ukraine.

Even if the US refuses to ally itself with China but improves its relations with China, China will be benefited while Russia will suffer.

That will precisely be what Henry Kissinger described. The only difference is that China and the US trade their positions. Now, Chinese relations with either Russia or the US are substantially better than the bilateral relations between Russia and the US themselves.

Reuters says in its report on July 2 titled ““China urges U.S. to be more objective ahead of key meeting” that Xi Jinping called on the US to “plant more flowers, not thorns” in the relationship between the US and China. Xi’s desire for alliance with the US is clearly displayed in his words. The problem is whether the US is willing to ally itself with China.

The following is the full text of Reuters report “China’s top paper says no place for a ‘new cold war’ with U.S.” on Chinese official media’s commentary on US-Chinese relations:

China and the United States must avoid a “new cold war” in their international relations, China’s top newspaper said on Saturday, in the wake of high level talks in Beijing between senior leaders of the world’s two largest economies.

China and the United States agreed on Thursday to boost military ties and counter-terrorism cooperation during annual talks in Beijing, but there was little immediate sign of progress on thorny cyber-security or maritime issues.

“Both China and the United States realize that today’s world has already undergone profound changes, and there is no longer a market for a “new cold war”, the People’s Daily, the ruling communist party’s official paper, said in a commentary.

It was published under the pen name “Zhong Sheng”, meaning “Voice of China”, often used to give views on foreign policy.

The commentary said that the gravest risk to relations between the two countries was “misunderstanding”, and called for both sides to strengthen channels of communication as they looked to shake off a “hazy” period of bilateral relations.

The U.S. Department of Justice charged a Chinese businessman on Friday with hacking into the computer system of airplane maker Boeing Co and other companies to obtain data about military projects, the latest in a string of spying allegations between the two countries.

The commentary added that complex Sino-U.S. ties were unlikely to get easier to manage any time soon. Positive steps would include boosting bilateral investment, deepening cooperation on environmental issues, strengthening military ties and making travel easier between the two countries.

“If we deal with (the relationship) well, it could benefit both sides. But if we deal with this badly, that could be a slippery slope to terrible competition and even conflict,” the commentary said.

Source: Reuters “China’s top paper says no place for a ‘new cold war’ with U.S.”

Related posts:

  • The beginning of a new Cold War: On Putin’s Beijing visit dated June 6, 2012
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  • Putin Declares Cold War against the US after Shanghai Meeting dated May 24, 2014
  • China Urges US to Accept It as an Ally ahead of Key Meeting dated July 4, 2014
  • China Shall Never Build Any Nuclear Aircraft Carrier dated July 9, 2014
  • Chinese-Russian Alliance for Countering the US Only dated July 12, 2014

US World Leadership More Important than Improving Economy?


Senior Colonel Liu Mingfu who wants China to replace US as number one militarily in the world

Senior Colonel Liu Mingfu who wants China to replace US as number one militarily in the world

People's Bank of China Governor Zhou Xiaochuan addresses delegates at the UK-China Financial Forum at Lancaster House, in London June 18, 2014.  Credit: Reuters/Sang Tan/Pool

People’s Bank of China Governor Zhou Xiaochuan addresses delegates at the UK-China Financial Forum at Lancaster House, in London June 18, 2014.
Credit: Reuters/Sang Tan/Pool

US President Obama, though has erred in military strategy and diplomacy, is correct in seeing the great potential of US economic growth from Xi Jinping’s reform.

China’s Xi Jinping is of the same mind. He knows well maintaining satisfactory Sino-US economic relations will not only bring huge economic benefits to both China and the US, but also help Xi accomplish his reform that will facilitate the realization of his Chinese dream.

The problem is that there are now quite powerful conservatives in the US who regard maintaining US world leadership is much more important than improving US economy. They believe that American people do not mind tightening their belts to allow US government to incur lots of military expenditures in arms race and military confrontation with China and military aids to Japan, Vietnam and the Philippines.

Chinese people, however, suffered more than 3 decades of poverty and starvation. Having been much better off, they certainly do not want to tighten their belts for arms race with the US. However, there are still lots of Maoists in China who uphold Mao’s sinocentric idea. It is typically reflected in the popularity of Maoist Senior Colonel Liu Mingfu’s book “China’s Dream: Major Power Thinking and Strategic Posture in a Post-American Era” that wants China to replace the US militarily as number one in the world.

Chinese reformists oppose Liu’s idea and banned reprint of Liu’s book after it was quickly sold out.

In order to reduce conservatives’ resistance to his reform, Xi took over Liu’s Chinese dream and turned it into the dream for the rejuvenation of Chinese nation. To please the conservatives, he has included in his Chinese dream making China militarily strong, but he has repeated times and again reformists’ promise that China will never pursue world hegemony, i.e. China will never replace the US as world leader.

In order to make China militarily strong to avoid a repetition of China’s misery of being bullied by foreign power for a century in the past, China has begun an arms race with the US since the US switched its focus to Asia by its pivot to Asia.

I pointed out in my post “Chinese Military’s Unlimited Budget” on May 17, 2014 that China has spent more funds in its arms race with the US. I said in the post:

How much Chinese military is actually spending? I can safely say, it spends more than US military as proved by the large number of expensive projects it is carrying out.

China is implementing an expensive lunar program, from which the PLA (Chinese military) has drawn the technology of its anti-satellite (ASAT) technology, including hitting a satellite, rendezvousing with a satellite to blind it with spray, capturing a satellite by the robotic arm of Chinese anti-satellite satellite and destroying the internal chip of a satellite with electromagnetic pulse weapon, its ASAT defense capability (the ASAT quick response capability), airospaceplanes such as Shenlong drone and J-28 space-air fighter, HGV (hypersonic glide vehicle) and anti-ICBM missile.

For its air force, it is developing quite a few stealth aircrafts including J-20, J-31 stealth fighter jets and J-18 VTOL stealth fighter jet, and the most advanced AEW&C able to detect stealth fighters and long-range strategic stealth bomber.

For its navy, it is producing the most advanced nuclear and conventional submarines, lots of advanced 052D Aegis destroyers and 056 frigates and huge 081 and 071 landing platform docks, which may serve as aircraft carriers if Chine has successfully developed its J-18 VTOL fighter jets.

Chinese military has all the projects US military has and quite a few projects that the US does not have.

However, unlike the US there is no need for Chinese people to tighten their belts for the arms race. In my post “China’s Mystic Super New Material for Aircraft, Spacecraft Graphene” on May 31, 2014, I pointed out China’s abundant funds for weapon development:

China’s tax income grows rapidly along with its economic growth. In addition, there is the income from state-owned enterprises at Chinese government’s disposal. Moreover, lots of corrupt officials’ assets have been confiscated in the anti-corruption campaign while the mass line campaign has greatly reduced government spending. The funds allocated to the military rise as a result of the increase in income and decrease in spending.

Let me give you an example. Before the mass line campaign, a quite rich province spent three times its budget due to construction of luxurious government offices and official housing and provision of luxurious cars, banquets and travels abroad for officials. Since the campaign, such luxuries are strictly forbidden and the province has to reduce spending within its budget. Lots of funds thus saved can be used for military spending.

Obama is certainly wise in attaching importance to economy in dealing with US relations with China. If the US fails to exploit the opportunity from the tremendous growth of China’s consumption market resulting from the reform to achieve economic growth, it will lose its world leadership to emerging economies in the long run. China is not the only country the US has to contain.

Xi Jinping is wise enough to overcome conservatives’ opposition to his thorough reform. He includes in his Chinese dream making China militarily strong that conservatives earnestly want. China’s recent economic slowdown proves that without further reform, China will not able to maintain economic growth to provide enough funds for weapon development. As a result, conservatives have to support Xi’s reform.

Will Obama and the next four US presidents (Xi is expected to rule China for 2 decades) be able to overcome conservatives’ hindrance to US economic growth?

There will be too much uncertainty in this fast changing world if the US fails to maintain its economic superiority. For example, if Russia succeeds in establishing a Russia-China-Indea alliance to challenge the US, US leadership will soon be in question.

China is indeed trying hard to please the US for good relations with the US. Reuters’ report “China agrees to reduce FX intervention ‘as conditions permit’” proves that.

Diplomatically, China shall try to improve its relation with Japan as its disputes with Japan does not involve much interest but tension with Japan will affect Chinese economy as Japan is China’s important trade partner.

China’s conflict with Japan is indeed mostly related to historical enmity, which both countries shall put behind them and look forward.

China’s dispute with Vietnam and the Philippines involve great economic interests. China certainly shall not make any concession as it raises claim long ago and the US did not oppose for many years the Republic of China’s claim.

If China has improved its relations with Japan and maintain good relations with Taiwan, US conservatives will have much less grounds for opposition to good US-China relations. That is the correct strategy that China has to adopt in spite of the surge of nationalism at home.

The following is the full text of Reuters’ report on China’s promise related to the exchange rate of Chinese currency:

China agrees to reduce FX intervention ‘as conditions permit’

U.S. and Chinese leaders have agreed that China will reduce its intervention in the currency market when conditions are ripe, reaching an understanding on a prickly issue that has hurt ties between the world’s two biggest economies for years.

China’s Central Bank Governor Zhou Xiaochuan said on the sidelines of annual high-level talks between the two nations that China will “significantly” reduce its yuan intervention when some prerequisites are met. He did not give further details.

Analysts said Zhou’s unusual candour about China’s currency intervention, which was echoed earlier on Wednesday by the Chinese finance minister, suggested that China may be ready to let the yuan rise again once its economy stabilises.

Indeed, U.S. Treasury Secretary Jack Lew told reporters at the end of talks on Thursday that China was committed to reducing its interference with the yuan, “as conditions permit”. China will also increase the transparency of its currency policy, he said, describing the agreements as “major” changes.

“The direction of our reforms is clear: we hope that the exchange rate can be kept basically stable, at a reasonable and balanced level through reforms,” Zhou said at a briefing on the sidelines of the two-day Strategic and Economic Dialogue.

“At the same time, we will allow market supply-and-demand to play a bigger role in determining the exchange rate, expand the floating range of the exchange rate, and increase the exchange rate’s flexibility.”

“This means that as the goals are being achieved and when conditions are ready, the central bank will significantly reduce its intervention in the foreign-exchange market.”

The value of the yuan has long strained bilateral relations between China and the United States. In June, the International Monetary Fund judged the currency to be “moderately undervalued”.

U.S. officials say China deliberately holds down its currency to boost its exports, an accusation China denies.

Instead, Chinese authorities weld their currency policy to the idea of stability, a stance that analysts say stems from China’s fear of reliving Japan’s experience in the 1980s, when a sharp rise in the yen hobbled the Japanese economy.

The yuan has fallen 2.4 percent so far this year as China’s economic growth ground to an 18-month low in the first quarter. There are signs that activity is picking up again, though not as quickly as some had hoped.

“It feels like there was a fairly concrete discussion this time,” said Louis Kuijs, an economist at RBS Bank in Hong Kong. “This is not just a repetition of the policy line that lay on the policy shelf.

“I think in the eyes of Beijing, once the concerns of economic growth are convincingly removed, there would be less resistance to letting the exchange rate appreciate.”

WATCH THE NEXT FEW MONTHS

As had been the case in recent years, the yuan was a matter of contention at this year’s Sino-U.S. talks. Lew told his counterparts from the start that a move to a market-determined exchange rate was a “crucial step” for China.

In response, Chinese Finance Minister Lou Jiwei said on Wednesday that Washington constantly raises the issue of whether Beijing can stop its yuan intervention. But Lou said it was difficult for China to be hands off given its unsteady economy and abnormal capital inflows.

Whether Thursday’s agreement will be supported by action remains to be seen, a point noted by Lew who said he will be monitoring the renminbi’s exchange rate in coming months.

“The experience of the next few months will tell us a lot about what the real impact is,” he said.

Statements issued by both governments at the end of Thursday said policymakers on both sides agreed to avoid “competitive devaluation” of their currencies under a broader G20 deal.

The ninth-most traded currency in the world, the yuan is kept on a tight leash by China compared with its peers. The central bank sets a midpoint value every day, from which the yuan is allowed to rise or fall 2 percent in the spot market.

Before the yuan’s retreat this year, China had denied it was intervening in the currency market. The central bank repeatedly said that it had ceased its interventions, and that the yuan was near its equilibrium level, even though traders said they still saw the central bank buying or selling the yuan on the market through state banks.

“China is sending a clearer message: it’s unlikely for China to completely stop (yuan) intervention under the managed float regime,” said Zhang Yongjun, a senior economist at China Centre for International Economic Exchange, a well-connected think tank in Beijing.

China’s Central Bank Governor Zhou also signalled that it was not feasible for Chinese authorities to remain entirely on the sidelines of the foreign exchange market.

“If short-term market volatility or speculative forces are too big, we should take appropriate measures,” he said in reference to gyrations in the foreign exchange market.

Apart from the yuan, the two sides agreed to try to wrap up talks on a bilateral investment treaty by the end of the year, and begin more contentious negotiations over a “negative list” of sectors that are off-limits to U.S. investment.

Washington wants to narrow the list to open up access to more areas of China’s strictly controlled economy, a process it argues will help drive China’s economic reforms.

China acceded as well to allowing U.S. firms that are being investigated by its anti-trust regulators to contest evidence presented against them by Chinese agencies.

The U.S. business community had pushed Washington to add China’s antitrust regime to the agenda, as companies had privately voiced concerns that Beijing was using its anti-monopoly law to drive industrial policy.

Source: Reuters “China agrees to reduce FX intervention ‘as conditions permit’”

Related posts:

  • US Republican warns of ‘death by a thousand cuts’ from China dated July 11, 2014
  • China, US say committed to managing differences dated July 10, 2014
  • China Shall Never Build Any Nuclear Aircraft Carrier dated July 9, 2014
  • China, US to discuss yuan, monetary policy this week dated July 8, 2014
  • China Urges US to Accept It as an Ally ahead of Key Meeting dated July 4, 2014
  • Chinese Dream and China’s Arms Race with the US January 8, 2013

U.S. Republican warns of ‘death by a thousand cuts’ from China


Chairman U.S. Rep. Mike Rogers (R-MI) (C) listens to testimony at the House Intelligence Committee on ''Worldwide Threats'', in Washington February 4, 2014 file photo.  Credit: Reuters/Gary Cameron

Chairman U.S. Rep. Mike Rogers (R-MI) (C) listens to testimony at the House Intelligence Committee on ”Worldwide Threats”, in Washington February 4, 2014 file photo.
Credit: Reuters/Gary Cameron

The United States must respond more aggressively to China’s territorial claims in Asia, an influential U.S. Republican said on Thursday, warning that failure to do so would bring “death by a thousand cuts.”

Mike Rogers, chairman of the U.S. House of Representatives’ intelligence committee, said Washington should be less concerned with Chinese sensibilities when dealing with Beijing.

The congressman’s comments came as China and the United States concluded two days of talks in Beijing aimed at managing an increasingly complex and at times testy relationship.

“We need to be more direct; we need to be more aggressive,” he told a conference at Washington’s Center for Strategic and International Studies think tank.

“We need to empower our friends and our allies in the region to be more direct and more aggressive,” he added in comments reflecting Republican frustration with Democratic President Barack Obama’s cautious approach to China, a country that is both a strategic rival and major economic partner for the United States.

Rogers said China was taking advantage of security distractions elsewhere in the world to pursue its territorial claims incrementally, at the expense of weaker neighbors.

“It’s really death by a thousand cuts … when you start adding the totality of it and looking at those brewing clouds of conflict, this is as serious as it gets.”

Rogers accused China of “gluttonous, naked aggression” in pursuit of its territorial claims and said he expected to see as a response, “a serious escalation of our ability to expand cooperation” with U.S. allies and partners in Asia.

“This is our chance to push back, to change the calculus, to change the outcome … this is our chance to let China understand that they should not question American resolve when it comes to the freedom of navigation, the freedom of trade and commerce, in the South China Sea,” he said.

Ways to do this included increased sharing of intelligence and expanded military cooperation with China’s neighbors, Rogers said.

The Strategic and Economic Dialogue between the United States and china, now in its fifth year, ended on Thursday with little immediate sign of progress on Asian maritime issues or the thorny issue of cyber-spying. The two sides did agree to strengthen cooperation in counter-terrorism, law enforcement and military-to-military relations.

Washington says it has not taken sides on China’s territorial disputes, but it has been increasingly forceful in recent months in its criticism of China’s behavior.

Source: Reuters “U.S. Republican warns of ‘death by a thousand cuts’ from China”

Related posts:

  • China, US say committed to managing differences dated July 10, 2014
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  • Chinese Dream and China’s Arms Race with the US January 8, 2013

China, U.S. say committed to managing differences


U.S. Treasury Secretary Jack Lew (5th L) speaks during the 6th China-U.S. Security & Economic Dialogue (S&ED) with Chinese Vice Premier Wang Yang (6th R) at the Diaoyutai State Guesthouse in Beijing, July 9, 2014.  Credit: Reuters/Andy Wong/Pool

U.S. Treasury Secretary Jack Lew (5th L) speaks during the 6th China-U.S. Security & Economic Dialogue (S&ED) with Chinese Vice Premier Wang Yang (6th R) at the Diaoyutai State Guesthouse in Beijing, July 9, 2014.
Credit: Reuters/Andy Wong/Pool

China and the United States need to manage their differences, the leaders of both countries said on Wednesday at the start of annual talks expected to focus on cyber-security, maritime disputes, the Chinese currency and an investment treaty.

The two-day talks in Beijing, called the Strategic and Economic Dialogue, will be an opportunity for the world’s two biggest economies to dial down tensions after months of bickering over a host of issues, experts have said.

U.S. Secretary of State John Kerry and Treasury Secretary Jack Lew chair the U.S. delegation, with Vice Premier Wang Yang and top diplomat Yang Jiechi leading the Chinese side.

President Xi Jinping said Sino-U.S. cooperation was of vital importance to the global community.

“China-U.S. confrontation, to the two countries and the world, would definitely be a disaster,” he told the opening ceremony at a government guesthouse in the west of the city.

“We should mutually respect and treat each other equally, and respect the other’s sovereignty and territorial integrity and respect each other’s choice on the path of development.”

Escalating tensions between China and some countries in the South China Sea and with Japan in the East China Sea as well as U.S. charges over hacking and Internet spying have provoked ire on both sides of the Pacific in recent months.

In a statement released as the discussions began, U.S. President Barack Obama said the United States was committed to building a “new model” of relations with China that is defined by cooperation and the constructive management of differences.

“The United States welcomes the emergence of a stable, peaceful, and prosperous China,” Obama said. “We remain determined to ensure that cooperation defines the overall relationship.”

A senior U.S. administration official said discussions between Kerry and senior Chinese officials included candid discussions over human rights, maritime disputes and cyber espionage.

“The Secretary made the case to the Chinese for the wisdom of getting back to work in the cyber working group,” the official said, referring to talks which were suspended in May when the U.S. charged the five Chinese military officers with hacking.

“He made clear that we are very much of the view that these issues are sufficiently important to warrant us rolling up our sleeves and tackling them.”

MARKET-DRIVEN YUAN

Despite deeply interconnected business ties and two-way trade worth more than half a trillion dollars a year, Beijing and Washington have deep differences over everything from human rights to the value of the Chinese currency, the yuan.

Washington has begun to push for China to move to a market-driven exchange rate.

“We support China’s efforts to allow the market to play a more decisive role in the economy and rely more on household consumption to drive China’s economic growth. Moving to a market-determined exchange rate will be a crucial step,” Lew said at the opening ceremony.

Critics say China artificially suppresses the value of the yuan to protect its exporters, an accusation China has always denied.

Chinese Finance Minister Lou Jiwei defended the country’s currency interventions, saying it was difficult to take a hands-off approach when it came to the yuan, given an unsteady economy and abnormal capital inflows.

“The U.S. side has constantly raised the issue about whether intervention is no longer needed in our foreign exchange policy,” Lou told reporters at a briefing. “But we say it’s difficult when the economy has yet to fully recover, and cross-border capital flows are not normal.”

He said he hoped U.S. authorities could do their part to keep the U.S. economy growing at a steady clip, and that Washington should be mindful of the spillover effects of its ultra-loose monetary policy.

“The normalization of U.S. monetary policy has drawn wide attention,” Lou said. “We hope the U.S. side can act prudently.”

The annual talks, now in their fifth year, have yielded few substantive agreements, in part because relations have grown more complex with China’s increasing military, diplomatic and economic clout. Still, U.S. officials have underscored the importance of the discussions to help ensure the relationship doesn’t drift toward confrontation.

Xi said both countries should strengthen cooperation in fighting terror and speed up talks on a bilateral investment treaty to reach an agreement at an early date.

The United States hopes the treaty will loosen Chinese restrictions to allow for a more level playing field for U.S. companies in China. Chinese officials say they hope it will help drive China’s own domestic reforms.

The U.S. official said Kerry explained U.S. viewpoint on the East and South China Sea disputes, emphasizing neither was “a situation in which countries should or can be permitted to act unilaterally to advance their territorial claims”.

Washington has not taken sides in the disputes but has been critical of China’s behavior in the potentially energy-rich South China Sea, where the Philippines, Vietnam, Malaysia, Brunei and Taiwan have overlapping territorial claims with China.

Beijing, though, views the United States as encouraging Vietnam and the Philippines to be more aggressive in the dispute, and of backing its security ally Japan in the separate spat over uninhabited islands in the East China Sea.

Kerry reiterated that the United States was not seeking to “contain” China.

“We have a profound stake in each others success,” he said. “I can tell you that we are determined to choose the path of peace and prosperity and cooperation, and yes, even competition, but not conflict.”

Source: Reuters “China, U.S. say committed to managing differences”

Related posts:

  • China Shall Never Build Any Nuclear Aircraft Carrier dated July 9, 2014
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  • China Urges US to Accept It as an Ally ahead of Key Meeting dated July 4, 2014
  • Chinese Dream and China’s Arms Race with the US January 8, 2013

China pushing banks to drop IBM servers in hacking dispute: report


A paramilitary policeman stands guard under flags outside the Great Hall of the People during the third plenary session of the National People's Congress (NPC) in Beijing March 10, 2013.  Credit: Reuters/Petar Kujundzic

A paramilitary policeman stands guard under flags outside the Great Hall of the People during the third plenary session of the National People’s Congress (NPC) in Beijing March 10, 2013.
Credit: Reuters/Petar Kujundzic

China is pressuring its banks to remove high-end servers made by IBM IBM.N and replace them with a local brand, Bloomberg reported on Tuesday, as tensions rise between Beijing and Washington over allegations of cyber espionage.

A spokesman for International Business Machines Corp said the U.S. technology company was not aware of any such demands by the Chinese government.

“IBM is not aware of any Chinese government policy recommending against the use of IBM servers within the country’s banking industry,” said IBM spokesman Ian Colley. “IBM is a trusted partner in China and has been for more than 30 years.”

The Bloomberg report, which cited anonymous sources, comes a week after the U.S. Justice Department charged five Chinese military officers, accusing them of hacking American companies to steal trade secrets.

China on Monday accused the United States of “unscrupulous” cyber surveillance that included large-scale computer attacks against the Chinese government and Chinese companies. China has also told state-owned enterprises to sever links with U.S. consulting firms, The Financial Times reported on Sunday.

The Bloomberg report said Chinese government agencies including the People’s Bank of China CNBNK.UL and the Ministry of Finance are reviewing whether Chinese commercial banks’ reliance on the IBM servers compromised the country’s financial security. (r.reuters.com/dyf69v)

The results of the review will be submitted to a working group on Internet security chaired by Chinese President Xi Jinping, according to Bloomberg.

The U.S. State Department said the Justice Department’s hacking charges, announced on May 19, relate to a law enforcement investigation.

“It doesn’t provide, in our view, any justification for retaliation against U.S. businesses or the U.S. government,” said State Department spokeswoman Jen Psaki.

“We continue to believe that a dialogue about cyber-related issues and concerns we have, and certainly concerns they have, is the best path forward,” she said, referring to the Chinese government.

The Chinese central bank and finance ministry did not immediately respond to requests for comment. A spokesman at China’s National Development and Reform Commission said the country’s top economic planner has not told companies to change their IBM servers, nor received orders from higher levels of the government to do so.

Sources at China’s “big four” state-owned banks said they had no knowledge of pressure for a technology change, saying any replacement of such systems would not be an easy task.

“We haven’t heard about the order,” an official at one of the bank’s IT department said, declining to be identified because he was not allowed to speak to the media.

“There aren’t any locally made hardware around that can handle the massive amount of data in the banking industry.”

Over the weekend a U.S. official told Reuters the government was looking at a number of measures to curb Chinese cyber espionage, including visa restrictions to prevent Chinese nationals from attending hacker conferences in the United States this summer.

Source: Reuters “China pushing banks to drop IBM servers in hacking dispute: report”

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U.S. companies may see China backlash over cyber spying charges


American technology companies appear most likely to feel any backlash that could come from China after the U.S. government charged five Chinese army officers with cyber spying and stealing trade secrets.

U.S. equipment and software providers such as IBM Corp and Cisco Systems Inc have already seen their China sales drop after last year’s revelations by former National Security Agency contractor Edward Snowden of U.S. spying.

IBM’s China sales have fallen by a fifth or more for three straight quarters, the firm reported in April. Cisco said last week that its China business declined 8 percent in the quarter to April 26. Microsoft Corp has long struggled with sales and the government is not using Windows 8, the company’s latest operating system.

Doing business in China could now get even tougher, although any retaliation may not be immediate or obvious, industry analysts and executives said.

“U.S. companies were having difficulty anyway. This will give them more difficulty,” said Howard Anderson, a senior lecturer at MIT’s Sloan School of Management. “The Chinese will use any excuse to turn to internal suppliers.”

Officials with IBM and Cisco did not respond to requests for comment. Boeing Co. had no immediate comment. An Intel Corp spokesman declined comment.

Experts said U.S. technology executives are unlikely to publicly complain about the decision to indict five members of a Chinese People’s Liberation Army unit on hacking charges, which Assistant Foreign Minister Zheng Zeguang denied in a meeting with U.S. Ambassador Max Baucus.

James McGregor, chairman for advisory firm APCO China, said that if American technology companies are “losing their intellectual property to cyber hacking they probably see this action as necessary and worrisome.”

Another person who works closely with U.S. technology firms said that the damage is so pervasive that no company is going to say that the U.S. government acted inappropriately.

“Companies in any industry seen as a priority for China’s industrial policy could be at risk,” the person said.

In December, Google Inc, Microsoft Corp and six other companies called for an overhaul of practices and laws to limit how governments collect user information amid growing concerns about online surveillance.

Last week, Cisco CEO John Chambers wrote to President Barack Obama calling for “standards of conduct” to ensure that Washington’s surveillance programs don’t undermine U.S. technology firms ability to sell overseas.

Some U.S. companies in China were caught off guard by the charges. People at several U.S. firms and trade sources said they were given no advance notice.

“It was very surprising to see that it came out in the way that it did,” said a person at a China-based business lobby. “I don’t think it will be overt retaliation, but there will certainly be ways that the Chinese government will preclude foreign companies from certain sectors.”

Other experts said the indictments were largely symbolic because no one expected the five people accused to be arrested or to answer the charges in a U.S. court.

Dean Cheng, a China expert with the Heritage Foundation, said the U.S. government was sending a powerful message, but China was unlikely to change its behavior unless other countries followed suit. He said similar actions by European countries who believe their companies are also victims of Chinese hackers could increase pressure on Beijing.

Tensions over cyber security were ratcheted up in late 2012 after Washington banned Chinese communications equipment makers Huawei Technologies Co Ltd and ZTE Corp from building U.S. telecoms infrastructure.

Beijing responded by pressuring big state-owned firms to stop buying U.S.-made hardware, emphasizing security risks following Snowden’s revelations, people in the industry said.

Source: Reuters “U.S. companies may see China backlash over cyber spying charges”

Related posts

  • US accuses China of cyber spying on American companies dated yesterday
  • Edward Snowden says US hacking Hong Kong and China for years dated June 13, 2013
  • EXCLUSIVE: US hacked Pacnet, Asia Pacific fibre-optic network operator, in 2009, June 23, 2013
  • EXCLUSIVE: Snowden reveals more US cyberspying details dated June 23, 2013