Critical Observer

IMF BACKING YUAN AS WORLD RESERVE CURRENCY

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgc7-1S6NuNZuXD6hBItbqpoiI_j7LOOimElc_EiGeuR9r27TRQ0ysqAxffF4IjuIPjiknqz5Y_7BJwUGk52TEkyH2aLlYFq78-9FIWCtVKCUKkYM14UOVpeOg0cxO5IFvRosBIeWfbFPc/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="324" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgc7-1S6NuNZuXD6hBItbqpoiI_j7LOOimElc_EiGeuR9r27TRQ0ysqAxffF4IjuIPjiknqz5Y_7BJwUGk52TEkyH2aLlYFq78-9FIWCtVKCUKkYM14UOVpeOg0cxO5IFvRosBIeWfbFPc/s640/00000.jpg" width="640" /></a></div>
<div id="yui_3_18_1_1_1447687613486_1550" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
<br /></div>
<div id="yui_3_18_1_1_1447687613486_1550" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world's financial system.</div>
<div id="yui_3_18_1_1_1447687613486_1554" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
It now looks likely the yuan will be formally admitted to the IMF's "special drawing rights" currency basket at the end of the month, which would mark a milestone in China's efforts to become a global economic power.Now the world's second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.</div>
<div id="yui_3_18_1_1_1447687613486_1558" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
IMF chief Christine Lagarde said the fund now deemed the yuan "meets the requirements to be a 'freely usable' currency" -- a key hurdle to joining the yen, dollar, pound and euro as a leading unit in international trade.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
The yuan hit headlines in August when China's central bank devalued the currency and said it would use a more market-oriented system to calculate the point around which the currency can trade each day.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
The move sent markets into a tailspin as investors took it as a sign of slowing growth in China, a key driver of the world economy, but the central bank on Saturday said such reforms had taken it closer to joining the SDR basket.</div>
<div class="body-related" style="background-color: white; clear: right; float: right; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 10px; margin-left: 10px; position: relative;">
<a class="body-related-link body-related-image go-to-slideshow-lightbox rapid-noclick-resp landscape onesize get-lbdata-from-dom" data-pos="1" data-rapid_p="28" data-uuid="07f6b42e-c3bc-3199-babd-af8dd17e4751" data-ylk="t1:a3;t2:ct-mod;t3:embd;sec:ct-mod;slk:expand;elm:img;elmt:ct;itc:1;g:cff68a8e-a4c0-3373-8000-21685a21ec6c;aid:07f6b42e-c3bc-3199-babd-af8dd17e4751;ct:4;cpos:1;" href="http://news.yahoo.com/photos/head-international-monetary-fund-christine-lagarde-delivers-speech-photo-010527065.html" style="color: #324fe1; display: block; margin: 0px auto; max-width: 300px; position: relative; text-decoration: none;" title="International Monetary Fund chief Christine Lagarde …"><div class="img-wrap" style="position: relative;">
<div class="cta-overlay" style="font-size: 13px; height: 218.993px; left: 0px; position: absolute; top: 0px; transition: background-color 0.24s linear; width: 300px;">
<span class="clearfix title cta-text medium" style="color: white; font-size: 15.6px; left: 5px; opacity: 0; position: absolute; top: 5px; transition: opacity 0.24s linear; white-space: pre-wrap; width: 270px; zoom: 1;"></span><span class="cta-text xsmall  " style="bottom: 5px; color: white; font-size: 15.6px; margin-left: 42px; opacity: 0; position: absolute; transition: opacity 0.24s linear;">View gallery</span><span class="icon-slideshow icon-white-slideshow-xsmall " style="background-color: #324fe1; background-image: url(data:image/svg+xml; background-repeat: no-repeat; background-size: cover; border-radius: 4px; bottom: 5px; cursor: pointer; height: 23px; left: 5px; line-height: 0; opacity: 0; padding: 0px; position: absolute; text-indent: -1000em; transition: opacity 0.16s linear; width: 32px; z-index: 1;"></span></div>
<img alt="International Monetary Fund chief Christine Lagarde …" class="body-related-thumb" data-src-2x="" height="219" src="http://l3.yimg.com/bt/api/res/1.2/E2EkYyTQoGLCXFpdP8t3GA--/YXBwaWQ9eW5ld3NfbGVnbztmaT1maWxsO2g9MjE5O3E9NzU7dz0zMDA-/http://media.zenfs.com/en_us/News/afp.com/Part-NIC-Nic6507772-1-1-0.jpg" style="background-repeat: no-repeat; border: 0px; display: block; opacity: 1 !important; vertical-align: baseline; visibility: visible !important;" width="300" /></div>
</a><div class="body-related-title photo-caption" style="box-sizing: border-box; color: grey; font-size: 11px; line-height: 16.5px; margin: 0px auto; max-width: 100%; padding: 5px 5px 0px 0px; position: relative; width: 300px;">
International Monetary Fund chief Christine Lagarde says the fund now deems the yuan "meets the …</div>
</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
"China thinks that the inclusion of the RMB (yuan) into the SDR basket will strengthen the representativeness and the attraction of the SDR (and) that it will improve the existing international monetary system," the People's Bank of China (PBoC) added.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
"It will have win-win benefits both for China and the world."</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
- Yuan's rapid rise -</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
The yuan has rapidly grown in importance in recent years as China -- the world's top trading nation -- has used it to settle more of its commerce, and made it directly convertable with more currencies.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
Including the Chinese currency in the SDR would likely boost demand for yuan-denominated assets among central banks, and give it a sheen of respectability at a time when many investors are questioning Beijing's ability to manage the slowing economy.</div>
<div class="body-related" style="background-color: white; clear: right; float: right; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 10px; margin-left: 10px; position: relative;">
<a class="body-related-link body-related-image go-to-slideshow-lightbox rapid-noclick-resp landscape onesize get-lbdata-from-dom" data-pos="2" data-rapid_p="29" data-uuid="feb2d6e8-19d2-326e-a786-d13550a284fa" data-ylk="t1:a3;t2:ct-mod;t3:embd;sec:ct-mod;slk:expand;elm:img;elmt:ct;itc:1;g:cff68a8e-a4c0-3373-8000-21685a21ec6c;aid:feb2d6e8-19d2-326e-a786-d13550a284fa;ct:4;cpos:2;" href="http://news.yahoo.com/photos/now-worlds-second-largest-economy-china-asked-last-photo-063402755.html" style="color: #324fe1; display: block; margin: 0px auto; max-width: 300px; position: relative; text-decoration: none;" title="Now the world's second-largest economy, China asked …"><div class="img-wrap" style="position: relative;">
<div class="cta-overlay" style="font-size: 13px; height: 200.99px; left: 0px; position: absolute; top: 0px; transition: background-color 0.24s linear; width: 300px;">
<span class="clearfix title cta-text medium" style="color: white; font-size: 15.6px; left: 5px; opacity: 0; position: absolute; top: 5px; transition: opacity 0.24s linear; white-space: pre-wrap; width: 270px; zoom: 1;"></span><span class="cta-text xsmall  " style="bottom: 5px; color: white; font-size: 15.6px; margin-left: 42px; opacity: 0; position: absolute; transition: opacity 0.24s linear;">View gallery</span><span class="icon-slideshow icon-white-slideshow-xsmall " style="background-color: #324fe1; background-image: url(data:image/svg+xml; background-repeat: no-repeat; background-size: cover; border-radius: 4px; bottom: 5px; cursor: pointer; height: 23px; left: 5px; line-height: 0; opacity: 0; padding: 0px; position: absolute; text-indent: -1000em; transition: opacity 0.16s linear; width: 32px; z-index: 1;"></span></div>
<img alt="Now the world's second-largest economy, China asked …" class="body-related-thumb" data-src-2x="" height="201" src="http://l1.yimg.com/bt/api/res/1.2/pssSKkOwpiMxaTxZhNaYQw--/YXBwaWQ9eW5ld3NfbGVnbztmaT1maWxsO2g9MjAxO3E9NzU7dz0zMDA-/http://media.zenfs.com/en_us/News/afp.com/Part-HKG-Hkg10229629-1-1-0.jpg" style="background-repeat: no-repeat; border: 0px; display: block; opacity: 1 !important; vertical-align: baseline; visibility: visible !important;" width="300" /></div>
</a><div class="body-related-title photo-caption" style="box-sizing: border-box; color: grey; font-size: 11px; line-height: 16.5px; margin: 0px auto; max-width: 100%; padding: 5px 5px 0px 0px; position: relative; width: 300px;">
Now the world's second-largest economy, China asked last year for the yuan to be added to the el …</div>
</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
Lagarde said IMF experts ruled Beijing had addressed "all remaining operational issues" required for SDR inclusion, which will be decided by the executive board at a November 30 meeting.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
"I support the staff's findings," she said, adding to expectations that the board will also back the yuan.</div>
<div style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
That would mark an about turn from the beginning of August -- before the yuan devaluation -- when the Fund said the currency was not freely usable enough to be included in the basket.</div>
<div id="yui_3_18_1_1_1447687613486_1560" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
Despite the recent misgivings, there has been strong pressure for the IMF to act now as the SDR basket is only reviewed every five years.</div>
<div id="yui_3_18_1_1_1447687613486_1562" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
If a decision to include the yuan is made this month, the actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.</div>
<div id="yui_3_18_1_1_1447687613486_1564" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
The recommendation Friday was broadly backed by the United States, China's main rival for world economic supremacy.</div>
<div id="yui_3_18_1_1_1447687613486_1566" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
"We intend to support the renminbi's inclusion in the Special Drawing Rights basket provided the currency meets the International Monetary Fund's existing criteria," the Treasury Department said, using another name for the yuan.</div>
<div id="yui_3_18_1_1_1447687613486_1568" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24px; margin-bottom: 1.1em;">
"We will review the IMF's paper in that light."</div>

IMF BACKING YUAN AS WORLD RESERVE CURRENCY

China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would s...

Read Article »

CHINA DEFAULTS TO POP WORLD’S BIGGEST BOND BUBBLE

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiI11LU4eARbQl9DWkTK8JBW7WK74aUX4QN6DHKwufFIIa59YV9T885sWegr7POxoF0keCz2jjRRxeC0tqvh4G35P9dRoCOT37ACgr7XVCTQA-5_bbw5y3XgIpf-Zho24BGrGOdpy1HaQs/s1600/000001.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="332" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiI11LU4eARbQl9DWkTK8JBW7WK74aUX4QN6DHKwufFIIa59YV9T885sWegr7POxoF0keCz2jjRRxeC0tqvh4G35P9dRoCOT37ACgr7XVCTQA-5_bbw5y3XgIpf-Zho24BGrGOdpy1HaQs/s640/000001.jpg" width="640" /></a></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; clear: both; font-stretch: inherit; line-height: 30px; margin: 0px; padding: 0px 0px 20px; text-align: center; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif; font-size: x-large;">Once China began to mark an exceptionally difficult transition from a smokestack economy to a consumption and services-led model, those who were aware of how the country had gone about funding years of torrid growth knew what was likely coming next.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">Years of borrowing to fund rapid growth had left the country with a sprawling shadow banking complex and a massive debt problem and once commodity prices collapsed – which, in a bit of cruel irony, was partially attributable to China’s slowdown – some began to suspect that regardless of how hard Beijing tried to keep up the charade, a raft of defaults was inevitable.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">Sure enough, the cracks started to show earlier this year with <a href="http://www.zerohedge.com/news/2015-01-01/and-2015-starts-bang-first-chinese-default-year-hits" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Kaisa</a> and<a href="http://www.zerohedge.com/news/2015-04-21/first-chinese-state-owned-firm-defaults-its-bonds" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Baoding Tianwei Group</a> and as we documented last month, <strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">if you’re a commodities firm, there’s a 50-50 chance you’re not generating enough cash to service your debt:</strong></span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; text-align: center; vertical-align: baseline;">
<strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><a data-slb-active="1" data-slb-asset="1337279734" href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/09/mac%20leverage%20curve%201.jpg" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;"><img alt="" height="377" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/09/mac%20leverage%20curve%201_0.jpg" style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: baseline;" width="600" /></span></a></strong></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">There’s only so long this can go on without something “snapping” as it were because even if Beijing intends to perpetuate things by continuing to engineer bailouts (e.g. <a href="http://www.zerohedge.com/news/2015-10-19/chinas-glencore-state-owner-miner-and-steel-trader-avoids-default-last-minute-intere" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Sinosteel</a>), that will only add to the deflationary supply glut that’s the root cause of the problem in the first place and ultimately, Xi’s plans to liberalize China’s capital markets aren’t compatible with ongoing bailouts so at some point, the Politburo is going to have to choose between managing its international image and allowing the market to purge insolvent companies.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-size: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit;"><span style="font-family: "trebuchet ms" , sans-serif;">On Wednesday we get the latest chapter in the Chinese defaults saga as cement maker China Shanshui Cement Group Ltd said it won’t be paying some CNY2 billion ($314 million) of bonds due tomorrow.</span></span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">Oh, and it’s also going to default on its USD debt and file for liquidation.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">Here’s <a href="http://www.bloomberg.com/news/articles/2015-11-11/china-s-shanshui-cement-to-default-on-onshore-bonds-on-thursday" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Bloomberg with more</a>:</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<em style="border: 0px; box-sizing: inherit; color: #5b5c5e; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;">On Wednesday, the creditors got their answer. <strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Shanshui, reeling from China’s economic slowdown and a shareholder campaign to oust Zhang, said it will fail to pay 2 billion yuan ($314 million) of bonds due on Nov. 12, making it at least the sixth Chinese company to default in the local note market this year. Analysts predict it won’t be the last as President Xi Jinping’s government shows an increased willingness to allow corporate failures amid a drive to reduce overcapacity in industries including raw-materials and real estate.</strong></span></em></div>
<blockquote style="background-color: white; border-bottom-color: rgb(213, 215, 219); border-bottom-style: solid; border-top-color: rgb(213, 215, 219); border-top-style: solid; border-width: 5px 0px; box-sizing: inherit; color: #5b5c5e; font-size: 17px; font-stretch: inherit; line-height: 30px; margin: 20px 0px; padding: 30px 0px 20px; position: relative; quotes: none; vertical-align: baseline;">
<div style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<em style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;">Shanshui’s troubles — it will also default on dollar bonds and file for liquidation — reflect the fallout from years of debt-fueled investment in China that authorities are now trying to curtail as they shift the economy toward consumption and services. In the latest sign of that transition, data Wednesday showed the nation’s October industrial output matched the weakest gain since the global credit crisis, while retail sales accelerated.</span></em></div>
<div style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;"> <strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><em style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">“Debt wasn’t a problem during the boom years because profits kept growing,” Zhang said last month. “But it’s not sustainable when the economy slows.”</em></strong></span></div>
<div style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;"> <em style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Shanshui’s total debt load as of June 30 was four times bigger than in 2008, according to data compiled by Bloomberg.</em></span></div>
<div style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;"> <em style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Defaults in China’s local corporate bond market have mounted this year as the economy weakened. </strong>Sinosteel Co. last month failed to pay interest on 2 billion yuan of notes maturing in 2017. Baoding Tianwei Yingli New Energy Resources Co., whose majority holder was until last year the world’s biggest solar panel company by shipments, failed to make a complete payment on a note due Oct. 13.</em></span></div>
</blockquote>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">There’s also a shareholder spat with the chairman going on here, but in the end, this is story fits perfectly with the narrative as laid out above and as we’ve documented on too many occasions to count. This is a perfect storm involving heavily indebted producers whose businesses have become uneconomic in the face of a sharp downturn and efforts to keep them afloat have only served to exacerbate the same overcapacity problem that forced them into de facto insolvency in the first place.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">So where do we go from here? Well, nowhere good and in a sign of things to come, Bloomberg<strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> also reports that Yunnan Coal Chemical has some CNY1.31 billion in overdue debt “due to continuous losses and rising financing.” </strong></span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;"><strong style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">As <a href="http://www.zerohedge.com/news/2015-10-23/we-now-have-eta-when-biggest-bond-bubble-world-will-burst" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">we noted</a> earlier this month, a</strong>s of this moment China has <a href="http://www.zerohedge.com/news/2015-10-13/clsa-just-stumbled-neutron-bomb-chinas-banking-system" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">between $25 and $30 trillion notional in financial and non-financial corporate credit </a>(in China, where everything is government backstopper, there isn’t really much of a difference), about 5 times greater than the market cap of Chinese stocks (and orders of magnitude greater than their actual float), and 3 times greater than China’s official GDP, which also makes it the biggest bond bubble in the world, even bigger than the US Treasury market.</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; text-align: center; vertical-align: baseline;">
<a data-slb-active="1" data-slb-asset="2022991480" href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/China%20bank%20assets%20Oct%202015.jpg" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;"><img alt="" height="410" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/China%20bank%20assets%20Oct%202015_0.jpg" style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: baseline;" width="600" /></span></a></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; vertical-align: baseline;">
<span style="font-family: "trebuchet ms" , sans-serif;">For their part, BofAML thinks this entire debacle could begin to unravel in earnest in about six months and on that note, we’ll once again close with the list of who’s most likely to be next:</span></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; text-align: center; vertical-align: baseline;">
<a data-slb-active="1" data-slb-asset="1323653865" href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/blow%20up%20candidates%201.jpg" style="background-color: transparent; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;"><img alt="" height="701" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/blow%20up%20candidates%201_0.jpg" style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: baseline;" width="600" /></span></a></div>
<div style="background-color: white; border: 0px; box-sizing: inherit; font-size: 19px; font-stretch: inherit; line-height: 30px; max-width: 100%; padding: 10px 0px; text-align: center; vertical-align: baseline;">
<a data-slb-active="1" data-slb-asset="2107946705" href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/blow%20up%20candidates%202.jpg" style="background-color: transparent; border-image-outset: initial; border-image-repeat: initial; border-image-slice: initial; border-image-source: initial; border-image-width: initial; border: 0px; box-sizing: inherit; color: #194e8e; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><span style="font-family: "trebuchet ms" , sans-serif;"><img alt="" height="701" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/blow%20up%20candidates%202_0.jpg" style="border: 0px; box-sizing: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; height: auto; line-height: inherit; margin: 0px; max-width: 100%; padding: 0px; vertical-align: baseline;" width="600" /></span></a></div>

CHINA DEFAULTS TO POP WORLD’S BIGGEST BOND BUBBLE

Once China began to mark an exceptionally difficult transition from a smokestack economy to a consumption and services-led model, those w...

Read Article »

CHINA'S YUAN MOVES TO TOPPLE THE U.S. DOLLAR

<div style="clear: both; text-align: center;">
</div>
<div style="text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqjBAfFpN3_Ua4FGlNzo6zUwJ1oyj8_MMg5XKL5zoO41yjXZHteBSy4Yk_U3FnBqx4pRwh90ASX9VyYeoSlCZZxRkLWmsYLbnvZg0cy_puOY2-HD0Gz6N32RXrIP0Xv5l4ZZ9-I3lGZRA/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Trebuchet MS, sans-serif;"><img border="0" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqjBAfFpN3_Ua4FGlNzo6zUwJ1oyj8_MMg5XKL5zoO41yjXZHteBSy4Yk_U3FnBqx4pRwh90ASX9VyYeoSlCZZxRkLWmsYLbnvZg0cy_puOY2-HD0Gz6N32RXrIP0Xv5l4ZZ9-I3lGZRA/s640/00000.jpg" width="640" /></span></a></div>
<br />
<div style="text-align: left;">
<span style="font-family: 'Trebuchet MS', sans-serif;">China took another step to boost the yuan’s global usage, saying it will start direct trading with the Swiss franc, as the nation pushes its case for reserve-currency status at the International Monetary Fund.</span></div>
<div style="text-align: left;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><div style="text-align: left;">
The link will start on Tuesday, the China Foreign Exchange Trade System said in a statement, making the franc the seventh major currency that can bypass a conversion into the U.S. dollar and be directly exchanged for yuan. The rate will be allowed to fluctuate a maximum 5 percent on either side of a daily fixing, according to CFETS.</div>
</span><span style="font-family: Trebuchet MS, sans-serif;"><div style="text-align: left;">
“This is an important step in strengthening bilateral economic and trade connections between China and Switzerland,” the People’s Bank of China said in a statement on its website on Monday. The link will help lower conversion costs and facilitate the use of both currencies in bilateral trade, it added.</div>
<div style="text-align: left;">
<br /></div>
</span><span style="font-family: Trebuchet MS, sans-serif;"><div style="text-align: left;">
The announcement, which confirmed an earlier report, comes as the IMF prepares to meet this month to review its Special Drawing Rights. The executive board of the Washington-based institution will gauge whether the Chinese currency has fulfilled the criterion of being "freely usable," after rejecting its bid in 2010. The other major currencies that can be directly converted into yuan are the U.S., Australian and New Zealand dollars, the British pound, the Japanese yen and the euro.</div>
<div style="text-align: left;">
<br /></div>
</span><span style="font-family: Trebuchet MS, sans-serif;"><div style="text-align: left;">
The PBOC this year extended Switzerland a 50 billion yuan ($7.9 billion) quota under the Renminbi Qualified Foreign Institutional Investor program, which allows yuan raised offshore to be used to buy securities in China’s domestic markets. In 2014, the Swiss and Chinese central banks signed a three-year currency-swap agreement that can be used to borrow as much as 150 billion yuan.</div>
</span><br />

CHINA'S YUAN MOVES TO TOPPLE THE U.S. DOLLAR

China took another step to boost the yuan’s global usage, saying it will start direct trading with the Swiss franc, as the nation push...

Read Article »

CHINESE SUBMARINE STALKED U.S. AIRCRAFT CARRIER

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk2vI9qjV4dqqV3c8NZyPsMkF70bbTGT7nIPenIMlt3P7FJRaGVyUIriqcCXp0VnbdnBnYCL2Zu8l9QvPWC4icyK0OKrJnn662B-m0WmBErSI1AkgTWDiveLz3_PZVmfIq5LfwtZRZTqs/s1600/000.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk2vI9qjV4dqqV3c8NZyPsMkF70bbTGT7nIPenIMlt3P7FJRaGVyUIriqcCXp0VnbdnBnYCL2Zu8l9QvPWC4icyK0OKrJnn662B-m0WmBErSI1AkgTWDiveLz3_PZVmfIq5LfwtZRZTqs/s640/000.png" width="640" /></a></div>
<br />
A Chinese attack submarine stalked the aircraft carrier USS Ronald Reagan near Japan last month in the closest encounter between a carrier and a People’s Liberation Army Navy submarine since 2006, according to American defense officials.<br />
<br />
The Chinese submarine sailed very close to the Reagan during the weekend of Oct. 24, said defense officials familiar with reports of the incident.<br />
<br />
The incident occurred as the Reagan sailed from its home port to the Sea of Japan around the southern end of Japan.<br />
<br />
Days later, in the Sea of Japan, the Reagan was targeted for a close flyby by two Russian Tu-142 bombers that flew within a mile of the ship at an altitude of 500 feet. U.S. Navy jets were scrambled to escort the bombers away from the carrier group.<br />
<br />
The submarine encounter also occurred days before the USS Lassen, a guided missile destroyer, carried out a freedom of navigation operation in the South China Sea.<br />
<br />
The Lassen’s passage within 12 miles of a disputed island in the South China Sea on Oct. 26 was fiercely denounced by the Chinese government. Chinese spokesmen, both military and civilian, said the passage was a violation of Beijing’s territorial sovereignty, a claim rejected by the United States, which said the ship was sailing in international waters.<br />
<br />
Disclosure of the Chinese submarine encounter comes as Adm. Harry Harris is visiting China for the first time as the commander of U.S. forces in the Pacific.<br />
<br />
Pacific Fleet and Pacific Command spokesmen declined to comment on the submarine encounter but did not deny that the incident occurred.<br />
<br />
Additional details of the encounter—such as the type of submarine involved, whether it surfaced or remained submerged, and how close it came to the ship—could not be learned.<br />
<br />
The nuclear-powered carrier is a symbol of U.S. power projection capabilities. China’s military has been attempting to drive the U.S. military out of Asia as part of efforts to assume the sole leadership role in the region.<br />
<br />
One defense official said the detection of the submarine set off alarm bells on the Reagan, although it could not be learned whether anti-submarine warfare aircraft were launched to locate and track the vessel.<br />
<br />
Other defense officials said the Reagan’s recent submarine encounter appeared similar to China’s stalking of the aircraft carrier USS Kitty Hawk in 2006.<br />
<br />
During that incident, a Song-class attack submarine surfaced undetected within torpedo range of the Kitty Hawk on Oct. 26, 2006—nearly nine years to the day of the recent Reagan encounter.<br />
<br />
The 2006 incident also was disclosed during the visit to China by Adm. Gary Roughead, then-commander of the U.S. Pacific Fleet.<br />
<br />
China is known to use its military forces to send political messages and it appears that the Reagan incident also was timed to the expected navigation operation in the South China Sea and to Harris’ visit.<br />
<br />
Harris has been a forceful advocate within the military for challenging China’s claims to vast areas of the South China Sea. He told a Senate hearing in September that “the South China Sea is no more China’s than the Gulf of Mexico is Mexico’s.”<br />
<br />
Harris visited U.S. troops in South Korea over the weekend and took part in the annual U.S.-South Korea Military Committee Meeting and Security Consultative Meeting in Seoul.<br />
<br />
On Monday, Harris traveled to Beijing for a three-day visit and talks with Chinese military leaders. He was scheduled to speak at Peking University on Monday.<br />
<br />
“Sustained military-to-military dialogue between the U.S. and China is designed to maximize cooperation on areas of mutual interest while candidly addressing and managing disagreements,” the Pacific Command statement said.<br />
<br />
Harris’ last visit to China took place in April 2014 when he took part in talks with the Chinese military on a Code of Unplanned Encounters at Sea in Qingdao, China. The code, which covers submarine-ship encounters, was approved in 2014.<br />
<br />
It is not known whether the Chinese submarine followed safety guidelines outlined in the code during the Reagan encounter. The code is designed to prevent collisions at sea.<br />
<br />
The Reagan and four other warships were on the way to conduct joint naval exercises with South Korean naval forces at the time of the Chinese submarine stalking.<br />
<br />
The exercises were held Oct. 26 to Oct. 29 in waters around the southern end of the Korean peninsula. The carrier arrived Friday in Busan, South Korea, for a port call.<br />
<br />
Accompanying the Reagan are the Ticonderoga-class guided missile cruiser USS Chancellorsville and the Arleigh Burke-class guided missile destroyers USS Fitzgerald and USS Mustin.<br />
<br />
A Pacific Command statement issued Saturday said the Reagan is one of two carrier groups operating in the region. The second is the USS Roosevelt, which departed Singapore Oct. 28 on its way to San Diego.<br />
<br />
The Reagan was “operating off the east coast of the Korean peninsula conducting routine bilateral training with the Republic of Korea navy,” the command statement said, adding that anti-submarine warfare training was part of the exercises.<br />
<br />
“The U.S. routinely conducts carrier strike group operations in the waters around the Republic of Korea to exercise maritime maneuvers, strengthen the U.S.-ROK alliance, and improve regional security,” the statement said.<br />
<br />
“The U.S. Navy maintains a presence in the Indo-Asia-Pacific region to help preserve peace and security and further our partnerships with friends and allies,” said Rear Adm. John Alexander, the Reagan’s commander. “Our forward presence contributes to freedom of navigation and lawful use of the sea, as well as furthers operational training and enables an exchange of culture, skills, and tactical knowledge.”<br />
<br />
Rick Fisher, a Chinese military affairs analyst, said China’s willingness to use submarines to harass U.S. large warship demonstrates that the Navy needs more submarines for escort missions.<br />
<br />
It also highlights the need for additional U.S. attack submarines as Los Angeles-class submarines are retired and are not replaced quickly enough by newer Virginia-class vessels.<br />
<br />
“The importance of our aircraft carriers was just demonstrated in the South China Sea,” said Fisher, with the International Assessment and Strategy Center.<br />
<br />
“While most press attention focused on the freedom of navigation exercise of the destroyer USS Lassen, the larger story was the fact that the destroyer was covered by the presence of the aircraft carrier USS Roosevelt,” he added. “The carrier was deployed to ensure that China was deterred from attacking or substantially harassing the destroyer.”<br />
<br />
Fisher said that he expects China’s attack submarine fleet to begin increasing in size.<br />
<br />
“The PLA may build up to 14 of their third-generation Type 095 SSN, which might add up to a total SSN fleet of about 20,” he said, using the military designation for attack submarine.<br />
<br />
“Inasmuch as the U.S. may only be able to spare about 30 SSNs for its Pacific-based forces, this could greatly stress the U.S. submarine fleet absent new construction,” he added.<br />
<br />
A fleet of 30 attack submarines may limit continuous deployment of submarines to around 10, given the need for maintenance and for crew rotations.<br />
<br />
Chinese state-run media and military commentators have denounced the deployment of the Reagan, which replaced the carrier group led by the USS George Washington.<br />
“The United States intends to strengthen its military superiority in order to frighten the neighboring countries of the disputed region, such as China, [North Korea], and Russia,” retired Chinese Rear Adm. Yin Zhuo told state television in September.

CHINESE SUBMARINE STALKED U.S. AIRCRAFT CARRIER

A Chinese attack submarine stalked the aircraft carrier USS Ronald Reagan near Japan last month in the closest encounter between a carrie...

Read Article »

AVOID ‘MINOR’ INCIDENTS THAT COULD ‘SPARK WAR’ - CHINA

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiz-I_SchFuBsh-R-xOsyVUxidMKcdtnnZzHLEnkEB7sjRkescH2NSIOEDisyt4RKPTsOE6Mn6GZnX2vi5T5X9CKAkbSUcDAQk7IXb6bOWinxdyTfSo1JxScCs7Fjx2YGmkA2FKRBArs9U/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiz-I_SchFuBsh-R-xOsyVUxidMKcdtnnZzHLEnkEB7sjRkescH2NSIOEDisyt4RKPTsOE6Mn6GZnX2vi5T5X9CKAkbSUcDAQk7IXb6bOWinxdyTfSo1JxScCs7Fjx2YGmkA2FKRBArs9U/s640/00000.jpg" width="640" /></a></div>
<h2 style="text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">China has issued its strongest warning yet to the US over the South China Sea islands situation. </span></h2>
This is over an incident during which a US destroyer sailed within territorial waters of China’s man-made islands in the South China Sea, claiming that US faces running the risk of “a minor incident that sparks war.”<br />
<br />
On Tuesday, the Aegis destroyer USS Lassen entered within 12 nautical miles of Subi Reef, an undersea cliff in the South China Sea, which Beijing turned into an artificial island. The destroyer was reportedly traveling with a Navy surveillance airplane near the contested Spratly Islands. China views the man-made creation as part of its territory and claims territorial sovereignty over the waters surrounding it.<br />
<br />
Addressing the issue of US intrusion on Thursday in a video teleconference, Admiral Wu Shengli warned the chief of US naval operations Admiral John Richardson to refrain from further “provocative acts”.<br />
<br />
“If the United States continues with these kinds of dangerous, provocative acts, there could well be a seriously pressing situation between frontline forces from both sides on the sea and in the air, or even a minor incident that sparks war,” Wu said, according to a Chinese naval statement.<br />
<br />
“(I) hope the US side cherishes the good situation between the Chinese and US navies that has not come easily and avoids these kinds of incidents from happening again,” Wu added.<br />
<br />
Commenting on the bilateral exchange during the teleconference, an American official told Reuters that both sides agreed to avoid clashes. The US and Chinese navies also decided to maintain dialogue and follow protocols stipulated under the Code for Unplanned Encounters at Sea (CUES).<br />
<br />
“They agreed that it’s very important that both sides continue to use the protocols under the CUES agreement when they’re operating close to keep the chances for misunderstanding and any kind of provocation from occurring,” said the official.<br />
<br />
The US Navy stressed that it is entitled to “protect the rights, freedoms, and lawful uses of the sea and airspace guaranteed to all nations under international law.”<br />
<br />
Following the incident Beijing had summoned the American ambassador to protest the “provocative” maneuver that according to China’s foreign ministry placed personnel and infrastructure on the island in jeopardy. Close to 200 Chinese troops are believed to be stationed at Subi reef. The reef is also claimed by Taiwan, Vietnam and the Philippines.<br />
<br />
Subi Reef lies 500 nautical miles away from Hainan Island, the nearest Chinese shoreline, but only 230 nautical miles from the island of Palawan in the Philippines which disputes Beijing’s territorial claim.<br />
<br />
On Thursday, the court in the Hague ruled that it has jurisdiction to hear territorial claims that were filed by the Philippines over the disputed areas in the South China Sea. The UN-based body will hold further hearings to settle the issue but they will not focus on sovereignty but rather economic entitlements.<br />
<br />
“This arbitration concerns the role of ‘historic rights’ and the source of maritime entitlements in the South China Sea, the status of certain maritime features in the South China Sea and the maritime entitlements they are capable of generating, and the lawfulness of certain actions by China in the South China Sea that are alleged by the Philippines to violate the Convention,” a press release issued by the Permanent Court of Arbitration read.

AVOID ‘MINOR’ INCIDENTS THAT COULD ‘SPARK WAR’ - CHINA

China has issued its strongest warning yet to the US over the South China Sea islands situation. This is over an incident during which ...

Read Article »

CHINA’S SELLING TONS OF U.S. DEBT

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYg6O3Yql-lr4UX6ElVxU4tH6q342z7O0V9bq9sSlbSYGzLGM2PRslt4shIkwcY9SfVAJUvyEliKHt5yTWQfYxb4PDu5J-jF8JagtjZxt2CcHYt5lbK7TaIKd-rqghv9WiGpuG9Zu-O6U/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYg6O3Yql-lr4UX6ElVxU4tH6q342z7O0V9bq9sSlbSYGzLGM2PRslt4shIkwcY9SfVAJUvyEliKHt5yTWQfYxb4PDu5J-jF8JagtjZxt2CcHYt5lbK7TaIKd-rqghv9WiGpuG9Zu-O6U/s640/00000.jpg" width="640" /></a></div>
<h5 class="entry-subtitle" style="background-color: white; box-sizing: border-box; color: #333333; font-family: Oswald, sans-serif; font-size: 20px; font-weight: 500; line-height: 1.1; margin-bottom: 10px; margin-top: 5px;">
<br /></h5>
<h3 style="background-color: white; box-sizing: border-box; color: #333333; font-family: Oswald, sans-serif; font-size: 20px; font-weight: 500; line-height: 1.1; margin-bottom: 10px; margin-top: 5px;">
U.S. funds are buying record amounts at Treasury auctions</h3>
For all the dire warnings over China’s retreat from U.S. government debt, there’s one simple fact that is being overlooked: American demand is as robust as ever.<br />
<br />
Not only are domestic mutual funds buying record amounts of Treasuries at auctions this year, U.S. investors are also increasing their share of the $12.9 trillion market for the first time since 2012, data compiled by Bloomberg show.<br />
<br />
The buying has been crucial in keeping a lid on America’s financing costs as China — the largest foreign creditor with about $1.4 trillion of U.S. government debt — pares its stake for the first time since at least 2001. Yields on benchmark Treasuries have surprised almost everyone by falling this year, dipping below 2 percent last week.<br />
<br />
It’s not the scenario that doomsayers predicted would leave the U.S. vulnerable to China’s whims. But the fact that Americans are pouring into Treasuries may point to a deeper concern: the world’s largest economy, plagued by lackluster wage growth and almost no inflation, just isn’t strong enough for the Federal Reserve to raise interest rates.

CHINA’S SELLING TONS OF U.S. DEBT

U.S. funds are buying record amounts at Treasury auctions For all the dire warnings over China’s retreat from U.S. government debt, th...

Read Article »

CHINA TO PARTICIPATE IN AIRSTRIKES IN SYRIA

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiglKYizkbINu7TmVE-cNNbB3_nhy59ZoX9Q0thJd5M8iagCpQdIBfyLr-YYUPD5Sj9vT8V7GZOdR1clGYqwcxY-5vlh5MazbFC1vMb1hMYZ5frB27SI2_GL1KKoJwFbag80Y2nNcGZbMo/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiglKYizkbINu7TmVE-cNNbB3_nhy59ZoX9Q0thJd5M8iagCpQdIBfyLr-YYUPD5Sj9vT8V7GZOdR1clGYqwcxY-5vlh5MazbFC1vMb1hMYZ5frB27SI2_GL1KKoJwFbag80Y2nNcGZbMo/s640/00000.jpg" width="640" /></a></div>
<br />
The Israeli intelligence source DEBKAfile claims China is preparing to join Russia in airstrikes against the CIA’s jihadist forces in Syria.<br />
<br />
“DEBKAfile’s military and intelligence sources report that China sent word to Moscow Friday, Oct. 2, that J-15 fighter bombers would shortly join the Russian air campaign that was launched Wednesday, Sept. 30,” the website reported on October 2.<br />
<br />
The J-15 warplanes will take off from the Chinese Liaoning-CV-16 aircraft carrier, which reached Syrian shores on Sept. 26… This will be a landmark event for Beijing: its first military operation in the Middle East as well the carrier’s first taste of action in conditions of real combat.<br />
<br />
Thursday night, China’s foreign minister Wang Yi, made this comment on the Syrian crisis at a UN Security Council session in New York: “The world cannot afford to stand by and look on with folded arms, but must also not arbitrarily interfere (in the crisis).”<br />
“The Syrian crisis has been going on for five years now. The international community cannot look on without lifting a finger, but also ought not to interfere arbitrarily,” the Chinese Foreign Ministry Wang Yi told a U.N. Security Council meeting on Thursday.<br />
<br />
Additionally, according to DEBKAfile, the Iraqi government has offered the Russians an airbase to strike ISIS targets in the country.<br />
<br />
A no less significant development occurred at about the same time when Iraqi Prime Minister Haider al-Abadi, speaking to the US PBS NewsHour, said he would welcome a deployment of Russian troops to Iraq to fight ISIS forces in his country too. As an added incentive, he noted that this would also give Moscow the chance to deal with the 2,500 Chechen Muslims whom, he said, are fighting with ISIS in Iraq.<br />
On September 30, according to Reuters, a Russian official said his country has established a military coordination center in Baghdad.<br />
<br />
The Russian Defense Ministry, however, said the center would be used to coordinate airstrikes in Syria. He did not mention strikes against ISIS inside Iraq.<br />
<br />
On Thursday the Russian Foreign Minister Sergei Lavrov said his country has been coordinating with Kurdish forces battling the Islamic State in Iraq and has sent arms to them through the central government in Baghdad, according to Rudaw, a Kurdish media network.<br />
<br />
“Military representatives from Iraq, Iran, Syria and Russia and the Kurdish government are with this information center which we established in Baghdad,” Lavrov said.<br />
<br />
by Kurt Nimmo of InfoWars

CHINA TO PARTICIPATE IN AIRSTRIKES IN SYRIA

The Israeli intelligence source DEBKAfile claims China is preparing to join Russia in airstrikes against the CIA’s jihadist forces in Syr...

Read Article »

CHINESE AIRCRAFT CARRIER DOCKS IN SYRIA - REPORT

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf-GhHf5pvHI6-Ho_rX1o6AktQmgQSxeNRdiKxfeumEDS6fQS6RqYy6tPWeQdPp-Caqs3FhFjbNjpOsexVGdLkObmdPcvMxr980V6qtId_ijsC1GmlpPE3UEwsOhEzfUEJdi6A9g0Yk1g/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf-GhHf5pvHI6-Ho_rX1o6AktQmgQSxeNRdiKxfeumEDS6fQS6RqYy6tPWeQdPp-Caqs3FhFjbNjpOsexVGdLkObmdPcvMxr980V6qtId_ijsC1GmlpPE3UEwsOhEzfUEJdi6A9g0Yk1g/s640/00000.jpg" width="640" /></a></div>
<br />
The Chinese aircraft carrier Liaoning-CV-16 has reportedly docked at the Syrian port of Tartus, according to DEBKAfile, an Israeli military intelligence website based in Jerusalem.<br />
<br />
Much of DEBKAfile’s reportage is based on unidentified sources and cannot be independently verified.<br />
<br />
The aircraft carrier was said to be accompanied by a guided missile cruiser.<br />
<br />
Al-Masdar Al-‘Arabi, The Arab Source, claimed on Tuesday a Chinese naval vessel passed through the Suez Canal.<br />
<br />
“Our military sources find evidence that the Chinese forces are digging in for a prolonged stay in Syria. The carrier put into Tartus minus its aircraft contingent. The warplanes and helicopters should be in place on its decks by mid-November – flying in directly from China via Iran or transported by giant Russian transports from China through Iranian and Iraqi airspace,” the unidentified sources told DEBKAfile.<br />
<br />
A squadron of J-15 Flying Shark fighters will be stationed on the aircraft carrier and at the Russian base outside of Latakia.<br />
<br />
According to the sources, the Chinese will also deploy Z-18F anti-submarine helicopters and Z-18J airborne early warning helicopters.<br />
<br />
Additionally, according to the report, the Chinese will send 1,000 marines to assist the Russians in their effort to rollback the gains of the Islamic State and other jihadist groups attempting to defeat the Syrian army and depose Bashar al-Assad.<br />
<br />
DEBKAfile claims marines will be instructed to single out rebel militias with recruits from Chechnya and the Caucasus and the Chinese marines will find and destroy Uighur fighters from the northern predominantly Muslim Chinese province of Xinjiang.<br />
<br />
In August Infowars.com reported Secretary of Defense Chuck Hagel’s remarks on ISIS and its advanced battlefield tactics due to the involvement of well-trained Chechens.<br />
<br />
As noted by researcher Wayne Madsen last year, the U.S. has financed Chechen groups through a number of civil society groups, a fact “gleaned from the tranche of a quarter million leaked classified State Department cables,” writes Madsen.<br />
<br />
According to Madsen the CIA, various establishment NGOs, USAID, the Soros foundations and the United Nations have worked together to underwrite Chechen terror. The Bush neocons also figure prominently in the Chechen connection.<br />
<br />
There is ample evidence of the neocon connection to Chechen rebels, including information provided by former FBI agent Coleen Rowley.<br />
<br />
Earlier this week Infowars.com reported on Jaish al-Muhajireen wal-Ansar, aka Muhajireen Brigade, joining al-Nusra, the jihadi terror organization linked to the Islamic State.<br />
<br />
Jaish al-Muhajireen wal-Ansar is comprised primarily of Chechen and other Russian-speaking foreign fighters. It was led by an ethnic Chechen, Abu Omar al-Shishani, aka Tarkhan Tayumurazovich Batirashvili.<br />
<br />
Batirashvili and other Chechen figures, including Doku Umarov have connections to the US State Department and the National Endowment for Democracy.<br />
<br />
by Kurt Nimmo of InfoWars

CHINESE AIRCRAFT CARRIER DOCKS IN SYRIA - REPORT

The Chinese aircraft carrier Liaoning-CV-16 has reportedly docked at the Syrian port of Tartus, according to DEBKAfile, an Israeli milita...

Read Article »

CHINA PUSHES FOR U.N. TYPE GOVERNANCE OF INTERNET

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0mQ5KFuklgVWVFZSGGTdAmvVUB1NpsZ6HpSg7X2VN-YOIj5T9Xui5bPfZKoTHmXaVDyI8039gwk1ILe_kGKrqYku1oyFyvQ9XpvJQXUZlhiMhGgt5Qh3MnSkU09wNlO8A4c0NsUaOzx0/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="310" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0mQ5KFuklgVWVFZSGGTdAmvVUB1NpsZ6HpSg7X2VN-YOIj5T9Xui5bPfZKoTHmXaVDyI8039gwk1ILe_kGKrqYku1oyFyvQ9XpvJQXUZlhiMhGgt5Qh3MnSkU09wNlO8A4c0NsUaOzx0/s640/00000.jpg" width="640" /></a></div>
<br />
Chinese president Xi Jinping is visiting the U.S. with a heavy itinerary. One of his stops included a speech Tuesday given to business leaders in Seattle addressing a number of concerns about Chinese government practices regarding the economy.<br />
<br />
According to The New York Times, Xi also promised “to work with the United States on fighting cybercrime, saying that the Chinese government was a staunch defender of cybersecurity.”<br />
<br />
“The Chinese government will not in whatever form engage in commercial theft, and hacking against government networks are crimes that must be punished in accordance with the law and relevant international treaties,” Mr. Xi said in an address to American business executives.<br />
<br />
President Obama shouldn’t take Xi’s words at face value. On top of the credible threat of cyberattacks out of China, the Chinese government has, like all authoritarian regimes sought to control the lives of their citizens through control of the internet. Now they are seeking to solidify control through a new proposal for governance of the internet.<br />
<br />
What does that look like? Protect Internet Freedom explains it like this:<br />
<br />
[The Chinese] envisioned a UN style structure that required each country respect the Internet sovereignty of others, where they had the power to demand that free nations respect the authoritarian denial of Internet access and accept restrictions on freedom-enhancing activities that they did not like. They see an opportunity to bring this vision to life through ICANN, an organization that typically handles website naming and coding languages.<br />
<br />
Until recently, the United States government opposed this idea, but, as PIF notes, the Obama administration has signaled its interest in relinquishing control of ICANN.<br />
<br />
For this reason, the Chinese government has begun to push for their goals, including submitting plans to the United Nations Public Administration Network, which included the following:<br />
<br />
We should establish a multilateral, democratic, and transparent international Internet governance system that ensures equal participation of all, reasonable allocation of Internet resources, and joint management of key Internet infrastructure. A multi-stakeholder governance model that brings together governments, the private sector and nongovernmental organizations would be respected, all of which contribute in their own distinct way to the joint governance of the Internet. This model should not be lopsided, and any tendency to place sole emphasis on the role of businesses and non-governmental organizations while marginalizing governments should be avoided. The roles and responsibilities of national governments in regard to regulation and security of the network should be upheld. It is necessary to ensure that United Nations plays a facilitating role in setting up international public policies pertaining to the Internet. We should work on the internationalization of Internet Corporation for Assigned Names and Numbers.<br />
<br />
The Justice Department is not helping either. According to PIF, they recently “set a new, outstanding legal precedent by announcing that foreign governments can obtain customer data held in the U.S.”<br />
<br />
They explain:<br />
<br />
By that logic, China can demand that they review the information of a U.S. citizen’s email records, kept by a company located in the United States, and the law supports their authority to review it. It’s a global free-for-all, and it’s not looking for freedom of speech.<br />
<br />
It should go without saying that governments and their values are not equal. It is dangerous to internet freedom and freedom in general to act as though expanding power to authoritarian regimes won’t have harmful effects.<br />
<br />
Obama should take a stand for internet freedom while Xi is visiting. Will he? We’ll see.<br />
<br />
Article from ConservativeIntel.com

CHINA PUSHES FOR U.N. TYPE GOVERNANCE OF INTERNET

Chinese president Xi Jinping is visiting the U.S. with a heavy itinerary. One of his stops included a speech Tuesday given to business le...

Read Article »

CHINESE JET IN NEAR-COLLISION WITH U.S. SPY PLANE

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUzyjJCfeLjMqJNXAuoDGAK-9ymUvxMS58HFKWSqBzfiLFLz6YH-cdA1WxNIXVbUd-duJ5NXK2wdN165-eu8Uxsr5okbmQpooTzkOP3f7DuFTMoQLb2T_FrOxI8D5Mu1xuuTkBJQrZy7Y/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="324" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUzyjJCfeLjMqJNXAuoDGAK-9ymUvxMS58HFKWSqBzfiLFLz6YH-cdA1WxNIXVbUd-duJ5NXK2wdN165-eu8Uxsr5okbmQpooTzkOP3f7DuFTMoQLb2T_FrOxI8D5Mu1xuuTkBJQrZy7Y/s640/00000.jpg" width="640" /></a></div>
<br />
A Chinese interceptor jet conducted a second dangerous pass near a U.S. surveillance aircraft over Asian waters—weeks before a state visit to the United States by Chinese leader Xi Jinping that begins Tuesday.<br />
<br />
The latest incident took place over the East China Sea near Japan’s Senkaku Islands when a Chinese interceptor flew in front of an RC-135 electronic intelligence-gathering jet, nearly colliding with the aircraft.<br />
<br />
It was the second time a Chinese aircraft nearly collided with a U.S. surveillance jet. The last incident took place in August 2014 over the nearby South China Sea.<br />
<br />
Pentagon and U.S. Pacific Command spokesmen declined to provide details of the latest encounter but did not dispute that it took place.<br />
<br />
“I have nothing for you regarding the incident you mention,” said Cmdr. Bill Urban, a Pentagon spokesman.<br />
<br />
The latest U.S.-China aerial confrontation was mentioned indirectly by Adm. Harry Harris, commander of the U.S. Pacific Command, during Senate Armed Services Committee testimony last week.<br />
<br />
Harris called the 2014 incident “a very dangerous event,” referring to the barrel roll conducted by a Chinese jet over the top of a P-8 maritime surveillance aircraft as “a dangerous maneuver in acrobatic circles, let along in an intercept regime in an open ocean.”<br />
<br />
“And we most recently have seen that again, but I’ll give the system credit for that intervening period of time, we’ve seen very few dangerous activities by the Chinese following that August 2014 incident,” Harris said.<br />
<br />
Harris, without mentioning the RC-135 incident, said the decline in dangerous aerial encounters until the latest incident was due to military and political relationships worked out with the Chinese.<br />
<br />
Asked about a second recent dangerous aerial encounter mentioned by the admiral, a Pacific Command spokesman at first said “there is no new P-8 incident.”<br />
<br />
Questioned later about the RC-135 incident, the spokesman, Capt. Darryn James, refused to provide details and referred questions to the Pentagon.<br />
<br />
Two Pentagon officials, speaking on background, described the East China Sea encounter as a dangerous and unprofessional aerial intercept that was similar to the 2014 near collision between a Chinese J-11 interceptor and Navy P-8 maritime patrol aircraft in the nearby South China Sea.<br />
<br />
The J-11 came within 50 feet of the P-8 as it was conducting surveillance, in an attempt to coerce the surveillance aircraft to depart.<br />
<br />
In the recent East China Sea incident, the Chinese interceptor crossed very close to the nose of the RC-135 near the Senkaku Islands—the location of a major dispute over ownership of the islands located south of Japan’s Okinawa and north of Taiwan.<br />
<br />
Disclosure of the dangerous Chinese jet encounter comes a day before Xi begins an official state visit to the United States. The incident is likely to embarrass the Communist Party secretary who arrives in Seattle on Tuesday. He is scheduled to meet President Obama later this week.<br />
<br />
Xi’s visit is also expected to raise two contentious issues: large-scale Chinese hacking of U.S. government and private-sector databases and the theft of data on tens of millions of Americans. China also has raised tensions as a result of disputes over maritime claims in the South China Sea and East China Sea.<br />
<br />
Xi is also contending with a wavering Chinese economy that has caused stock markets around the world to drop sharply in recent weeks.<br />
<br />
The Chinese leader, who recently was seen in a major military parade riding in the back of a limousine as he reviewed thousands of Chinese troops, tanks, missiles, and aircraft, will be hosted at a White House state dinner, an honor normally reserved for U.S. allies.<br />
<br />
The dangerous aerial encounter is a setback for the Pentagon’s aggressive military diplomacy with China, which President Obama has made a centerpiece of Pentagon policy.<br />
<br />
Critics in Congress, including Sen. John McCain (R., Ariz.), the chairman of the Senate Armed Services Committee, and Rep. Randy Forbes (R., Va.), chairman of the House Armed Services subcommittee on sea power, have called on the Obama administration to cut back on military exchanges that are not producing results.<br />
<br />
The Pentagon recently concluded an agreement outlining what it calls rules of the road for encounters at sea that are designed to prevent further dangerous ship-to-ship incidents like the 2013 near-collision in the South China Sea.<br />
<br />
On Dec. 5, 2013, a Chinese amphibious ship sailed directly in front of the guided missile cruiser USS Cowpens and stopped, forcing the Cowpens to sharply alter course to avoid hitting the Chinese vessel.<br />
<br />
The Obama administration announced at the November 2014 summit between Obama and Xi that the Pentagon and Chinese military had concluded a memorandum of understanding on “rules of behavior” for the safety of air and sea encounters.<br />
<br />
Pentagon officials have said the rules for maritime encounters are clearer than those for aerial intercepts.<br />
<br />
Talks in Beijing on the aerial rules have been bogged down in Chinese demands that the United States halt all aerial surveillance near China’s coasts, something the Pentagon so far has refused to accept.<br />
<br />
Harris, the Pacom commander, said last week that he has ordered his component commanders to continue to conduct operations when challenged by Chinese jets or naval forces.<br />
<br />
“What I’ve told the component commanders of the Pacific fleet and Pacific air forces to tell their pilots and crews to do is to continue to insist on our right to operate in international airspace and maritime space,” Harris said.<br />
<br />
“When challenged by Chinese fighter aircraft, our aircraft ought to maintain a professional flight profiles, predictable flight profiles, and we have the means to record that activity and then we’ll see what happens.”<br />
<br />
The area where the incident occurred has been the focus of a major dispute between Beijing and Tokyo over the ownership of the Senkakus.<br />
<br />
Senior U.S. officials, while claiming neutrality in Asian maritime disputes, have invoked the U.S.-Japan defense treaty several times in recent years, stating that U.S. forces would defend Japan if the islands are attacked.<br />
<br />
Further heightening tensions, China in November 2013 unilaterally imposed an air defense identification zone over the East China Sea, claiming control over a security zone covering the Senkakus and several South Korean islands.<br />
<br />
China is claiming ownership of the Senkakus, which it calls the “Diaoyu Islands,” though they have been under Japanese authority for decades. The waters around the islands are believed to contain large reserves of undersea gas and oil coveted by both countries.<br />
<br />
The Chinese have demanded that all aircraft entering the zone seek permission and submit flight plans. China has threatened to use military forces to enforce the zone, but so far has not done so.<br />
<br />
The United States, Japan, and South Korea have said they do not recognize the air defense zone.<br />
<br />
Officials said the most recent aerial encounter between the United States and China was less dangerous than the 2014 encounter between the J-11 and the P-8.<br />
<br />
The Pentagon called the 2014 intercept “aggressive” and “dangerous” and threatened to cut off military relations with the People’s Liberation Army unless the maneuvers were halted.<br />
<br />
Defense officials have said that aerial intercepts remain an unresolved issue between the two countries. National Security Adviser Susan Rice, during a visit to Beijing last fall, was told by Chinese officials that China is demanding that the United States halt all surveillance flights along Chinese coasts.<br />
<br />
Urban, the Pentagon spokesman, while not providing details of the East China Sea incident, defended the Pentagon’s efforts to seek to lower the risk of dangerous encounters.<br />
<br />
“The department has made tremendous progress with respect to reducing risk between our operational forces and those of the People’s Republic of China (PRC),” Urban said.<br />
<br />
“Over the past year, we have seen improvements in PRC behavior, specifically the safety and professionalism with which they intercept our aircraft.”<br />
<br />
Additionally, the Pentagon has “robust, existing mechanisms to deal with incidents between our operating forces, such as the Military Maritime Consultative Agreement,” he said.<br />
<br />
Rick Fisher, a China military analyst with the International Assessment and Strategy Center, said the latest aerial encounter should not go unchallenged.<br />
<br />
“Threatening intercepts over the East and South China seas require a very firm U.S. response,” Fisher said.<br />
<br />
“The first step should be increased flights. But there must also be a deliberate program of expanding air defense cooperation with Japan and the Philippines.”<br />
<br />
Fisher urged states in the region to conduct joint aircraft deployments to Japanese air fields in the Sakishima Islands and said that the United States should offer the Philippines air defense systems and training to bolster its defenses.<br />
<br />
BY: Bill Gertz<span class="Apple-tab-span" style="white-space: pre;"> </span> of The Washington Free Beacon

CHINESE JET IN NEAR-COLLISION WITH U.S. SPY PLANE

A Chinese interceptor jet conducted a second dangerous pass near a U.S. surveillance aircraft over Asian waters—weeks before a state visi...

Read Article »

China Dumps $94b US Treasurys In One Month

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjW-U5mPl0gDot0iCptvfx9dL2BUpMpRnLIFpaLrYJdBVuRY_TLrIlXKCoIXCdYR1DREN9eptrlGKUUbC_kF5leozb0iaa_HvAhr8an9XvxEoQfYescEqogD5sMKCpynIWlXcSfiYNyUKU/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjW-U5mPl0gDot0iCptvfx9dL2BUpMpRnLIFpaLrYJdBVuRY_TLrIlXKCoIXCdYR1DREN9eptrlGKUUbC_kF5leozb0iaa_HvAhr8an9XvxEoQfYescEqogD5sMKCpynIWlXcSfiYNyUKU/s640/00000.jpg" width="640" /></a></div>
<br />
Shortly after the PBoC’s move to devalue the yuan, we noted with some alarm that it looked as though China may have drawn down its reserves by more than $100 billion in the space of just two weeks. That, we went on the point out, would represent a stunning increase over the previous pace of the country’s reserve draw down, which we’ve began documenting months ahead of the devaluation (see here, for instance). We went on to estimate, based on the estimated size of the RMB carry trade unwind, how large the FX reserve liquidation might need to be to offset capital outflows and finally, late last week, we suggested that China’s official FX reserve data was set to become the new risk-on/off trigger for nervous, erratic markets. In short, the pace at which Beijing is burning through its USD assets in defense of the yuan has serious implications not only for investors’ collective perception of market stability, but for yields on core paper, for global liquidity, and for US monetary policy.<br />
<br />
On Monday we got the official data from China and sure enough, we find out that the PBoC liquidated around $94 billion in reserves during the month of August and as Goldman argues (see below), the “real” figure might have been closer to $115 billion. Whatever the case, it’s a staggering burn rate and needless to say, were the PBoC to continue to liquidate its assets at this pace, it would necessitate a raft of RRR cuts and hundreds of billions in short-term liquidity ops to ensure that money market don’t seize up in the face of the liquidity drain.<br />
<br />
Here’s some commentary from across sellside desks on the official numbers:<br />
<br />
From RBC’s Sue Trinh:<br />
China FX reserves suggest about $140b used to defend yuan in April once valuation is accounted for<br />
Believes PBOC has been intervening to maintain the yuan’s stability since the devaluation, but this kind of intervention can’t continue indefinitely<br />
It’s unsustainable in the long run; yuan is overvalued by around 15% by RBC’s latest estimate; still targeting USD/CNY at 6.56 by year-end and 6.95 by the end of 2016<br />
From Commerzbank’s Zhou Hao:<br />
Decline in foreign reserves clearly suggests China’s central bank intervened intensively in the FX market to stabilize CNY exchange rate<br />
“One-off devaluation” in mid-Aug. triggered market expectations of further CNY deprecation, which has not only endangered the financial stability, but also posts a downside risk to the economy due to capital outflows<br />
It’s costly because frequent intervention will burn foreign reserves rapidly and tighten the onshore market liquidity;that said, further tightening of regulations is expected near term<br />
Expects spread between CNY and CNH is likely to persist as PBOC has become an active player in onshore market<br />
<br />
From Goldman:<br />
The People’s Bank of China (PBOC) reported that its foreign exchange reserves dropped by US$94bn in August, to US$3.557tn at the end of the month. However, it is not straightforward to derive the actual scale of FX reserves sales from the headline FX reserves data, given uncertain valuation effects and possible balance sheet management by the PBOC.<br />
<br />
It is possible to get an approximate sense about valuation effects stemming from currency movement: e.g., assuming the currency composition of the PBOC’s FX reserves broadly follows that of the average country’s (using the IMF COFER weights, which suggest roughly 70% in USD for EM countries),the currency valuation effect would probably be positive to the tune of roughly US$20bn (i.e., if we only look at the change in headline FX reserves as a gauge of sales of FX reserves, sales of FX reserves might have been underestimated by around US$20bn, given the currency valuation effect).However, besides currency movements, there could also be significant valuation effects from changes to the market prices of the PBOC’s investment portfolios, and the direction and size of those effects is hard to measure given the uncertainty of the asset composition. Moreover, there could also be possible short-term transactions and agreements between the PBOC and banks that may complicate the interpretation of the change in FX reserves as an underlying measure of RMB demand.<br />
<br />
Of course the huge draw down was widely anticipated and indeed, we’ve explored and detailed virtually every angle of this story in the lead up to the data. The key takeaway here is that we now have official confirmation that August saw $94 billion in reverse QE (and more likely $115 billion) or, quantitative tightening as Deutsche Bank puts it.<br />
<br />
We can, as we explained on Saturday, argue about what the ultimate effect on safe haven assets will be, but what’s not up for debate is that conceptually speaking, China’s massive UST dumping is the opposite of Western central bank QE and as such should be expected to pressure yields. More specifically, Citi has suggested that for every $500 billion in EM FX reserve liquidation, there’s an attendant 108 bps or so of upward pressure on 10Y yields. Similarly, Deutsche Bank, citing the extant literature, flags 50-60bps of upward pressure on 5Y yields for every $100 billion in monthly EM FX reserve liquidations.<br />
<br />
The takeaway, as we put it last week, is that if the Fed hikes this month, it will be tightening into a tightening.<br />
<br />
But it’s not that simple. It’s also possible that, if China’s FX reserve draw downs do indeed end up serving as a trigger for risk-off behavior (i.e. a selloff in risk assets), the subsequent flight to safety could end up driving yields on long bonds lower, not higher. We discussed this in detailover the weekend.<br />
<br />
Still, China isn’t the only country liquidating its USD assets.When you consider that global EM FX reserves amount to more than $7 trillion, it seems reasonable to ask whether the flight to safety that would invariably accompany a worldwide selloff in risk assets would be sufficient to replace the lost bid from massive reserve draw downs. Or, as we put it on Saturday, “the real question is what would everyone else do. If the other EMs join China in liquidating the combined $7.5 trillion in FX reserves (i.e., mostly US Trasurys but also those of Europe and Japan) shown below into an illiquid Treasury bond market where central banks already hold 30% or more of all 10 Year equivalents (the BOJ will own 60% by 2018), then it is debatable whether the mere outflow from stocks into bonds will offset the rate carnage.”<br />
<br />
And that consideration, in turn, puts the Fed in a very, very difficult spot. A rate hike cycle will put further pressure on already beleaguered EM currencies which raises the possibility that the FX reserve liquidation will be larger than the eventual safe haven flows and besides, there’s bound to be a lag between the liquidation of USD assets and the flight to safety and given the potential for extraordinary bouts of volatility in UST, JGB, and German Bund markets, it’s anyone’s guess what happens in between.<br />
<br />
Whatever the case, something will have to give here. That is, all of these dynamics (i.e. a Fed hike, China’s massive UST dumping, an EM meltdown precipitating FX reserve drawdowns, illiquid markets for the same assets everyone is dumping, hemorrhaging petrostate budgets, etc.) simply cannot coexist for long without something snapping because, as we put it last week, in this very unstable arrangement, the smallest policy error will reverberate exponentially, and those reverberations can lead to only one thing: the Fed’s admission of policy failure by adopting a tightening bias, and ultimately launching another phase of monetary easing, be it QE4 or perhaps even the long-overdue and much anticipated Friedmanesque “helicopter money” episode.

China Dumps $94b US Treasurys In One Month

Shortly after the PBoC’s move to devalue the yuan, we noted with some alarm that it looked as though China may have drawn down its reserv...

Read Article »

US China sanctions may entail harsh retaliation

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_a1oMvAm97oC7fdQncrRo21_ThKg76Btu9lNzPtN0OtzozWJQsdWwPCH_qNE1Xw6GZq7Fga8LVYIzxRoRFk01b68FJFAopWmKXwEFLIzH14UvYkSsv2xQp9aDM4PAQb4kPqdccYS0oDo/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_a1oMvAm97oC7fdQncrRo21_ThKg76Btu9lNzPtN0OtzozWJQsdWwPCH_qNE1Xw6GZq7Fga8LVYIzxRoRFk01b68FJFAopWmKXwEFLIzH14UvYkSsv2xQp9aDM4PAQb4kPqdccYS0oDo/s640/00000.jpg" width="640" /></a></div>
<br />
The fact that the United States is accusing China of cyberattacks and is threatening it with sanctions is a sure sign the Americans get increasingly fearful over the Chinese technological boom, say Russian experts. Some note that after whistleblower Edward Snowden’s revelations the United States has no moral right whatsoever to accuse anyone of spying in the cyber space. Should the US dare impose sanctions, China will imminently fight back.<br />
<br />
The United States is considering the possibility of sanctions against individuals and companies in China and Russia that launch cyberattacks against the United States, Reuters said on Tuesday quoting anonymous official US sources. The Washington Post on Monday mentioned the possibility of "unprecedented" sanctions against Chinese companies and individuals involved.<br />
<br />
US officials say, though, that a final decision regarding sanctions has not been made yet, and it is highly improbable before China’s leader Xi Jinping pays a visit to the US.<br />
<br />
Of late, the United States ever more often accused China of hacking attacks against the websites of US companies and offices. China has systematically dismissed all of these charges. Russian officials, too, have repeatedly denied US claims Moscow was responsible for engineering acts of cyber sabotage against US resources.<br />
<br />
"Debates over the possibility of sanctions are a political reaction, and not a technological one," the head of the school of oriental studies at the Higher School of Economics, Aleksey Maslov, is quoted as saying by the Svobodnaya Pressa (Free Press) portal. "Real protection from cyberattacks is found exclusively in the realm of technological solutions."<br />
<br />
Washington has just made a decision to put pressures on Beijing, using cyberattacks as a pretext, he believes. "The United States finds the Chinese technological boom scaring. It’s not the expansion of Chinese mobile phone and computer brands that makes the US fearful, but the powerful Chinese industrial complexes capable of making breakthroughs in IT technologies as such. The United States once regarded China as a major market, if not the only one, for selling its products. But the Chinese IT boom has pushed US companies into the background. In attempts to retain technological leadership the United States might try to put a brake on Chinese technologies - to introduce sanctions.<br />
"The US stance looks absurd, because that country is a recognized champion of cyber spying," the senior research fellow at the Centre of Analysis and Technologies, Vasily Kashin, has told TASS. "After Snowden’s revelations, which provide clear evidence the United States itself indulges in this type of activity to a far greater scale than any other country, has no grounds to accuse others of gathering information through computer networks."<br />
<br />
In all likelihood an angry response from China will follow virtually in due time.<br />
<br />
"The Chinese will fight back very harshly. Should the Americans dare hit any specific Chinese company, for instance, in the IT sector, China’s response may be disproportionately tough. China may curtail the purchases of US industrial equipment or, say, civilian aircraft. It can do so without declaring any sanctions at all."<br />
<br />
This problem, Kashin believes, may spoil bilateral relations.<br />
<br />
"But neither side is interested in starting a row before Xi’s visit to China. The issue will most probably be raised during the summit visit. If no agreement is forged, the parties may "exchange punches" a short while after the visit.<br />
<br />
by Lyudmila ALEXANDROVA of TASS News Agency

US China sanctions may entail harsh retaliation

The fact that the United States is accusing China of cyberattacks and is threatening it with sanctions is a sure sign the Americans get i...

Read Article »

Five Chinese Navy Ships Are Operating in Bering Sea off Alaska

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWbmwQzEfDvDm0Dpuf8jPqCxqAjYkAFwmwuH8Sxr_0zHyttqHMJQp4zBsSQ-V_CKBu6oGTDmSXm5H6Xu8Dti_4QQ7nb0Zji84Q3Af_lGerhVXd6kz2z8iACoomeqaMU1rXF4jUvrnsv-4/s1600/00000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWbmwQzEfDvDm0Dpuf8jPqCxqAjYkAFwmwuH8Sxr_0zHyttqHMJQp4zBsSQ-V_CKBu6oGTDmSXm5H6Xu8Dti_4QQ7nb0Zji84Q3Af_lGerhVXd6kz2z8iACoomeqaMU1rXF4jUvrnsv-4/s640/00000.jpg" width="640" /></a></div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Five Chinese navy ships are currently operating in the Bering Sea off the coast of Alaska, Pentagon officials said Wednesday, marking the first time the U.S. military has seen them in the area.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
The officials have been tracking the movements in recent days of three Chinese combat ships, a replenishment vessel and an amphibious landing ship after observing them moving toward the Aleutian Islands, which are split between U.S. and Russian control.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
“This would be a first in the vicinity of the Aleutian Islands,” one defense official said of the Chinese ships, which have been operating in international waters. “I don’t think we’d characterize anything they’re doing as threatening,” the official said.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
A spokesman for the Chinese embassy in Washington couldn’t immediately be reached to comment.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Chinese officials have complained in the past that the U.S. is meddling in their affairs by flying military jets near a chain of islands known as the <a class="icon none" href="http://www.wsj.com/articles/u-s-surveillance-on-island-reveals-chinese-arms-1432864632" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: no-repeat; background-size: 30px 30px; color: #0080c3; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;" target="_self">Spratlys in the South China Sea</a>.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
The naval operation took place just before Chinese President Xi Jinping was set to preside over a World War II Victory Day parade Thursday in Beijing, an event that the U.S. and its allies fear is being used to showcase China’s new military strength and ambition.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Mr. Xi also is heading to the U.S. later this month for a state visit, which has already been overshadowed by tensions over Chinese military activity, including alleged cyberattacks on the U.S. and island-building in the South China Sea.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China has repeatedly said that its military activities aren’t designed to threaten any other nation but are expanding in tandem with its economic power, as well as its interests and responsibilities around the world.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Pentagon officials said Wednesday that the Chinese ships were still in the area, but declined to specify when the vessels were first spotted or how far they were from the coast of Alaska, where Mr. Obama wound up his visit Wednesday.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Pentagon officials also said there was no information suggesting the Chinese ships had gone through the Bering Strait, a narrow waterway north of the sea that abuts Alaska.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
“We respect the freedom of all nations to operate military vessels in international waters in accordance with international law,” said Cmdr. Bill Urban, a Pentagon spokesman, noting: “This is the first time we have observed [People’s Liberation Army Navy] ships in the Bering Sea.”</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
U.S. government officials acknowledged the curious timing of the Chinese ships navigating in the waters near Alaska at a time when President Obama is there, but White House spokesman Josh Earnest said Beijing’s intent was still unclear.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
The Pentagon official said there were a “variety of opinions” on how to interpret the Chinese ships’ deployment.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
“It’s difficult to tell exactly, but it indicates some interest in the Arctic region,” the official said. “It’s different.”</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China has made clear its intentions to become a so-called blue water navy, traveling far from its coastline, said Bonnie Glaser, a senior adviser on Asia for the Center for Strategic and International Studies in Washington.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
“We better get used to it,” Ms. Glaser said. “The Chinese navy is taking on more and more of an expeditionary character… the Chinese navy is going global.”</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Ms. Glaser noted that she didn’t see the navigation of the Chinese vessels as particularly threatening. “China’s navy is going to increasingly become a blue water navy,” she said. “I don’t think we should be alarmed by it.”</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
The Pentagon has been scrutinizing China’s military activities outside its immediate region for some time. In recent months, defense officials have tracked those movements with increasing wariness.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China has been particularly active in the South China Sea, where it has been expanding a chain of islands by piling materials dredged from the ocean floor atop of natural reefs and rocks.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
According to the Pentagon, China has expanded significantly its claims to these islands, known as the Spratlys, from about 500 acres at the end of last year to about 2,500 acres as of last month.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Defense officials are concerned that China’s island-building campaign has military aims that could create instability in one of the region’s biggest shipping routes.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Beijing acknowledged it was building the islands in part for military use, but said it can make territorial claims to the islands, which sit about 700 miles off the Chinese coastline.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
While Beijing has since said it has stopped construction, a Pentagon senior official said last month that it remained unclear just what work Beijing had ceased doing in the Spratlys.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China has shown growing interest in using the so-called Northern Sea Route to transport goods between Asia and the West via the Arctic in recent years as melting polar ice has eased access for shipping. The route can take several days less than the journey via the Suez Canal.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
The first Chinese vessel to sail the entire Northern Sea Route was an icebreaker called the Snow Dragon in 2012, and some Chinese commercial ships have used the route since, according to state media.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Beijing also has shown growing interest in exploiting energy resources in the Arctic region and in 2013 became a permanent observer to the Arctic Council, whose members are Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the U.S.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China and Russia held joint naval exercises off the Russian Pacific coast—about 2,000 miles west of the Bering Sea—between August 20 and 28, according to the official Xinhua News Agency.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Seven Chinese ships took part, including two destroyers, two frigates, two landing ships and one supply ship, Xinhua said but it gave no details about where the vessels went afterward.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
China’s navy confined itself to patrolling its own coast for the first five decades after the Communist takeover in 1949.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
But in the past few years, it has ventured deep in the Pacific and Indian oceans, and the Mediterranean Sea.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
Last year, Chinese navy ships made their debut at U.S.-led Rim of the Pacific, or Rimpac, joint naval drills in Hawaii.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
As part of that exercise, three of those ships participated in a special “communications drill” with the U.S. and then made a port call in San Diego, Calif., according to a Pentagon report that was released earlier this year.</div>
<div style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: 0px 0px; background-repeat: initial; background-size: initial; border: 0px; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px; margin-bottom: 18px; outline: 0px; padding: 0px; vertical-align: baseline;">
U.S. officials said an uninvited Chinese spy ship observed the Rimpac drills from international waters just off Hawaii. China’s defense ministry said at the time that its ship operations complied with international law.</div>

Five Chinese Navy Ships Are Operating in Bering Sea off Alaska

Five Chinese navy ships are currently operating in the Bering Sea off the coast of Alaska, Pentagon officials said Wednesday, marking the...

Read Article »