Is a US-China Showdown in South China Sea Imminent?

“We will never allow any country to violate China’s territorial waters and airspace in the Spratly Islands, in the name of protecting freedom of navigation and overflight,” said Chinese Foreign Ministry spokeswoman Hua Chunying at Friday’s regular news briefing. “We urge the related parties not to take any provocative actions, and genuinely take a responsible stance on regional peace and stability.”

Hua was evidently reacting to a Navy Times report that the US Navy was planning to send a surface combatant within 12 nautical miles of a Chinese island in the South China Sea in a bid to preserve freedom of navigation for itself and others.

China Stock Crash Imperils Proposed Nicaragua Canal

The net worth of Chinese entrepreneur Wang Jing, the driving force behind a proposed canal across Nicaragua, has fallen $9.1 billion since mid-June, when China’s stock market collapsed. No other individual in the Bloomberg Billionaires Index during this period has lost a greater proportion of assets, 84 percent in his case.

Chinese ambition in recent years has been stunning, and no person outside officialdom has been more optimistic than Wang, 42, who owns 35 percent of publicly listed Beijing Xinwei Telecom Technology Group Co.

In 2013, Wang announced he would build the waterway, three times longer than the Panama Canal. His plans also contemplated two deep-water ports, an airport, an artificial lake, a tourist area, a free-trade zone, roads, and factories to make cement and steel. Wang’s closely held vehicle, the Hong Kong Nicaragua Canal Development Investment Group Co., has an initial 50-year concession awarded by Daniel Ortega’s government.

China Imposes New Capital Controls

The State Administration of Foreign Exchange, China’s foreign exchange regulator, has imposed annual limitations on cash withdrawals outside China on China UnionPay bank cards, the Wall Street Journal learned on Tuesday. The limitations are reportedly contained in a circular SAFE, as the regulator is known, sent to banks.

Cardholders, under the new rules, may withdraw a maximum 50,000 yuan ($7,854) in the last three months of this year and a maximum 100,000 yuan next year.

Because UnionPay processes virtually all card transactions in China, the new limits apply to all Chinese credit and bank cards. Beijing already imposes a 10,000-yuan daily limit on withdrawals.

And why should the rest of the world care about how much money a holder of a Chinese credit card can get from an ATM in, say, New York? The new rules could be the first in a series of measures leading to draconian prohibitions of transfers of money from China.

Draconian prohibitions, in turn, could spark a global panic.

China Intercepts US Aircraft Over Yellow Sea in Dangerous Maneuver

On September 15th, a Chinese military jet intercepted a US Air Force RC-135 reconnaissance aircraft over the Yellow Sea, about 80 miles east of China’s northern Shandong Peninsula. The Chinese jet crossed the nose of the American plane, passing within 500 feet, a dangerous maneuver.

The US regularly conducts surveillance flights over international water along China’s coast, airspace that Beijing wrongly claims to be its own. As a result, there has been a series of Chinese intercepts of these flights.

“One of the maneuvers conducted by the Chinese aircraft during this intercept was perceived as unsafe by the RC-135 air crew and at this point, right now, there’s no indication this was a near collision, but the report that came back was that the plane operated in an unsafe fashion,” said Pentagon spokesman Peter Cook last week.

China Official Creates Controversy in Hong Kong

Tuesday, Leung Chun-ying, Hong Kong’s chief executive, lent support to controversial remarks made Saturday by China’s top official in Hong Kong. Zhang Xiaoming, head of Beijing’s Liaison Office, precipitated a new controversy over the weekend with comments about the supremacy of the powers of the city’s top political official.

Zhang said the CE, as the chief executive is sometimes called, has “a special legal position which overrides administrative, legislative, and judicial organs.”

Beijing, in the Sino-British Joint Declaration of 1984, promised Hong Kong “a high degree of autonomy” until 2047. The city has been a special administrative region of the People’s Republic since 1997.

Chinese Warships Sail into American Waters

Last Thursday, the Pentagon confirmed five Chinese warships had sailed within 12 nautical miles of the Alaskan coast. The US, in accordance with international law, claims as territorial water a band of sea extending 12 miles from its shores. The Chinese vessels, therefore, entered American waters.

US authorities did not grant permission for the Chinese transit, and the waters in question are not an internationally recognized strait. The Pentagon did not complain, however, maintaining the warships “transited expeditiously and continuously through the Aleutian Island chain in a manner consistent with international law.” As a US official explained to CNN, the intrusion constituted “innocent passage.”

Beijing at the Corner of Desperation and Panic

Monday, China Central Television, the state broadcaster, carried the “confession” of a weary Wang Xiaolu. The journalist from Caijing Magazine, a prominent financial publication, admitted to adding his “own subjective judgment” to information he obtained “through private channels” about the central government’s stock rescue plan.

Wang’s crime, in Beijing’s eyes, was to pen a July 20th article stating that the China Securities Regulatory Commission was considering halting intervention in the Chinese stock market. Since early July, the central government had been buying blue chip stocks in an effort to keep prices high.

Guess Who’s Coming to China’s Military Parade

Tuesday, Beijing revealed the list of countries participating in its military parade, scheduled for September 3rd, commemorating the 70th anniversary of the defeat of Japan in the Second World War.

Belarus, Cuba, Egypt, Kazakhstan, Kyrgyzstan, Mexico, Mongolia, Pakistan, Serbia, Tajikistan, and Russia will each send about 75 marchers. Afghanistan, Cambodia, Fiji, Laos, Vanuatu, and Venezuela will contribute about seven troops each. The 17 countries, Beijing said, will chip in about 1,000 soldiers.

This is an odd group celebrating the end of World War II in the Pacific. Fiji remained untouched in the struggle, but can at least say it’s in the Pacific. Belarus, on the other hand, resides in Europe. It did not exist 70 years ago. When Japanese diplomats signed instruments of surrender on the deck of the Missouri, the territory that now comprises Belarus was part of the Soviet Union.

Obama Toughens Stance Against China's 'Fox Hunt'

On Monday, Beijing revealed that the US had demanded it withdraw agents from American soil.

The revelation came on the same day of a CNN report saying US officials had confirmed that they had told China to stop covert operations in the US aimed at pressuring Chinese citizens to return to China.

The activity, part of Beijing’s “Fox Hunt” and “Sky Net” operations, was illegal, Washington reportedly told Chinese officials. CNN’s confirmation followed New York Times reporting on the topic Sunday.

China to Build Olympic Site in Nature Reserve

A Beijing official on Friday denied that 2022 Olympic events will be held in a nature preserve.

Earlier, outdoor enthusiasts had charged that municipal authorities were planning to build the alpine ski course and sledding tracks in the Songshan National Nature Reserve, considered an “ecological barrier” protecting the urban portion of Beijing from seasonal winds and sand blowing from the north.

Beijing, in its bid documents, apparently told the International Olympic Committee that events would be held adjacent to the sensitive reserve, in the northwest portion of the sprawling Beijing municipality. Yet activists and others, after examining IOC photographs, satellite images, and official Chinese geographic coordinates, determined that the municipality had reserved sites inside Songshan for the Games. Censors took down blog postings on the matter.

Taiwan Students Storm Education Ministry

Students in Taiwan are continuing their occupation of the courtyard of the Education Ministry in Taipei, objecting to changes to textbooks scheduled to be delivered to schools during the week. Talks with ministry officials have gone nowhere.

The students, many of them still in high school, had broken into the compound on Friday following the suicide, a day earlier, of Lin Kuan-hua, a 20-year-old leader of the demonstrators. Students say Lin took his life in “a silent protest.”

An Erosion of Confidence in China

“There is no Alan Greenspan or Mario Draghi in China,” said Peng Junming of Beijing-based Empire Capital Management, referring to the former chairman of the Federal Reserve and the current president of the European Central Bank. Peng, a former official of the People’s Bank of China, highlighted one weakness of his country’s financial system. When stocks started to slide in June, no top official appeared in front of the cameras to reassure nervous investors.

The Wall Street Journal thinks Beijing’s silence is significant. “The rescue effort is missing one feature found in markets elsewhere: a senior figure stepping forward to stop the panic,”  the paper noted on Tuesday.

There are, in fact, leaders who the Chinese people see with some regularity, namely the general secretary of the Communist Party, Xi Jinping, and the premier of the central government, Li Keqiang. Neither Xi nor Li, however, has gone on the record over the stock rout. 

North Korea Rolls Back Economic Reform

Kim Jong Un, the North Korean ruler, has reportedly ordered the removal of foreign products from his country’s markets. Said an official in North Hamgyong Province, “I was told by North Korea’s central authorities not to stop travelers from bringing in products from China through customs, but to strictly prohibit sales of the products in the market.”

The move at first looks like an attempt to target China, the source of many of the goods sold in the North, but Pyongyang could also be trying to implement a broad anti-reform agenda.

China’s Last ‘Immortal’ Dies

Wan Li died last week, according to his son. Bloomberg called him the last of the Chinese Communist Party’s “Eight Immortals,” revered post-revolution-era figures. He was 98.

Wan, a reformer, oversaw the breakup of agricultural collectives in eastern Anhui Province, paving the way for family farming. He retired in 1993 after serving as chairman of the National People’s Congress as well as Beijing party chief, railway minister, and vice premier. In 2004, Wan boldly called for liberalization of the party’s decisionmaking.

Rewriting Japan’s ‘Peace Constitution’

On Sunday, 40 soldiers from Japan’s Ground Self-Defense Force participated in the biennial Talisman Sabre exercise in northern Australia, jointly held by the US and Australia.

Japan’s involvement in the massive military event followed a flight on June 23rd of one of its P-3Cs over contested waters. The patrol plane flew about 100 kilometers west from the Philippine island of Palawan into the South China Sea. The craft came close to Reed Bank, claimed by both Manila and Beijing, and then headed back to base. On board, three Filipino military personnel accompanied the Japanese crew of 13.


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