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Wednesday, 6 March 2013

China Promises Flexibility on Renminbi

China will press ahead with currency overhauls to allow more flexibility in the renminbi’s exchange rate, while maintaining a relatively steady value, a senior central bank official said Wednesday.


The comments from Yi Gang, who reiterated an assertion that the central bank — the People’s Bank of China — had reduced intervention in the foreign exchange market, emphasize the stability that Chinese policy makers want to ensure, even as they try to turn the renminbi into a more freely traded currency.


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Reuters via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/5mBTwUK-HVY/

China Agrees to Sanctions Targeting N. Korean Diplomats

North Korea and its ruling elite are facing additional sanctions after the U.S. and China agreed on a United Nations Security Council resolution punishing the Communist nation for its February nuclear test explosion.


U.S. Ambassador to the UN Susan Rice announced the agreement yesterday after a meeting of the council, which plans to adopt the measure with a vote later this week. Russia, which like China has veto-power, also supports the sanctions, Russian UN Ambassador Vitaly Churkin said in comments reported by the RIA news agency.


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Peter S. Green, Bloomberg News via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/JVnP9CaCFnI/

China eyes residence permits to replace divisive hukou system

China’s new leaders are planning a system of national residence permits to replace the household registration or ‘hukou’ regime, a government source said, a vital reform that will boost its urbanization campaign and drive consumption-led growth.


The hukou system, which dates to 1958, has split China’s 1.3 billion people along urban-rural lines, preventing many of the roughly 800 million Chinese who are registered as rural residents from settling in cities and enjoying basic urban welfare and services.


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John Ruwitch and Hui Li, Reuters via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/mVTHaTblmMY/

China Weighs Risks to $50 Billion Investment After Chavez

Chinese firms are assessing the risk that Venezuelan President Hugo Chavez’s death poses to investments worth at least $50 billion, after 14 years of closer ties between the two countries.


China Development Bank Corp., which has lent Venezuela more than $40 billion since 2008, has contingency plans in place, Yao Zhongmin, head of the bank’s supervisory board, said in an interview today. State-owned conglomerate Citic Group Corp. is also weighing the risks, Chairman Chang Zhenming said.


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Michael Forsythe and Henry Sanderson, Bloomberg News via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/6Iv3SHAJe0o/

Not the Android China’s Looking For

China’s searching for an alternative to Android.


The China Academy of Telecommunication Research, a think tank linked to the Ministry of Industry and Information Technology, has said that China is too reliant on Google Inc.’s mobile operating system and accused the company of using its dominance to discriminate against Chinese firms.


The irony is that by making its operating system freely available, Google has provided a platform for explosive growth in China’s smartphone industry. Lenovo Group Ltd., ZTE Corp. and Huawei all use Android. An open system also allows Google’s Chinese rival Baidu to install its search bar in Android phones.


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Tom Orlik, Wall Street Journal via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/z-lfY2LKKG0/

Tuesday, 5 March 2013

Nuclear North Korea: The Least Unacceptable Option

On the 12th of February 2013, North Korea conducted its third nuclear test – it seems to have been significantly more powerful than the two previous tests, which occurred respectively in 2006 and 2009.


While the international community went through the usual motions of condemnation, there was an air of despair in Washington. Analysts have come to realize that little of any practical value can be done about North Korea’s nuclear program. Engagement, attempted in the 1990s, did not succeed. Hardline, sanctions-based approaches have also failed quite spectacularly.


It is not surprising, therefore, that in the present circumstances there has been a palpable revival of the ‘China Dream’ – i.e. the belief that China can be somehow persuaded to change its hitherto grudgingly tolerant approach to North Korean nuclear program, and bribe/blackmail North Korea into surrendering its nukes. Indeed, China controls roughly 75% of North Korea’s external trade, and provides nearly all of Pyongyang’s aid, so it seems to have all necessary leverage.


These hopes were recently encouraged by the palpable cooling of relations between Pyongyang and Beijing. Last August, China politely declined North Korea’s request for a significant increase in aid, and at the same time, China also allowed a big Chinese mining company who had been cheated by its North Korean partners to voice its dissatisfaction publicly and loudly. In January, much to the surprise of most observers, Chinese representatives in the UN Security Council supported a resolution highly critical of Pyongyang. Soon after this, a Chinese newspaper carried open threats to reduce aid to North Korea from Chinese government sources.


All these expectations were proven wrong however in the aftermath of the third nuclear test. The Xinhua news agency was quick to put the blame for the test on the “hostile policies” allegedly pursued by the Japanese and American ‘imperialists. While Chinese diplomats uttered the ritual condemnations, there is little doubt that in spite of the changing of the guard in Beijing, China will remain tolerant and forgiving of North Korea.


We should not be surprised by this, since hopes in China were misplaced from the very beginning. It is indeed true that China has the theoretical capability to corner the North Korean leadership; it is highly unlikely that such capabilities will ever be utilized. China does not approve North Korea’s nuclear adventurism. It is also hardly fond of North Korea’s brinksmanship tactics. However, all things considered, China tends to see a nuclear North Korea as the least unacceptable option.


With regard to Chinese dealings with North Korea, one can define three strategic goals, which are pursued by China. These goals can be described as “the three no’s”: “No Instability, No Unification, and No Nuclear Weapons”. Unfortunately for the outside world, these three goals are clearly hierarchical, with the de-nuclearization being at the bottom of the list.


The preeminent goal of China is preventing instability in Korea. China would not welcome either a domestic crisis in North Korea, or an outbreak of hostilities in region. The implosion of the North Korean regime will send hundreds of thousands (perhaps, millions) of refugees across the poorly protected Sino-Korean border. It may lead to aggravated tensions between China and the United States as well as to the smuggling of nuclear materials. It will also clearly be a distraction for China as it seeks to continue its unprecedented economic growth. China therefore needs a stable Korean Peninsula.


Second, China would prefer to see a divided Korean peninsula. North Korea is an important buffer zone. There is little doubt that a unified Korean state will be dominated by the South and is likely to be democratic and nationalistic, as well as probably still an ally of the United States. As a Chinese border official recently told the present author, “If Korea is unified by Seoul, we will have to spend much more money on fortifying and controlling the border than we do in feeding these imbeciles in Pyongyang”.


The third goal is, of course, denuclearization. Being an officially recognized nuclear state, China is a member of a highly exclusive club that it does not want to see enlarged. It does not want North Korea’s nuclear program to contribute towards nuclear proliferation or trigger a nuclear arms race in East Asia. However, these worries seem to be quite theoretical at the time of writing, especially if compared with the worries about a coming collapse of the North Korean regime and its potential fallout.


Therefore, Chinese policy towards North Korea is, like most policies, the pursuit of a lesser evil. China would probably prefer a stable and divided non-nuclear Korean Peninsula. As it has to compromise though, it would prefer to jettison the dream of denuclearization for the more important goals of stability and division.


This is exactly the reason why China is not going to press North Korea too hard. It can theoretically reduce the amount of aid, or even curtail trade with North Korea. This would lead to economic problems and decline in living standards – an outcome which would be an anathema for nearly all governments worldwide. However, as experience has shown, the North Korean regime has been remarkably immune to such changes.


The North Korean government can ignore the suffering of the population and the population will have no way of influencing the decision-making or expressing its discontent (we have seen this during the great North Korean famine of the 1990s when at least half million died quietly).


Therefore, in order to achieve the desired result, China would have to take drastic steps, halting aid altogether. As a senior South Korean diplomat told the present author a few years ago, “China does not have leverage when it comes to North Korea, rather it has a hammer. It can knock North Korea unconscious if it wishes.”


However, China has good reasons not to wield this hammer. Even if such drastic measures spur North Korean leaders to surrender their nuclear weapons, there is a very high probability that such measures will bring about the dramatic and irreversible disintegration of the North Korean state, followed by violent crisis and perhaps the absorption of the North by the powerful and affluent South. And this is clearly not what China wants.


In other words, China faces a choice between a relatively stable (for the time being), but nuclear North Korea, and a non-nuclear, but very unstable North Korea. Up until now, Chinese decision makers have had the view that the first scenario is better for China’s long-term interests. Unfortunately for the outside world, they are probably right in their assumptions.


Dr. Andrei Lankov is Professor at Kookmin University, in Seoul.







Andrei Lankov, Prof. at Kookmin University in Seoul via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/w55V29T4hTo/