The yuan goes global: Money talks and London is listening to the yuan

The Chinese currency is fast gaining weight worldwide and becoming a key topic of conversation for bankers.

THE fashionable youths in hot pants flocking to high-end department stores in London and bankers in dark suits walking in and out of skyscrapers in the financial district have one thing in common, a growing interest in the Chinese currency.

During the recent holiday to celebrate the Diamond Jubilee of Queen Elizabeth II, Harrods, a department store known for its ties with the British royal family, launched its own Sina Weibo, a popular Chinese social media platform, to attract more Chinese customers. Shoppers can find “the very latest, limited edition and exclusive products”, with Hermes, Chanel and Louis Vuitton among the most popular brands, according to the store’s spokesman.

More than 100 UnionPay payment terminals in the store also help to make Chinese shoppers feel more at home. Through the machines, part of China’s unified bank card network, Chinese visitors can pay for their purchases with the same cards they use at home.

Hear, hear: A man walking past the London Stock Exchange in London. London is now a yuan offshore trading centre, which will help both Chinese and European business people to avoid foreign exchange risks. — China Daily/Asia News Network

 

A few streets from Harrods, a billboard featuring a green jade dragon shaped like the yuan symbol stands outside a bank. The ad reads: “A new global currency is emerging. Be part of it.” The commercial is for HSBC, a bank rooted in the silk and tea trade between China and Britain in the 19th century.

The UnionPay terminals, the jade dragon advertisements and the shops on the streets of London offering exchange services between the British pound and the yuan are the tip of the iceberg in the biggest story in the financial markets today: the internationalisation of the Chinese currency.

As people search for a bright spot amid sluggish economic growth in the West, beset as it is by the European debt crisis, companies, investors and financial institutions are increasingly focused on the yuan. From Beijing to Hong Kong, Tokyo to London, policymakers and businesses are part of the push.

There are several forces driving this move, both at home and abroad. The People’s Bank of China has made several moves this year to liberalise the exchange rate; George Osborne, the UK chancellor of the exchequer, took the initiative to develop London into an offshore trading centre for the yuan earlier this year; and this month, the yuan became convertible with the Japanese yen under an agreement between the Chinese and Japanese governments.

“All of it demonstrates that the Chinese government is pushing forward the internationalisation of the yuan and encouraging the use of yuan offshore. That will help the global economy in many ways,” said Adam Tyrrell, head of European capital markets for Standard Chartered in London.

Greenback to redback

These initiatives will have a profound influence on the development of trade. For instance, China and Europe are each other’s largest trading partners, but, up till now, the bulk of that trade has been settled in the US dollar. If a Chinese company buys pork from a UK company, it does not buy and sell in yuan, the pound or the euro. It settles in dollars.

That paradox is changing. Now the same pork company can open a yuan account at a British bank such as HSBC or Standard Chartered, or a Chinese bank that operates in Europe, such as Bank of China or Industrial and Commercial Bank of China, and can then invoice the goods or settle the deal with its Chinese clients in their national currency.

The advantage of this is clear: Settling in yuan helps both sides to avoid foreign exchange risks and reduces transaction costs. For instance, in 2008, many companies in southeast China had to lay off workers and close factories because they were losing money through currency appreciation.

That situation would have been different if the contracts had been signed in yuan, because the agreements would have a fixed value no matter what the change in the exchange rate.

The initiative can also benefit companies outside the European time zone, given London’s position as the world’s foreign exchange centre. “The beauty of London is not just about London,” said Patrick Law, Hong Kong-based managing director and head of trading for Greater China at Barclays. “If you look at the London time zone, it covers both the northern and southern hemispheres.” And that means it will also help facilitate business between China and Africa and the Middle East.

“Africa is a very interesting market to look into because China and Africa have a lot of business together,” Law said. He added that Barclays, a bank with strength in commodity trading, began to conduct trade between the South African rand and yuan from April.

Uncle Sam to dim sum

The internationalisation of the yuan will also offer a new platform for companies and investors looking for alternative methods of financing.

The “dim sum bond” got its name from delicacies in Chinese cuisine such as spring rolls, shrimp dumplings and steamed buns. The name has been appropriated for fixed income denominated in yuan and was started in Hong Kong when the city became the first offshore centre for yuan trading. The bond has become increasingly popular outside Asia and grew rapidly in Europe last year, according to Standard Chartered’s Tyrrell.

British banks were involved in five dim sum bond deals with European companies and financial institutions last year. It has also been involved in three client deals so far this year, according to Tyrrell: “Over time, as the yuan is used more, more European corporations and financial institutions will be interested in transacting in yuan, either for their China business, when they can remit onshore, or as a way of diversifying their investor base.”

The motivation for getting involved in dim sum bonds is also changing, he said. When the yuan market first developed offshore, a lot of investors were looking for a currency play rather than a bond play. At first, investors were looking to invest in the currency because they thought it was going to appreciate.

“Over time, it is developing into a more mature bond market,” said Tyrrell. “It will tend to be more driven by traditional bond market influences.”

Chances and problems

That’s particularly true this year, because of the fragile state of the global economy. If the investor sentiment is not there, there will be fewer bond issuances, according to Tyrrell. “There is definitely momentum in the yuan. It will not stop. It will grow,” he said.

Given the fact that the yuan is still not fully convertible, there is still a lot of work to be done to encourage people to hold it and conduct business with it, as they do with dollars.

The main issue for London as it attempts to develop into an offshore yuan trading centre revolves around the lack of liquidity. That’s due to both a paucity of knowledge about the yuan market and the limits of infrastructure to facilitate trade flows.

“Without liquidity, we cannot grow the pie and make the market more efficient,” Law said. “Everybody is definitely very interested. The current situation is that people have just started looking into it,” he said. “The involvement is still relatively small, but the amount of interest is actually very high.”

Some observers have suggested that the pool of yuan liquidity in London can grow through a huge variety of sources. For instance, Standard Chartered recently issued yuan-denominated European Commercial Paper to investors in Europe.

“ECP is issued to investors. Then Standard Chartered holds the liquidity in yuan and can use that for trade finance. This will help to increase trade flows with China for European clients,” Tyrrell said.

“As investors become more comfortable holding yuan, it will help build liquidity here.”

By Diao Ying, China Daily/Asia News Network

US poverty on track to rise to highest since 1960s

This photo shows new parents Garrett Goudeseune, 25, Laura Fritz, 27, left, with their daughter Adalade Goudeseune, as they pose for a photo at the Jefferson Action Center, an assistance center in the Denver suburb of Lakewood. Both Fritz and Goudeseune grew up in the Denver suburbs in families that were solidly middle class. But the couple has struggled to find work and are now relying on government assistance to cover food and $650 rent for their family. The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net. Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections. (AP Photo/Kristen Wyatt)

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections.

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 per cent in 2010, climbing as high as 15.7 per cent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965.

Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out. Suburbs are seeing increases in poverty, including in such political battlegrounds as Colorado, Florida and Nevada, where voters are coping with a new norm of living hand to mouth.

"I grew up going to Hawaii every summer. Now I'm here, applying for assistance because it's hard to make ends meet. It's very hard to adjust," said Laura Fritz, 27, of Wheat Ridge, Colo., describing her slide from rich to poor as she filled out aid forms at a county centre. Since 2000, large swaths of Jefferson County just outside Denver have seen poverty nearly double.

Fritz says she grew up wealthy in the Denver suburb of Highlands Ranch, but fortunes turned after her parents lost a significant amount of money in the housing bust. Stuck in a half-million dollar house, her parents began living off food stamps and Fritz's college money evaporated. She tried joining the Army but was injured during basic training.

Now she's living on disability, with an infant daughter and a boyfriend, Garrett Goudeseune, 25, who can't find work as a landscaper. They are struggling to pay their $650 rent on his unemployment checks and don't know how they would get by without the extra help as they hope for the job market to improve.

In an election year dominated by discussion of the middle class, Fritz's case highlights a dim reality for the growing group in poverty. Millions could fall through the cracks as government aid from unemployment insurance, Medicaid, welfare and food stamps diminishes.

"The issues aren't just with public benefits. We have some deep problems in the economy," said Peter Edelman, director of the Georgetown Centre on Poverty, Inequality and Public Policy.

He pointed to the recent recession but also longer-term changes in the economy such as globalisation, automation, outsourcing, immigration, and less unionisation that have pushed median household income lower. Even after strong economic growth in the 1990s, poverty never fell below a 1973 low of 11.1 per cent. That low point came after President Lyndon Johnson's war on poverty, launched in 1964, that created Medicaid, Medicare and other social welfare programs.

"I'm reluctant to say that we've gone back to where we were in the 1960s. The programs we enacted make a big difference. The problem is that the tidal wave of low-wage jobs is dragging us down and the wage problem is not going to go away anytime soon," Edelman said.

Stacey Mazer of the National Association of State Budget Officers said states will be watching for poverty increases when figures are released in September as they make decisions about the Medicaid expansion. Most states generally assume poverty levels will hold mostly steady and they will hesitate if the findings show otherwise. "It's a constant tension in the budget," she said.

The predictions for 2011 are based on separate AP interviews, supplemented with research on suburban poverty from Alan Berube of the Brookings Institution and an analysis of federal spending by the Congressional Research Service and Elise Gould of the Economic Policy Institute.

The analysts' estimates suggest that some 47 million people in the U.S., or 1 in 6, were poor last year. An increase of one-tenth of a percentage point to 15.2 per cent would tie the 1983 rate, the highest since 1965. The highest level on record was 22.4 per cent in 1959, when the government began calculating poverty figures.

Poverty is closely tied to joblessness. While the unemployment rate improved from 9.6 per cent in 2010 to 8.9 per cent in 2011, the employment-population ratio remained largely unchanged, meaning many discouraged workers simply stopped looking for work. Food stamp rolls, another indicator of poverty, also grew.

Demographers also say:

—Poverty will remain above the pre-recession level of 12.5 per cent for many more years. Several predicted that peak poverty levels — 15 per cent to 16 per cent — will last at least until 2014, due to expiring unemployment benefits, a jobless rate persistently above 6 per cent and weak wage growth.

—Suburban poverty, already at a record level of 11.8 per cent, will increase again in 2011.

—Part-time or underemployed workers, who saw a record 15 per cent poverty in 2010, will rise to a new high.

—Poverty among people 65 and older will remain at historically low levels, buoyed by Social Security cash payments.

—Child poverty will increase from its 22 per cent level in 2010.

Analysts also believe that the poorest poor, defined as those at 50 per cent or less of the poverty level, will remain near its peak level of 6.7 per cent.

"I've always been the guy who could find a job. Now I'm not," said Dale Szymanski, 56, a Teamsters Union forklift operator and convention hand who lives outside Las Vegas in Clark County. In a state where unemployment ranks highest in the nation, the Las Vegas suburbs have seen a particularly rapid increase in poverty from 9.7 per cent in 2007 to 14.7 per cent.

Szymanski, who moved from Wisconsin in 2000, said he used to make a decent living of more than $40,000 a year but now doesn't work enough hours to qualify for union health care. He changed apartments several months ago and sold his aging 2001 Chrysler Sebring in April to pay expenses.

"You keep thinking it's going to turn around. But I'm stuck," he said.

The 2010 poverty level was $22,314 for a family of four, and $11,139 for an individual, based on an official government calculation that includes only cash income, before tax deductions. It excludes capital gains or accumulated wealth, such as home ownership, as well as non-cash aid such as food stamps and tax credits, which were expanded substantially under President Barack Obama's stimulus package.

An additional 9 million people in 2010 would have been counted above the poverty line if food stamps and tax credits were taken into account.

Robert Rector, a senior research fellow at the conservative Heritage Foundation, believes the social safety net has worked and it is now time to cut back. He worries that advocates may use a rising poverty rate to justify additional spending on the poor, when in fact, he says, many live in decent-size homes, drive cars and own wide-screen TVs.

A new census measure accounts for non-cash aid, but that supplemental poverty figure isn't expected to be released until after the November election. Since that measure is relatively new, the official rate remains the best gauge of year-to-year changes in poverty dating back to 1959.

Few people advocate cuts in anti-poverty programs. Roughly 79 per cent of Americans think the gap between rich and poor has grown in the past two decades, according to a Public Religion Research Institute/RNS Religion News survey from November 2011. The same poll found that about 67 per cent oppose "cutting federal funding for social programs that help the poor" to help reduce the budget deficit.

Outside of Medicaid, federal spending on major low-income assistance programs such as food stamps, disability aid and tax credits have been mostly flat at roughly 1.5 per cent of the gross domestic product from 1975 to the 1990s. Spending spiked higher to 2.3 per cent of GDP after Obama's stimulus program in 2009 temporarily expanded unemployment insurance and tax credits for the poor.

The U.S. safety net may soon offer little comfort to people such as Jose Gorrin, 52, who lives in the western Miami suburb of Hialeah Gardens. Arriving from Cuba in 1980, he was able to earn a decent living as a plumber for years, providing for his children and ex-wife. But things turned sour in 2007 and in the past two years he has barely worked, surviving on the occasional odd job.

His unemployment aid has run out, and he's too young to draw Social Security.

Holding a paper bag of still-warm bread he'd just bought for lunch, Gorrin said he hasn't decided whom he'll vote for in November, expressing little confidence the presidential candidates can solve the nation's economic problems. "They all promise to help when they're candidates," Gorrin said, adding, "I hope things turn around. I already left Cuba. I don't know where else I can go."

By Hope Yen Associated Press

Economic Slowdown in developing nations

Emerging economies are being affected adversely by the European and US economic situations. 

DEVELOPING countries are increasingly being affected adversely by the economic recession in Europe and the slowdown in the United States.

The hope that major emerging economies like China, India and Brazil would continue to have robust growth, decoupling from Western economies and becoming an alternative engine of global growth, has been dashed by recent data showing that they are themselves weakening.

Just as during the 2008-2010 global crisis, a decline in exports caused by falling Western demand is the main way in which the developing countries are being hit.

Inflows of capital into developing countries have also slowed down, and a reversal to a new outflow situation may well take place. The lending conditions of banks in emerging economies have also deteriorated, according to a banking industry survey.

Recent reports confirm the slowdown in many major developing economies.

In China, growth of the gross domestic product fell to 7.6% in the second quarter of this year, denoting a continuous deceleration from 10.4% in 2010, 9.2% in 2011 and 8.1% in first-quarter 2012.

The IMF has lowered its growth projection for India to 6.1% for this year. This compares to 6.5% last year and 8.4% in the previous two years.

The Singapore economy contracted 1.1% in the second quarter over the previous quarter at an annualised rate, mainly due to manufacturing output falling by 6%.

For Malaysia, the growth rate for this year is projected to be 4.2% by the Malaysian Institute of Economic Research. This is lower than last year’s 5.1%, which had also slowed to 4.7% in the first quarter.

In Indonesia, the Central Bank said growth was slowing and projected this year’s rate to be 6.2%, compared with 6.5% last year (and 6.3% in the first quarter).

In South America, two of the largest economies are also facing decelerating growth prospects.

For Brazil, the government has lowered its growth projection for this year to 3% (from 4.5% earlier), but the IMF’s latest growth estimate is even lower at 2.5%. Growth last year was 2.7%; industrial production declined by 4.3% in the 12 months to May.

Argentina had one of the fastest growing economies in the world. Growth was 8.9% in 2011, and the average annual growth was 7.6% in 2003-2010.

But the economy contracted by 0.5% in the 12 months to May. Industrial production in June fell 4.4% on the year due mainly to a 31% decline in the auto sector.

In South Africa, growth in the first quarter was 2.7% over the previous quarter, which was down from the 3.2% growth of fourth-quarter 2011.

Last Friday, new World Bank President Jim Yong Kim warned that the debt crisis in Europe would hurt most regions in the world. He predicted that if a major European crisis developed, growth in developing countries could be cut by 4% or more.

Even if the eurozone crisis is contained, it could still reduce growth in most of the world’s regions by as much as 1.5%.

Also last week, the International Monetary Fund in its latest world economic outlook gave a downbeat picture of how developing countries were being affected adversely by the European and US economic situations.

It warned that the ability of governments worldwide to respond to the new slowdown had become limited. And while the withdrawal of capital from developing countries was not at critical levels, there could be problems for some if conditions deteriorated.

The prevailing view of prospects for developing economies has almost suddenly changed from their being emerging leaders of the global economy to being victims of the Western slowdown.

A paper by Yilmaz Akyuz, chief economist of the South Centre, shows that the theory of the “staggering rise of the South” had vastly exaggerated the developing countries’ decoupling from the economic fortunes or misfortunes of the developed countries.

Much of the high growth in developing countries in the past decade had been due to the favourable external conditions generated by Western countries.

High consumption growth in the US was a main basis for the high growth of manufactured exports from China and other East Asian countries, and these together enabled the boom in commodity prices that lifted growth in Africa and South America.

The boom in capital flows into major developing countries also helped to fuel their growth and covered the current deficits of several of them.

The 2008-09 global crisis slowed down developing countries’ export growth and reversed capital flows, but the strong anti-recession actions (fiscal stimulus, low interest rates and expansion of liquidity) in developed countries resulted in the resumption of export growth and capital inflows in developing countries.

However, with the developed countries ending their reflationary policies and switching to austerity budgets, with their low interest rates having little effect, recessionary conditions in Europe are now impacting adversely on developing countries.

With the positive conditions that supported the South’s rise no longer in place but instead turning negative, developing countries’ prospects have dimmed, prompting the need for a change in development strategy.

Meanwhile the Wall Street Journal of July 19 reported that lending conditions in emerging economies deteriorated in recent months due to the eurozone crisis.

According to a report of the Institute of International Finance, credit standards grew tighter in emerging-market banks around the world, while bad loans increased in the second quarter.

The results suggest trouble ahead for emerging economies, with banks in Asia and Latin America showing deeper caution, which can lead to weaker lending.

GLOBAL TRENDS 

By MARTIN KHOR newsdesk@thestar.com.my 

Corporate Lawyer charged with inside trading

KUALA LUMPUR: A corporate lawyer involved in almost all major corporate deals in the country has been charged in the Sessions Court here with seven counts of insider trading involving Sime Darby, UEM, VADS and Maxis shares.

Datuk E. Sreesanthan,(pix), 52, who has been practising for more than two decades, is the second high-profile figure to be charged this week after Datuk Seri Ahmad Zubair Murshid, who was brought to court by the Malaysian Anti-Corruption Commission.

Zubair, the former Sime Darby Bhd president and group chief executive officer, was charged on July 17 with two counts of committing criminal breach of trust over land in Sarawak, incurring losses of over RM100mil.

Sreesanthan appeared calm while sitting outside the courtroom on Friday for about 30 minutes before Securities Commission (SC) prosecutors determined which court to charge him in.

The lawyer, who was dressed in a black suit and checked shirt, claimed trial to the seven charges, read as three different cases to reflect the different shares involved and time frame in which they were alleged to have been committed.

Sreesanthan is accused of buying shares while in possession of information that was not generally available, which on becoming generally available, a reasonable person would expect to have a material effect on the price and value.

He allegedly bought the shares using insider information, which would have given him the benefit that the share price would change before that information became public.

The alleged offences occurred at Bursa Malaysia Securities Berhad, at Bukit Kewangan here between Oct 9, 2006 and April 27, 2008.

Under the first three charges, Sreesanthan is alleged to gave acquired 75,000 units of Sime Darby Berhad shares while in possession of insider information on the proposed acquisition of several real estate and plantation companies by Synergy Drive Sdn Bhd between Oct 9 and Nov 12, 2006.

In the next two charges, he is accused of insider information involving 250,000 units of Maxis Communication Bhd shares on the proposed conditional take-over by Binariang GSM Sdn Bhd to acquire all the voting shares in Maxis and Maxis' proposed privatisation between April 25 and 27, 2007.

Under the sixth and seventh charges, he is accused of buying 200,000 units of UEM World Berhad and 100,000 units of VADS Berhad shares while in possession of insider information on Feb 13 and Sep 18, 2008, respectively.

If convicted under the Securities Industry Act 1983 and Capital Market and Services Act 2007, Sreesanthan could be fined a minimum of RM1mil and jailed up to 10 years.

SC prosecutor DPP Rosmawar Rozain said the offences were non-bailable but urged the court to set it at RM500,000 for each case if it used its discretion to offer bail.

“The investigation into the case has taken some time and expense,” said Rosmawar, adding it was a serious offence and that the court should force Sreesanthan to surrender his passport.

Counsel M. Puravalen said the prosecution had not put forward any factor that his client was a possible flight risk.

He said his client was a family man holding a steady job in his law firm, and had been practising law for 23 years.

“The bail amount should not be excessive,” said Puravalen, who proposed bail be set at RM50,000 for each case.

The prosecution applied for a joint trial of the three cases but the defence asked for a deferred decision as it had not received instructions from Sreesanthan.

Sessions judge Jagjit Singh set bail at RM300,000 for all the charges and ordered Sreesanthan to surrender his passport.

He fixed Sept 20 for case management in three separate courts.

By QISHIN TARIQ The Star 21 July 2012

China pledges to work with ASEAN to safeguard peace in South China Sea

BEIJING: China pledged Friday to make joint efforts with the Association of Southeast Asian Nations (ASEAN) to safeguard regional peace and stability after the 10-member bloc issued a six-point statement on the South China Sea.

"The Chinese side is willing to work together with the ASEAN members to implement the Declaration on the Conduct of Parties in the South China Sea (DOC) comprehensively and effectively," Chinese Foreign Ministry spokesman Hong Lei said in response to a question on the ASEAN statement.

In the statement issued earlier on Friday, the ASEAN members reaffirmed their commitment to the "peaceful resolution of disputes" in the South China Sea. Analysts said the six-point principles were reached to make up for the lack of a customary communique after a foreign ministers' meeting last week.

In an unprecedented development, the 45th Foreign Ministers' Meeting of the ASEAN was not wrapped up with the release of a communique showcasing common ground.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Qu Xing, head of the China Institute of International Studies, told Xinhua that it was Vietnam and the Philippines that should be blamed for the failure to pass a communique last week.

"The two countries attempted to turn the disputes between them and China into a problem between China and ASEAN as a whole," he said, "which was unacceptable for the other members of the bloc."

"The Chinese side has noticed the ASEAN's statement on the South China Sea (on Friday)," Hong said, adding that the core problem of the South China Sea was the disputes over the sovereignty of the Nansha islands and the demarcation of the islands' adjacent waters.

"China has sufficient historical and jurisprudential evidence for its sovereignty over the Nansha islands and the adjacent waters," he added.

However, Hong said China is open to consultations with the ASEAN on the conclusion of a Code of Conduct in the South China Sea.

"(We) hope that all the parties will strictly abide by the DOC and create necessary conditions and atmosphere for the consultations," he said.

As a signatory to the United Nations Convention of the Law of the Sea (UNCLOS), China attaches importance to safeguarding the principles and mission of the Convention, said the spokesman.

Hong said UNCLOS is aimed to establish a legal order for the seas and oceans "with due regard for the sovereignty of all States," and it does neither serve as an international treaty to address disputes over territorial sovereignty between states nor as evidence used to judge over the disputes.

The countries concerned should address the disputes over the maritime demarcation in the South China Sea, after the land disputes have been resolved, in accordance with historical facts and all international laws including UNCLOS, he added.

"China attaches importance to its ties with the ASEAN," Hong said, adding the country is committed to promoting friendly neighborhood and reciprocal cooperation with the ASEAN to push ahead with the cooperation in East Asia with joint efforts.

The spokesman said China and ASEAN share common interests and responsibilities in keeping Asia's development and maintaining regional peace and stability against the backdrop of the ongoing international financial crisis.

"The two sides should continue to promote their strategic communication in pursuit of a reciprocal and win-win situation, with mutual respect and trust in mind as well as handle the relationship between the two sides from strategic and long-term perspective," he added.

 Related:

China to deploy military garrison in South China Sea

GUANGZHOU, July 20 (Xinhua) -- China's central military authority has approved to form and deploy a military garrison in the newly established city of Sansha.

Sources with the People's Liberation Army (PLA) Guangzhou Military Command said Friday that the Central Military Commission (CMC) had authorized it to form a garrison command in the city.Full story

ASEAN forum not proper platform to discuss South China Sea issue

BEIJING, July 11 (Xinhua) -- As the foreign ministers of the 27 participating parties of the ASEAN Regional Forum (ARF) meet in Phnom Penh on Thursday, many eye the talks as a platform to ease the tension over the South China Sea, which has flared up in recent months.

However, analysts say the attending parties are likely to be more interested in forging closer ties than focusing on differences that concern only a few members.Full story

Editor: Chen Zhi, Xinhua

Related post:
Asean has no reason to panic

Asean has no reason to panic

Asean is younger than its member nations, so teething problems as it continues to mature are no cause for alarm.

ASEAN’S set pieces following its meetings have become so predictable as to provoke panic when a blip in the set routine appears unexpectedly.

That happened with the anticipated joint communique following the ministerial meeting in Phnom Penh a week ago. This was the first time a communique was not issued, after disagreement over the text between the Philippines and host Cambodia on Manila’s territorial squabble with Beijing.

That was enough to set tongues wagging, pens wriggling and keyboards clacking about a presumed “turning point” in Asean and even speculation about its imminent demise.

Asean proceedings have traditionally been weighed down by diplomatic gobbledygook just because everyone expects such statements to be issued. What later happens in the conduct of member states, however removed from the spirit and content of the communiques, then becomes quite irrelevant.

Yet the substance of statements issued should be more important than the fact of issuing just any statement. After all, Asean is supposed to be more about political process than mere diplomatic procedure.

Therefore, not issuing a collective statement after this month’s pow wow among foreign ministers is better than issuing a meaningless statement just for the sake of issuing something. It makes no sense to produce a statement in the absence of a joint agreement about what it would say.

As it happened, not issuing a joint communique amounts to an indirect statement on the different positions taken by some members, in this case the hotly disputed claims on island territory between the Philippines (and to some extent Vietnam) and China.

Ironically, the Phnom Penh meeting was supposed to consolidate efforts at establishing an Asean community by 2015, as well as to reaffirm blossoming relations between Asean and China.

It may have failed at delivering either, but simply deviating from the norm by not perpetuating a scripted, choreographed and rehearsed custom regardless of circumstances is not a failure of Asean. Nonetheless, the apparent detour from the objectives of this year’s ministerial meeting was enough to turn surprise into shock for many.

Traditionally criticised for saying little and doing even less with boring predictability, Asean is suddenly seen as risking the unprecedented. Its critics should now make up their mind about the nature of their criticism, because they are beginning to contradict themselves.

The other irony concerns the Asean style itself. The regional organisation has long been assessed less by what it says in communiques than what it leaves unsaid, and understood less by what it does than what it obliquely skirts doing.

Thus going by its record, the decision not to issue a communique may be deemed doubly and traditionally Asean. Yet it was taken to be untypical of Asean.

Cynics predicting doom-and-gloom scenarios for Asean forget that its watchword has always been “resilience”, as supported by its near-half-century record. Asean is made of sterner stuff, to which its experience testifies.

But Asean is also not immune to the pitfalls of complacency. Failure to do what is needed now can escalate current challenges and lead to more problems in the future.

For what it is worth, Indonesian President Susilo Bambang Yudhoyono swiftly dispatched Foreign Minister Dr Marty Natalegawa to four Asean capitals, including Kuala Lumpur, to try to cobble together some kind of a belated joint communique.

That may be possible but unlikely, since foreign ministers who refused to be accommodating while together at an official meeting would be even less inclined to compromise when back home. Even if such a statement materialises, it would just be “in absentia” of the assembled ministers, now dispersed, and not a statement “posthumous” of Asean.

Meanwhile, news and commentary about the lack of a communique have overshadowed the issues behind it. And it is not only the absence of a communique that can be seen as untypical of Asean.

Manila and Hanoi had come into the meeting room after a recent diplomatic spat with China over competing territorial claims. Despite the ministerial meeting covering various other matters, the Philippines and Vietnam insisted that their problems with China be included in the text of the joint communique.

Cambodia, as host, refused as it saw this as unbecoming and inappropriate. Only half of the 10 Asean members have disputes over island territory with China, with the dispute in question over Scarborough Shoal/Huangyan Island involving only one Asean country, the Philippines.

Philippine Foreign Minister Albert del Rosario then openly accused his Cambodian counterpart Hor Namhong of “consistently defending China’s interest.” Point number two in being untypically Asean.

The ill will created extends beyond the scope of any Asean conference. Its import and impact have already spread beyond the few countries involved.

No country can claim victory or savour any sense of satisfaction from these developments, because they work to the detriment of all. There is also the additional risk of some countries misreading the situation to even worse effect.

China had a pie in the face when it began the conference, as an Asean dialogue partner, by celebrating the new priority of taking relations with Asean to greater heights. If it is seeking any consolation from a divided Asean, it will find itself gravely mistaken.

The Philippines is also finding that it has fewer “allies” in this imbroglio than it would have liked. Thailand had already warned it would not let bilateral differences with China upset regional ties with Beijing, while a caucus of retired diplomats in Indonesia criticised the Philippines for being “blunt” and “very un-Asean.”

The other Asean countries are not exactly behind Manila, and likewise some Filipino commentators. Even Vietnam, despite its inter-state disputes with China, has always had quieter, positive inter-party ties as fellow communist nations.

In contrast, the Philippines has only a treaty with the US. That can make matters worse through emboldening Manila in rash actions, or initiating major power conflict in the region.

Now President Benigno Aquino III has passed the handling of the issue from del Rosario to Ambassador Sonia Brady in Beijing to handle more diplomatically. A sense of realism may yet dawn after all.

In the meantime, changes in the region include some that question old ideological allegiances. Diplomats and policymakers need to be sensitive to such developments to respond accordingly.

Not only does Vietnam have serious differences with China, Myanmar may also begin to do so on separate bilateral matters. At the same time, Taiwan increasingly feels at one with China over claims on territory disputed by other countries, such as the one with the Philippines.

Beyond all the conflicting claims, some realities remain.

Asean is only 45 years old as a regional organisation in the global community of nations, so more differences between members are likely to appear in future. These should not be a problem as long as they are manageable.

Disputes are also best settled, or can only be settled, through negotiations or arbitration. Souring the atmosphere by making diplomacy difficult only makes things worse for everyone.

With China, it has been said that upping the ante only strengthens the hand of hardliners in Beijing. Most Asean countries are wise enough to steer clear of that approach, however much of a rush it may give some politicians playing to the gallery at home.

Behind The Headlines By BUNN NAGARA

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No one can stop China in South China Sea but China - Former Philippines National Security Adviser

No one can stop China from claiming “indisputable sovereignty” over the West Philippine Sea (South China Sea)—except China itself or the authoritative power of world opinion.

Short of war, a war nobody wants or would wish, even the United States can only delay or impede the fulfillment of China’s inordinate ambition to gain sovereign control of 3 million square kilometers of this great inland sea that is also Southeast Asia’s maritime heartland.

This is the strategic context of China’s assertive ambiguity in the West Philippine Sea (South China Sea).

Just now, Beijing can only bluster and intimidate, as it probes for weaknesses in its rival claimants.

But once China can translate its economic power into military capability credible enough to challenge that of the United States—when the “time is right” in China’s terms—then the geopolitical configuration in the Asia-Pacific region will change radically.

And time and circumstances favor China. Analysts say China is likely to become the world’s largest economy in a decade or so.

If they are right, the Philippines has only 10 short years to prepare for what is likely to become an interesting Asia-Pacific future.

Long-term security

Given the constraints under which it’s working, the administration of President Benigno Aquino has so far done all that could possibly be done, in the short term, to defend our nation’s interests in the West Philippine Sea.

But in this case it’s not enough to deal with the immediate problem. Our nation’s long-term security hangs in the balance.

And to ensure our safety, we must look at the root of our nation’s security, which lies in our people—in everyone of us and nobody else.

If our country is to prevail in any challenge, if the Philippines is to become worthy of respect as a sovereign nation, we must first of all enable our people to become effective wealth creators.

We must make our country rich enough to enable us to acquire the means to defend our nation’s interests, to protect our people’s dignity and honor.

Nationhood infrastructure

To carry out the government’s strategies, policies, plans and programs to grow and develop the nation, we must strive urgently to create the four conditions necessary for growth and development.

Let us make no mistake, without these, the nation can hardly enforce its Constitution and its laws, and no development plan can succeed:

1. We must come to terms with ourselves. We must build among us the infrastructure of nationhood. We must be able to answer the basic question of who we are.

We must live the core values our forebears fought and died for: Dignity, honor, freedom, justice, self-determination, hard work, discipline, tolerance, mutual caring and compassion.

We must become a people at peace with themselves and with the world.

There is nothing our people cannot accomplish, if our identity and the goals we seek are articulated in terms of the core values taught us by our heroes and martyrs.

These core values define what is right or wrong for our people. They guide us, like our heroes and martyrs, to live only when it is right to live, and to die only when it is right to die.

2. No matter what it takes, we must end our internal wars. Our radical insurgency is kept alive by our grievous inequality and the elemental injustice of mass poverty. And both are caused by corruption and misgovernment.

The same is true of our separatist conflict in Mindanao. There popular frustrations are worsened by rivalries over land and livelihood, and the situation is complicated by ethnic and religious enmities.

3. We must complete all the land and nonland reforms we still need to do. Not only will their completion make rebellion, separatism and mutiny irrelevant but will also accelerate our nation’s growth. And, finally, it will unite our people.

4. We must transfer the power of the few over the state to the people as citizens. In the World Bank’s view, we are a country where state policies and their implementation serve not the common good but those of special interests.

The capture of the state and its regulatory agencies by vested interest groups has made our economy the least competitive among comparable economies in East Asia.

In sum, we must put our house in order. We must level our popular playing field to grow and develop the nation—and so enable our people to surmount any challenge.

No luxury of time

As we create the four conditions necessary for growth and development, we must also carry out our development plans. Given the uncertainties building up in East Asia, we do not have the luxury of time.

It is the Chinese people’s historic sense that is driving their country’s rise. They count their recovery from generations of humiliation at the hands of the great powers as lasting 150 years starting from the initial European effort to open up China around 1800.

In 1949, Mao Zedong proclaimed China had stood up. But China began to recover economically only after Deng Xiaoping’s reforms (1978). In three and a half decades, China has become the world’s second largest economy.

We, too, must tap into our people’s sense of nationality—and do no less. By creating the four conditions necessary for growth and development that I cited above, and by simultaneously carrying out the government’s development plans, we can change our country—we can modernize it without leaving anyone behind—during the next 10 years.

By that time, we will also have nurtured the inclusive institutions that will sustain our people’s capacities for wealth creation.

No primrose paths

Let us not delude ourselves. There are no short cuts—no primrose paths—to growth and development. We must never give up even if our country’s rise takes 150 years or more.

We have no choice. The alternative is too dire to contemplate.

We must work together to prevent the situation developing that reduces our country into a tributary, a vassal, a province of a great power.

Those who sacrificed and died for us and for generations yet to come will never forgive us if we fail to summon the courage and the will to take the radical steps toward the Filipino future: To deliberately put in place the four conditions necessary for growth and development without delay.

By: Jose T. Almonte
Former National Security Adviser

China launches Sansha City Maritime management in South China Sea

Sansha City to administer South China Sea

HAIKOU: Maritime management has begun in the newly established city of Sansha in the South China Sea, as local Chinese authorities hope to enhance maritime safety there and protect the environment.

 The building on Yongping Island will be home to the Sansha city government. [File photo]

The State Council, or China's cabinet, approved the establishment of Sansha, a prefectural-level city in south China's Hainan province, to administer the Xisha (Paracels) , Zhongsha (Middles Sands) and Nansha (Spratlys) islands and their surrounding waters in the South China Sea on June 21.



"We began maritime management there soon after the State Council's decision was made," a spokesman with the Hainan Maritime Safety Administration said Thursday.

Maritime personnel are working to build infrastructure, buoy tenders, supply bases, light stations and radio stations in order to enhance maritime supervision and rescue capabilities, the spokesman said.

Maritime authorities are also studying sea travel routes in the area and considering introducing new laws to regulate traffic, as Sansha will develop its own tourism industry in the future and receive more ships, he said.

In addition, the Hainan Maritime Safety Administration is now researching the disposal of waste and pollutants and the supervision of yachts in an effort to keep a clean marine environment, the spokesman added.

"We are also planning to cruise regularly in the area in the future and set up a daily cruise mechanism when conditions are ripe," he said.

China on Tuesday set up an organizing committee for the legislative body of Sansha, officially beginning the formation of the government of the newly established city.

The government seat of Sansha will be stationed on Yongxing Island, part of the Xisha Islands.

Sansha administers over 200 islets, sandbanks and reefs in the Xisha, Zhongsha and Nansha islands.

China said it first discovered and named the reefs, islets and surrounding waters of Xisha, Zhongsha and Nansha islands. In 1959, it became the first country to set up an administrative office to exercise sovereignty over the area.

By Lu Hui. Xinhua

Mayor elected in China's newly established Sansha city

  
Representatives pose for group pictures after the first session of the first Sansha Municipal People's Congress held on Yongxing Island, the government seat of Sansha City, in south China's Hainan province, July 23, 2012. Forty-five deputies to the municipal people's congress attended the first session of the first Sansha Municipal People's Congress and cast their votes. Xiao Jie was elected the first mayor of the newly established Sansha city Monday afternoon. (Xinhua/Hou Jiansen)
 
YONGXING ISLAND, Hainan, July 23 (Xinhua) -- The newly established city of Sansha in the South China Sea elected its first mayor Monday afternoon.

Xiao Jie, 51, head of the Hainan Provincial Agriculture Department, was elected mayor in the first session of the first Sansha Municipal People's Congress held on Yongxing Island, the government seat of the city.

Xiao was also appointed secretary of the Sansha Municipal Committee of the Communist Party of China (CPC).

Fu Zhuang, 56, deputy director of Hainan Provincial Civil Air Defence Office, was elected director of the standing committee of Sansha Municipal People's Congress, the city's legislative body.

The legislative conference also elected three deputy mayors, head of the city's intermediate people's court and procuratorate. It also elected another five members of the standing committee of the Sansha Municipal People's Congress.

"It's a great honor to be the first mayor of Sansha, and it's also a brand new mission, challenge and test for me," said Xiao.

The first Sansha municipal government will be devoted to administrative management, economic development, people's livelihoods and environment protection in the coming five years, Xiao said.
The deputies and members of the standing committee of the municipal People's Congress should make positive contributions to the management, development and protection of the islands as well as the sea waters surrounding Xisha, Zhongsha and Nansha, said Fu.

Forty-five deputies to the municipal people's congress attended the first session of the first Sansha Municipal People's Congress and cast their votes.

The deputies, divided into groups from the Xisha, Nansha and Zhongsha islands, were elected Saturday by 1,100 residents from the islands.

The State Council, or China's cabinet, in June approved the establishment of Sansha, a prefectural-level city in south China's Hainan province to administer the Xisha, Zhongsha and Nansha islands and the surrounding waters in the South China Sea.

China's central military authority has approved the formation and deployment of a military garrison in Sansha.

Sources with the People's Liberation Army Guangzhou Military Command said Friday that the Central Military Commission had authorized it to form a garrison command in the city.

Yongxing Island is part of the Xisha Islands.