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Xi’s Power Play Foreshadows Historic Transformation of How China Is Ruled

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Party insiders say president wants to remain in office after his second term, breaking succession conventions.

BEIJING— Jeremy Page and Lingling Wei report: China’s Communist Party elite was craving a firm hand on the tiller when it chose Xi Jinping for the nation’s top job in 2012. Over the previous decade, President Hu Jintao’s power-sharing approach had led to policy drift, factional strife and corruption.

The party’s power brokers got what they wanted—and then some.

Four years on, Mr. Xi has taken personal charge of the economy, the armed forces and most other levers of power, overturning a collective-leadership system introduced to protect against one-man rule after the death of Mao Zedong in 1976.

Shattering old taboos, Mr. Xi has targeted party elders and their kin in an antigraft crusade, demanded fealty from all 89 million party members, and honed a paternalistic public image as Xi Dada, or Big Papa Xi.

Now, as he nears the end of his first five-year term, many party insiders say Mr. Xi is trying to block promotion of a potential successor next year, suggesting he wants to remain in office after his second term expires in 2022, when he would be 69 years old.

Mr. Xi, who is president, party chief and military commander, “wants to keep going” after 2022 and to explore a leadership structure “just like the Putin model,” says one party official who meets regularly with top leaders. Several others with access to party leaders and their relatives say similar things. The government’s main press office declined to comment for this article, and Mr. Xi couldn’t be reached for comment.

[Read the full story here, at WSJ]

Mr. Xi’s efforts to secure greater authority may help ensure political stability in the short run, as an era-defining economic boom starts to falter. But they risk upending conventions developed since Mao’s death to allow flexibility in government and ensure a regular and orderly transition of power.

Concern is rising among China’s elite that the nation is shifting toward a rigid form of autocracy ill-suited to managing a complex economy. China’s array of challenges includes weaning the economy off debt-fueled stimulus spending, breaking up state monopolies and cleaning up the environment.

“His dilemma is that he can’t get things done without power,” says Huang Jing, an expert on Chinese politics at the National University of Singapore. “He feels the need to centralize, but then he risks undermining these institutions designed to prevent a very powerful leader becoming a dictator.”

Chinese President Xi Jinping, left, and Premier Li Keqiang arrived for the opening session of the National People's Congress in March.
Chinese President Xi Jinping, left, and Premier Li Keqiang arrived for the opening session of the National People’s Congress in March. Photo: Agence France-Presse/Getty Image

Mr. Xi’s supporters say he still faces resistance within the party, and needs to modernize leadership structures to confront the slowing economy and a hostile West.

At a meeting of 348 party leaders in October that granted Mr. Xi another title—“core” leader—he railed against indiscipline and warned of senior officials who “lusted for power, feigned compliance and formed factions and gangs.”

Since then, many party members have signed written pledges of “absolute loyalty.” In a speech in October, the party chief of Henan province, Xie Fuzhan, hailed Mr. Xi as a “great leader”—words usually reserved for Mao.

[Read the more here, at WSJ]

Hours before Donald Trump’s election victory, China officially launched its own convoluted process for selecting a new national leadership team, to be unveiled at a twice-a-decade party congress next fall. Up to five of the seven members of the Politburo Standing Committee, China’s top leadership body, are due to retire.

Only Mr. Xi and Premier Li Keqiang would remain if the party observes the precedent, established in 2002, that leaders over age 67 step down. Read the rest of this entry »

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As Yuan Weakens, Chinese Households Rush to Open Foreign Currency Accounts

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Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad.

SHANGHAI: Zhang Yuting lives and works in Shanghai, has only visited the United States once, and rarely needs to use foreign currency. But that hasn’t stopped the 29-year-old accountant from putting a slice of her bank savings into the greenback.

“Expectations of capital flight are clear. I might exchange more yuan early next year, as long as I’ve got money.”

She is not alone. In the first 11 months of 2016, official figures show that foreign currency bank deposits owned by Chinese households rose by almost 32 per cent, propelled by the yuan’s recent fall to eight-year lows against the dollar.

The rapid rise – almost four times the growth rate for total deposits in the yuan and other currencies as recorded in central bank data – comes at a time when the yuan is under intense pressure from capital outflows.

The outflows are partially a result of concerns that the yuan is going to weaken further as US interest rates rise, and because of lingering concerns about the health of the Chinese economy.

US President-elect Donald Trump’s threats to declare China a currency manipulator and to impose punitive tariffs on Chinese imports into the US, as well as tensions over Taiwan and the South China Sea, have only added to the fears.

“Expectations of capital flight are clear,” said Zhang, who used her yuan savings to buy US$10,000 this year. “I might exchange more yuan early next year, as long as I’ve got money.”

Household foreign currency deposits in China are not huge compared to the money that companies, banks and wealthy individuals have been directing into foreign currency accounts and other assets offshore.

All up, households had US$118.72 billion of foreign money in their bank accounts at the end of November, while total foreign currency deposits were US$702.56 billion.

But the high growth rate in the household forex holdings are symbolic of a growing headache for the government as it struggles to counter the yuan’s weakness.

Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad. Read the rest of this entry »


‘Show Me on the Drone Doll Where China Touched You’

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China returns seized U.S. drone

Beijing has returned a U.S. underwater drone seized last week in the South China Sea by a Chinese Navy vessel after “friendly” talks between the two countries, China’s Defense Ministry said in a short statement posted to its website Tuesday.

“After friendly consultations between the Chinese and U.S. sides, the handover work for the U.S. underwater drone was smoothly completed in relevant waters in the South China Sea at midday on Dec. 20,” the statement said.

The Pentagon confirmed the handover, but criticized the Chinese Navy over the move.

“The incident was inconsistent with both international law and standards of professionalism for conduct between navies at sea,” Pentagon spokesman Peter Cook said in a statement. “The U.S. has addressed those facts with the Chinese through appropriate military channels, and have called on Chinese authorities to comply with their obligations under international law.”

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The drone was scooped up by the Chinese Navy in the strategic waterway on Thursday in a row that also drew in U.S. President-elect Donald Trump and further stoked tensions between the two rivals.

The U.S. said the unmanned underwater vehicle (UUV) had been operating in international waters.

The Chinese Defense Ministry said Saturday that a Chinese naval lifeboat had taken the drone “in order to prevent the device from causing harm to the safety of navigation and personnel of passing vessels.”

The Chinese side had criticized what it said were U.S. moves to dramatize the seizure and accused the U.S. of “frequently” dispatching vessels and aircraft to carry out “close-in reconnaissance and military surveys within Chinese waters.”

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“China resolutely opposes these activities, and demands that the U.S. side should stop. … China will continue to be vigilant against the relevant activities on the U.S. side, and will take necessary measures in response,” Yang said.

The incident drew criticism from Trump, who takes office Jan. 20, and has vowed to deal with Beijing in a more hard-line manner.

Misspelling “unprecedented,” Trump tweeted Saturday: “China steals United States Navy research drone in international waters — rips it out of water and takes it to China in unpresidented act.”

He later reissued the tweet, correcting the spelling to “unprecedented.”

After China said it would return the drone, Trump spokesman Jason Miller tweeted a link to a news story detailing the announcement, saying: “@realdonaldtrump gets it done.”

Despite the apparent claim that Trump played a role in securing the drone’s return, there has been no evidence that this was the case.

Nearly 11 hours after his first China tweet, Trump delivered another dig at China. Read the rest of this entry »


Chinese Rush to Open Foreign Currency Accounts

A teller counts US dollars and Chinese 100-yuan notes at a bank in Hefei, east China's Anhui province on January 16, 2011

The biggest monthly rise in the foreign currency account deposits so far this year came in January when the annual $50,000 conversion quota was reset and individuals rushed to change yuan into dollars.

SHANGHAI  – Winni Zhou and John Ruwitch report: Zhang Yuting lives and works in Shanghai, has only visited the United States once, and rarely needs to use foreign currency. But that hasn’t stopped the 29-year-old accountant from putting a slice of her bank savings into the greenback.

“Expectations of capital flight are clear. I might exchange more yuan early next year, as long as I’ve got money.”

— Zhang Yuting

She is not alone. In the first 11 months of 2016, official figures show that foreign currency bank deposits owned by Chinese households rose by almost 32 percent, propelled by the yuan’s recent fall to eight-year lows against the dollar.

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“Banks under pressure to minimize outflows are also offering deals and giveaways for people who voluntarily convert their forex savings back into yuan. Bank of Communications is entering any customer who changes more than $1,000 into yuan the chance to be part of a lucky draw, with various prizes, such as portable printers.” 

The rapid rise – almost four times the growth rate for total deposits in the yuan and other currencies as recorded in central bank data – comes at a time when the yuan is under intense pressure from capital outflows. The outflows are partially a result of concerns that the yuan is going to weaken further as U.S. interest rates rise, and because of lingering concerns about the health of the Chinese economy.

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“The more you see people converting, reflected in foreign currency deposits in the banking segment, it means obviously there’s pressure on the local currency.”

— Raymond Yeung, chief economist for Greater China at ANZ

U.S. President-elect Donald Trump’s threats to declare China a currency manipulator and to impose punitive tariffs on Chinese imports into the U.S., as well as tensions over Taiwan and the South China Sea, have only added to the fears.

“Regulators have a lot of control over what happens to those deposits, and they can control the rate of inflows into onshore FX deposits.”

“Expectations of capital flight are clear,” said Zhang, who used her yuan savings to buy $10,000 this year. “I might exchange more yuan early next year, as long as I’ve got money.”

Household foreign currency deposits in China are not huge compared to the money that companies, banks and wealthy individuals have been directing into foreign currency accounts and other assets offshore. All up, households had $118.72 billion of foreign money in their bank accounts at the end of November, while total foreign currency deposits were $702.56 billion.

But the high growth rate in the household forex holdings are symbolic of a growing headache for the government as it struggles to counter the yuan’s weakness.

Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad.

More measures may be in the cards. Read the rest of this entry »


[VIDEO] Syaru Shirley Lin Discusses Her Book ‘Taiwan’s China Dilemma’

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[Order the book “Taiwan’s China Dilemma: Contested Identities and Multiple Interests in Taiwan’s Cross-Strait Economic Policy” from Amazon.com]


Michael Auslin: China Drone Seizure Throws Down Gauntlet to Obama and Trump

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Michael Auslin is the author of The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region,” which will be published by Yale in January. The opinions expressed in this commentary are his.

michael-auslin-headshotMichael Auslin writes: In seizing an unmanned, underwater US Navy drone in international waters off the Philippines on Thursday, China has thrown down a North Korean-style gauntlet to both the outgoing Obama Administration and the incoming Trump team.

While media reports are still sketchy, it appears that a Chinese naval vessel was close enough to a US oceanographic survey ship to launch a small boat to grab the scientific drone as the American vessel was preparing to retrieve it. That would mean a ship-to-ship level of intimidation, and not a snatch-and-grab action in isolated waters.

Like in 2009, when the Chinese harassed the USNS Impeccable in the South China Sea, the latest action comes against a similarly unarmed US research vessel. This time, however, the Chinese flagrantly flouted international law, and unlawfully seized US property while possibly endangering the safety of US military personnel on the high seas.

[Order Michael Auslin’s book “The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region” from Amazon.com]

Such a dramatic upping of the ante is out of character for China, and American officials should understand that Beijing now appears willing to take increasingly risky actions. This latest provocation may well be at least partly in response to President-elect Trump’s recent comments on China, Taiwan and the One-China Policy.

At the same time, the latest challenge comes on the heels of steadily degrading relations between the Obama Administration and China, including news that Beijing is rapidly militarizing its newly built islands located near the Philippines. On these reclaimed shoals, China has emplaced anti-aircraft and anti-missile systems in what can also be a precursor to fielding offensive weapons capabilities.

[Read the full story here, at CNN.com]

In response, senior US military leaders have made forthright statements about America’s national interest in maintaining open and uncontested sea lanes. These comments have put Beijing on notice that Washington will not sit idly by if China appears be upending decades of peaceful development in Asia’s waters. Read the rest of this entry »


Kissinger Dismisses Concerns About Tillerson, One China Policy

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Kissinger himself negotiated the One China policy, which recognizes the Chinese government in Beijing, as opposed to Taiwan. 

Addy Bairdaddy-baird-staff-photo-squarespace reports: Former secretary of state Henry Kissinger dismissed concerns Wednesday about President-elect Donald Trump’s nominee for secretary of state, ExxonMobil CEO Rex Tillerson, who has been criticized for his close ties with Russian President Vladimir Putin.

 “I hope and I am optimistic that the cooperative way will prevail… Keep in mind that if China and America are in conflict, then the whole world will be divided.”

“I pay no attention to this argument that he is too friendly with Russia,” Kissinger said at an event in Manhattan. “He would be useless at the head of Exxon if he was not friendly with Russia… I don’t hear those concerns at all.”

Kissinger was asked about Tillerson at an event put on by the Committee of 100, an organization that works to advance Chinese-American relations, where the former secretary talked about the future of U.S.-Chinese relations under Trump.

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“I pay no attention to this argument that he is too friendly with Russia. He would be useless at the head of Exxon if he was not friendly with Russia… I don’t hear those concerns at all.”

But Kissinger walked a fine line in talking about Tillerson, joking when he was asked about the appointment that he didn’t “come to commit suicide,” but that he “sympathized” with Trump’s decision.

“Nobody can meet every single qualification for secretary of state,” Kissinger said. “I think it’s a good appointment.”

Reflecting on Trump’s developing relationship with China, Kissinger said he is optimistic about the coming administration.

[Read the full story here, at POLITICO]

“[We have to decide] whether to attempt to deal cooperatively or confrontationally” with China, Kissinger said. “I hope and I am optimistic that the cooperative way will prevail… Keep in mind that if China and America are in conflict, then the whole world will be divided.”

Earlier this month, Trump became the first U.S. president or president-elect to speak with the leader of Taiwan since 1979. And he suggested this past weekend that the U.S. shouldn’t have to be “bound” by the “One China” policy that American leaders have stood by for decades. Those comments “seriously concernedChina’s Foreign Ministry, its spokesperson said Monday. Read the rest of this entry »


OH YES THEY DID: As Expected, China Installs Weapons Systems on Artificial Islands

U.S. Navy leadership and senior officers from the Chinese People's Liberation Army (Navy) meet for lunch aboard the Chinese destroyer Harbin (DDG 112) marking the conclusion of a U.S.-China counter piracy exercise between Harbin and the guided-missile destroyer USS Mason (DDG 87). Mason is deployed in support of maritime security operations and theater security cooperation efforts in the U.S. 5th Fleet area of responsibility. (U.S. Navy photo by Mass Communication Specialist 1st Class Gary M. Keen/Released)

The Asia Maritime Transparency Initiative at the Center for Strategic and International Studies said its findings come despite statements by the Chinese leadership that Beijing has no intention to militarize the islands in the strategic trade route, where territory is claimed by several countries.

WASHINGTON (Reuters) –David Brunnstrom reports: China appears to have installed weapons, including anti-aircraft and anti-missile systems, on all seven of the artificial islands it has built in the South China Sea, a U.S. think tank reported on Wednesday, citing new satellite imagery.

“It now seems that these structures are an evolution of point-defense fortifications already constructed at China’s smaller facilities on Gaven, Hughes, Johnson, and Cuarteron reefs.”

The Asia Maritime Transparency Initiative (AMTI) at the Center for Strategic and International Studies said its findings come despite statements by the Chinese leadership that Beijing has no intention to militarize the islands in the strategic trade route, where territory is claimed by several countries.

DigitalGlobe overview imagery from June 3rd, 2016 of the Fiery Cross Reef located in the South China Sea. Fiery Cross is located in the western part of the Spratly Islands group. Photo DigitalGlobe via Getty Images.

“These gun and probable CIWS emplacements show that Beijing is serious about defense of its artificial islands in case of an armed contingency in the South China Sea. Among other things, they would be the last line of defense against cruise missiles launched by the United States or others against these soon-to-be-operational air bases.”

AMTI said it had been tracking construction of hexagonal structures on Fiery Cross, Mischief and Subi reefs in the Spratly Islands since June and July. China has already built military length airstrips on these islands.

“This is the first time that we’re confident in saying they are anti-aircraft and CIWS emplacements. We did not know that they had systems this big and this advanced there. This is militarization. The Chinese can argue that it’s only for defensive purposes, but if you are building giant anti-aircraft gun and CIWS emplacements, it means that you are prepping for a future conflict.”

“It now seems that these structures are an evolution of point-defense fortifications already constructed at China’s smaller facilities on Gaven, Hughes, Johnson, and Cuarteron reefs,” it said citing images taken in November and made available to Reuters.

“This model has gone through another evolution at (the) much-larger bases on Fiery Cross, Subi and Mischief reefs.”

Satellite images of Hughes and Gaven reefs showed what appeared to be anti-aircraft guns and what were likely to be close-in weapons systems (CIWS) to protect against cruise missile strikes, it said.

Images from Fiery Cross Reef showed towers that likely contained targeting radar, it said.

AMTI said covers had been installed on the towers at Fiery Cross, but the size of platforms on these and the covers suggested they concealed defense systems similar to those at the smaller reefs.

“These gun and probable CIWS emplacements show that Beijing is serious about defense of its artificial islands in case of an armed contingency in the South China Sea,” it said. Read the rest of this entry »


China Complains After President-Elect Trump Speaks to Taiwan Leader Tsai Ing-wen

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Beijing (AFP) – China protested to Washington Saturday after US President-elect Donald Trump broke with decades of foreign policy and spoke with the president of Taiwan.

“It was not immediately clear whether Trump’s telephone call with Tsai Ing-wen marked a deliberate pivot away from Washington’s official ‘One China’ stance, but it fuelled fears he is improvising on international affairs.”

It was not immediately clear whether Trump’s telephone call with Tsai Ing-wen marked a deliberate pivot away from Washington’s official “One China” stance, but it fuelled fears he is improvising on international affairs.

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Xiamen University

Zhang Wensheng, of Xiamen University, was more circumspect, dismissing Trump’s use of the term ‘president’ as ‘personal greetings’ that ‘do not reflect a political position whatsoever’.

China regards self-ruling Taiwan as part of its own territory awaiting reunification under Beijing’s rule, and any US move that would imply support for independence would likely trigger fury.

[ALSO SEE – Commentary: Trump, Taiwan and China – punditfromanotherplanet]

During Friday’s discussion, Trump and Tsai noted “the close economic, political and security ties” between Taiwan and the United States, according to the president-elect’s office.

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Even before the call with Taiwan, Trump’s unorthodox diplomatic outreach had raised eyebrows, and, for some critics, in extending his hand to Taiwan, Trump crossed a dangerous line.

“President-elect Trump also congratulated President Tsai on becoming President of Taiwan earlier this year,” it said.

Beijing on Saturday offered a robust response.

“We have already made solemn representations about it to the relevant US side,” the Chinese foreign ministry said.

“There is no change to our longstanding policy on cross-Strait issues. We remain firmly committed to our ‘One China’ policy,” she added. “Our fundamental interest is in peaceful and stable cross-Strait relations.”

— National Security Council spokeswoman Emily Horne

“It must be pointed out that there is only one China in the world. Taiwan is an inalienable part of China’s territory,”ObaMao

China also urged “relevant parties in the US… to handle Taiwan-related issues with caution and care to avoid unnecessarily interfering with the overall situation of Sino-US relations.”

Trump, who had come under fire for the telephone call, hit back — on Twitter.

“Interesting how the U.S. sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call,” Trump tweeted.

– ‘How wars start’ –

President Barack Obama’s White House said the outgoing US administration had not changed its stance on China-Taiwan issues.

“There is no change to our longstanding policy on cross-Strait issues,” National Security Council spokeswoman Emily Horne told reporters. Read the rest of this entry »