Der wöchentliche Presserückblick der Schweizer Botschaft in der VR China
The Weekly Press Review of the Swiss Embassy in the People's Republic of China
La revue de presse hebdomadaire de l'Ambassade de Suisse en RP de Chine
  1-5.7.2013, No. 482  
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DPRK and South Korea


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Foreign Policy

China, ASEAN to hold meetings on South China Sea in September (Xinhua)
China and the Association of Southeast Asian Nations (ASEAN) will hold senior officials' meetings in September in China to push forward consultations over the key documents related to dispute management on the South China Sea, foreign ministers said in a joint press release on Sunday. The meetings are the 6th Senior Officials' Meeting and the 9th Joint Working Group on the implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC). They will have in-depth exchange of views on the full and effective implementation of the DOC and enhance maritime cooperation, and "have the official consultations on the COC within the framework of the implementation of the DOC." China and ASEAN signed the DOC in 2002, outlining the most important principles in the management of disputes on the South China Sea. They achieved consensus recently to push for consultations to develop a more detailed Code of Conduct in the South China Sea (COC). The foreign ministers at a meeting in Brunei on Sunday said they reiterated "the need to steadily move towards the conclusion of a COC on the basis of consensus." Speaking at a press conference after the meeting, Chinese Foreign Minister Wang Yi said that China is willing to work together with the ASEAN nations to push forward the process of developing a code of conduct from the declaration. "The commitment to developing a COC is part of the DOC. This is a continual, gradual and deepening process. You can't separate them from each other," he said. "You can't have a COC without a DOC." Wang said China has fully complied with the principles it committed to under the DOC over the past years. […] He also stressed that the overall peace and security has been safeguarded on the South China Sea. "The differences on the South China Sea are not an issue between China and the whole of ASEAN. […]" he said. The few individual countries that go against the prevailing trend of peace and stability on the South China Sea will not have the support of the majority of nations, he added. ^ top ^

China agrees to hold talks on 'code of conduct' in disputed waters (SCMP)
China has agreed to hold formal talks with Southeast Asian nations on a plan to ease maritime tensions as the Philippines accused it of causing "increasing militarisation" of the South China Sea, one of Asia's naval flashpoints. The rebuke by Philippine Foreign Minister Albert del Rosario yesterday at a regional summit in Brunei came a day after China's state media warned of an inevitable "counterstrike" against the Philippines if it continued to provoke Beijing. Friction between China and the Philippines over disputed territories has surged since last year due to several naval stand-offs as China asserts its vast claims over the oil and gas rich sea. The heated rhetoric came as both China and the 10-member Association of Southeast Asian Nations (Asean) claimed progress in efforts to agree to a mechanism aimed at defusing naval tensions. China agreed to hold "official consultations" on a proposed Code of Conduct (CoC) governing naval actions at a meeting with Asean in China planned for September, a step that Thailand's foreign minister hailed as "very significant". The two sides had already agreed to hold the foreign ministers' meeting, which will follow a special Asean ministers' gathering on the South China Sea issue in Thailand in August. [But Foreign Minister Wang Yi] stressed that any progress on the new framework would be dependent on countries following a confidence-building "declaration of conduct" agreed in 2002 which it accuses the Philippines of violating. […] Del Rosario said the "massive" presence of Chinese military and paramilitary ships at the Second Thomas shoal and at another reef called the Scarborough Shoal was a threat to regional peace. "The statement on counterstrike is an irresponsible one. We condemn any threats of use of force," Del Rosario told reporters following a meeting of Asean foreign ministers. He said the ministers had discussed China's ongoing "illegal" occupation of the Scarborough Shoal, which China calls Huangyan Island. ^ top ^

China, Russia to hold joint military drills (Xinhua)
China and Russia will hold two joint military drills in the coming two months, military officials from both countries said here Monday. Fang Fenghui, chief of the General Staff of the Chinese People' s Liberation Army (PLA), together with his Russian counterpart Valery Gerasimov, ratified relevant documents and announced the decision at a joint press conference. Fang, who is also a member of the Central Military Commission, is paying an official visit to Russia. According to the two officials, Chinese and Russian armed forces will hold "Joint Sea-2013" drill in Peter the Great Bay, Sea of Japan from July 5 to July 12, and China-Russia joint anti- terrorism military drill code-named Peace Mission-2013 in Russia's Chelyabinsk from July 27 to August 15. The joint drills are not targeting any third party, and meant to strengthen cooperation between the two armed forces in military training, enhance their capability in coordinating military operations, so that they can play a positive role in safeguarding regional security and stability, Fang said. In a separate meeting with Russian Defense Minister Sergei Shoigu, Fang praised the good momentum of relationship between the two armed forces and their fruitful cooperation. China, together with Russia, is willing to enhance high-level mutual visits, professional and personnel exchanges as well as joint exercises between the two armed forces, so as to push forward bilateral military ties, Fang said. Shoigu, for his part, called for closer military exchanges and coordination between the two close neighbors and strategic partners in the context of new challenges facing regional and global peace and stability. ^ top ^

China refutes Philippines' accusations of militarizing South China Sea (Xinhua)
Foreign Ministry spokeswoman Hua Chunying on Monday refuted the Philippines' accusations that China's military build-up threatens peace and security in the South China Sea. Hua made the remarks when asked to comment on the remarks Philippine Foreign Secretary Albert Del Rosario made during the foreign ministers' meeting of the Association of Southeast Asian Nations (ASEAN) on Sunday. […] Hua said China has indisputable rights over, and interests in, the Nansha Islands and their surrounding waters, and it will unswervingly safeguard its sovereignty, rights and interests. She reaffirmed that China's position on safeguarding the peace and stability of the South China Sea is also steadfast. The recent tensions in the South China Sea were not caused by China, said Hua, citing facts of harassment of Chinese fishermen by the Philippine military vessels last year as well as the Philippines' illegal occupation of the Ren'ai Reef. She recalled how a Philippine warship illegally landed on a beach of the Ren'ai Reef of China's Nansha Islands in 1999, claiming it was stranded. Since then, China has repeatedly demanded the Philippines to tow away the warship, but the Philippine side has cited a lack of "component parts" for its failure to drag away the ship, said the spokeswoman. She stressed that the Philippine ship's illegal landing on the Ren'ai Reef does not justify the Philippines' illegal occupation of the reef. […] It is reasonable and legitimate for the Chinese side to respond to a series of provocations from the Philippine side on China's territorial sovereignty and maritime rights and interests, said Hua. China has sufficient sincerity and patience to resolve relevant disputes with parties concerned through dialogues and negotiation, she said, adding that if any claimant insists on confrontation, there is no way out of it. ^ top ^

Tokyo warned not to resort to 'empty talk' (People's Daily)
Beijing on Monday urged Tokyo not to engage in empty talk about "dialogue" and to stop infringing on China's territorial sovereignty, after the Japanese prime minister accused China of setting "certain conditions" for a summit between the two sides. The Japanese government and right-wing forces have been beefing up their rhetoric and actions around the Diaoyu Islands issue. Observers said right-wing forces in Japan were flaring up the dispute to push politicians to a more conservative stance before the country's upper house election, which is scheduled for July 21. The Abe administration also wants to woo voters by bowing to right-wing pressure on the islands issue while showing its diplomatic capability with overtures toward communication, observers said. The current difficult situation between China and Japan was caused by Japan's successive provocations over the Diaoyu Islands, Chinese Foreign Ministry spokeswoman Hua Chunying said at a daily news conference on Monday. She made the remarks a day after Abe said he wanted talks with Chinese leaders but would not accept any so-called conditions set by China for such meetings. "China has been committed to properly controlling and settling the Diaoyu Islands issue through dialogue," Hua said. "Japan should not solely resort to empty talk about 'dialogues' but needs to face up to history and reality." Yang Bojiang, an expert on Japanese studies at the Chinese Academy of Social Sciences, said the major obstacle for a bilateral summit meeting is not from Beijing, but from Tokyo. "Abe would never make any compromise before the election," Yang said. "What he wants is to avoid escalating tension while attracting international attention by making the gesture." […]. ^ top ^

'Positive' sign on free trade pact (China Daily)
China is becoming 'positive' toward the US-led Asia-Pacific free trade agreement, saying it may join the Trans-Pacific Partnership, although it will take time to do so, according to sources at the Ministry of Commerce. 'China is still doing its research (on the TPP),' said a source close to the issue. Consensus has been reached on the importance of the free trade pact, a step forward from some time ago, when many people were opposed to the proposal, an official told China Daily on condition of anonymity. The US launched the TPP in 2010 in an attempt to strengthen trade relations with the Asia-Pacific region, and in April participating countries approved Japan joining the TPP talks. Eleven nations are involved, including Canada, Peru, Chile, Vietnam and New Zealand. […] Hong Lei, a spokesman for the Ministry of Foreign Affairs, said China is open to all trade pacts that boost the integration and prosperity of the regional economy in Asia, including the TPP. But there is a long way to go before China could eventually join, as the pact would involve the core interests of many sectors including finance, foreign exchange and State-owned enterprises, Tian said. […]. ^ top ^

China on charm offensive at Asean security forum (SCMP)
China turned on the charm at a regional security meeting this week, signalling a change in tone as President Xi Jinping seeks to counter a US push for more influence in Asia. Beijing agreed during an Association of Southeast Asian Nations-hosted forum in Brunei to meet the 10-member group in September to develop rules to avoid conflict in waters marked by confrontations with nations such as Vietnam and the Philippines. China also expressed unity with the United States, South Korea and Japan to rid North Korea of nuclear weapons. Those policy stances may reflect a more conciliatory approach after China's aggressive assertion of sovereignty in the South China Sea in recent years prompted neighbours to boost security links with the US. China is vying for influence in Asia, while the US conducts a pivot toward the region and supports allies like the Philippines. "China has moved from the, 'Do little, engage little' form of engagement to, 'Do a lot, engage a lot," said Gary Li, a senior analyst at IHS Maritime in London. "The new dynamism signals a potential new era in Chinese relations with its neighbours, including Asean." Foreign Minister Wang Yi, attending his first Asean meeting since Xi took the presidency in March, said China and Asean were "like members of one big family". He pledged to upgrade an Asean-China trade agreement and push ahead with talks on a regional economic partnership. A year ago, China warned nations to avoid mentioning the territorial spats during Asean meetings and said it would begin talks on a code of conduct for the South China Sea only "when conditions are ripe". China may be taking a friendlier tone to isolate the Philippines over a dispute that has seen several stand-offs between Chinese and Philippine vessels. The Philippines has boosted defence ties with Japan and the Obama administration, which since 2011 sought to pivot toward Asia. […] At the weekend, the Philippines said the presence of Chinese ships around two land features it claims in the South China Sea threatened maritime peace. Foreign Minister Albert del Rosario said Wang was looking to make a good impression at his first Asean meeting since China's leadership handover. […] US Secretary of State John Kerry left behind marathon meetings with Israeli and Palestinian leaders to attend the Asean forum and reinforce America's commitment to Asia. […]. ^ top ^

Pakistan Prime Minister Nawaz Sharif begins China trade trip (SCMP)
Nawaz Sharif began his maiden foreign trip as Pakistani prime minister yesterday, visiting China in hopes of securing infrastructure projects to help tackle Pakistan's economic and energy problems. Sharif is due to meet President Xi Jinping, and Premier Li Keqiang, before heading to Shanghai. He will also meet financial and corporate leaders, and visit major industrial centres during his trip. The visit is the second high-level meeting between the two nations since May, when Li visited Pakistan. Both sides are expected to highlight a tradition of friendship and pledge to boost investment. Trade between China and Pakistan last year reached US$12 billion - a fraction of China and India's US$67 billion bilateral trade. But observers said both China and Pakistan still find each other strategically important. China wants to boost development in the restive region of Xinjiang and cement ties with countries along its western border, while Pakistan aims to get rid of internal violent unrest through fixing its ailing economy, they said. [...] Sharif said on Saturday that one of his priorities for discussions with the Chinese leadership was the China-Pakistan economic corridor. A Chinese firm has the rights to operate the corridor, which links Kashgar in Xinjiang and the Indian Ocean port of Gwadar in Pakistan. The corridor, which included a rail line and special economic zones, was expected to boost bilateral trade and reduce the journey time for goods being taken from eastern parts of China to central Asia, Sharif said. Zhao Gancheng, director of South Asia studies at the Shanghai Institute for International Studies, said China wanted to use the corridor to promote Xinjiang's development as part of counterterrorism measures. […] But he said China was concerned the instability in Pakistan would make the corridor more vulnerable to attack, especially after the withdrawal of US troops from Afghanistan next year. China has previously blamed the surge in violence on the East Turkistan Islamic Movement, which it claims trains in Pakistan. A source close to the Pakistani army said Islamabad was willing to co-operate and share anti- terrorism intelligence with Beijing, but insurgents who sneaked into China were mainly from central Asian countries. […]. ^ top ^

Senior CPC official meets senior official of Workers' Party of Korea (Xinhua)
Wang Jiarui, a senior official of the Communist Party of China (CPC), met with a delegation of the Workers' Party of Korea (WPK) on Wednesday. Wang, vice chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and head of the International Department of the CPC Central Committee, met with a delegation led by Kim Song Nam, vice director of the International Affairs Department of the WPK Central Committee. ^ top ^

Indian defense minister to visit China: Indian gov't (Xinhua)
Indian Defense Minister A.K. Antony will leave Thursday on a four-day official visit to China, the first by an Indian defense minister to Beijing since 2006, according to an official release by the Indian government. Antony will be accompanied by Defense Secretary R.K. Mathur, General Officer Commanding-in-Chief Eastern Command Lt.General Dalbir Singh, Flag Officer Commanding-in-Chief Southern Naval Command Vice Admiral Satish Soni, and others from the defense ministry and the armed forces. Antony will have delegation-level talks with his counterpart, Chinese State Councillor and Minister of National Defense Chang Wanquan, said the release. "Both ministers are expected to discuss a number of issues, including those related to maintenance of peace and tranquillity on the border, exchanges and interactions between the armed forces of both sides, and matters relating to regional and global security," the release said. ^ top ^

China backs 'choice of Egyptian people' but says nothing on Mursi (SCMP)
Beijing said yesterday it supported the "choice of the Egyptian people" and called for dialogue and negotiation after the army toppled President Mohammed Mursi, detaining him and his top aides. But Foreign Ministry spokeswoman Hua Chunying sidestepped questions on whether her comments offered "hope" to the Egyptian leader overthrown a year after his election. "China respects the choice of the Egyptian people," Hua said in Beijing. "We also hope that all parties concerned in Egypt can avoid violence and solve their disputes through dialogue and consultation, and realise reconciliation and social stability." Mursi's first official trip outside the Arab world was to Beijing last August, a fact highlighted by state media. The Foreign Ministry has issued a travel warning, cautioning Chinese citizens against any travel to Egypt, especially to Cairo, Alexandria and the Nile Delta. Hong Kong's government has maintained its red outbound travel alert for Egypt since March 2011. But Holyland Travel based in the city said yesterday its group of 20 religious tourists would continue their tour. Egypt's coup has drawn heated debate among mainland internet users. Unlike in 2011, when president Hosni Mubarak was overthrown by millions of protesters, mainland internet users were divided over whether democracy, or even constitutionalism, would really suit China. Yang Yu, a commentator from state-run broadcaster China Central Television, questioned whether democracy in Egypt was a success. "There are two preconditions for a direct shift of the Western democracy," Yang wrote on his Sina Weibo account. "First is economic freedom … Second is a public following the rules … [The result] would be today's Egypt if [we] force democracy into a populous country with an underdeveloped economy." Some disagreed. Qiao Mu, a professor at Beijing Foreign Studies University, slammed the idea that constitutionalism and elections fail. "Even in Egypt, when an elected president is deposed, it is the Constitutional Court president who works as acting president to prepare the next election," Qiao wrote on his Tencent Weibo account. An online commentator using the name Wuyuesanren compared the current upheaval as an inevitable problem in a growing democracy. "It's nothing new for a one-year-old child to wet the bed … and [the current Egypt] is much better than a place where its people have no right to vote." Two years ago, during the Arab spring mass revolt in Egypt, mainland internet users embraced the revolution, and some even drew comparisons between Egypt and China. And to some people, the images of tanks and thousands of protesters battling police on Egypt's streets served as a vivid reminder of the bloody crackdown on the pro-democracy protest in Tiananmen Square in 1989. It also hit the nerves of the central government, and internet discussion on the Egyptian uprising was heavily censored, and the search for the Chinese characters for Egypt was blocked on Sina Weibo. However, this time, when searching for Egypt, Sina Weibo returned with nearly 15 million posts by yesterday. ^ top ^

China, Pakistan vow to cement cooperation (Xinhua)
Echoing Xi's views on the bilateral relations, Sharif said the Pakistani people highly value the friendship with the Chinese people. He expressed his appreciation to the valuable aid and help offered by China in a long time. Sharif said China was the first foreign nation he visited after he took office in May, which showed his determination to consolidate and foster the good-neighborly and friendly ties with China. He said Pakistan expects to expand cooperation with China in many fields as the country is on a fast track of its own national development. He said Pakistan welcomes Chinese companies to invest and establish business in the country and he pledged to create a safer and more favorable environment for investors. At the invitation of Premier Li Keqiang, Sharif is on an official visit to China from July 3 to 8. ^ top ^

China-Canada pact targets crimes (China Daily)
Canada and China will take a tougher approach to crack down on transnational crimes, Canadian Foreign Minister John Baird told China Daily on Thursday. The two countries concluded negotiations on a deal called the Agreement of Sharing of Forfeited Assets and the Return of Property before Baird wrapped up his two-day visit to Beijing. "We look forward to ensuring that Canadian and Chinese criminals do not use the Canadian-Chinese route to move their assets around," the foreign minister said. Once signed and approved, the landmark agreement may enable one country to get money back if a fugitive transfers illegal assets to the other country. The two countries are "working harder to get greater cooperation on security" to deal with transnational crimes, human smuggling and human trafficking, Baird said. The move is a further development of the Canada-China Joint Statement of December 2009 and the Joint List of Outcomes of February 2012. Both countries must now complete their internal processes for signing and ratifying the agreement before it takes effect, according to a news release from Canada. Canadian law requires that a formal asset-sharing agreement with a foreign state must be signed and effective before any forfeited proceeds of a crime can be shared with that country. The foreign minister arrived in Beijing on Wednesday after the two countries finished their discussions on a possible bilateral free trade agreement. As for the timing of initiating formal FTA negotiations, the senior diplomat said "hopefully in a short order we will be able to have a dialogue with our Chinese counterpart on this part". He also indicated that Canada is focused on sealing free trade pacts with the European Union and India before "turning attention" to China. Meanwhile, media reports said the Canada-China Foreign Investment Promotion and Protection Agreement has not been ratified by Canada. Canadian Prime Minister Stephen Harper and then-Chinese president Hu Jintao witnessed the signing of the FIPA on Sept 8. Bilateral trade reached record levels in 2012, and China is now Canada's second-largest export destination after the United States. The FIPA may have an economic or ecological impact on Canada, Canadian media quoted some observers as saying. Baird said Canada is very pleased with the outcome of the negotiations on the FIPA. But "the administrative process in Canada has taken a little bit longer than we have expected", he said. Asked about the possibility of the FIPA being rectified by the Canadian cabinet, he said "absolutely" but without a particular date in mind. Key government officials paid attention to the agreement, including the trade minister, and it is expected to be brought into force "in short order", Baird said. It was Baird's first China visit after the new Chinese leadership was unveiled months ago. ^ top ^


Domestic Policy

Anti-corruption drive puts Inner Mongolia official in crosshairs (SCMP)
The head of the United Front Work Department (UFWD) in Inner Mongolia is under investigation for "serious disciplinary violations", state media reported yesterday. Wang Suyi, who occupies a vice-ministerial position, has become the latest senior official to draw the Communist Party's ire in an ongoing anti-corruption campaign ordered by President Xi Jinping after he took leadership of the party in November. Other high-ranking officials recently investigated for such violations include former deputy party chief of Sichuan Li Chuncheng, deputy director of the National Development and Reform Commission Liu Tienan and vice-governor of Anhui Ni Fake. […] The party's corruption crackdown has intensified since China's new leaders took office. During a four-day meeting of the all-powerful Politburo that ended on Tuesday, all of its 25 members were told by Xi not to violate party discipline, and to reflect on their own actions and correct any misbehaviour. On Saturday, a day before the news on Wang, the National People's Congress expelled Zhou Wenbin, a former Nanchang University president, also for breaches of discipline - a euphemism for corruption. Gu Hua, deputy editor-in-chief of the rural edition of the Henan Daily, wrote on his microblog yesterday that Wang was accused by mistresses of taking 100 million yuan (HK$125 million) in bribes, keeping several college students and journalists as mistresses, and for nepotism involving about 30 relatives. "He raped three young girls, and one mother petitioned but was later beaten up and kept in a black jail on his orders," Gu wrote. […]. ^ top ^

Petitions office in China to accept complaints online (SCMP)
Critics fear accepting online complaints will make it easier to track petitioners rather than improve the handling of public's grievances. The state body that vets public grievances has launched a website to take complaints about all abuses of administrative power, a move intended to help ease the crush of petitioners who flood into the capital. The website run by the State Bureau of Letters and Calls allows citizens to file complaints without making a costly and long trip to Beijing - where they are often intercepted by their local governments and detained. But some rights lawyers and petitioners questioned whether such online complaints would receive the requisite level of attention. "Their problems cannot be solved even through face-to-face dialogue, so I'm not optimistic about the function of the website," said Yuan Yulai, a prominent rights lawyer. "Their problems would be much more easily fixed if the country had a legal system that could earn the people's trust." The website was nevertheless overwhelmed by visitors yesterday and was down for part of the morning, state media said. Petitioners' complaints often mirror the issues blamed for larger incidents of social unrest on the mainland, from corruption to land grabs to mistreatment by law enforcement officers. To get a hearing from the central government, petitioners technically must exhaust local venues first. The State Bureau of Letters and Calls set up an office to handle email complaints in 2009, although they were limited to farming and other rural issues. Social welfare and construction cases have since been added. The announcement yesterday by bureau chief Shu Xiaoqin would expand complaints to all issues, including abuses of administrative power. Shu said the website provides a convenient way to register and monitor the progress of complaints. The bureau would review and reply to every single petition. People seeking to file complaints online must first register their personal information, including their real name, identity card number and residential and work addresses. Such requirements could discourage some petitioners. Many petitioners are forced to sneak into the capital, where they must elude local authorities seeking to send them home, beat them or cart them off to extralegal "black jails". Yang Jinfen, who has travelled to Beijing several times to protest against her brother's wrongful torture and imprisonment in Henan, said she would not use the website. "At the same time the bureau launches its website, there are many interceptors waiting in front of the bureau to ensnare petitioners before we can file our grievances," Yang said. "By giving information like our names and addresses in the system, it's just much easier for the government to track us in the future.". ^ top ^

"Mass line" campaign shows CPC's determination (Xinhua)
The reinforcement of the "mass line" has demonstrated the determination of the Communist Party of China (CPC) to correct any misbehavior that may get in the way of its development. The "mass line," a guideline introduced by the revolutionary forerunners of the CPC, champions close Party-people relations that helped the Party come to the national power. The CPC followed the line and grew stronger by aligning with the public during the the Agrarian Revolutionary War (1927-1937), the War of Resistance Against Japanese Aggression (1937-1945) and the War of Liberation (1945-1949). The line's significance was brought up again decades after its introduction. Top CPC leaders decided in April to launch a year-long "mass line" campaign from the second half of this year to cement Party-people ties. CPC officials at or above county level are required to reflect on their own practices and correct any misbehavior. Xi Jinping, General Secretary of the CPC Central Committee, said in June that the campaign will be a "thorough cleanup" of undesirable work styles such as formalism, bureaucratism, hedonism and extravagance among officials. The campaign came on the heels of an "eight-point" regulation that the CPC leadership began promoting in December 2012 to ban extravagance and formalism from events attended by officials. Both the "eight-point" instruction and the "mass line" campaign are the CPC leadership's endeavor to shoot persistent problems such as red tape, corruption and Party-people alienation among officials. […]. ^ top ^

A new word invented to describe China's economic reforms: 'Likonomics' (SCMP)
Last century, Margaret Thatcher gave the world ‘Thatcherism' and her counterpart – and good friend – across the Atlantic brought us ‘Reaganomics'. More recently, Japanese Prime Minister Shinzo Abe's policies to revive the economy after two decades of stagnation inspired ‘Abenomics' and now Chinese Premier Li Keqiang has stepped up with ‘Likonomics'. The origins of the term – and the correct spelling – are vague but Post columnist Tom Holland referred to ‘Liconomics' last week, and a few days later Barclays Capital produced its own Likonomics research. Three Barclays Capital economists wrote that Likonomics was “exactly what China needs to put its economy on a sustainable path, which we estimate is around 6 per cent to 8 per cent annual growth for the next 10 years”. Thatcherism aimed at lowering inflation, reducing the size of government, and privatisation, freeing up markets, particularly the labour market. Ronald Reagan aimed to slow the growth of government spending, cut taxes, slash red tape and control the money supply. They stand in stark contrast to the policies espoused by Japan's Abe, who wants to lift inflation to at least two per cent, weaken the yen and print money and boost public investment. Defining Likonomics is more challenging. Barclays Capital believes that the three pillars of Li's economic policies are straightforward: no stimulus, de-leveraging and structural reform. Li wants to lessen government directed investment, lower China's credit ratio and loosen controls over utility prices and interest rates. Unsurprisingly, China Daily praised Likonomics, saying in an editorial that it was “in a nutshell, trading the economy's short-term pain for long-term gain.” If Likonomics succeeds, “it may be seen as a mini-crisis on a controlled scale, engineered by the government's visible hand, to divert from the likelihood of a more serious crisis that would otherwise be inevitable if things are left entirely to be decided by the invisible hand of market forces,” the newspaper said. “China's visible hand is likely to work as regulation within the market, instead of against the market.” Others were more cynical. In a blog, a journalist for The Economist reported that Beijing's aversion to government-sponsored surpluses and overaggressive deleveraging might do more harm than good. “Too many economists in China now think that stimulus is autonomous with reform, as if microeconomic evolution requires macroeconomic pain,” the Economist blog said. “It doesn't… [China] still runs a sizeable current-account surplus, which shows that it spends less than it earns…Its domestic demand falls short of its supply…and consumer price inflation remains low, which shows that domestic and foreign demand combined are not putting undue pressure on productive resources. China does not need to spend less. It just needs to spend differently.”. ^ top ^



State Council gives green light to Shanghai free-trade zone (SCMP)
In a move underlining the leading role Shanghai will play in the country's economic future, the cabinet has formally endorsed the city's plan to open the mainland's first free-trade zone. The free port will be a testing ground for major policy reforms to free up cross-border commodity and capital flows, areas in which it threatens to eclipse Hong Kong's traditional contribution to the national economy. The State Council said in a statement after a meeting chaired by Premier Li Keqiang that the free-trade zone would be a snapshot of an "upgraded Chinese economy". Economists said the plan, aimed at eventually creating a "mini-Hong Kong" in the mainland's commercial hub, would benefit Shanghai as the city sought new engines to revive its slowing economic growth. […] Initially, Shanghai will upgrade and expand its existing four bonded areas, where goods can be imported, processed and re-exported without the intervention of customs authorities. Government officials said the free-trade zone would eventually become a large territory and undertake financial liberalisation. Xu Quan, a deputy director of the Shanghai Financial Services Office, told a financial forum last week that reforms of interest rate and exchange rate mechanisms would be carried out in the free-trade zone. [...] Shanghai's economy has grown more slowly than those of most other provinces and municipalities since 2008. Its ambition to become a global financial centre by 2020 was regarded as empty talk while the previous top leaders remained reluctant to approve major financial liberalisations in the city. The new leadership, including Li and President Xi Jinping, which is seen as being more reformist, is believed to be more supportive of Shanghai's growth. In 2007, Xi had a brief stint in Shanghai as its party secretary before election to the Politburo Standing Committee. Last month, the Post reported that Fang Xinghai, former head of the Shanghai Financial Services Office, who once downplayed Hong Kong's importance as a financial hub, had been named a senior official of the central leading group for financial and economic affairs in Beijing. ^ top ^



Guangdong chief justice calls for reform of China's 'Soviet' court system (SCMP)
Guangdong's highest judge likened China's judicial system to the Soviet Union's as he called for more judicial independence and better training of judges amid growing public distrust of the courts. "Our current trial mechanism derives from the one built under the planned economy, similar to the trial mechanism in the Soviet Union," Zheng E, head of the Guangdong Higher People's Court, said in an interview with China Newsweek. "The current system doesn't suit the developments of our times," he said. Zheng praised pilot schemes in Shenzhen and Foshan courts, where judges have been allowed to rule on cases in front of them instead of having to seek guidance from superior Court officials or local Communist Party politics-legal committees. The pilot programmes are designed to "eliminate interference by the executive power in trials", he said, adding that they are intended to make the judiciary more professional and help judges become "real judges". Zheng also re-iterated calls for better selection and education of judges, comparing them with their counterparts abroad who receive years of training. "Our judges are trained on the job," he said. While observers applaud the recent series of judiciary statements, many say they do not address the root of the problem: the Communist Party's interference and the courts' financial dependence on local governments. […] In May, China's second-highest judge Shen Deyong called wrongful convictions "an unprecedented challenge" in an article in the People's Court Daily. Judges "face intervention and pressure from all sides", he wrote. Some say the comments are meant to appease public discontent after a series of wrongful convictions have embarrassed China's courts. Criminal trials in China had a conviction rate of 99.9 per cent in 2009, according to the latest Law Yearbook of China. "The idea that judges should be more professional and take responsibility is an attempt to try to raise confidence in the judicial system," said Joshua Rosenzweig, a human rights researcher at the Chinese University of Hong Kong. ^ top ^



Dalai Lama policy unchanged after Locke visit, say local officials (Global Times)
Officials on Sunday confirmed to the Global Times that the US ambassador to China had just wrapped up his three-day visit to the Tibet Autonomous Region on Friday. They also reiterated that the policy over the Dalai Lama has not changed. […] The US acting deputy State Department spokesman Patrick Ventrell said Locke discussed the importance of opening up access to Tibet for diplomats and also emphasized the importance of preserving the Tibetan people's cultural heritage, the Global Times learned in an e-mail reply from the US embassy in Beijing. It was also the first time Chinese authorities had approved an embassy request to visit Tibet since September 2010. The ambassador met with senior local officials and also leading monks from a number of Lhasa-based monasteries. The official also slammed a report by the Washington-based Radio Free Asia that China has shown signs of rethinking some aspects of its Tibet policy following a series of self-immolations. "They are all rumors," he said. "We hope the Dalai clique gives up its intention of separatism and gets back to the ground of unification and patriotism," he said, adding that local people are still not allowed to post portraits of the Dalai Lama on walls. Hua Yanlong, a deputy inspector also from the CPC department, told the Global Times that changing the policy currently is "impossible." "Our policy toward the Dalai clique is clear and consistent, and has not changed," the State Administration for Religious Affairs said in a reply sent to AFP and the BBC. ^ top ^

Watching cautiously amid signs of shift towards Tibet (SCMP)
After 120 self-immolations over the past four years, a series of events in Tibetan regions has sparked speculation that Beijing is rethinking its hard-line stance towards the ethnic minority. Since Radio Free Asia reported on Wednesday that open worship of the Dalai Lama was no longer prohibited in Tibetan areas, international media have been buzzing with cautious optimism. What is described as an "experimental" policy appears uncharacteristically tolerant. Even interacting with the exiled Tibetan leader has been enough for Beijing to keep overseas politicians out in the cold; British Prime Minister David Cameron just finished a 14-month stint. But now, apparently, previously hidden portraits of the Dalai Lama can be displayed in monasteries again - as long as a clear distinction is made between his political and religious roles. Are things finally starting to look better for Tibetans? Not necessarily. "While the Dalai Lama photos carry symbolic importance to the Western audience, this is not a very significant indicator for anyone in the Tibetan Autonomous Region," said Robert Barnett, director of the Modern Tibetan Studies Programme at Columbia University in New York. "We should be optimistic, but this will not necessarily add up to what people would like it to." In fact, the ban was never strictly enforced in Qinghai and Sichuan, where it may now in part be lifted, Barnett said. And besides, the policies from the more lenient Tibetan areas very rarely spill over to the Tibetan Autonomous Region. Also, the eased policy may affect only a limited area. The Tibetan government-in-exile in Dharamsala, India, said on Thursday that the reform had only been reported from the areas with the highest rates of self-immolation. […] Other developments threaten to dim the prospects of a brighter future for Tibet. A report published by Human Rights Watch said two million Tibetans have been forcibly relocated to "new socialist villages" since 2006. The moves require Tibetans to sell yaks, farmland and other means of traditional livelihood and survive on government handouts. Last week, a petition urging Unesco's World Heritage Committee to protect Lhasa's old city from Beijing's "modernisation" drive collected its 100,000th signature. Meanwhile, two Tibetan folk singers were jailed for allegedly supporting "separatism" in a music video. Nicholas Bequelin, a senior researcher at Human Rights Watch, said any reforms merely reflected a revision of Beijing's counterproductive security policies. "What matters to Beijing is how to cement its control," Bequelin said. "If the religious policies don't help Beijing's objective to domesticate the region - avoiding popular protest and ethnic tensions - then the leadership will revise them. This just reflects that the new leadership is more pragmatic about these issues, but the fundamental policy has not changed. […]" Human Rights Watch reported in March that a new surveillance "grid" with more than 600 new police posts had been set up throughout Tibet, and that party cadres had been stationed in all monasteries. Still, there are other indications that things may be stirring in Beijing. Perhaps more significant than the treatment of the Dalai Lama's portrait were two high-profile visits to Tibet last week. Travelling to the region requires a special permit and remains extremely restricted for foreigners, especially diplomats and the press. Last month Beijing lashed out at a French documentary filmmaker who went to Tibet undercover as a tourist to gather footage. Nonetheless, US ambassador Gary Locke was allowed to visit areas in and around Lhasa to "increase familiarity with the local conditions". It was the first American diplomatic visit since 2010 and only the third in the past decade and attracted much press coverage. Few, however, noted the arrival of Rigzin Wangmo, a daughter of the 10th Panchen Lama. Rigzin Wangmo has been blocked by Beijing from visiting Tibet for many years and was greeted by thousands of Tibetans in Lhasa, despite government attempts to keep the visit secret. "This could be read as a signal that leaders are starting to pay attention to cultural affairs of the Tibetans," Barnett said. "These visits suggest to Tibetans that hardliners of the Hu Jintao era are no longer running the show. These are early signs that debate regarding Tibet is allowed." Still, while many outside China would welcome a softer approach to Tibet, there may still be little incentive for the leadership to improve the situation. "Changing ethnic policies is very risky and a direct personal liability," Bequelin explains. "If it fails, the consequences for whoever is in office are profound. And if it succeeds, well that's good, but who cares? The government has bigger fish to fry right now.". ^ top ^



Bloody clashes bring army onto streets in Xinjiang (SCMP)
Chinese paramilitary troops began round-the-clock patrols yesterday in Xinjiang following fatal clashes last week. Police also released new details about a clash on Wednesday in the remote township of Lukqun, about 200 kilometres southeast of Xinjiang's capital, Urumqi. Authorities said the violence left 35 people including 11 attackers, dead, blaming it on a violent gang of Muslim extremists. The order for the patrols by the People's Armed Police was issued by the Communist Party's top law enforcement official, Meng Jianzhu, at an emergency meeting late on Saturday in Urumqi. The action came just days ahead of the July 5 anniversary of a 2009 riot between Xinjiang's native Uygur people and Han Chinese migrants in the city that left nearly 200 people dead. […] A Lukqun resident said by phone that troops could be seen patrolling the streets over the past few days. According to a police statement posted on the Xinjiang government's official website yesterday, the attackers belonged to a 17-member extremist Islamic cell formed in January by a man identified by the Chinese pronunciation of his Uygur name, Aihemaitiniyazi Sidike. The statement said the cell regularly listened to recordings promoting violence and terrorism and since mid-June had been raising funds, buying knives and gasoline, and casing various sites in preparation for an attack. But last Tuesday authorities captured one of the members. Fearing they would be discovered before they could act, Sidike ordered the gang to assemble before dawn Wednesday and attack, the statement said. It said their victims included 16 Uygurs, eight Han and two women. Police wounded and captured four gang members and seized the last suspect yesterday following a search, Xinhua reported yesterday. Following that incident, more than 100 knife-wielding people mounted motorbikes in an attempt to storm the police station on Friday in Karakax county in southern Xinjiang's Hotan region, where the population is overwhelmingly Uygur. Elsewhere the same day, an armed mob staged an attack in the township of Hanairike, according to the Xinjiang regional government's news portal. There was no official word on casualties. State-run newspapers reported yesterday that Xinjiang was calm, and state broadcaster CCTV ran interviews with pro-government Muslim clerics and residents of Urumqi, both Chinese and Uygur, who denounced violence and expressed confidence in the government's ability to maintain security. Xinhua said in a separate commentary that "terrorist organisations should be aware that the Chinese nation and its people are determined to safeguard the country's territorial integrity and national unity against all enemies. Any attempt to sabotage will eventually fail.". ^ top ^

Media blame US for stoking Xinjiang violence (SCMP)
The United States is encouraging “terrorism” in Xinjiang, Chinese state media said on Monday, also claiming separatists in the region – which has a large Uygur minority – had fought alongside Syrian rebels. Beijing denies the unrest in the vast region bordering Central Asia – which last week left at least 35 people dead – is due to ethnic tensions between Uygurs and China's majority Han. It has vowed to crack down on “terrorist groups”, ordering military exercises ahead of Friday's anniversary of major riots in 2009 that left around 200 dead. But rights groups for the mostly Muslim Uygurs blame unrest on economic inequality and religious repression, and Washington has raised concerns about discrimination. The People's Daily, a mouthpiece for the ruling Communist Party, slammed the US government and media for what it said was its role in the violence. “For fear of a lack of chaos in China,” it said in a commentary, the US was “conspiring to direct the calamity of terrorist activities toward China”. “America's double standards on the issue of countering terrorism is no different than incitement and indulgence...How is this different than those who act as accomplices to terrorism?” it said. It asked if the 9/11 attacks and Boston marathon bombings in April meant “America's ethnic and religious policies also have problems”, while rejecting such linkages in China. “The violent terrorist incidents in Xinjiang are not an ethnic issue or a religious issue,” it said, calling the “massacres” of officials and bystanders “inhumane”. According to the official Xinhua news agency, “knife-wielding mobs” attacked police stations and other sites in the town of Lukqun last Wednesday before security personnel arrived and opened fire. At least 35 people were killed. Two days later, Xinhua said, more than 100 “terrorists” provoked “riots” in the prefecture of Hotan, attacking people “after gathering at local religious venues”. Last Friday a US State Department spokesman said it was “deeply concerned about ongoing reports of discrimination against and restrictions” on Uygurs in China. He said the US urged a “transparent investigation” but did not want to “draw broader conclusions” about the incidents. The Global Times accused members of the "East Turkestan" movement of being trained by Syrian opposition forces fighting the government of Bashar al-Assad before returning to Xinjiang to plot attacks. […] Authorities had arrested a 23-year-old "terrorist", known in Chinese as Maimaiti Aili, belonging to the East Turkestan Islamic Movement (ETIM), the report said, adding that he had taken part in the Syrian war. The Global Times quoted a statement from Maimaiti Aili as saying that the ETIM "specifically asked me to carry out sabotage activities in Xinjiang and enhance the 'struggle level'". The Uygur World Congress hit back at what it called China's “distorting accusations”. “Uygurs live in an outdoor prison,” it said in an emailed statement, adding that their “resistance” had “nothing to do with terrorism”. On Saturday, large sections of the Xinjiang capital Urumqi were shut down as military vehicles took to the streets with at least 1,000 personnel from the People's Armed Police, part of China's armed forces responsible for law enforcement and internal security during peacetime. Beijing's assertive presence on the ground comes ahead of the sensitive anniversary of riots between Uygurs and China's ethnic majority Han four years ago. The Muslim fasting month of Ramadan is also expected to begin next week. […]. ^ top ^

Xinjiang police launch new crackdown on knives and separatist propaganda (SCMP)
Xinjiang police launched a new crackdown on the possession of knives, explosives and separatist propaganda yesterday, and offered rewards of up to 100,000 yuan (HK$125,400) for clues leading to the arrest of separatists. The ban on knives longer than 22cm - their blades must be no longer than 15cm - appeared to be a first of its kind for the restive western region. Residents were ordered to hand over all banned materials within 10 days or face "severe punishment", the region's public security bureau said. Regional Communist Party secretary Zhang Chunxian reiterated that stability was the top political priority. The region has witnessed a new outbreak of violence and unrest in recent days, with 35 people killed in one incident alone. […] Pan Zhiping, a Central Asian affairs specialist at the Xinjiang Academy of Social Sciences, said the ban on knives would be difficult to enforce in Xinjiang, where residents often carry blades for everyday use. "The length limit of 22cm is rather tight as such knives are not uncommon for household uses," Pan said. "This shows the pressure on keeping stability in Xinjiang is very serious now." […] But Jiang Zhaoyong, a Beijing-based expert on minority affairs, questioned the effectiveness of relying on the public. "It shows the incompetence of the entire public security system and the inefficiency of anti-terrorist mechanisms," Jiang said. "I don't think this will be very helpful because the ties between the police and the public in the region are obviously not strong enough to generate meaningful tips." The state-run Global Times said 30 Uygur men from Xinjiang had travelled to Turkey after receiving military training in Pakistan. They planned to join rebel forces in Syria, the paper said. But Dolkun Isa, chairman of the World Uygur Congress' executive committee, said: "This is typical of the Chinese strategy, to try to turn other countries against the Uygurs.". ^ top ^

Xinjiang cadres try to quell unrest ahead of July 5 anniversary (SCMP)
Xinjiang authorities have sent senior officials to 50 townships where ethnic tensions are believed to be high, as part of ongoing efforts to quell unrest in the region ahead of the fourth anniversary of the July 5 riots. Security in the restive region's capital Urumqi has also been tightened, with several teams of paramilitary police visible in People's Square in the centre of the city yesterday. The officers, dressed in riot gear and armed with machine-guns, were deployed alongside trucks from the army and civilian special police. Local residents, organised by the authorities, checked the bags of "suspicious" people at bus stops. Xinjiang's official news portal Tianshannet reported that all 50 of the officials had arrived at their destinations on Tuesday to "take resolute measures to stop the trend of frequent, violent terrorist attacks and to ensure the stability of Xinjiang society for the time being". [...] Xinjiang police also issued a "most wanted" list on Tuesday for 11 suspects involved in eight cases of murder or bombings dating from June 2011, offering rewards of up to 100,000 yuan (HK$125,000) for information. The police said government organisations and law enforcement agencies had been the major targets of bombings. At least 32 people have been arrested or detained for creating or circulating "rumours" online since last week, said Xinjiang police's microblog at and the Legal Daily website. Those detained were internet users from cities across the autonomous region including Urumqi, Karamay and Ili. In Changji prefecture, seven people have been detained for circulating "false" information online and via text services. The head of Uchturpan county's tourism bureau was sacked for being absent from duty, the People's Daily website reported. The official had lied to colleagues on Friday of last week about helping his wife with admission procedures in a hospital in Aksu, it reported. The official instead went to meet friends alongside a river bank. County leaders argued he had failed to carry out his task of maintaining stability and had "exerted a very bad influence". ^ top ^

Xinjiang calm ahead of anniversary of deadly riots (SCMP)
Four years after deadly ethnic clashes erupted in Xinjiang's Urumqi, the city appeared peaceful amid tightened security - but people's grievances remained. The centre of the city was closely watched by police and public buses underwent strict security checks on the eve of the July 5 riot anniversary. Squads of seven or eight People's Armed Police officers patrolled People's Square in central Urumqi yesterday, while others stood in the shade of trees. In contrast to the scene four years ago, when hundreds of Uygur protesters gathered and chanted slogans, middle-and old-aged residents played cards under the shadows of the trees amid temperatures above 34 degrees Celsius. Many men, who appeared to be undercover policemen, sat in the front of cars or drove around the square, while looking at passers-by with watchful eyes. On Nanmen Square - where the then-municipal party boss, Li Zhi, spoke at the top of a police vehicle for nearly two hours on July 7, 2009, begging thousands of angry Han protesters to go home - a billboard advertising patriotism, unity and mutual help had been set up. A bus stop has been built on the Jiefang South Road where several thousand Han people marched with knives and sticks, seeking revenge on the Uygurs, but were stopped by officers of the People's Armed Police with tear gas. Elderly women wearing red armbands sat on chairs at the bus stop yesterday, watching passers-by, while squads of armed police patrolled the area. A Uygur who owns a grocery shop on the Xinhua South Road said his business was affected for several months after the riot in 2009, as the road was the worst-hit part of the city. "Uygurs would be regarded as terrorists after the July 5 incident, if men wore a beard or women wore a kerchief, a veil or a gown," he said. "Schools are teaching children not to believe in religion. "We're so depressed and feel unable to breathe," he said. A Uygur cadre on Xiheba Street said that, during each anniversary, he had to patrol the neighbourhood or visit residents for a whole month to ensure stability. "Each and every migrant worker or temporary visitor must apply for a residence permit and leave his fingerprints, blood sample and photos at the police station," he said. "It's called 'creating convenience' for the people - and police can then trace them when something happens." The street looks almost the same as four years ago, with Uygurs continuing to form the majority of residents and a mosque standing in the same place at one end. The Rebiya plaza, named after a businesswoman who was accused of being the "mastermind" of the ethnic unrest, was closed. Zhang Mingfu, whose younger brother died in a fire with four other relatives after a riot in the grocery store he ran in Urumqi four years ago, said there had been "no special care" from the authorities over the past years. His brother's only immediate family member who survived the riot in 2009 was a daughter, now a 13-year-old student in middle school in Urumqi. ^ top ^



Protests not a sign of desire to separate (Global Times)
Yesterday was the 16th anniversary of Hong Kong's return to China. It was the occasion for many activities, including protests on the streets where participants shouted a variety of slogans related to democracy, universal suffrage, animal protection and demolition projects. Despite the relatively small scale of this year's protest compared to previous years, it still made headlines. Media tend to focus on negative news, whether it is in Hong Kong or the mainland. The mainland has given growing attention to public opinion in Hong Kong, but we suggest a more mature approach and attitude toward understanding public opinion in Hong Kong. Hong Kong has adopted a different political system from the mainland, which better enables the public to express anger and opposition. But this doesn't necessarily guarantee all appeals will be responded to or satisfied. It would be abnormal if Hong Kong didn't have protests. The mainland should better adapt to Hong Kong's political system. In this case, the influences of Hong Kong's opposition would automatically be diminished. […] The principle of "one country, two systems" has been smoothly carried out since Hong Kong's return. In recent years, some Hong Kong residents have held strong negative emotions toward the mainland, most of which are related to disputes concerning livelihoods, including the complicated feelings of Hong Kong residents brought by the rapid economic development of the mainland. Hong Kong in fact has increasingly closer ties with the mainland, and patriotism is closely related to the interests of Hong Kong residents. Magnifying Hong Kong's "independent impulse" makes no sense. Hong Kong's system is more flexible at mobilizing public opinion than the mainland's, which allows some to maximize their interests by expressing radical opinions and taking aggressive actions. The mainland should keep a sober mind and understand it's not necessary to respond to them all. Hong Kong still has the status of an independent economy. It is in the interests of the mainland to create external conditions to maintain Hong Kong's prosperity. But the mainland's support for its economy shouldn't be taken for granted or Hong Kong will blame the central government for anything that goes wrong. This should be corrected. Prosperity is conducive to Hong Kong's stability and the welfare of Hong Kong residents. But it is no longer politically connected to Hong Kong's return to the mainland. Economic vitality should be the result of the hard work of local people. The solution to many specific issues of Hong Kong will decide the content of "Hong Kong People administering Hong Kong.". ^ top ^

Beijing urged to listen to message of July 1 marchers (SCMP)
Beijing should focus on the political demands of the July 1 marchers, not on the number who turned out, an expert on Hong Kong affairs said yesterday. Professor Jiang Shigong said the desire of Hongkongers for the early introduction of universal suffrage had been spelled out loud and clear over the past decade. Jiang, the deputy director of Peking University's Centre for Hong Kong and Macau Studies, was speaking a day after a big turnout for the march - despite an approaching tropical storm. He said: "The central government should not take Hongkongers' strong call for universal suffrage less seriously simply because turnout for this year's march was not much bigger than last year's. How to resolve the problems reflected by the July 1 march is more important than disputing the turnout. Obviously, political reform is the key issue which has plagued the Hong Kong government." Jiang, who advises the central government on Hong Kong policies, warned everyone would lose out if universal suffrage was not achieved in 2017. "The central government's moral image would be tarnished, while the Hong Kong government would be unable to resolve the deadlock over its governance," he said. The Civil Human Rights Front, organiser of the annual march, said 430,000 people took part on Monday, compared to 400,000 last year. But police said just 35,500 left Victoria Park and 66,000 participated at its peak. The University of Hong Kong's public opinion programme estimated 93,000 took part. Another mainland academic familiar with Hong Kong affairs, who declined to be named, said the central government had definitely noted the appeal for full democracy since, by any measure, a huge number of people took to the streets. But he added: "Beijing has its own strategy on implementing universal suffrage in Hong Kong and its line of thinking will not hinge on the march turnout." […]. ^ top ^



China credit squeeze puts brakes on factory growth (SCMP)
The refusal of the new leadership in Beijing to ease the credit crunch and boost liquidity is translating into slower growth in the economy. Mainland factories ran at their slowest pace in nine months in June as the new leadership's caution in boosting liquidity dampened hopes that aggressive monetary easing would provide easier credit. Premier Li Keqiang has diverged from the policy of his predecessor by refraining from injecting fresh liquidity into the mainland economy to ease a credit crunch on the interbank market. In a sign that the top leadership has reached a consensus, President Xi Jinping told a high-level party meeting over the weekend that officials "shouldn't be judged solely on gross domestic product figures", but that their performance was also linked to people's livelihoods, social progress, and the environment. Xi's remarks were confirmation that the new administration aims to slow credit expansion and focus on structural reforms to the economy, where the wealth gap has been widening and rapid industrial growth has come at the expense of overcapacity and pollution. Patrick Chovanec, chief strategist at Silvercrest Asset Management and a former professor at Tsinghua University, said reining in credit expansion may help curb overcapacity and bad debt, although "it will translate to slower growth, at least in the short term". "Last week's freeze-up in China's interbank lending market was just a symptom of a more chronic disease," he said. "As the burden of bad debt grows, it takes more and more credit to generate less and less growth." Money supply in the mainland is expanding at roughly twice the rate of GDP growth and the government plans a bigger financial deficit this year than last. In 2012 the mainland delivered the slowest year of growth in 13 years as policymakers attempted to walk a fine line between structural reform and job creation. Some analysts believe Beijing risks missing its annual growth target of 7.5 per cent for this year, though this may not necessarily be a bad thing for the economy. Beijing appears more comfortable with slower growth, and in the current five-year plan only forecasts 7 per cent average annual growth for the period 2011-2015, against the 10 per cent average growth delivered over the past 30 years. Former premier Wen Jiabao has been heavily criticised for flooding the economy with too much liquidity under a stimulus programme introduced to combat the global financial crisis. As a legacy of the stimulus programme, 18 provincial and municipal governments tracked by the National Audit Office had 3.85 trillion yuan (HK$4.87 trillion) of outstanding debt at the end of last year, up 13 per cent from two years ago. Of the total, nearly half was new debt built up after 2011, the agency revealed last week. Barclays Capital described Li's policy framework as "Li-konomics", under which Beijing has signalled it would endure short-term pain to favour more sustained development.Stimulus measures introduced last year in the form of US$150 billion of accelerated infrastructure approval plans have not been repeated so far this year. Barclays estimated that the mainland may see 6 to 8 per cent annual growth for the next 10 years. But it warned of "an increasingly likely downside scenario" and a temporary "hard landing", with quarterly growth falling to 3 per cent over the next three years before bouncing back rapidly. The HSBC China purchasing managers index, with a heavy weight in small businesses, showed operating conditions deteriorated at the quickest pace since September. The index fell to 48.2 in June, down from 49.2 in May, dragged by falling new export orders and the first contraction in output since October. The official PMI data compiled by the National Bureau of Statistics, which cover a wider range of companies, was at 50.1 in June, down from 50.8 in May and only slightly above the threshold of 50 that indicates an expansion. The seven-day repurchase rate, a gauge of interbank liquidity, has eased to just above 5 per cent from the record 12.45 per cent on June 20, after the central bank said it had pumped in fresh liquidity for selected lenders and added 12 billion yuan in rediscounted loans for banks to support small businesses. ^ top ^

China official services PMI drops to 53.9 in sign of cooling (SCMP)
China's official purchasing managers' index (PMI) for its services sector dropped to 53.9 in June from May's 54.3, the government said, a sign that an economic cooldown is creeping across the country. […] A PMI reading above 50 suggests businesses are growing, while that below 50 indicates contraction. Despite its fizzling growth momentum, China's services firms have braved the economic cooldown better than manufacturers, who are fighting excess capacity as well as sluggish foreign demand, on top of cautious domestic consumers. ^ top ^

Frankfurt joining race to become key yuan center (China Daily)
Frankfurt, the German financial capital, is joining the race to become a major offshore yuan trading hub in Europe as local financial institutions push for a potential currency swap agreement between the European Central Bank and the People's Bank of China. Frankfurt Main Finance, a financial association that represents major German banks, is expecting the ECB to sign an 800 billion yuan ($130 billion) currency swap with Beijing, according to a Bloomberg report. But both the ECB and the PBOC declined to comment on the currency swap when contacted by China Daily. If the agreement becomes reality, it will dwarf the 200 billion yuan agreement signed by the Bank of England and the PBOC. "The fact that about 10 percent of Sino-German trade is handled in renminbi shows the opportunities for a yuan-trade center in Frankfurt," said Lutz Raettig, president of Frankfurt Main Finance. While some market observers said that liquidity is one of the main hurdles for Frankfurt to develop its yuan-trading market, Raettig said that trading risk and hedging costs will drop significantly if the swap agreement is reached, which could lead to significant yuan savings and could further boost trade between Germany and China. Raettig also emphasized the supportive role of Frankfurt in deepening Sino-German economic relations and noted that such close ties between the financial sector and industries are not found in other financial centers in Europe. Frankfurt, also home to the ECB, is facing off with rivals such as London, Paris and Zurich to win yuan business for German financial institutions and exporters as China has been keen to lift the global profile of its currency. "Frankfurt has a better chance to win as it is the ECB headquarters and Germany has the most outstanding trade and investment relations with China in Europe," said Stefan Strater, manager of the Frankfurt branch of Industrial and Commercial Bank of China. Strater said that while China needs to further liberalize its financial market to convince international investors of the value of its currency, a currency swap between the ECB and PBOC is the first step, which will significantly boost yuan business for banks in Germany. Yuan payments in Germany increased by 71 percent between April and May, the biggest increase in the top 20 countries in yuan payments, according to the Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, which provides messaging services to banks. [...]. ^ top ^


DPRK and South Korea

North Korea restores Kaesong hotline and allows visits (SCMP)
North Korea yesterday restored its hotline with South Korea and announced it would let businessmen from the South visit a shuttered joint industrial zone, Seoul officials said. The move came hours after dozens of South Korean firms threatened to withdraw from the zone at Kaesong in the North, complaining they had fallen victim to political bickering between the two rivals. "The hotline was restored this afternoon after North Korea accepted our request to normalise it," a South Korean unification ministry official said. The Kaesong estate, where North Koreans work in Seoul-owned factories, was the most high-profile casualty of the months of elevated tensions that followed the North's nuclear test in February. Operations at the complex ground to a halt soon after the North banned entry by the South's factory managers and other officials on April 3. In an unexpected change of course yesterday, the North sent a message to the South saying South Korean businessmen and managers would be allowed to visit the complex. It said the businessmen could take steps to avert damage to facilities during the rainy season. Representatives of the South Korean companies have repeatedly urged the two sides to open talks to revive the complex. "The manufacturers of machinery and electronics parts cannot wait any longer. Kaesong must be reopened... or they have to move elsewhere", businessman Kim Hak-kwon said. ^ top ^

North Korea under fire at Asean security forum (SCMP)
North Korea came under fire at an Asia-Pacific security forum on Tuesday as foreign ministers called on the defiant communist state to end its nuclear weapons programme. In a flurry of diplomatic activity, the gathering in Brunei also saw Beijing pressured over its South China Sea claims while the top US and Russian envoys met to discuss the thorny issues of Syria and US fugitive Edward Snowden. Participants in the Asean Regional Forum, which include 26 countries across the Asia-Pacific and the European Union, sent a “very strong message” to North Korea, Seoul's envoy said. “Most ministers at the meeting expressed a very strong message to the North Korean delegation that they should denuclearise, they should refrain from provocative action,” South Korean Foreign Minister Yun Byung-se told reporters on the sidelines. “So they have to listen to these messages very seriously.” However, North Korean Foreign Minister Pak Ui-chun fired back in the discussions, calling the United States the “true provocateur” and saying it would retain its nuclear weapons programme until Washington drops its “hostile” stance. “Unless the US removes all its anti-North policies and threats against us, any problems including the nuclear issues on the (Korean) peninsula will not be solved,” North Korean official Choe Myung-nam told reporters, citing Pak. A day earlier, US Secretary of State John Kerry said after talks with his counterparts from China, Japan and South Korea in Brunei that the four nations were united on the issue. China is the main ally of North Korea, which defiantly carried out its third nuclear weapons test in February and threatened to attack the United States, in language shrill even by the standards of the reclusive communist state. A joint statement emerging from a separate meeting in Brunei of 16 East Asian countries, the United States, and Russia called on the resumption of long-stalled six-country talks hosted by China aimed at negotiating the North's disarmament. The issue of the South China Sea also simmered on after the Philippines at the weekend accused Beijing of a military build-up to enforce its claims to nearly all of the disputed waterway. Philippine Foreign Secretary Albert Del Rosario told reporters that one foreign minister after another at Tuesday's event stressed the need for negotiations on avoiding conflict at sea. The 10-member Association of Southeast Asian Nations has been pushing a reluctant China for talks on a set of rules governing conduct at sea meant to prevent actions that could lead to conflict. China claims virtually all of the South China Sea and has long resisted moves to talk with Asean as a bloc, reluctant to cede any ground on its claims. On Sunday in Brunei it agreed to begin discussing a code of conduct. But a senior US government official, speaking on condition of anonymity, dismissed the move as merely a gambit to deflate pressure while in Brunei. […]. ^ top ^

US blacklists Myanmar general over North Korea arms deals (SCMP)
The United States placed a Myanmar general on its sanctions blacklist on Tuesday for arms deals with North Korea that violated a UN Security Council embargo on buying weapons from Pyongyang. The US Treasury named Lieutenant General Thein Htay, the head of Myanmar's Directorate of Defence Industries, for the sanctions, saying he was involved in buying North Korean military goods despite his government's support of the Security Council ban. It also said he acted on behalf of the Directorate of Defence Industries, which was already on the US sanctions blacklist for arms deals with North Korea. “This action specifically targets Thein Htay, who is involved in the illicit trade of North Korean arms to Burma,” the US Treasury said in a statement, using the former official name for Myanmar. “It does not target the Government of Burma, which has continued to take positive steps in severing its military ties with North Korea.” The sanctions forbid any American from doing business with Thein Htay and freeze any assets he might have in the United States. ^ top ^

North Korea says 'yes' to fresh talks on factory zone (SCMP)
North Korea and South Korea agreed yesterday to hold talks aimed at reopening a jointly run factory park that was a rare source of cash for Pyongyang three weeks after their last attempt at dialogue collapsed in bickering over protocol. North Korea accepted the South's proposal, made by its Unification Ministry, paving the way for talks tomorrow at the Panmunjom village that straddles their heavily guarded border. "The North agreed to working-level talks at [10am] on July 6 … at Panmunjom," the Unification Ministry said. The two sides used a phone hotline restored by the North late on Wednesday amid pressure from the owners of small and medium-sized South Korean firms in the Kaesong industrial zone. The companies had sought action to stem losses caused by the shutdown that occurred in April. "The proposal takes into account the big problems facing the Kaesong industrial zone's firms three months after it was suspended and the potential damage anticipated with the start of the monsoon season," ministry spokesman Kim Hyung-suk said. A sudden flurry of activity last month raised expectations that the two Koreas, which remain technically at war under a truce ending the 1950-53 war, would resume high-level dialogue for the first time in six years to ease tension. The North had proposed talks to reopen the factory zone, which generates US$90 million annually in wages for its workers. It shut the zone down in April at the height of weeks of tension during which Pyongyang threatened both South Korea and the US with nuclear annihilation. The owners of 123 South Korean factories, who had withdrawn from Kaesong after their North Korean workers deserted them, have been eager to return. Their hopes rose, then were dashed after the two governments agreed to hold senior-level talks in Seoul on June 12, but cancelled them in a last-minute dispute over who should lead their delegations. The North, which has vastly inferior conventional military power compared to the affluent South, has for years channelled scarce resources into nuclear and missile programmes, and has issued such threats often for propaganda purposes. Proposed cabinet-level talks last month were called off one day before they were due to start, with each side accusing the other of insincerity by planning to send low-ranking officials. The US and South Korea, as well as China - the North's sole major diplomatic ally - have urged Pyongyang to take steps to end its nuclear programme and to return to dialogue. The impoverished and isolated North conducted its third nuclear test in February, prompting stiffer UN sanctions against it. South Korean President Park Geun-hye has pledged to engage the North in dialogue and take steps to build confidence for better ties, but has also vowed not to give in to unreasonable demands or make concessions to achieve superficial progress. Her predecessor, Lee Myung-bak, cut off a decade of lucrative aid from liberal leaders and demanded nuclear disarmament, angering the North. ^ top ^



Recent Presidential Election violates some rules of Copenhagen Document (UB Post)
The Organization for Security and Co-operation in Europe (OSCE) praised the overall good proceedings of last Wednesday's election, while pointing out a few violations of the Copenhagen Document by which Mongolia should strive to abide. The OSCE and its affiliated Office for Democratic Institutions and Human Rights (ODIHR) have voiced their first observations regarding the Mongolian Presidential Election yesterday at a press conference. The overall positive proceedings of the elections were highlighted by Head of the OSCE/ODIHR election mission Audrey Glover. She noted that “voting was assessed positively in 99 percent of the cases observed,” adding later that no major complaints have been filed yet. The assessment is tainted with several problems though, mostly regarding the independence of the media and the criteria for the eligibility of presidential candidates and the selection of civil servants at the General Election Commission (GEC). ^ top ^

Turquoise Hill Resources entered Short-Term Bridge Funding Agreement with Rio Tinto (
Turquoise Hill Resources announced that it has entered into an agreement with majority shareholder Rio Tinto for a non-revolving bridge facility for up to US$225 million (the "Bridge Facility") maturing on August 12, 2013. Advances made under the Bridge Facility will be used by Turquoise Hill to fund operations and current underground development of the Oyu Tolgoi mine. The previous bridge funding facility, agreed on April 17, 2012, expired undrawn on May 23, 2013. Turquoise Hill expects to make an initial drawdown under the Bridge Facility in order to fund a cash call obligation for Oyu Tolgoi, which is due on July 2, 2013. In the event the Bridge Facility is not repaid in full at the maturity date or in case of an event of default under the terms of the Bridge Facility, Rio Tinto may convert any outstanding amounts into common shares at a price per share equal to 85% of the then prevailing five-day volume weighted average trading price of the shares on the New York Stock Exchange. The full agreement will be filed on SEDAR at The Company continues to explore various financing alternatives which would allow it to repay the Bridge Facility in full prior to maturity and fund the operations at Oyu Tolgoi pending receipt of $300 million in proceeds from the sale of its 50% interest in Altynalmas Gold Ltd. and completion of project financing. ^ top ^

The 3,000 horses racing and 10,000 Mongolian horse-riders will be registered in the Guinness World Records (Info Mongolia)
Within the framework of the 750 year anniversary of establishment of the Horse Ministry, the "Mongol Horse 3000" horse race of 3,000 horses and 10,000 Mongolian horse-riders all dressed up in the Mongolian traditional Deel (costume) with their saddles and reins will be registered in the Guinness World Records and upon receiving approval from the Guinness World Records committee and inviting the judges, the preparations have began to organize this event under the auspices of the President of Mongolia Ts.Elbegdorj in Ulaanbaatar city and Khui Doloon Khudag on August 09-10, 2013. Participating in this event is an honor for all Mongolians and will raise the Mongolian name at world level and the Horse-riding Mongolians will be most successful. The 21 Aimag sub-committees and over 360 horse trainers of the Federation of Mongolian Horse Racing Sports and Trainers have began preparations to participate in the “Mongol Horse 3000” horse race and the 10,000 Mongolian horse-riders parade. The race lanes and jockey safety have been fully provisioned for the race that will begin from 6 start off points with 6 region categories and the Federation of Mongolian Horse Racing Sports and Trainers (FMHRST) is fully confident that this will be a great race to demonstrate the bravery and greatness of Mongols. ^ top ^



Not so secret Swiss pain (SCMP)
Privacy served Switzerland well, but a shake-out is looming in the nation's wealth management industry as foreign banks look elsewhere for European lenders with private-banking aspirations, a presence in Switzerland used to be a must. Now, with bank secrecy eroding and rising compliance costs chipping away at profits, more are saying adieu. The number of foreign-owned Swiss banks fell to 129 by the end of May from 145 at the start of last year, according to data from the Association of Foreign Banks in Switzerland. Assets under management slid by a quarter to 870.7 billion Swiss francs (HK$7.1 trillion) in the five years to 2012 as clients withdrew money or paid taxes on undeclared accounts, the data shows. A crackdown on bank secrecy and increased regulatory scrutiny may unlock a wave of mergers and acquisitions in the next 12 to 18 months, according to bankers, consultants and analysts. While Switzerland remains the biggest centre for global offshore wealth with US$2.2 trillion, or about 26 per cent of the market, according to Boston Consulting Group, departures may further chip away at the alpine republic's status. "There will be a bit of a shake-out among private banks," said Felix Wenger, a Zurich-based director and co-head of the private-banking practice at consulting firm McKinsey. "Specifically for Switzerland, some foreign players might conclude that an exit is a better option." Some already have. Lloyds Banking Group, Britain's biggest mortgage lender, sold its international private-banking business in May to Swiss wealth manager Union Bancaire Privee, which also bought part of the offshore business in Geneva from Spain's Banco Santander a year ago. In 2009, Commerzbank sold its Swiss units and ING disposed of its private bank in Switzerland. More deals may be imminent. HSBC, the biggest foreign private bank in Switzerland by assets under management, might sell parts of the unit, chief executive Stuart Gulliver signalled in May. The bank did not plan to exit Swiss private banking altogether, he said. Italian insurer Assicurazioni Generali is trying to sell BSI Group, the 140-year-old Lugano-based private bank. More banks might also be reviewing their presence in Switzerland, said Christopher Wheeler, a London-based analyst at Mediobanca. A report last week by PricewaterhouseCoopers showed that an increasing number of wealth-management firms worldwide see more mergers. More than a third of those surveyed expect "significant consolidation" over the next two years, compared with 7 per cent in the last two years, PwC said in the report. The shake-up in Europe is leading to a widening gap between top performers and "also rans", McKinsey said in an industry survey last month. Almost a third of private banks in the region had outflows of funds last year, while about one bank in six recorded a loss, according to the report, based on an analysis of more than 160 private banks globally. "As a result, many players are reviewing their geographical footprint, especially in offshore markets, leading to renewed M&A activity," the McKinsey report said. An eastward shift in riches is nibbling away at Switzerland's lead over rival centres of cross-border wealth. Its market share slipped to 26 per cent from 27 per cent in 2011, and by 2017 may decline to 25 per cent, according to Boston Consulting's Global Wealth report in May. Singapore is likely to grow to 12 per cent from 10 per cent, according to the forecasts. The United States has been investigating Swiss banks and units of foreign banks in the country, including that of London-based HSBC, after UBS in 2009 avoided prosecution by admitting it fostered tax evasion and delivering data on about 4,700 accounts of Americans. France and Germany have been searching for tax dodgers using data stolen from Swiss banks and also sharing some of the information with authorities in other European countries. Agreements with Britain and Austria to collect taxes on behalf of those countries on accounts held in Switzerland have been in force since January, and Switzerland is in talks with other European countries on taxing secret accounts. The country would join the international push against tax dodgers and help develop global standards allowing banks to share customers' details to combat tax evasion, Finance Minister Eveline Widmer- Schlumpf said last month. ^ top ^


Andrin Lutz
Embassy of Switzerland

The Press review is a random selection of political and social related news gathered from various media and news services located in the PRC, edited or translated by the Embassy of Switzerland in Beijing and distributed among Swiss Government Offices. The Embassy does not accept responsibility for accuracy of quotes or truthfulness of content. Additionally the contents of the selected news mustn't correspond to the opinion of the Embassy.
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