Towards closer ties between China and US

By Luo Jie

President Xi Jinping’s first state visit to the United States may mean vastly improved China-US relations, with key agreements signed ahead to mark the occasion.

IF timing is a significant factor in shaping important events, what has it done to Chinese President Xi Jinping’s first state visit to the United States?

That the visit came at the same time as the first-ever papal address to the US Congress meant that media attention was effectively halved. Xi and Pope Francis had to share the media blitz; prime-time and front-page priorities were split.

But while the Pope’s visit was imbued with spirituality, Xi’s was rich in material significance and consequence. The Xi-Obama huddle was a meeting between leaders of the world’s two largest economies with much to discuss on economic and security matters.

More significantly, the Chinese leader, who is still in the early years of his decade in office, has come to visit his US counterpart in the twilight of the latter’s tenure. Yet China’s state media have no qualms about calling the visit “historic”.

President Barack Obama leaves office in January 2017. Although that is still more than a year away, it takes time for two distant yet interrelated, lumbering giants – China and the United States – to size each other up to work effectively together.

Not that Xi and Obama are total strangers. They have met repeatedly since 2009, some of those times only incidentally “on the sidelines” of a larger conference.

Still, much is assumed about the decisive nature of personal rapport between leaders. What impact does it have on bilateral relations between nations?

Western societies generally prefer formal agreements such as treaties to benchmark external relations.

For Asian countries such as China, unilateral pledges work as well and their voluntary observance deserves plaudits.

But Asian cultures also value personal connections, such that know-who is at least as important as know-how. Thus, Xi’s careful cultivation of Obama is nearing its end.

That cultivation has included the development of relations between the two First Ladies, and Xi’s affinity with Lincoln High School and Tacoma from early personal associations.

These are human touches, not simply frivolous details. For millions of Americans, they help to flesh out the character of the leader of an otherwise faceless, alien monolith that is China.

The importance of a personable character and thus of personal ties is also more important in the United States than is generally supposed. How can the personal imprint of any particular president on policy be denied?

It is unlikely for US policy on China to be identical with George W. Bush, Barack Obama or Hillary Clinton in the White House. Election impresario and political mud wrestler Donald Trump will want it to be different again in his White House.

The US election season has begun, and among the seasonal domestic bloodsports is China bashing. How will the next president honour any deals Obama now makes with China?

The soothing argument is that however much a maverick a presidential candidate may be, the heft of political realities and high office will weigh on the incoming president to ensure a pragmatic moderation.

The problem is that nothing can guarantee that outcome.

Consistency in China’s external policymaking is less of a problem. A one-party state ensures that regardless of the personal style or preference of the leader of the day, the collective outlook is constant.

Barring unforeseen circumstances and contingencies, the ends and means in China’s long-term plans are reasonably clear. Individual leaders bring only a certain accent or tenor to dealmaking, with certain emphases such as eliminating corruption.

Xi has also called for a major reset in relations with the United States since at least 2013. No country can reasonably reject that call so there has been progress, even if it has been slow.

Xi’s first state visit is particularly significant in tackling three main themes head-on: essential new major-power bilateral relations, economic cooperation whose need is obvious enough, and military cooperation, which is as important as it may seem unlikely.

In mid-2013, just months into his new presidency, Xi flew to Califor­nia for a working meeting with Obama to jointly design a new style of US-China relations. They agreed on the importance of that task and on its follow-through.

This month’s summit is the next big step on that road. In the intervening two years, officials on both sides had been working on consolidating that agreement.

The economic aspects of the reset in relations are the most evident. So are their limitations.

The US Foreign Investment and National Security Act (2007) constrains China’s investments in certain key sectors deemed to impinge on key US infrastructure or other national security interests. Foreign enterprises are known to face difficulties in acquiring stakes in US “strategic industries” – oil or high technology assets.

China followed the US example this year with a draft of its own Foreign Investment Law (2015). During the Seattle trip, Xi pledged to facilitate US investments in China, but it was not clear if any aspect of the FIL would be compromised.

Meanwhile, reports of mergers and acquisitions between China and the United States continue to show promise.

The value of M&A deals in the first half of this year exceeded US$300bil (RM1.3 trillion), an increase of more than 60% over the same period last year, which had already set the record for the first half year.

Perhaps most significantly, China and the United States signed annexes to two agreements on major military operations, as well as air and sea encounters.

With China’s growing naval reach and US naval “rebalancing”, sea lanes in the Western Pacific are becoming more traversed as routes tend to overlap. The agreements signed just days before are intended to improve operational coordination and avoid misunderstanding and false alarms.

The first annex covers a telephone hotline between both countries’ defence ministries and mutual notification of an impending crisis. The second relates to airborne encounters, improved communication and better coordination in emergencies.

These are still early days in such China-US cooperation, but a promising start has been made in addressing the most pressing concerns. More cooperation and coordination can be expected.

More broadly, China-US cooperation has yielded results in environmental management and the Iran nuclear deal. More progress may be envisaged over North Korea, anti-terrorism measures and even improved US-Russia relations.

In already focusing on security provisions for the Western Pacific, with all its implications for the South China Sea and the East China Sea, Beijing and Washington have taken the bull by the horns.

This is surely the better and bolder way. The alternative is a somewhat indecisive and half-hearted attempt to face the issues, in part by deferring them to a later time that may never come.

Now that a bold start has been made, the follow-up has to be at least as gutsy. The momentum, once created, has to be maintained and built on to reach satisfactory policy conclusions.

Chinese commentaries have largely pronounced Xi’s state visit as momentous, in terms of China’s intent in soliciting a positive US response to redefining their bilateral relations. That will also require China’s continued commitment to the cause.

Xi’s objectives should also be Obama’s, as evidenced in their discussions for two years now, particularly since these objectives equally serve US and Chinese interests. To help realise them, the United States needs to contribute its share of commitment.

By Bunn Nagara Behind the Headlines

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Xi visit helps US avoid anxiety over China

President Xi Jinping arrived in Washington DC on Thursday. His stay there was the climax of his week-long state visit to the US.

The diplomatic exchanges in recent years seem to have reached a consensus, in which the heads of state prefer to hold a more private and longer meeting, where the subjects of their talks can range from domestic as well as diplomatic matters. Such a scheme helps to build personal trust and enable them to better understand each country’s policies.

On Thursday night, Xi and Obama’s talk lasted for three hours. On Friday morning the two met again in limited company. When the meeting expanded to more people, the duration was shorter. As such intensive exchanges continue, China and the US are in better place to avoid strategic miscalculation.

As for the achievement of this visit, people are focusing their attention on how much the talks over cyber security can yield and whether a code of behavior to govern the two air forces’ encounter will be officially signed. Although the bilateral investment treaty may not be signed this time, an exchange of negative lists for foreign investment will help both sides get closer toward the eventual agreement.

The strategic impact of Xi’s visit will take effect in the near future, which will be assessed by how much the tension will ease around thorny issues between the two countries.

Talk about a “Thucydides trap,” in which a rising power clashes with an existing power, permeates academic and media circles, especially in the US.

However, both Xi and Obama said they do not believe in the Thucydides trap, which means the two countries will not walk toward the strategic confrontation.

The US had three enemies in history, Germany, Japan and the Soviet Union. China is different from any of the three. It is larger than Germany and Japan, and it was more efficient than the Soviet Union. The most important thing is that China is one of the largest US trade partners. The US has more interests in China than in any of its allies.

China is still growing at a high speed, though the momentum has slowed. But the growth still outpaces other major economies. The anxiety from the US is inevitable.

Xi’s latest visit has helped ease the anxiety from the US. The Chinese and US people may also do something to help their countries avoid the Thucydides trap – give their governments more flexibility so that both can make compromises on thorny matters. – Global Times

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Xi’s DC visit hailed as success

The first official state visit to the United States by Chinese President Xi Jinping has been applauded as a great success, despite skepticism expressed by some before the trip.

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Chinese President Xi Jinping delivers a speech during a welcome banquet jointly hosted by Washington State government and friendly communities in Seattle, the United States, Sept. 22, 2015. Xi arrived in this east Pacific coast city on Tuesday morning for his first state visit to the U.S. (Xinhua/Liu Weibing)Chinese President Xi Jinping (4th L, rear) speaks during the Third China-U.S. Governors Forum in Sea[Read it]

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China’s Long March-6 new carrier rocket succeeds in carrying 20 satellites to space

A new model of China’s carrier rocket Long March-6 carrying 20 micro-satellites blasts off from the launch pad at 7:01 a.m. from the Taiyuan Satellite Launch Center in north China’s Shanxi Province, Sept. 20, 2015. The new carrier rocket will be mainly used for the launch of micro-satellites and the 20 micro-satellites will be used for space tests. (Xinhua/Yan Yan) 

China successfully launched a new model of carrier rocket, Long March-6, at 7:01 a.m. Sunday from the Taiyuan Satellite Launch Center in north China’s Shanxi Province.

The rocket carried 20 micro-satellites into the space for space tests.

The new rocket, fueled by liquid propellant made of liquid oxygen and kerosene, is China’s first carrier rocket that uses fuel free of toxicity and pollution, said Gao Xinhui, an official at China Aerospace Science and Technology Corporation.

“Using such propellant can cut costs by a great margin,” he said.

Zhang Weidong, designer-in-chief at the Shanghai Academy of Spaceflight Technology with the China Aerospace Science and Technology Corporation, said the new rocket also “reformed the way carrier rockets are tested and launched in China.”

“Loading, testing and positioning were finished when the Long March-6 rocket was at a horizontal position, before it was lifted to an upright position for launching,” he said.

“We believe it will greatly boost the competitiveness of Chinese carrier rockets in the international market. The new model will also significantly improve our abilitiy to access space,” said Zhang.

The launch on Sunday has tested the feasibility and accuracy of the rocket’s design as well as other new technologies.
The new carrier rocket will be mainly used for the launch of micro-satellites.

The rocket is the 210th mission by the Long March rocket family. In 1970, a Long March-1 rocket sent China’s first satellite, Dong Fang Hong 1, or “the East is Red”, into Earth orbit. – Xinhua

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China launches new carrier rocket with 20 satellites

Great contribution from the Chinese: UN Chief Praises WW2 parade, 回憶麻坡 (Muar)人支援抗戰

UN chief praises parade, China’s great contribution

The world has been saying about Beijing’s grand military parade on Thursday, held to mark the 70th anniversary of China’s victory in the War of Resistance Against Japanese Aggression and the end of World War Two. Here’s what many world leaders who attended the commemorations thought.

UN Secretary-General Ban Ki-moon has spoken to CCTV about his feelings regarding China’s V-Day parade. He said he was deeply impressed by the celebration, and has fully recognized China’s contribution during the World War Two.

The world has been saying about Beijing’s grand military parade on Thursday, held to mark the 70th anniversary of China’s victory in the War of Resistance Against Japanese Aggression and the end of World War Two. Here’s what many world leaders who attended the commemorations thought.

“The V-Day parade was very grand. I felt that not only Chinese leaders, but also ordinary Chinese, could cherish the memory of the victory in the war against Japanese aggression, as well as the memory of the martyrs who made contributions.”

回憶麻坡 (Muar)人支援抗戰

《血脉长城——华侨华人与抗日战争》 20150822 第一集 海外赤子 情系中华_新闻频道_央视网(


  • (圖:星洲日報)





– See more at:


UN chief stresses UN′s impartiality after Japan protests China parade trip 반기문

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WW2 Eastern frontier main battle: China’s V-day parade 2015

Xi takes group photos with foreign guests ahead of V-Day parade
Chinese President Xi Jinping took group photos with foreign leaders, government representatives and leading officials of international and regional organizations ahead of a V-Day parade on Thursday morning


China holds parade, vows peace on war anniversary

Staged a grand parade on Thursday in Tian’anmen Square to mark the 70th anniversary of victory in the Chinese People’s War of Resistance against Japanese Aggression (1937-45) and the end of World War II, China attracted the world’s attention by showing the aspiration for peace and its determination to safeguard post-war international order.

President Xi Jinping delivered a speech before the parade to call people to commemorate the hard-won peace after years of bloody war that had inflicted heavy losses on China and other countries.

China holds parade, vows peace on war anniversary
Scan the code and check China Daily’s up-to-date full coverage of China’s V-Day parade.

In honoring all the Chinese who perished in the war and those who have contributed to the victory in the deadly conflicts with Japan, the parade is a tribute to history and a call for peace, Xi said.

But he warned that the world is far from tranquil although peace and development have become the prevailing trend.

War is the sword of Damocles that still hangs over mankind. We must learn the lessons of history and dedicate ourselves to peace, he said.

Ravaging through Asia, Europe, Africa and Oceania, that war inflicted over 100 million military and civilian casualties. China suffered over 35 million casualties and the Soviet Union lost more than 27 million lives, Xi said.

The victory of the Chinese People’s War of Resistance Against Japanese Aggression is the first complete victory won by China in its resistance against foreign aggression in modern times.

This great triumph re-established China as a major country in the world and opened up bright prospects for the great renewal of the Chinese nation, Xi said.

Xi vowed that China will never seek hegemony or expansion no matter how much stronger it may become. He said the country will never inflict its past suffering on any other nation.

Xi, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, inspected the troops after the speech.

On the Tian’anmen Square, Xi and the first lady Peng Liyuan welcomed honored guests, including 30 national leaders, to watch the parade which involved more than 12,000 military personel as well as veterans and their descendants. Seventeen foreign military teams also took part.

Leaders including Russian President Vladimir Putin, President of the Republic of Korea Park Geun-hye, Pakistani President Mamnoon Hussain and UN Secretary-General Ban Ki-moom witnessed the historical event.

1779 overseas Chinese from more than 120 countries and regions were invited, 5 of them were invited to watch the parade from the Tian’anmen Rostrum, including Chinese American physicist Paul Chu, and business tycoon Lucio Tan.

Opened with a helicopter flying by parading the national flag, the march past lasted for about 50 minutes. 20 military helicopters flew overhead forming the figure 70 to mark the 70th anniversary commemorations. Seven fighter jets flew past, making the world’s longest colored vapor trail.

After more than 300 veterans, including Kuomingtang veterans, and their descendants passed by in two vehicle formations, eleven formations of Chinese troops marched past, including 51 female honor guards. It was the first time female honor guards have joined a parade. More than 50 generals, with an average age of 53, leaded parade units.

Seventeen formations of foreign troops from 17 countries including Russia and Pakistan, marched past, before twenty-seven formations of armaments paraded.

This was the first time foreign military teams join in a Chinese military parade.

More than 500 pieces of China’s latest equipment were displayed, 84 percent of which have never been viewed by the public, many of which are among the world’s most advanced.

The navy displayed its latest anti-ship missiles, ship-to-air missiles and carrier-based aircraft, while the air force brought long-range bombers, fighters and airborne early warning and control (AEWC) aircraft.

The armaments on display also included the army’s newest helicopter gunships and battle tanks as well as intermediate-range conventional and strategic ballistic missiles from the Second Artillery Force.

The events ended with 10 air force formations flying over the square and doves and balloons being released.

China has held 15 military parades since the establishment of the People’s Republic of China. In 1999 and 2009, grand military parades were held to celebrate the country’s 50th and 60th founding anniversary. This was the first parade not held on China’s National Day.

As it is an international convention to hold a parade to mark the victory day, China held the grand event with a theme of “remember history, cherish the memory of China’s revolutionary martyrs, uphold peace and create the future”.

By PENG YINING in Tian’anmen square (

Obama’s absence at parade costs US chance to display leadership

Tomorrow, China will be holding a military parade to commemorate the 70th anniversary of the victory in the World Anti-Fascist War. Dozens of global leaders or their special envoys have arrived in Beijing, save for US President Barack Obama or his high-level representative, who could have been a guest of honor at the ceremony.

The absence of the US president at such an important event is a pity. Washington’s move has also affected most Western European leaders, who decided to follow the US’ lead.

But Washington compromised, and will send US Ambassador to China Max Baucus to the parade, a gesture to show that the US will be present at the event. Washington clearly doesn’t want the absence of Obama or his high-level envoy to turn into media fodder.

While it is a pity, Obama’s absence will hardly affect Sino-US relations. Still, as former allies, China and the US have lost a chance to celebrate the victory they achieved together. How they fought side by side 70 years ago continues to be cherished by the Chinese, and the memory of that time has helped nurture a favorable impression of the US.

Geopolitics remains central to Washington’s decision-making process, and weighs heavily on US diplomatic policy. However, calculated moves do not always lead to a better decision. Washington’s ambivalence to Beijing’s invitation has cost itself a chance to display leadership across the Pacific Ocean, regardless of trivial gamesmanship and bickering in the region. The US seems unable to look at the big picture: The parade in Beijing is a righteous cause.

It is not hard to figure out why Obama or a special envoy will be absent. To some extent, the reasons are understandable. First, the US simply wants to show its support to Japan, which strongly opposes the parade and imagines itself as the target of the event. Second, the US dislikes such large parades in a non-Western country, considering it “muscle-flexing.” Third, as the US election approaches, presidential candidates try to earn brownie points with the electorate through China-bashing. The political climate in the US might have made Obama think twice.

To be honest, China never expected Obama to attend. But his “remedial work,” by asking Baucus to attend on his behalf, is weak.

Many China watchers have differing takes on the US’ attitude toward China’s parade. Some believe Baucus’ presence reaffirms an agreement between China and the US that both countries have no animosity towards each other. But some think Obama’s absence is much more complicated.

The Chinese have learned how to deal with narrow-mindedness, so they don’t actually mind whether Obama or a high-level official from Washington will attend. China’s open mind will help steer both countries away from unnecessary disputes Published: 2015-9-2 21:11:50

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A region evolves with rising China

South-East Asia’s complex big power relations demand careful and considered understanding, where frequent complications and familiar gut reactions do not help.

WHEN countries have difficulty relating to a rising China, part of the problem lies in not understanding where China is heading and not knowing what it will become.

The sheer scale of China’s development and the weight of its trajectory mean that the impact of its rise on the rest of Asia and the world is bound to be considerable and profound.

As a frame of reference, the future of today’s China is often seen in the context of its past: a “Middle Kingdom” entity, the heart of an Asian tributary system, a regional superpower with global pretensions whose once closed-door policy is opening to the world.

Yet none of these references fits because modern China’s pace of change is as rapid as it is vast. Not only is it a post-Deng China, it is now into the fourth- and fifth-generation leadership of post-Dengist society.

A sense of a likely future China may then be deduced through elimination, by discarding what it is unlikely to be.

These include a communist superpower, a nation shaped by a distinct ideology, and one led by a powerful charismatic individual. But what of those things, admittedly few, that it will still be?

One of these is rule by the Chinese Communist Party (CCP), particularly since single party rule continues to be a central bastion of the status quo. Yet even this requires qualification, if not some revision, and is already subject to much speculation.

The CCP has had to undergo some redefinition as circumstances evolve. The state socialism it championed underwent a social(ist) market phase to emerge as state capitalism.

Ideology continues to be diluted as dogma fritters away. Conservatives and reformists both within and outside China agree the trend is irreversible if not also inevitable.

Just about the only thing that a future China is still certain to be is a unitary state. But even this has to be qualified again.

What is now regarded as Greater China – the People’s Republic of China on the mainland, Hong Kong, Macao and Taiwan – are unlikely to be fused into one singularly cohesive whole anytime soon.

Yet they are moving together towards a unitary economy, the basis of the modern nation state. Such a trend is beyond the protestations of democrats and the comprehension of many strategists.

At the same time, provinces are slowly moving towards greater autonomy in economic matters, including in dealings with neighbouring countries. A country as large as China cannot endure too long under strict centralised rule.

And China has endured longer than all others, with the country now into its fifth millennium of continued statehood. These trends and movements take time and may seem imperceptible for other countries, but they are par for the course with China’s enormous timelines.

For decades now, Chinese authorities have also introduced elections at local levels with invited inputs from the Carter Center. Voting has been practised in village and provincial levels, and despite occasional fits and starts the trend is towards a controlled political opening with assured stability.

All of this contributes to the near-incomprehension of today’s China on the part of external observers. A survey of their attitudes, assumptions and responses in any given week attests to this reality.

Questions of whether China (meaning Beijing) can ever govern Taiwan, or even understand Hong Kong, are typical. The real risk of observers not seeing the wood for the trees is ever-present.

A debate of sorts has emerged over China’s likely reaction to a possible win by Taiwan’s Democratic Progressive Party (DPP) in next January’s election. Pessimists who fret over their own cynical pronouncements fail to realise that China is playing for bigger stakes than petty party feuding.

China’s interest in Taipei is Taiwan, not necessarily a Kuomintang (KMT) Taiwan. A lately declining KMT under President Ma Ying-jou has sufficiently energised pragmatists in Beijing to be diplomatic towards the DPP.

Another perennial issue is the presumed rivalry between the US and China. Although competition exists between them, they have more in common than at variance for now and the foreseeable future.

Their shared interests include international security and a single global economy in which both hold the largest stakes. Rivalry in these core areas compromises the interests of both without enlarging opportunities for either.

An understanding of that basic reality is shared between US and Chinese leaders, but apparently not by Japanese ones. The Abe administration is still stuck between old wartime anxieties and proudly snubbing Beijing.

However, China should also not expect anything but Abe’s cancellation of a visit on Sept 3. The occasion, with Western leaders absent, is being presented by some in China as celebrating its victory over Japan.

China: Military parade not aimed at any country

China says its upcoming September 3rd military parade is part of commemorations for the 70th anniversary of its victory in the war of resistance against Japanese aggression, and is not specifically aimed at any country.

Nonetheless, the Abe government remains an activist one in provoking competition with China over military issues. Its White Paper released last month inflates China’s maritime military capabilities and even conflicts with US calculations.

Besides the US, Taiwan and Japan, the other barometer of China’s rise as seen through its foreign relations is Asean.

China regards Asean wariness of its territorial assertiveness as limited and negotiable, since not all member countries have rival claims to offshore territory. But Beijing may seriously be underestimating Asean’s sense of solidarity, given not just Asean’s community-building agenda but also its common resolve to develop community cohesiveness.

The established links between China and Asean’s newer CLMV members (Cambodia, Laos, Myanmar, Vietnam) are both limited and fraying in places. Beijing needs to rebuild trust and good faith within Asean as much as in North-East Asia.

China has thus emphasised multi-level, multi-sectoral joint ventures both bilaterally and collectively. Its proposals for a Maritime Silk Road and a One Belt, One Road link to Europe are backed by the China-Asean Maritime Cooperation Fund, the Asian Infrastructure Investment Bank, the New Development (Brics) Bank and China’s own solvency.

On the ground however, Asean collectively seeks enlarged trade volumes with China. However, China’s currency devaluations and the subsequent jolts to regional currencies compromise these goals.

With Indonesia, China is extending cooperation in fighting drug trafficking as Jakarta favours using the yuan for bilateral trade. With Malaysia, China is building linkages in education and industrial development.

Thailand’s post-coup government is seen as leaning towards China, thanks in part to a US snub. Now Thai-Chinese ties are growing over purchases of stockpiled Thai rice and even the prospect of a Kra Isthmus canal.

China’s relations with Vietnam and more so the Philippines will require more time and work. Ironically, Unctad trade data identifies the Philippine economy as the biggest regional beneficiary of China’s rise.

Beijing’s ties with the other Asean countries may be less complicated but still require attention and constant tending. Its record of fully understanding Asean is not impressive.

Overall, Beijing’s relations with Asean and its member nations are economic, diplomatic and socio-cultural, without political interference in their domestic matters. This contrasts with Washington’s largely military posturing and its political pressures on issues of democracy and human rights.

China’s impact on this region is likely to remain non-political and non-military – differing from US interaction. This asymmetry makes up much of South-East Asia’s strategic status quo.

Whether and how it will endure, and whether it deserves to remain, still have to be seen.

By Bunn Nagara Behind the Headlines

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

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CASS briefing on significance of War of Resistance

China is preparing to mark the 70th anniversary of Victory in the Chinese People’s War of Resistance against Japanese Aggression and the World Anti-Fascist War. The Chinese Academy of Social Sciences is currently holding a press conference in Beijing on the significance of the V-Day anniversary.

Chinese yuan extends fall, long-term depreciation unlikely, weakening is not devaluation

BEIJING, Aug. 12 (Xinhua) — Chinese currency continued to fall on Wednesday after the central bank reformed the exchange rate formation system to better reflect the market.

The central parity rate of renminbi, or yuan, weakened by 1,008 basis points, or 1.6 percent, to 6.3306 against the U.S. dollar, narrowing from Tuesday’s 2 percent, according to the China Foreign Exchange Trading System.

The People’s Bank of China (PBOC), the central bank, changed the exchange rate formation system so that it takes into consideration the closing rate of the inter-bank foreign exchange market on the previous day, supply and demand in the market and price movement of major currencies.

The International Monetary Fund (IMF) described the central bank’s move as “a welcome step” that allows market forces to have a greater role in determining the exchange rate.

“Greater exchange rate flexibility is important for China as it strives to give market-forces a decisive role in the economy and is rapidly integrating into global financial markets,” an IMF spokesperson said in an email on Wednesday.

The IMF said it believes the country can achieve an effective floating exchange rate system within two or three years.

However, the move still surprised the market and prompted the lowest valuation of the yuan since October 2012.

Ma Jun, chief economist at the PBOC’s research bureau, attributed the lower rate to a long-standing gap between the central parity rate and the previous day’s closing rate on the inter-bank market.

In a latest statement released on Wednesday, the PBOC said the rate changes are normal, as it shows a more market-based system and the decisive role that the supply-demand relationship plays in determining the exchange rate.

“This may lead to potentially significant fluctuations in the short run but after a short period of adaptation the intra-day exchange rate movements and resulting central parity fluctuations will converge to a reasonably stable zone,” the PBOC said.

Ma also said the shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation.

A relatively robust economy, current account surplus and the internationalization of the yuan will help the currency remain stable, the PBOC said.

Official data showed the Chinese economy maintained 7 percent growth in the first half of 2015 against challenges at home and abroad, creating sound conditions for the yuan to hold steady.

Surplus in goods trade reached 305.2 billion U.S. dollars in the first 7 months, a fundamental prop for the exchange rate.

An internationalized yuan and open financial sector have boosted the demand for the currency in recent years, which serves as momentum for the rate’s stabilization, the PBOC said.

In addition, the PBOC also cited China’s abundant foreign exchange reserves, stable fiscal condition and healthy financial system.

The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said it will strive to further improve market-based exchange rate formation, maintain normal fluctuations and keep the rate basically stable at an adaptive and equilibrium level.

– Xinhuanet

Yuan weakening is not devaluation: central bank economist

Photo taken on March 16, 2014, shows yuan (central) and other currencies in the picture. [Photo/IC]

BEIJING, Aug. 11 (Xinhua) — Allowing the Chinese yuan to weaken sharply against the U.S. dollar does not signify the beginning of a downward trend, a central bank economist said on Tuesday .

The yuan central parity rate announced by the China Foreign Exchange Trading System (CFETS) stood at 6.2298 against the greenback on Tuesday compared to 6.1162 on Monday, down nearly 2 percent, the lowest level since April, 2013.

The shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation, said Ma Jun, chief economist at the research bureau of the People’s Bank of China (PBOC).

The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said Tuesday’s lower rate resolved accumulated differences between the central parity rate and the market rate, and was part of improvements to the central parity rate formation system to make it more market-based.

Ma said a long-standing gap between the central parity rate and the previous day’s closing rate on the inter-bank market led to the lower rate on Tuesday.

He said China’s economic fundamentals support a “basically stable” yuan exchange rate. A central parity rate closer to the market rate will provide a more stable environment for macro-economic development.

The economy has shown signs steadying and recovery, with infrastructure investment accelerating and property sales improving. Compared with some economies under strong pressure to depreciate their currencies, China is better-off, with a current account surplus, huge foreign exchange reserves, low inflation and sound fiscal conditions, he explained.

From Tuesday, daily central parity quotes reported to CFETS before the market opens will be based on the previous day’s closing rate on the inter-bank market, supply and demand and price movements of other major currencies, according to the PBOC.

In July 2005, the central bank unpegged the yuan against the U.S. dollar, allowing it to fluctuate against a basket of currencies.

Making formation of the central parity rate more market-based touches on the core of reform, compared with previous steps that mainly concerned how much the yuan can fluctuate, said Guan Tao, former head of the international payments department at the State Administration of Foreign Exchange.

The yuan was at first allowed to vary by 0.3 percent from the central parity rate each trading day and the trading band gradually expanded to 2 percent in March last year. The market expects it to expand to 3 percent in the near future.

The latest reform actually increases China’s flexibility and independence in foreign exchange control, as a rigid exchange rate system is open to speculative attacks, Guan told China Business News.

Two-way fluctuations will become normal for the yuan in future, he said.

– Xinhuanet

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Sorry is the hardest word for Abe


The news that the “draft of Abe’s statement contains an ‘apology'” made the headlines all day on Japanese broadcaster NHK on Monday. According to the report, the statement to mark the 70th anniversary of the end of World War II by Japanese Prime Minister Shinzo Abe on Friday will also include key expressions used in the 1995 statement by then-prime minister Tomiichi Murayama, including “apology,” “deep remorse,” “aggression” and “colonial rule.” This is so far the first report released saying that Abe’s speech will cover this positive content.

Yet over the past few days, a number of Japanese media have been quoting a variety of inside information saying that Abe’s remarks will not include terms like “apology.” As the day that marks Japan’s defeat in WWII approaches, how Abe will talk about it has been placed under global public scrutiny.

Abe’s statement will reflect the future path of the country. If he only reflects on the wartime past but tries to blur the nature of the war by refusing to apologize, or avoiding mention of “aggression,” the nation will face serious doubts over whether it is planning to ditch peaceful development, and means to reshape the political and historical pattern that formed after the war.

Abe has always been beating about the bush, trying to lower the world’s anticipation of him echoing the spirit of the Murayama Statement. Not long ago, his cabinet voted through revisions of the country’s security rules, which has triggered quite a few domestic protests. His domestic support rate has tumbled sharply, causing him unprecedented pressure since he assumed office as prime minister for the second time.

Abe might compromise, and add those key words from the 1995 Statement. Yet this is not as certain as a compromise to political pressure, rather than his own moral and political responsibility. His historical revisionism is known by all, and opportunism is universally considered as his main principle to adjust strategies over historical issues. Hence, there is a good chance that he may rewrite his statement draft at the last minute.

Accordingly, instead of the real historical recognition by Abe’s administration, the speech will more likely mirror Abe’s scheming and calculating among all the pros and cons in the power structure of the Asia-Pacific region.

Even so, a statement that can be accepted by the international community is still worth welcoming.

Abe’s political logic is weird. He should realize that the US is Japan’s biggest obstacle on the path toward becoming a “normal state.” But he won’t let go of the rivalry with China. Some suspect that Tokyo is eager to stay in the good graces of Washington, letting its guard down and seeking a chance to get rid of its control. However, Japan is unable to make that work.

Abe will find that his ability falls short of his wishes over his strategy in the Western Pacific. We hope he will make the right choice for his statement, whatever the reasons. And history will judge him fairly.

– Global Times


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