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Dory 7/10/17
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Trump And China Agree To Military Exercises Over North Korean Threat As President Tones Down Tough Talk Against China’s Xi Jinping
Jul 9, 2017 | Newsweek
By Graham Lanktree
U.S. President Donald Trump struck a conciliatory tone with Chinese leader Xi Jinping Saturday despite criticizing China last week for not helping to crack down on North Korea's nuclear weapons program. -
Beijing now calls the shots in the South China Sea, and the US and Asean must accept this for lasting peace
Jul 9, 2017 | South China Morning Post
By Mark J. Valencia
... China’s perceptual domination of the sea lanes is complete and, military grandstanding aside, the US and others in the region will need to focus on realistic goals, rather than desirable ones -
Sanctions Are Fine, But What About The Chinese Who Depend On Trade With North Korea
Jul 9, 2017 | South China Morning Post
By Coco Liu
Su Nan, a trader along the China-North Korea border, used to be a busy man. He used to wake early in the morning, fill his schedule with endless phone calls, and in a good year close deals worth millions of US dollars. But now, all of that has gone. -
COSCO Shipping Shares Climb After Bid to Become Third-Biggest Container Line
Jul 10, 2017 | Reuters (In The New York Times)
COSCO Shipping Holdings Co Ltd saw its stock climb on Monday after bidding $6.3 billion (4.89 billion pounds) for a Hong Kong peer, a deal that would see it become the world's third-biggest container shipper and underline China's supply-chain ambitions. -
Asia-ECSA service shows cost to shippers of larger ships
Jul 7, 2017 | Journal of Commerce
Ship upsizing coupled with inadequate infrastructure is costing Itajai shippers frequency on an Asia-east coast South America (ECSA) service, laying bare the costs to shippers of carriers deploying larger tonnage on smaller trades.
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Jul 9, 2017 | Newsweek
By Graham Lanktree
U.S. President Donald Trump struck a conciliatory tone with Chinese leader Xi Jinping Saturday despite criticizing China last week for not helping to crack down on North Korea's nuclear weapons program.
The Trump administration and China now intend to move forward with military and security cooperation between the two counties. But President Xi also stressed the importance of talks with North Korea—an idea not embraced by the Trump administration.
"We had very direct discussions about North Korea,” U.S. Treasury Secretary Steven Mnuchin told reporters on Air Force One Saturday. Trump and Xi had "substantive discussions" about how to deal with North Korea, he added, and “very direct discussions about military and security cooperation.”
State news agency Xinhua said that Xi will order China's navy to join U.S.-led military exercises in the Pacific Rim in 2018.
The Trump-Xi meeting lasted over an hour-and-a-half and followed a tweet by Trump just days before the summit in which he admonished Xi for not doing more to curb North Korea’s nuclear capabilities.
Pyongyang claimed to have test launched an intercontinental ballistic missile (ICBM) Tuesday that could reach Alaska.
“So much for China working with us,” Trump tweeted Wednesday, adding, “trade between China and North Korea grew almost 40 percent in the first quarter” of 2017.
In April, during Trump’s meeting with Xi at his Mar-a-Lago club in Florida, the president received assurances that China would do more to contain the North Korean threat.
However, Trump changed his blustering tone toward China while at the table with Xi during the G20 Summit in Hamburg, Germany.
“Let me just say that it’s an honor to have gotten to know you. We are developing and have developed a wonderful relationship,” Trump said to Xi Saturday. “I appreciate the things that you have done in regard to the very substantial problem that we all face in North Korea.”
Tensions between the U.S. and North Korea have ratcheted up, with the U.S. threatening military action. In Poland on Thursday, Trump warned: “I have some pretty severe things that we are thinking about” in response to the missile test. “That doesn't mean we are going to do it. I don't draw red lines,” the president said.
U.S. ambassador to the United Nations Nikki Haley said Wednesday that the U.S. is considering military action to stop Pyongyang’s missile tests.
China has been frustrated by the increasingly combative rhetoric of the U.S. Xi stressed the importance of talks with North Korea in his meeting with Trump, according to Xinhua news agency.
“China has many times talked about its principled position, namely that at the same time as the international community [is] making necessary responses to North Korean acts that go against U.N. Security Council resolutions, They must step up efforts to promote talks and manage and control the situation," Xinhua said, citing Xi.
http://www.newsweek.com/trump-tones-down-tough-talk-against-chinas-xi-jinping-over-north-korean-threat-633916
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Jul 9, 2017 | South China Morning Post
By Mark J. Valencia
Mark J. Valencia says China’s perceptual domination of the sea lanes is complete and, military grandstanding aside, the US and others in the region will need to focus on realistic goals, rather than desirable ones
The contest for the perceptual domination of the South China Sea, for the Asean claimants and thereby Southeast Asia, is over. China has won. There is little its regional opponents can do now. How did this come about and what are the options for dealing with it?
By guile, patience and perseverance, China has inexorably occupied and “militarised” seven supposedly strategic features in the South China Sea. In the process, it has successfully defied an international arbitration decision invalidating its infamous nine-dash line claim, as well as its actions against the Philippines and its sovereignty claim, and occupation of four low-tide elevations.
More significantly, it has done so in the face of US challenges and even shows of force in the form of “freedom of navigation operations” (Fonops), as well as protests from other claimants, like Vietnam and the Philippines. The latter was the first to recognise the futility of opposing China there and the benefits of “working with it”. It is likely that others – like Brunei and Malaysia – will follow suit. Even Vietnam, increasingly the lone and lonely opponent, may be coming round.
The irony is that the contest has been, and still is, primarily perceptual in nature. No commercial shipping has been affected, despite the constant US concern with “freedom of navigation”, nor is it likely to be in peacetime, given China’s heavy dependence on ship-borne trade.
Indeed, China is just as, or even more, concerned that the US might try to block its shipping traffic in the event of hostilities. Most importantly, a point often lost in the diplomatic hand-wringing is that, in a real shooting war, China’s military installations would be highly vulnerable to attack and destruction; they give China little, if any, strategic advantage in a clash with the US.
The real value for China of its actions and installations is they have shown that the claimants, including US military ally the Philippines, are essentially alone in their contest with China. To be sure, given Philippine President Rodrigo Duterte’s pivot away from the US and President Donald Trump’s inconsistent and confusing policy towards China , the South China Sea and the region have serendipitously enhanced China’s perceptual position. Trump’s abandonment of the US economic initiative with Asia, the Trans-Pacific Partnership, and his “let’s make a deal” approach to foreign policy have left Southeast Asian nations questioning the US will and staying power in the region. The resultant hedging, waffling and even tilting of Southeast Asian countries towards China has only served to illustrate the shallowness and fragility of American security ties in the region.
So what are the options for the United States in the near term?
One possibility, advocated by US hardliners, is for it to physically confront China over its actions and claims in the South China Sea. This could include forcing China’s forces off the features it occupies or even blockading them. Another suggestion is for the US to gain military access to the other claimants’ bases there and thus compete in a mini arms race with China.
But this is highly unlikely. The current US strategy to prevent China’s build-up there – if there was or is one – has not worked so far. Moreover, as prominent Australian analyst Hugh White observes, Washington has shown little appetite for engaging in a confrontation with China in its own backyard, where it might take heavy losses and not win quickly or outright. The US also reckons that support for its “friends and allies” or for nebulous concepts, like the international order or the freedom of navigation, are not sufficient reasons to do so.
More importantly, it perceives that its “friends and allies” do not want to see a US-China confrontation, at least one that will involve or negatively affect them, and it is difficult to imagine one that would not.
Worst of all, this would be a bad idea because, as White suggests, China believes the US does not have the will and wherewithal to meaningfully confront it and would thus press on. If the US was not bluffing, as China would think, the result could well be war.
Another option, also unlikely, is for the US and China to proactively agree to a modus operandi that accommodates Chinese concerns and shares management of the regions’ security situation. But the US has no history of, or predilection for, sharing power with anyone – and this is likely to continue in the Trump era.
A third, more likely, option is a leaking status quo. In this scenario, China continues to enhance its military capacity in the South China Sea and to interfere with other claimants’ activities there. The US continues to object and, in the words of its defence secretary, James Mattis, to “sail, fly and operate wherever international law applies”. This includes continued Fonops and intelligence, surveillance and reconnaissance (ISR) probes in China’s near-shore waters. China continues to vehemently object to and even challenge the more provocative operations. This could produce a tit-for-tat dynamic in which China enhances its military presence in the sea with each probe or Fonop, which China has repeatedly warned would be the result of such provocation.
Indeed, after the recent Fonop in which the USS Dewey indirectly challenged China’s sovereignty over a low-tide elevation, the defence ministry in Beijing warned that the US actions would “only motivate the Chinese military to enhance its capacity”.
Trump’s honeymoon with China seems to be ending. China has not delivered to Trump’s satisfaction on North Korea, his administration has agreed a new arms sale to Taiwan, despite Beijing’s vehement objections, and is making noises about punishing China for unfair trade. Relations overall are likely to become more contentious.
What China considers provocative Fonops and ISR probes are ever more likely with aggressive Pacific Command chief Harry Harris apparently calling the tactical shots. The July 2 operation near Triton Island in the Paracels is probably a harbinger of more to come, including in the Spratlys, even though the two disputed island groups present different situations.
More US-China military incidents are likely, but hopefully none will cross the threshold to open conflict – although they will likely come increasingly closer to it.
In any of these scenarios, the Southeast Asian claimants – and the rest of the Association of Southeast Asian Nations, are increasingly sidelined. As China rises in power, the Western-built and US-led international order, particularly the UN Convention on the Law of the Sea, continues to haemorrhage, and there is really little that Asean or the US can do about it.
Asean’s centrality in security affairs for the region becomes an ever more unobtainable goal in the face of big power rivalries.
The point is that the sooner the other claimants, Asean as a whole and the US face reality and embrace the art of the possible, rather than the desirable, the more likely it is that they can find and accept a modus operandi that will maintain peace in the South China Sea.
Mark J. Valencia is an adjunct senior scholar at the National Institute for South China Sea Studies, Haikou, China
http://www.scmp.com/comment/insight-opinion/article/2101696/beijing-now-calls-shots-south-china-sea-and-us-and-asean
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Sanctions Are Fine, But What About The Chinese Who Depend On Trade With North Korea
Jul 9, 2017 | South China Morning Post
By Coco Liu
Su Nan, a trader along the China-North Korea border, used to be a busy man. He used to wake early in the morning, fill his schedule with endless phone calls, and in a good year close deals worth millions of US dollars. But now, all of that has gone.
“We have no revenue so far this year,” Su told This Week in Asia. “In fact, we have been struggling since 2016, with fewer and fewer orders coming.”
Although his company hasn’t lowered his salary or laid off workers, Su said he can’t help but worry. After all, “we just sit in the office and do nothing”, he said.
Su works at Dandong Sevsuns Trading, an export firm located in Dandong, a stone’s throw from North Korea. China’s 1,420km-long border with North Korea has fostered many cross-border businesses – Dandong alone hosts 600 such firms by some estimates.
But with Beijing trying to thwart Pyongyang’s accelerating nuclear and ballistic-missile programmes, Chinese traders like Su have begun to feel the pinch, leaving many wondering what the future holds.
For cross-border businesses, recent high-level security talks between China and the US in Washington – alongside North Korea’s test-firing last week of an intercontinental ballistic missile – have fuelled even more anxieties.
US Secretary of State Rex Tillerson told reporters after the talks that China and the US had “both agreed that our companies should not do business with any UN-designated North Korean entities” .
Given China has already signed on to international sanctions against North Korea, it is unclear how the latest developments will affect the country’s policies. But many believe Beijing is poised to take further action.
Cheng Xiaohe, an associate professor specialising in China-North Korea relations at Renmin University in Beijing, said China was facing growing international pressure to distance itself from its once-close ally.
He said it was also in China’s national interest to keep North Korea nuclear-free. Pyongyang’s repeated nuclear tests have raised the stakes considerably in the region, stoking talk of Japan and South Korea acquiring their own nuclear arsenals.
Since attempts to halt North Korea’s nuclear tests through diplomacy have fallen flat and Beijing doesn’t want a war near its soil, “curbing North Korea’s nuclear ambition through tougher economic sanctions has become the only choice”, Cheng said.
But that worries the many Chinese whose livelihoods rely on trade with North Korea. For Su, the trader in Dandong, such a move could be “a killer blow”.
Su’s firm helps international organisations purchase and deliver supplies of humanitarian aid to North Korea. International relief to North Korea has almost dried up in recent months, and Su said his company had likewise been struggling to stay in business.
“If China suspends more trade activities, then we will have no choice but to shut down,” he said.
Other Chinese traders share his concern.
“Selling fruit to North Korea is the only source of income for my family. What shall we do for a living if China will no longer trade with North Korea?” said Wu Xiuhua, a middle-aged Chinese woman in Tumen, a border city an hour’s drive from North Korea.
Like other traders, Wu used to drive her produce straight over the Tumen River; now all must apply for permits to take their goods across the border.
Since the summer months are traditionally a low season for fruit sales, Wu is able to cope with the financial losses – for now. But other Tumen traders recently took to the street, she said, angry about the costly and time-consuming change.
The local authority in Tumen declined to comment.
It is unclear how many Chinese traders living along the border have been, or will be, affected by the sanctions, but Wu is not optimistic.
“Many people here are running cross-border businesses,” she said, adding that some of her friends had even invested in North Korea, building warehouses equipped with industrial cooling systems to store imported seafood.
“All these investments will go down the drain if China cuts off economic ties with North Korea,” she said.
Besides traders, any business that deals with North Korea, however indirectly, is also at risk.
At a garment factory in Fengcheng, another city near Dandong, an executive told This Week in Asia that although his company did not sell to North Korea, it had hired at least 100 North Korean workers to make clothes – ironically – for customers in Europe and the US.
“If Beijing expands its sanctions to include the hiring of North Korean workers, that would have a negative impact on our business,” said the executive.
“North Koreans work for a lower salary,” he said. “It is also hard to find enough Chinese workers, as Fengcheng, like many cities in China, faces a labour shortage.”
Labour exports are considered a major source of income for North Korea.
Nearly 80,000 North Korean working overseas send up to US$2.3 billion back home annually, according to a report by the North Korean Strategy Centre, a defector group. The report said more than half of them work in China and Russia.
The factory has yet to receive any official notices that restrict hiring, but some residents say changes are already underway. “A restaurant here used to have a lot of North Korean waitresses, but many have disappeared in the past few months. Nobody knows why they left or where they went,” said one resident.
The only businesses that remain unaffected, and at least in some respects optimistic about the future, are Chinese companies that arrange cross-border trips to North Korea.
In fact, an agent at Dandong China International Travel Service said their business had been going so well that the company now ran the tour daily.
“Many Chinese are curious about North Korea,” said the travel agent, who gave only her surname, Wang. “We now send more than 30 tourists to North Korea every day, with some clients coming all the way from Hong Kong and Macau.”
Despite the recent death of Otto Warmbier, an American student detained in North Korea in 2016 who fell into a coma and died shortly after being released back to the US, Wang said she was certain that it was “safe to travel in North Korea”.
When asked whether her company planned to promote tourism routes other than North Korea amid growing tensions between Beijing and Pyongyang, Wang burst out laughing.RELATED ARTICLESChina and North Korea: What now if Xi-Trump bromance is over?What the next Korean war will be likeIs US ignorant of the limits of Chinese influence over North Korea?Trump calls North Korea ‘a problem and a menace’China and North Korea: What now if Xi-Trump bromance is over?What the next Korean war will be like1234
“No, we don’t have to,” the agent replied. “China won’t end its business with North Korea. There is no need for a Plan B,” she said.
http://www.scmp.com/week-asia/business/article/2101743/sanctions-are-fine-what-about-chinese-who-depend-trade-north
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COSCO Shipping Shares Climb After Bid to Become Third-Biggest Container Line
Jul 10, 2017 | Reuters (In The New York Times)
SHANGHAI/HONG KONG — COSCO Shipping Holdings Co Ltd saw its stock climb on Monday after bidding $6.3 billion (4.89 billion pounds) for a Hong Kong peer, a deal that would see it become the world's third-biggest container shipper and underline China's supply-chain ambitions.
State-backed COSCO Shipping on Sunday offered to buy Orient Overseas International Ltd (OOIL) at a 31.1 percent premium to its Friday close, a price analysts said was high given the industry was just emerging from a prolonged slump.
The offer comes as China's government is outspoken over its desire to raise its profile in global shipping, which dovetails with its Belt and Road initiative aimed at increasing its influence over supply chains from Asia to Europe.
It formed COSCO Shipping last year by merging sixth- and seventh-ranked container fleets China Ocean Shipping (Group) Co and China Shipping Group. The latest deal would raise COSCO from fourth rank and place it behind only Denmark's Maersk Line <MAERSKb.Co> and Switzerland's Mediterranean Shipping Co (MSC).Continue reading the main story
"For Maersk, MSC, I think its a matter of time that COSCO will probably want to stake a claim to be the world's biggest carrier," said an analyst, who was not authorized to speak with media about the deal and so declined to be identified.
A suitor's shares often fall after making a bid, but COSCO Shipping's Hong Kong-listed stock rose as much as 6 percent on Monday to its highest in almost two years. OOIL stock rose as per usual for a target but at 20 percent, it was short of the offer price.
BOCOM International analyst Geoffrey Cheng said COSCO Shipping's offer represented a premium to comparable firms such as Maersk as well as similar transactions like France's CMA CGM SA's [CMACG.UL] purchase of Singapore's Neptune Orient Lines in 2015.
"We think accepting the offer is the best option for (OOIL) investors," he said.
DIMMING STATUS
From Hong Kong's perspective, the deal comes as the city's transport hub status dims. Its once world-leading port is handling less cargo than in past years whereas cargo at mainland ports is on the rise. In the skies, flag carrier Cathay Pacific Airways Ltd recently posted its first loss since 2008.
OOIL commands less than 3 percent of the global container shipping market but could help COSCO gain exposure to the United States, industry insiders said.
OOIL's main container unit, Orient Overseas Container Ltd (OOCL), was founded in 1969 by Tung Chao-yung, father of former Hong Kong leader Tung Chee-hwa. The magnate's second son, Tung Chee-chen is now chairman, president and chief executive.
"The merger would be complementary as OOIL is strong in Transpacific and Intra-Asia trade, and COSCO has strong China domestic trade," said Samson Lo, head of Asia mergers-and-acquisitions at UBS, which is advising COSCO Shipping.
"The terminals and logistics businesses of OOIL can bring further synergies to COSCO as well."
COSCO is making its offer with Shanghai International Port Group Co Ltd. The shipping line, which in January secured $26 billion in financing from China Development Bank to support business development, said it would finance the deal with a bridge loan from Bank of China.
(Reporting by Brenda Goh in SHANGHAI and Kane Wu in HONG KONG; Writing by Adam Jourdan; Editing by Christopher Cushing)
https://www.nytimes.com/reuters/2017/07/10/business/10reuters-china-cosco-oil.html
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Asia-ECSA service shows cost to shippers of larger ships
Jul 7, 2017 | Journal of Commerce
Ship upsizing coupled with inadequate infrastructure is costing Itajai shippers frequency on an Asia-east coast South America (ECSA) service, laying bare the costs to shippers of carriers deploying larger tonnage on smaller trades.
The Asia-ECSA service from Hapag-Lloyd, NYK Line, Zim Integrated Shipping Services, Hyundai Merchant Marine, and Hamburg Sud is a prime example of why ports around the world are racing to upgrade their infrastructure to keep up with growing ship sizes. The service will call Itajai every two weeks rather than weekly as it does at the other ports on the service rotation because the Itajai turning basin is unable to handle ships longer than 306 meters (1,004 feet) until expansion work slated to wrap up in April is completed. As it stands, six of the 13 ships on the service are longer than 306 meters, including Zim’s 11,000-TEU, the largest ship in its fleet.
The use of such large ships also threatens the sustained increases in freight rates on what is possibly the world’s most profitable container trade, with rates of around $2,600 per FEU.
“With regard to the larger vessels being deployed in this trade lane it does look like it might be a capacity increase but we cannot say for sure yet as there is not much detail from the carriers,” said Alan Murphy, CEO of SeaIntel, a Copenhagen-based maritime analyst.
“We also do not know what the demand situation is behind this development. If this is, potentially, new capacity to meet excess demand, then the carriers can probably keep their profitable rates on this trade lane, but if it is a move to take advantage of the high rate levels to fight for market share, then that could disrupt the high freight rate levels, which are probably the highest in the world right now.”
The Asia-ECSA service, which will call at the Asian ports of Klang, Singapore, Qingdao, Shanghai, Ningbo, Hong Kong, Shekou and Busan, will start calling at APM Terminals (APMT) facilities in Buenos Aires and Itajai after terminals in both ports battled for the business.
“We are excited to welcome this new service that expands Argentina’s markets into Asia for our customers. We can now offer more supply chain solutions for importers and exporters using our on-dock rail service and terminal connectivity,” said APMT Argentina managing director Silvia Iglesias.
Argentina’s annual container throughput in 2016 was 1.6 million TEU and Buenos Aires, which handled 1.4 million TEU last year, is the fourth-busiest container port in South America. The service will begin Aug. 25 at Buenos Aires Terminal 4, which has a 10.7 meter draft, but that usually causes few problems because it is at the end of the service, and so vessels arrive and leave fairly light.
“This new service is good news for our landside customers who will now compete better in world markets with more routing choices,” said Ricardo Arten, managing director of APMT in Brazil.
APMT Itajai handled 90,000 TEU during the first five months of this year, up 10 percent over the same period of 2016. Itajai is Brazil’s second-largest container port — after Santos, with 3.64 million in 2016 — and it handled 1.1 million TEU in 2016. Poultry is a major commodity moved through the port, where APMT Itajai handled 200,000 TEU in 2016. In total, the Itajai Port Complex, which includes Portonave as well as APMT Itajai, handled 106,000 TEU of frozen poultry in 2016.
After losing cargo to Itajai rival Portonave for several years, APMT Itajai now boasts four deep-sea calls: Samba (Europe), Bossa Nova (Europe and the Middles East), and two Asia services. The terminal also has a Mercosul Line/Log-In Logistica joint cabotage service
http://www.joc.com/maritime-news/ships-shipbuilding/asia-ecsa-service-shows-cost-shippers-larger-ships_20170707.html?utm_campaign=CL_JOC%20Asia%207%2F10%2F17%20%20%20%20%20%20%20_PC9156_e-production_E-1705_DB_0709_1835&utm_medium=email&utm_source=Eloqua
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