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Project Dory Monitoring 3 August 2017
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Chinese investment breathes new life into new Yalu River Bridge
Aug 2, 2017 | Daily NK
Anticipation for the opening of the new Amrok (Yalu) River Bridge connecting Dandong (Liaoning Province, China) with Sinuiju (North Pyongan Province, North Korea) has risen after a Chinese businessman decided to invest money in the project’s infrastructure. -
US, China scholars exchange views of each other, North Korea
Aug 2, 2017 | ejinsight
By Frank Ching
At a time when the US-China relationship seems to be drifting, with the very clear potential of a steep downward slide, possibly sparked by events in North Korea, it is encouraging to learn that experts from think tanks in both countries have worked together for the past year to analyze knotty issues besetting the relationship and have now published parallel reports with their observations. -
Australia’s Fortescue starts iron ore marketing at Chinese ports: sources
Aug 3, 2017 | Hellenic Shipping News
Australian iron ore producer Fortescue Metals Group has started marketing one of its iron ore products at a few Chinese ports recently — the first Australian miner to venture into China’s port stock market, industry sources said. -
China issues rules to curb state firms' overseas investment risk
Aug 3, 2017 | Reuters
By Kevin Yao and Adam Jourdan
China's finance ministry has issued guidelines on overseas investment of state-owned enterprises (SOEs), amid a campaign to tighten controls on outbound investment and financial risks. -
In rare bipartisan display, U.S. Democrats back Trump on China trade probe
Aug 3, 2017 | Reuters
By Ginger Gibson
Three senior Democratic senators, in a rare show of bipartisanship, urged U.S. President Donald Trump to stand up to China as he weighs launching an investigation of its intellectual property and trade practices. -
US wants China to decide on North Korea sanctions soon: diplomats
Aug 3, 2017 | AFP (In Business Times)
The United States is pressuring China to decide in the coming days on whether to back tougher UN sanctions on North Korea after weeks of negotiations on a response to Pyongyang's missile launches, diplomats said. -
Rising Asia-Europe demand won't fill new mega-ship capacity
Aug 2, 2017 | Journal Of Commerce
By Greg Knowler
Carriers on the Asia-Europe trade are reaping the benefits of a bullish container shipping market, but the steady flow of ultra-large vessels into service at the rate of one a week will continue to put pressure on the supply-demand balance.
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Chinese investment breathes new life into new Yalu River Bridge
Aug 2, 2017 | Daily NK
Anticipation for the opening of the new Amrok (Yalu) River Bridge connecting Dandong (Liaoning Province, China) with Sinuiju (North Pyongan Province, North Korea) has risen after a Chinese businessman decided to invest money in the project’s infrastructure.
The construction of the new Yalu River Bridge was initiated in December 2010 with the expectation that it will bring an expansion of the trade volume between China and North Korea. The bridge was completed in 2014 after overcoming significant issues. However, the construction of roads on the North Korean side slowed to a halt, delaying further progress.
Recently, a Chinese businessman has announced his decision to invest in North Korea's road construction efforts, which have remained the biggest obstacle to the opening of the bridge.
A source familiar with North Korean affairs in China told Daily NK on July 24 that according to North Korean traders in Sinuiju, a Chinese businessman has committed 300 million RMB (about US$44.7 million) to the road construction project.
The construction of the new bridge was first proposed due to safety concerns regarding the existing Sino-Korean Friendship Bridge, which although derelict, has been responsible for more than 70% of bilateral trade. The bridge was repaired twice last year alone, highlighting its significant structural issues.
Aware of the situation, China sponsored the construction of a two-way (four-lane) road in the area, paying for the entire construction expenses totaling 2.2 billion RMB (approx US$327 million).
However, the source noted that North Korea suspended the construction of roads between the bridge and North Korean cities, demanding further investment from China.
"North Korea has been continuously demanding investment from Chinese businessmen, threatening them with a suspension of trade unless they invest. It seems that these efforts have produced results," he said.
But actual construction has yet to start. When asked about this, the source said it is presumably due to the tense bilateral relations between China and North Korea, as well as international sanctions and overall political climate.
There are expectations that the opening of the new Yalu River Bridge will reinvigorate trade between China and North Korea (according to KOTRA, bilateral trade volume last year was US$6 billion, a 6.1% increase from the previous year), but Chinese businessmen, who have long heard North Korea's absurd excuses for delaying the opening of the bridge, are constantly on the alert.
"The North Korean authorities have been using the construction materials and vehicles provided by China to repair other facilities instead of building roads to the bridge. For this reason, the Chinese businessmen are worried that if they accept North Korea's demand to build the road connecting the bridge to Sinuiju, the regime may demand that they extend the road to Pyongyang in the future," a separate source in China told Daily NK.
"The expectations are spreading after the Chinese government approved the investment, but everyone is waiting to see if the construction will actually take place.”https://www.dailynk.com/english/read.php?num=14644&cataId=nk01500
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US, China scholars exchange views of each other, North Korea
Aug 2, 2017 | ejinsight
By Frank Ching
At a time when the US-China relationship seems to be drifting, with the very clear potential of a steep downward slide, possibly sparked by events in North Korea, it is encouraging to learn that experts from think tanks in both countries have worked together for the past year to analyze knotty issues besetting the relationship and have now published parallel reports with their observations.
In July, the Center for Strategic and International Studies in Washington D.C. launched a major report on US-China relations written by a group of experts drawn from some of the leading American think tanks. At the same time, a parallel Chinese report, released in May, was also posted on the CSIS website.
John Hamre, CSIS president, disclosed that Fu Ying, chair of the foreign relations committee of China’s National People’s Congress, approached him in May 2016 and proposed that scholars in both countries should take a look at the bilateral relationship. In the end, it was decided to focus on five aspects of the relationship: economic relations, Asia-Pacific security issues, military relations, global governance and domestic political issues.
If any one issue dominated the discussion at the launch, it was North Korea. Both the Americans and the Chinese were highly critical of its leader, Kim Jong-un but, clearly, the American side felt that China was not doing enough to put pressure on Pyongyang.
One Chinese speaker, Zhang Tuosheng, director of the China Foundation for International and Strategic Studies, said it was not in China’s interests for North Korea to become a de facto nuclear state.
Another, Zhu Feng, a professor of international relations at Nanjing University, said, “It’s not easy for China to cut off all the trade relations with the DPRK overnight.” Of course, it has been years since the United Nations Security Council started to impose various sanctions on the Democratic People’s Republic of Korea, not yesterday or the day before.
Still, Zhu made it clear that China would not fight alongside North Korea against the US again, as it did in the early 1950s. He ridiculed the idea that if the US were to “kick Kim’s ass militarily, China will reach out and help him”.
But the question is what China is doing to stop North Korea from pursuing its nuclear weapons and ballistic missile programs. The US recently imposed sanctions on a small Chinese bank, the Bank of Dandong, which it accused of laundering money for North Korea. China immediately criticized the move as the US using domestic laws to impose “long-arm jurisdiction” on Chinese companies or individuals.
Bonnie Glaser, senior adviser for Asia at CSIS, said of the sanctions against the small bank in a city on the North Korean border: “It really goes to this issue of banks operated in northeast China that are facilitating North Korea’s access to the international financial system.”
Washington may well take further action against Chinese entities by imposing “secondary sanctions” on companies that, according to Glaser, “are facilitating North Korea’s access to the international financial system”. And, she may well have added, Chinese banks that China has so far protected.
US President Donald Trump, in an unusually severe tweet Saturday, castigated China because, he said, “they do NOTHING for us with North Korea, just talk.”
Trump added: “We will no longer allow this to continue. China could easily solve this problem.”
Trump’s latest tweets came the day after North Korea tested another intercontinental ballistic missile, one that experts said put the continental US within range of a strike, further provoking Washington.
Although Hamre said that scholars on both sides were acting independently and did not represent their governments, it is clear where their sympathies lie. For one thing, Fu Ying, who had proposed these papers in the first place, is a high level Chinese government official who used to be a vice foreign minister.
There was at least one thing that the scholars, Chinese and Americans, agreed upon. The US-China relationship is enormously important and the two countries should strive to avoid becoming adversaries but to attempt to build patterns of cooperation in every area.
The usefulness of having such scholars exchanging viewpoints is that they tend to be well connected with their governments. It is of vital importance, therefore, that they not only analyze situations from their own country’s perspective but that they understand how their opposite numbers think.
After all, how the two countries relate to each other in the decades to come will affect not only the people of the two countries but also the whole of humanity.
http://www.ejinsight.com/20170731-us-china-scholars-exchange-views-of-each-other-north-korea/
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Australia’s Fortescue starts iron ore marketing at Chinese ports: sources
Aug 3, 2017 | Hellenic Shipping News
Australian iron ore producer Fortescue Metals Group has started marketing one of its iron ore products at a few Chinese ports recently — the first Australian miner to venture into China’s port stock market, industry sources said.
The producer’s Kings fines was heard to have been sold at Qingdao and Rizhao ports, as well as at some ports along the Yangtze River, and the transactions were in Chinese Yuan, sources said.
“I heard parcels of Kings fines were sold at Qingdao port,” said a Shanghai-based trader.
Market participants said FMG has appointed an international trading house based in Singapore as the agent because FMG does not have a company registered in China with a license to sell port stocks.
“FMG has one agent opening L/Cs [letters of credit] and doing financing for it. After clearing customs, it [FMG] markets the cargoes at the port itself,” said a Shanghai-based trader.
In response to the matter, FMG CEO Nev Power said: “We are not currently selling product from port stocks,” in an email last Friday.
The agent could not be reached for comment this week.
An international trader said it makes sense for the miner to appoint an agent as it is time consuming to apply for a license to sell port stocks, especially when the Chinese government is tightening its grip on capital outflow from China.
“I think the reason for FMG to market at local ports is to reach out to buyers that were not their customers previously. There are more buyers who want to buy in smaller lots of 5,000-10,000 mt than buy in large Capesize vessels, especially when the price for steel feedstock can be so volatile,” said the international trader.
As to why the miner is marketing Kings fines instead of other flagship products, some sources said it may be difficult to sell Capesize vessels of lower grade Kings fines to Chinese end-users, who are chasing after productivity when the steel margins are very strong.
Other sources thought the move was to avoid direct competition with its term and spot customers who are already marketing Super Special and Fortescue Blend fines at the ports.
“Not many people want to buy Kings fines in the seaborne market, so instead of selling low and destroying the pricing, it’s a better option to sell in Yuan currency at the ports,” a Zhejiang-based trader said, adding that FMG was primarily targeting end-users.
The same Zhejiang trader said the initiative could be a move by the miner to gauge whether it could sell its other products at the ports in the future.
For the seaborne market, the Australian miner prices its seaborne iron ore products namely Super Special, Fortescue Blend and King fines using the Platts 62% Fe IODEX assessment with an adjustment for iron content, based on market dynamics.
Port stocks are becoming increasingly popular as more Chinese end-users prefer prompt cargoes, as well as buy in smaller parcels without opening letters of credit.
Brazil’s Vale — the first international miner to enter the Chinese port stock market — currently blends Brazilian blended fines at the northern Chinese ports of Caofeidian, Dalian, Yantai, and at eastern ports of Qingdao, Dongjiakou and Lianyungang and sells to their customers in US dollar and Chinese Yuan currencies.
But some market sources were concerned that more miners may enter the port stock business in the future, leaving little room for traders to actively market the iron ore products.
“What will be our job if more and more miners start selling their products in yuan at the port themselves?” said a trader in southern China.
https://www.hellenicshippingnews.com/australias-fortescue-starts-iron-ore-marketing-at-chinese-ports-sources/
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China issues rules to curb state firms' overseas investment risk
Aug 3, 2017 | Reuters
By Kevin Yao and Adam Jourdan
BEIJING (Reuters) - China's finance ministry has issued guidelines on overseas investment of state-owned enterprises (SOEs), amid a campaign to tighten controls on outbound investment and financial risks.
China's giant SOEs making products from trains to chemicals have been leading the country's "go out" drive with growing overseas investments, but they have encountered low returns on investment and weak profitability, the ministry said.
The guidelines will help "strengthen financial management of overseas investment of state-owned enterprises, prevent financial risks and improve investment efficiency," the ministry said in a statement on Wednesday.
China is increasingly scrutinizing overseas spending by both private and state-owned firms, amid growing concerns about rising debt levels and potential systemic financial risk.
The guidelines, which come into effect from August, covered the areas of investment decisions, financial management, cost control, dividend distribution and foreign exchange business.
"Greater outbound investment by SOEs is going to take place and many of them lack the ability to properly manage risks," Xu Baoli, director of the research center at China's state-owned assets regulator told the official China Daily newspaper.
"The lack of accountability of senior executives for poor or failed investment is one of the reasons that lead to radical decision-making and loss-making deals."
China's SOE's are spearheading investment in infrastructure projects overseas along the ancient Silk Road land and sea trade routes, part of Beijing's signature 'Belt and Road' initiative.
In January, China issued regulatory rules on outbound investments by centrally controlled state firms, in a bid to tighten controls on money moving out of the country and stabilize a faltering yuan.
Beijing's crackdown on showy overseas deals has drawn in corporate giants including property developer Dalian Wanda, HNA Group, Anbang Insurance [ANBANG.UL], Fosun and Zhejiang Luosen, which was behind the purchase of A.C. Milan football club.
https://www.reuters.com/article/us-china-economy-soe-idUSKBN1AI1BO?il=0
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In rare bipartisan display, U.S. Democrats back Trump on China trade probe
Aug 3, 2017 | Reuters
By Ginger Gibson
WASHINGTON, Aug 2 (Reuters) - Three senior Democratic senators, in a rare show of bipartisanship, urged U.S. President Donald Trump to stand up to China as he weighs launching an investigation of its intellectual property and trade practices.
Senate Democratic leader Chuck Schumer encouraged the Republican president to skip the investigation and go straight to action against China.
"We should certainly go after them," said Schumer in a statement. Senators Ron Wyden of Oregon and Sherrod Brown of Ohio also urged Trump to rein in China.
Trump has frequently attacked China over steel imports and technology and pressured Beijing to do more to rein in North Korea's missile program.
Trump is considering encouraging U.S. Trade Representative Robert Lighthizer to launch an investigation of China under the 1974 Trade Act's Section 301 and could make an announcement within days, a senior administration official said.
The act allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. industries.
The United States has a long list of grievances with China, ranging from accusations of steel dumping to theft of U.S. companies' intellectual property.
China counters that trade between the two nations benefits both sides, and that Beijing is willing to improve trade ties.
North Korea is a point of major friction for Trump and China, with the president saying China needs to do more to restrain Pyongyang's nuclear and missile programs. Beijing has said its influence on North Korea is limited.
A senior Chinese official said on Monday there was no link between North Korea's nuclear program and China-U.S. trade.
Wyden, the top Democrat on the Senate Finance Committee, wrote to Lighthizer urging action to stop China from pressuring U.S. tech companies into giving up intellectual property rights.
Wyden's state of Oregon is home to several companies that could make a case regarding intellectual property rights and China, including Nike Inc and FLIR Systems Inc. His state is also home to Schnitzer Steel Industries Inc , which has accused the Chinese of dumping steel in the United States at a low price to drive down prices.
Section 301 was often used in the 1980s against Japanese imports of motorcycles, steel and other goods. The law has seldom been used since the World Trade Organization formed in 1995 to resolve trade disputes.
Lighthizer and Trump's Commerce Secretary Wilbur Ross have complained the WTO is slow and biased against the United States.
Trump on April 20 launched a trade probe against China and other foreign exporters of cheap steel into the U.S. market, citing national security concerns and raising the possibility of new tariffs.
He announced the inquiry surrounded by U.S. steel executives from Nucor Corp, United States Steel Corp and TimkenSteel Corp.
https://www.reuters.com/article/us-usa-trump-russia-tillerson-idUSKBN1AH55C
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US wants China to decide on North Korea sanctions soon: diplomats
Aug 3, 2017 | AFP (In Business Times)
[UNITED NATIONS, United States] The United States is pressuring China to decide in the coming days on whether to back tougher UN sanctions on North Korea after weeks of negotiations on a response to Pyongyang's missile launches, diplomats said.
US Ambassador Nikki Haley has been in talks with her Chinese counterpart on a proposed sanctions resolution since North Korea launched a first intercontinental ballistic missile on July 4.
But China, North Korea's main ally and trading partner, has yet to agree to the new measures even after Pyongyang's second ICBM test on Friday again raised questions on how the UN Security Council will respond.
"In the coming days, we'll understand whether there'll be a resolution," Russian Ambassador Vassily Nebenzia told reporters on Wednesday.
Japan's Ambassador Koro Bessho expressed hope that sanctions will be agreed this week. "I hope we can get it done in days," he told reporters on Tuesday.
Ms Haley on Sunday declared that the "time for talk was over" and that "China must decide" whether it will agree to the new raft of sanctions, aimed at ramping up the pressure on North Korea to change its behaviour.
The US ambassador warned that a weak resolution would be "worse than nothing" because it would send a message to Kim Jong Un that global powers are unwilling to unite to challenge him.
US Secretary of State Rex Tillerson is expected to meet Chinese Foreign Minister Wang Yi at the weekend, on the sidelines of a ministerial meeting of the Southeast Asian ASEAN group in Manila.
If the United States and China agree on a draft resolution, the Security Council could meet quickly to vote on the sanctions.
NOT GIVING UP YET
A US official told reporters in Washington that there were "indications" that China was ready to take steps to address the situation in North Korea.
"We would like to see more action faster and more obvious and quick results. But I think we're not giving up yet," said Susan Thornton, acting assistant secretary of state for Asian affairs.
Moscow's UN envoy said any new sanctions should not worsen North Korea's humanitarian crisis.
"The question is: What is the aim of the sanctions?" Mr Nebenzia said.
"If we see that they are suffocating the people, that will be the question. If they will help to eliminate the nuclear program of North Korea, that's another thing." Russia has maintained that stronger sanctions alone will not resolve the crisis over North Korea's military programs and has backed China's call for talks between the United States and Pyongyang.
Ms Haley has suggested that cutting of North Korea's oil supplies, banning North Korean guest workers or imposing new air and maritime restrictions could be among the new UN sanctions.
President Donald Trump has demanded that China rein in its nuclear ambitions - angrily tweeting over the weekend that he would no longer allow China to "do nothing" on North Korea.
China hit back, saying that primary responsiblity for resolving the crisis rests with North Korea and the United States.
In all, six sets of UN sanctions have been imposed on North Korea since it first tested an atomic device in 2006, but two resolutions adopted last year significantly toughened the sanctions regime.
http://www.businesstimes.com.sg/government-economy/us-wants-china-to-decide-on-north-korea-sanctions-soon-diplomats
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Rising Asia-Europe demand won't fill new mega-ship capacity
Aug 2, 2017 | Journal Of Commerce
By Greg Knowler
Carriers on the Asia-Europe trade are reaping the benefits of a bullish container shipping market, but the steady flow of ultra-large vessels into service at the rate of one a week will continue to put pressure on the supply-demand balance.
Alphaliner that said the sustained cargo volumes were being largely soaked up by the current fleet and the ongoing ULCS deliveries, and that brand new vessels of 14,000-21,000 TEU would continue to flow into the AsiaEurope market throughout the summer.
However, during the first six months of this year, 26 ships of more than 14,000 TEU were delivered, and a further dozen newbuildings of this size are expected to join the container shipping fleet at a rate of at least one a week before the annual low season begins in October.
Fortunately for carriers, the onslaught of very large and ultra large ship deliveries coincided with a cargo rally and the onset of the peak season just as the new east-west carrier alliances were being launched in April. Service contracts on Asia-Europe, settled at significantly higher levels than those negotiated in 2016, and more disciplined capacity management has ensured higher levels of profitability for container lines.
SeaIntel said while the year-over-year comparisons on Asia-Europe were impressive, comparing 2017 with 2015 was a more realistic benchmark than 2016. The container shipping analyst forecast that carriers on the trade stood to gain $1.2 to $1.7 billion in higher rate levels for full-year 2017 versus 2015.
Spot rates were well above 2016 levels through the first half when carriers were waging a debilitating rate war, but those comparisons have begun to fall off. Even though the rate for shipping a 20-foot container between Shanghai and North Europe rose 4.8 percent to $963, and the rate to the Mediterranean was up 3.6 percent to $883, yearover-year the rate to North Europe is down 14.4 percent while that to the Mediterranean is 12.1 percent lower. The weekly movement of spot rates, supplied by the Shanghai Shipping Exchange’s SCFI, can be tracked at JOC.com’s Market Data Hub
The rising rates and growing demand were reflected in Orient Overseas Container Line’s half-year results. The Hong Kong-listed carrier reported higher volumes as the European economy, driven by strong retail sales and domestic demand, expanded 0.6 percent in the second quarter from the first, according to IHS Markit, which has revised upward its 2017 forecast for Eurozone GDP growth 0.1 percentage point to 2 percent.
The three Japanese carriers also reported improved profitability coming out of their Asia-Europe liner divisions, and this is expected to be also reflected in the interim results that will soon start flowing in from the other lines
The improved cargo market has emboldened carriers to bring forward the delivery of large ships that had initially been deferred back when the trade outlook for 2017 still looked gloomy, the analyst said. Carriers and ship owners have also frozen scrapping decisions since April, although the analyst said some of this can be attributed to the postponement until 2019 of the enforcement of the Ballast Water Management convention that has removed a powerful incentive to scrap some mid-aged ships.
While containership demand has been resilient so far this year, it has not been strong enough to overcome the supply overhang that continues to weigh down on charter rates. Alphaliner said current rates are only profitable for those non-operating owners that bought tonnage at distressed prices from bankrupted or ailing companies. Owners that were carrying the full capital costs of newbuildings, especially those contracted at the peak of the market in 2005-08, were suffering massive losses.
The analyst said that even ships ordered after the 2009 financial crisis were loss-making at current charter rates. As a result, during the past 18 months, numerous non-operating owners have deferred newbuildings and have had to accept severe daily losses when finally taking delivery of the ships.
“Non-operating owners continue to bear the brunt of the overcapacity and the current newbuilding overhang still delays a re-balancing of ship supply and demand,” Alphaliner noted. “Even a relatively robust vessel demand in the coming months, with only a mild retreat for the winter slack season, will not prevent a rise in idle capacity.”
http://www.joc.com/maritime-news/solid-demand-not-enough-absorb-mega-ship-inflows-asia-europe_20170802.html
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