Category Archives: China

(BBG) Banned Chinese Security Cameras Are Almost Impossible to Remove

(BBG) An August deadline to remove them from federal agencies likely won’t be met as many departments don’t even know what cameras they’re using.

Thousands of Banned Chinese Surveillance Cameras Remain in U.S.

U.S. federal agencies have five weeks to rip out Chinese-made surveillance cameras in order to comply with a ban imposed by Congress last year in an effort to thwart the threat of spying from Beijing.But thousands of the devices are still in place and chances are most won’t be removed before the Aug. 13 deadline. A complex web of supply chain logistics and licensing agreements make it almost impossible to know whether a security camera is actually made in China or contains components that would violate U.S. rules. The National Defense Authorization Act, or NDAA, which outlines the budget and spending for the Defense Department each year, included an amendment for fiscal 2019 that would ensure federal agencies do not purchase Chinese-made surveillance cameras. The amendment singles out Zhejiang Dahua Technology Co. and Hangzhou Hikvision Digital Technology Co., both of which have raised security concerns with the U.S. government and surveillance industry.

Hikvision is 42% controlled by the Chinese government. Dahua, in 2017, was found by cybersecurity company ReFirm Labs to have cameras with covert back doors that allowed unauthorized people to tap into them and send information to China. Dahua said at the time that it fixed the issue and published a public notice about the vulnerability. The U.S. government is considering imposing further restrictions by banning both companies from purchasing American technology, people familiar with the matter said in May. “Video surveillance and security equipment sold by Chinese companies exposes the U.S. government to significant vulnerabilities,” said Representative Vicky Hartzler, a Republican from Missouri, who helped draft the amendment. Removing the cameras will “ensure that China cannot create a video surveillance network within federal agencies,” she said at the time.Dahua declined to comment on the ban. In a company statement, Hikvision said it complies with all applicable laws and regulations and has made efforts to ensure its products are secure. A company spokesman added that the Chinese government is not involved in the day-to-day operations of Hikvision. “The company is independent in business, management, assets, organization and finance from its controlling shareholders,” the spokesman said.Despite the looming deadline to satisfy the NDAA, at least 1,700 Hikvision and Dahua cameras are still operating in places where they’ve been banned, according to San Jose, California-based Forescout Technologies, which has been hired by some federal agencies to determine what systems are running on their networks. The actual number is likely much higher, said Katherine Gronberg, vice president of government affairs at Forescout, because only a small percentage of government offices actually know what cameras they’re operating. The agencies that use software to track devices connected to their networks should be able to comply with the law and remove the cameras in time, Gronberg said. “The real issue is for organizations that don’t have the tools in place to detect the banned devices,” she added. Several years ago the Department of Homeland Security tried to force all federal agencies to secure their networks by tracking every connected device. As of December, only 35% of required agencies had fully complied with this mandate, according to a 2018 report by the Government Accountability Office. As a result, most U.S. federal agencies still don’t know how many or what type of devices are connected to their networks and are now left trying to identify the cameras manually, one by one. 

(GUA) Hong Kong showed China is a threat to democracy. Now Europe must defend Taiwan

(GUA) Beijing is bullying another democratic neighbour. The EU must stop ignoring authoritarianism for the sake of stability and cash

China’s sole aircraft carrier, the Liaoning
 China’s aircraft carrier, the Liaoning. China ‘has stepped up its aerial missions violating Taiwanese airspace, sailing warships near or in Taiwanese waters’. Photograph: Anthony Wallace/AFP/Getty Images

Hong Kong’s administration has backed down over the controversial extradition bill, but the canary in the coalmine of China’s tacit acceptance of democracy is already dead.

Under China’s “one country, two systems” model, Hong Kong was given the guarantee that the freedoms of its citizens would be preserved and respected. Meanwhile, for a long time in the west, the consensus was that, as its economy grew, China would start to look more like Hong Kong. Regrettably, in recent years the opposite has happened and Hong Kong looks more like China by the year. Perhaps we were naive to believe that this erosion of Hong Kong’s democracy was not inevitable. Beijing makes no secret of its view that democracy and Chinese civilisation are incompatible. The protesters in the streets of Hong Kong would beg to differ, and I hope they succeed through peaceful means.

For democracy activists in Hong Kong and beyond, there is a shining city on the hill: Taiwan. It is the one clear example of a Chinese liberal democratic project that has thrived in recent years. It should come as no surprise that it has faced intense pressure from Beijing.

In the South China Sea, China is strengthening its military presence. Its violations of Taiwanese air and sea space have escalated to dangerous levels. Beijing’s hostility towards Taipei has intensified since 2016, when Taiwan elected a president who defends Taipei’s sovereignty. It has stepped up its aerial missions violating Taiwanese airspace, sailing warships near or in Taiwanese waters, with the most recent example in June when China’s aircraft carrier passed through the Taiwan Strait. Taipei is also seriously concerned about Chinese interference in Taiwan’s presidential election next January.

To date, Europe has been erratic in its dealings with China. Several states have been eager to jump into bed with Beijing and auction off our democratic values for the promise of a boost in investment. They have turned a blind eye to Beijing’s human rights abuses at home and bellicosity in its neighbourhood. Meanwhile, other states see China’s continued authoritarian drift but shrink in the face of its global bullying.

The European Union regularly argues that its foreign policy is based on values, not just short-term interests. If this is the case, we should stand up for these values and defend the largest Chinese democracy from authoritarian pressure. The United States is leading by example, including the recent decision to sell military equipment worth more than $2bn to Taipei.

Taiwanese protesters hold slogans reading “No extradition to China” during a rally to oppose Hong Kong’s contentious extradition bill
 Taiwanese protesters show solidarity with the people of Hong Kong’s in rejecting the contentious extradition bill. Photograph: Chiang Ying-ying/AP

In Europe, however, China bullies capitals into accepting its warped viewpoint that Taiwan is just a rebel province. It forces us to deny Taiwan’s access to international forums and feigns outrage if any European politicians meet democratically elected representatives of the Taiwanese people – a country with a population almost equal to that of Australia.

The new EU leadership should change this approach, and make a stand for democratic self-determination. It should start by meeting Taiwan’s leaders, and moving forward with an investment partnership; and it should no longer be silent when China takes an aggressive posture. Until we do, the EU’s claims to be basing foreign policy on values is a statement that rings hollow.

Our defence of democracy abroad matters for our security at home. Europe’s current debates around China relate to potential security threats – from questions about Huawei and its role in building 5G, through to Chinese one-way investment in Europe’s strategic crown jewels. We want China to offer opportunity and be a partner, but its nationalistic shift gives us cause to worry about its real motives, underpinned by a totally different set of values.

This is why Europe’s stand for our values matters. It is not some abstract discussion about what happens halfway around the world, but the maintenance of a rules-based global order which has kept relative peace, spread prosperity and built free societies.

The people of Hong Kong want more democracy. They will have to win it for themselves. But Europe cannot continue turning the other cheek for the sake of stability and Chinese cash, while people seek the rights that we insist on for ourselves. Yes, China is rich and powerful, but it will only rewrite the world’s rulebook if we allow it to – starting by dismantling democracy on its own doorstep.

We should stand up for Taiwan’s self-determination and treat it as a fully-fledged member of the alliance of democracies. In a globally interdependent world, failure to defend our values in east Asia and beyond will eventually lead to the erosion of those same values at home.

(Reuters) China second quarter GDP growth slows to 27-year low as trade war bites, more stimulus seen

(Reuters)

BEIJING (Reuters) – China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.FILE PHOTO: Workers are seen at a production line manufacturing tyres at a factory in Nantong, Jiangsu province, China April 28, 2019. REUTERS/Stringer/File Photo

While more upbeat June factory output and retail sales offered signs of improvement, some analysts cautioned the gains may not be sustainable, and expect Beijing will continue to roll out more support measures in coming months.

China’s trading partners and financial markets are closely watching the health of the world’s second-largest economy as the Sino-U.S. trade war gets longer and costlier, fuelling worries of a global recession.

Monday’s growth data marked a loss of momentum for the economy from the first quarter’s 6.4%, adding to expectations that Beijing needs to do more to boost consumption and investment and restore business confidence.

The April-June pace, in line with analysts’ expectations, was the slowest since the first quarter of 1992, the earliest quarterly data on record.

“China’s growth could slow to 6% to 6.1% in the second half,” said Nie Wen, an economist at Hwabao Trust. That would test the lower end of Beijing’s 2019 target range of 6-6.5%.

Cutting banks’ reserve requirement ratios (RRR) “is still very likely as the authorities want to support the real economy in the long run,” he said, predicting the economy would continue to slow before stabilizing around mid-2020.

China has already slashed RRR six times since early 2018 to free up more funds for lending, and analysts polled by Reuters forecast two more cuts by the end of this year.

Beijing has leaned largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly 2 trillion yuan ($291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

The economy has been slow to respond, however, and business sentiment remains cautious.

Trade pressures have intensified since Washington sharply raised tariffs on Chinese goods in May. While the two sides have since agreed to resume trade talks and hold off on further punitive action, they remain at odds over significant issues needed for an agreement.

Despite the trade dispute, net exports accounted for a striking 20.7% of the first-half GDP growth, as Chinese exporters had rushed to sell ahead of higher U.S. tariffs and imports had weakened more sharply amid sagging domestic demand.

For June, both exports and imports fell, and an official survey showed factories were shedding jobs at the fastest pace since the global crisis a decade ago..

“Due to the global slowdown and impact from the trade war, our exports will continue to fall and it’s possible they may post zero growth for the year,” said Zhu Baoliang, chief economist at the State Information Centre, a top government think-tank.

The contribution from net exports will decline as domestic demand gradually recovers, Zhu told the official Financial News ahead of the Q2 data, adding that he expects economic growth to slow to 5.8% next year.

MORE SUPPORT ON THE WAY

A string of downbeat data in recent months and the sudden escalation in the trade row had sparked questions over whether more forceful easing may be needed to get the economy back on steadier footing, including some form of interest rate cuts.

China has “tremendous” room to adjust policies if the trade war worsens, the central bank governor was quoted as saying in June.

Premier Li Keqiang said this month that China will make timely use of cuts in banks’ reserve ratios and other financing tools to support smaller firms, while repeating a vow not to use “flood-like” stimulus.

Analysts believe room for more aggressive monetary policy easing is being limited by fears of adding to high debt levels and structural risks.

Moreover, June industrial production, retail sales and fixed-asset investment data all beat analysts’ forecasts, suggesting that Beijing’s earlier growth-boosting efforts may be starting to have an effect.

Industrial output climbed 6.3% from a year earlier, data from the National Bureau of Statistics showed, picking up from May’s 17-year low and handily beating an expected 5.2%.Slideshow (2 Images)

Daily output for crude steel and aluminum both rose to record levels.

Retail sales jumped 9.8% – the fastest since March 2018 – and confounding expectations for a slight pullback to 8.3%. Gains were led by a 17.2% surge in car sales.

Mao Shengyong, a spokesman at the National Bureau of Statistics, told a briefing that he expected the benefits of policy measures will be more obvious in the second half.

Some analysts, however, questioned the apparent recovery in both output and sales.

Capital Economics said its in-house model suggested slower industrial growth last month, while the jump in car sales may have been partly due to a one-off factor.

Car dealers in China are offering big discounts to customers to reduce high inventories that have built up due to changing emission standards. Motor vehicle production actually fell 15.2%, the 11th monthly decline in a row, suggesting automakers don’t expect a sustained bounce in demand any time soon.

INVESTMENT ALSO SLOWLY PICKING UP

Fixed-asset investment for the first half of the year rose 5.8% from a year earlier, compared with a 5.5% forecast and 5.6% in the first five months. Infrastructure expanded 4.1%, with railways continuing to grow in the double digits.

Real estate investment, a major growth driver, also quickened in June, rising 10.1% on-year, Reuters calculated. But new home sales shrank for a second month.

“The monthly data were better than expected… (But) we are skeptical of this apparent recovery given broader evidence of weakness in factory activity,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“Looking ahead, we doubt that the data for June will mark the start of a turnaround.”

Additional reporting by Leng Cheng, Writing by Ryan Woo and Stella Qiu; Editing by Kim CoghillOur Standards:The Thomson Reuters Trust Principles.

(ZH) China To Sanction American Companies Selling Weapons To Taiwan

(ZH)

When it comes to tail risks that could cause WWIII, simmering tensions around Taiwan and Beijing’s increasingly belligerent rhetoric probably rank as one of the most probable. Since at least the beginning of the year, President Xi has warned that ‘reunification’ between Taiwan and the mainland is inevitable, and hinted that Beijing wouldn’t hesitate to attack any foreign power that tries to stop China. In response, Taiwan’s President Tsai Ing-wen has insisted that the people of Taiwan would ‘never’ tolerate rule by the Communist Party, and insisted that the island’s military would fight.

In the middle of this, Washington has okayed the sale of $2.2 billion in weapons, including missiles and tanks, to Taiwan. The decision outraged Beijing, which accused Washington of interfering in its relations with its wayward province.

Now – at a time when Peter Navarro said that trade talks are going “great” – Beijing is moving ahead with an unexpected escalation: China’s Foreign Ministry Spokesman Geng Shuang said in a statement that Beijing intends to impose sanctions on American companies selling arms to Taiwan.

That list likely includes most of the major American defense contractors, particularly General Dynamics, the maker of the Abrams tank, and Raytheon, maker of the Stinger missile – two of the armaments being purchased by Taiwan.

  • CHINA SAYS TO SANCTION U.S. FIRMS INVOLVED IN TAIWAN ARMS SALES
  • U.S. GOVT IN `TOTAL DISREGARD’ OF CHINA, MINSTER WANG YI SAYS
  • WANG YI: U.S. SHOULDN’T HAVE OFFICIAL RELATIONS WITH TAIWAN

The announce comes as Chinese Foreign Minister Wang Yi warned during a trip to Hungary on Friday that Washington must end its dealings with Taiwan, saying that continuing would be like “playing with fire.”

Wang

Wang Yi

He added that no foreign power will be able to prevent China’s reunification with its runaway province. Though the US has vowed to protect Taiwan should the mainland try to invade. Wang added that the US government is in ‘total disregard’ of China.

And just like that, the prospects for moving from trade war to military confrontation with Beijing have climbed considerably.

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(EUobserver) Russia approves China-Europe highway

(EUobserver)

The Russian government has approved the plans to construct a toll-highway between Kazakhstan and Belarus, connecting China and Europe. It is the missing part of the so-called ‘Meridian highway’. It would make transportation between China and Europe faster than three current rail corridors. Gazprom estimated the 2,000km highway project would cost around €10bn and would take between 12 to 14 years of construction.

(CNBC) Nintendo says it will shift part of its Switch gaming console production out of China

(CNBC)

  • Nintendo, which currently outsources almost all of the console production to contract manufacturers in China, plans to make the partial shift to Vietnam this summer.
  • Its spokeswoman said the shift was intended to diversify risks and not to escape potential tariff hikes by the United States on products imported from China.
GP: Sony Nintendo 170614

Sony PlayStation and Nintendo Switch game console signage is displayed during the E3 Electronic Entertainment Expo in Los Angeles, California, U.S., on Wednesday, June 14, 2017.Patrick T. Fallon | Bloomberg | Getty Images

Japan’s Nintendo plans to shift a part of the production of its Switch gaming consoles to Vietnam from China in an effort to diversify manufacturing sites, a spokeswoman said on Tuesday.

Nintendo, which currently outsources almost all of the console production to contract manufacturers in China, plans to make the partial shift to Vietnam this summer.

The spokeswoman said the shift was intended to diversify risks and not to escape potential tariff hikes by the United States on products imported from China.

The United States has held off from launching the fourth tranche of tariffs on $300 billion worth of goods that would cover nearly everything imported from China to the United States.

(GUA) Chinese border guards put secret surveillance app on tourists’ phones

(GUA)

Software extracts emails, texts and contacts and could be used to track movements

Irkeshtam border
 The Irkeshtam border is China’s most westerly border and is used by traders and tourists, some following the historic Silk Road. Photograph: Luo Yang/Xinhua/Barcroft Media

Chinese border police are secretly installing surveillance apps on the phones of visitors and downloading personal information as part of the government’s intensive scrutiny of the remote Xinjiang region, the Guardian can reveal.

The Chinese government has curbed freedoms in the provincefor the local Muslim population, installing facial recognition cameras on streets and in mosques and reportedly forcing residents to download software that searches their phones.

An investigation by the Guardian and international partners has found that travellers are being targeted when they attempt to enter the region from neighbouring Kyrgyzstan.

Border guards are taking their phones and secretly installing an app that extracts emails, texts and contacts, as well as information about the handset itself.

Tourists say they have not been warned by authorities in advance or told about what the software is looking for, or that their information is being taken.

The investigation, with partners including Süddeutsche Zeitung and the New York Times, has found that people using the remote Irkeshtam border crossing into the country are routinely having their phones screened by guards.

Edin Omanović, of the campaign group Privacy International, described the findings as “highly alarming in a country where downloading the wrong app or news article could land you in a detention camp”.

Analysis by the Guardian, academics and cybersecurity experts suggests the app, designed by a Chinese company,searches Android phones against a huge list of content that the authorities view as problematic.

This includes a variety of terms associated with Islamist extremism, including Inspire, the English-language magazine produced by al-Qaidain the Arabian Peninsula, and various weapons operation manuals.

However, the surveillance app also searches for information on a range of other material – from fasting during Ramadan to literature by the Dalai Lama, and music by a Japanese metal band called Unholy Grave.

Another file on the list is a self-help manual by the American writer Robert Greene called The 33 Strategies of War.

About 100 million people visit the Xinjiang region every year, according to Chinese authorities. These include domestic and foreign tourists, and most enter from elsewhere in the country.

The Irkeshtam crossing is China’s most westerly border and is used by traders and tourists, some following the historic Silk Road.

There are several stages to crossing, and at one travellers are made to unlock and hand over their phones and other devices such as cameras. The devices are then taken away to a separate room and returned some time later.

The iPhones are plugged into a reader that scans them, while Android phones have the app installed to do the same job.

It seems that in most cases the app is uninstalled before the phone is returned, but some travellers have found it still on their phone.

It is unclear where all extracted information goes and for how long it is stored.

While there is no evidence that the data is used to track people later in their journeys, the information it collects would allow the authorities to locate someone if used together with details of the phone’s location.

The app as it appears on Android phones.
 The app as it appears on Android phones. Photograph: Süddeutsche Zeitung

It appears with the default Android icon and the words 蜂采 (Fēng cǎi); the term has no direct English translation, but relates to bees collecting honey.

The Guardian spoke to a traveller who had crossed the border to Xinjiang this year with an Android phone and was disturbed to see the app installed on his phone.

He said he had been asked to hand over his phone at the checkpoint, and it had been taken into a separate room. He and all the other travellers at that checkpoint had also been asked to hand their pin numbers to the officials, and had waited about an hour to have their phones returned.

The app icon, right.
 The app icon, right

At no point were they told what was being done to the phones.

He had been told by an international travel agent and by tourist information in Kyrgyzstan that something would happen with his phone at the border.

“We thought it was a GPS tracker,” he said. “[The travel company] was pretty sure we were going to have this thing put in.”

He checked his phone when it was handed back and found the app immediately.

“There was another checkpoint about two hours away and I was thinking that maybe they had downloaded things and they would have all of their analysts going through it all while we were travelling, and then maybe they [would] send people back when they got to the next place.”

The traveller said he had not been asked to hand over the phone at any other point during his visit, nor when he departed from China. He said he had not been concerned about carrying the phone with him, as there was so much overt surveillance in the region. He added: “I don’t like it. If they were doing it in my home country I would be aghast, but when you are travelling to China you know it might be like this.”

All of the installations confirmed by the Guardian and its partners were on Android phones, but travellers report that iPhones were also taken by officers.

Omanovic said: “This is yet another example of why the surveillance regime in Xinjiang is one of the most unlawful, pervasive and draconian in the world.

“Modern extraction systems take advantage of this to build a detailed but flawed picture into people’s lives. Modern apps, platforms and devices generate huge amounts of data which people likely aren’t even aware of or believe they have deleted, but which can still be found on the device.”

Maya Wang, China senior researcher at Human Rights Watch, said: “We already know that Xinjiang residents, particularly Turkic Muslims–, are subjected to round-the-clock and multidimensional surveillance in the region.

“What you have found goes beyond that. It suggests that even foreigners are subjected to such mass and unlawful surveillance.”

The use of the app came to light after travellers took their phone to reporters in Germany.

Analysis of that software by the Guardian, Süddeutsche Zeitung, Ruhr-University Bochum and the German cybersecurity firm Cure53 suggested it was designed to upload information such as emails on to a server at the border office.

The Chinese authorities were contacted for comment but there was no reply by the time of publication.

Previously the Chinese government has defended its hi-tech surveillance of citizens in Xinjiang, saying it has improved security in the region.

(ZH) HP, Dell & Amazon Join Manufacturing Exodus Leaving China

(ZH)

Though China wasn’t the only Asian nation where manufacturing activity slumped last month, according to a slate of almost unilaterally disappointing PMI readings released earlier this week, the tend over the past year is increasingly clear: The trade war is President Trump’s to win, as more tech companies resolve to move at least some production outside of the mainland.

PMI

And in the latest warning to Beijing that the trade war is having a real, and perhaps irreversible, impact, Nikkei Asian Review reports that HP, Dell and Amazon are joining the wave of consumer-electronics manufacturers who are planning to shift production elsewhere.

The burgeoning exodus, which also reportedly includes a half-dozen Apple suppliers (most notably Foxconn), Nintendo, Sony and others is threatening China’s status as the global manufacturing hub.

Laptop

HP and Dell, the world’s No. 1 and No. 3 laptop manufacturers, who are responsible for a combined 40% of the world’s production, are planning to shift 30% of their production elsewhere.

Lenovo Group, Acer and Asustek Computer are also evaluating plans to shift production elsewhere. And Amazon is planning to shift at least some of the production for its Kindle e-reader and Echo assistant. For all of these companies, the focus would mostly be on products bound for the US.

HP has already drawn up plans to move some 20% to 30% of production outside China, and is reportedly looking to build out a new supply chain in Thailand and Taiwan. The move could begin as soon as the end of the current quarter, though Nikkei’s sources cautioned that it’s not set in stone.

Dell, meanwhile, has already started a “pilot run” of notebook production in Taiwan, Vietnam and the Philippines, though it still has reservations about a possible shortage of skilled workers.

And at this point, even if China and the US resolve the trade spat amicably in the near future, an outcome that doesn’t look super likely (particularly since the meeting between Trump and Xi in Osaka resulted in what was essentially a reiteration to work toward a solution, exposing how little progress has actually been made over the past six months), rising labor costs in China and the risks associated with such concentrated production are already providing enough incentive to leave.

As one economist put it, “there is no turning back.”

“There is no turning back, and it is not only about tariffs but also about reducing risks for the long term [such as rising labor costs],” said TIER’s Chiu. “Southeast Asian countries and India will together become new competitive hubs in coming years for electronics production,” the economist said.

“There is plenty that policymakers can do in the short-term to pick up the slack if some exporters relocate out of China,” said Mark Williams, a China economist at global research firm Capital Economics. “But China would suffer over the years ahead if it could no longer benefit from the know-how that globally competitive exporters bring to its economy.”

Unfortunately for Beijing, which is already struggling with its slowest economic growth since the early 1990s, even opening up its markets to more foreign companies likely won’t be enough to reverse this trend.

(Reuters) China pledges to scrap financial sector ownership limits in 2020, one year early

(Reuters)

DALIAN, China (Reuters) – China will end ownership limits for foreign investors in its financial sector in 2020, a year earlier than scheduled, to show the world it will keep opening up its markets, Premier Li Keqiang said on Tuesday.FILE PHOTO: China’s Premier Li Keqiang speaks to Netherlands’ Prime Minister Mark Rutte and Former U.N. Secretary General Ban Ki-moon during the Global Commission on Adaptation ceremony, at the Great Hall of the People in Beijing, China June 27, 2019. Fred Dufour/Pool via REUTERS

China will also further open its manufacturing sector, including the auto industry, while reducing its negative investment list that restricts foreign investment in some areas, Li told the World Economic Forum in the northeastern Chinese port city of Dalian.

Beijing’s signal that it is quickening the pace of opening up came after the presidents of China and the United States agreed over the weekend to restart trade talks in another attempt to strike a deal and end a bruising tariff war.

But analysts doubt the ceasefire will lead to a sustained easing of tensions, and warn lingering uncertainty could dampen corporate spending and global growth.

“We will achieve the goal of abolishing ownership limits in securities, futures, life insurance for foreign investors by 2020, a year earlier than the original schedule of 2021,” Li said.

Foreign investment banks such as Morgan Stanley (MS.N) are looking to join HSBC Holdings PLC (HSBA.L), JPMorgan Chase & Co (JPM.N), Nomura Holdings Inc (8604.T) and UBS Group AG (UBSG.S) in owning controlling stakes in onshore securities joint ventures in China under liberalized rules announced in 2017.

RELATED COVERAGE

“JPMorgan welcomes any decision made by the Chinese government that looks to liberalize its financial sector further,” said JPMorgan China CEO Mark Leung.

Citigroup (C.N), which is in the process of setting up a majority-owned securities joint venture in China, also applauded the news.

“Citi welcomes any move that leads to the further opening up of the Chinese financial system,” said a Hong Kong-based spokesman.

The United States and other countries in the West have long complained that Beijing is blocking foreign access to its fast-growing financial markets and not allowing a level playing field when multinational companies are allowed in.

But in recent months, China has allowed many foreign financial firms to either set up new businesses onshore or expand their presence through majority ownership in domestic joint ventures across mutual funds, insurance and brokerage businesses.

Sources with direct knowledge of the matter previously told Reuters that Morgan Stanley is likely to get regulatory approval for owning a majority stake in the second half of this year.

Li also said the government will reduce restrictions next year on market access for foreign investors in the value-added telecoms services and transport sectors.

On Sunday, China cut the number of sectors subject to foreign investment restrictions, a widely expected move, to 40 from 48 in the previous version, published in June last year.

GLOBAL RISKS

On Saturday, leaders of the Group of 20 major economies warned of growing risks to the global economy but stopped short of denouncing protectionism, calling instead for a free and fair trade environment after talks some members described as difficult.

Echoing the sentiment, Li said protectionism is rising, but did not make references to specific economies.

“In the face of pressure from a slowing global economy, I believe people are all in the same boat. We should promote the spirit of partnership, carry out equal consultations, seek common ground while reserving differences and manage and control disputes,” Li said.

The U.S.-China trade war has hit business confidence worldwide, disrupted supply chains and shaken financial markets, adding to worries about a global economic slowdown.

Fallout from the dispute is spreading. Business surveys this week showed factory activity shrank in China and much of the rest of Asia in June, as well as in Europe, while manufacturing growth cooled in the United States, keeping pressure on policymakers to shore up growth.

Rising worries over global growth have compelled some central banks, such as those in Australia, New Zealand, India and Russia to cut interest rates.

“Currently, global economic risks are rising somewhat, international investment and trade growth is slowing, protectionism is rising and unstable and uncertain factors are increasing,” Li said.

“We should actively cope with this. Some countries have taken measures including cutting interest rates, or sent clear signals on quantitative easing.”

But China will not resort to competitive currency devaluation, Li said, and will keep the yuan exchange rate CNY=CFXS basically stable at a reasonable and balanced level.

China is likely to hit its economic growth target of 6%-6.5% this year provided the trade dispute with the United States does not worsen, and hence will not need “very big” stimulus measures to prop up growth, a central bank adviser said on Monday.

The People’s Bank of China (PBOC) has already slashed the amount of cash banks must hold as reserve six times since early 2018 to help turn around soft credit growth, and more cuts in banks’ reserve requirement ratios (RRRs) are widely expected in coming months.

China has also injected large amounts of liquidity into the financial system and guided short-term interest rates lower, while ramping up infrastructure spending and cutting taxes.

“The strength of the tax cuts on the fiscal side is unprecedented, and this measure is the most fair, direct and effective,” Li said in a meeting with business executives in Dalian. “As for monetary policy, we will make appropriate fine-tuning while keeping it prudent.”

“We can say that money supply is reasonably ample, but the question is how to make SMEs and private firms feel a significant drop in real interest rates by the end of this year through effective transmission measures.”

(Reuters) China says joint interests with U.S. greater than differences

(Reuters)

OSAKA (Reuters) – The joint interests of China and the United States are greater than the differences, a senior Chinese diplomat said on Saturday, following talks between the two countries’ presidents at a G20 summit in Japan.

China and the United States both hope the world can achieve stable growth, Wang Xiaolong, the special envoy of G20 affairs of the foreign ministry and director general of the Department of International Economic Affairs, told reporters.

(WSJ) Apple Moves Mac Pro Production to China

(WSJ) The $6,000 desktop computer had been the company’s only major device assembled in the U.S.

Apple CEO Tim Cook and Chief Design Officer Jonathan Ive look over the new Mac Pro during Apple’s annual Worldwide Developers Conference in San Jose, Calif., June 3.PHOTO: MASON TRINCA/REUTERSBy Tripp Mickle and Yoko KubotaJune 28, 2019 9:32 am ET

Apple Inc. AAPL -1.16% is manufacturing its new Mac Pro computer in China, according to people familiar with its plans, shifting abroad production of what had been its only major device assembled in the U.S. as trade tensions escalate between the Trump administration and Beijing.

The tech giant has tapped contractor Quanta Computer Inc. to manufacture the $6,000 desktop computer and is ramping up production at a factory near Shanghai, the people said. Quanta’s facility is close to other Apple suppliers across Asia, making it possible for Apple to achieve lower shipping costs than if it shipped components to the U.S.

While the Mac Pro isn’t one of Apple’s bigger products, the decision on where to make it carries outsize significance. Apple’s reliance on factories in China to manufacture its products has been an issue for the company, especially under President Trump, who has pressured Apple and other companies to make more in the U.S.

With the previous Mac Pro model, released in 2013, Apple Chief Executive Tim Cook trumpeted plans to build it in the U.S. Apple invested $100 million in tooling and other equipment for a plant in Austin, Texas, run by contract manufacturer Flex Ltd. Each computer was stamped with “Assembled in the USA.”

Flex and Quanta declined to comment. An Apple spokesman said the new Mac Pro is designed and engineered in the U.S. and includes U.S.-made components. Apple said it supports manufacturing in 30 U.S. states and spent $60 billion last year with more than 9,000 U.S. suppliers.

“Final assembly is only one part of the manufacturing process,” the spokesman said, adding that the company’s investments support two million American jobs. The Mac Pro is Apple’s most powerful computer, used primarily by a small group of professionals working in industries such as film and videogames.

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President Trump has pressured Apple to make some iPhones, Macs or iPads in the U.S. since the 2016 presidential campaign. He told The Wall Street Journal in 2017 that Mr. Cook promised to build “three big plants, beautiful plants” in the U.S., a claim Apple declined to comment on at the time. Last year, as his administration imposed tariffs on imports from China, Mr. Trump said the only way to ensure prices for Apple goods don’t increase would be to make products in the U.S.

Apple in the past two years has announced a second campus in Austin, Texas, to handle customer support and operations, and announced more than $500 million in new contracts with U.S. component suppliers that manufacture at home. But Apple hasn’t disclosed any plans to build new manufacturing facilities in the U.S.

Making the new model in China isn’t likely to affect many workers in Texas because demand for the old Mac Pro had fizzled years ago. The Flex workforce had shifted to refurbishing already-made computers, former Flex employees said. The Flex plant continues to make products for HP Inc. and other companies, they said.

Mr. Trump and Chinese President Xi Jinping, looking to revive trade talks, are scheduled to meet for lunch Saturday at the Group of 20 meeting in Osaka, Japan.

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Trade tensions are disrupting supply chains in China that have churned out electronics such as Apple’s iPhone and Nintendo’s Switch. Now companies are considering a move out of the country. Photo composite: Sharon Shi

Last year, the Trump administration spared product categories including Apple’s smartwatch and AirPods wireless earbuds from an initial round of duties. But the administration’s proposal to impose additional tariffs of 25% covering $300 billion in imports from China would affect all of Apple’s major devices, including the Mac, iPhone and iPad.

While it shifts Mac Pro production to China, Apple more broadly also is considering moving some of its assembly work out of China because of concerns about U.S. tariffs, The Wall Street Journal reported last week. One of the people familiar with Mac Pro plans said that same consideration also could extend to the Mac Pro, with Ireland as an alternate possible site.

The Mac Pro’s history reflects the hurdles to doing assembly in the U.S. The previous Mac Pro model—known as the “trash can” because of its stumpy, cylindrical appearance–was the first computer Apple had made in the U.S. in about a decade. Mr. Cook, who had architected Apple’s outsourcing to China, announced plans to build the product in the U.S. in late 2012, when Apple was facing major scrutiny over its reliance on manufacturers in China and those contractors’ treatment of workers.

Flex secured a designation as a Texas Enterprise Zone project at the time of the initiative, entitling it to $250,000 in annual tax breaks in support of $15 million in equipment purchases and 500 jobs with an average annual wage of $30,276, according to the state. The designation expires this month.

Almost immediately, Apple ran into challenges at the Flex plant in Austin, former Apple employees said.

More than 80% of the workers working across three assembly lines were contract employees paid minimum wage for eight-hour workdays, said Alan Hanrahan, a former Apple manufacturing supervisor, in an interview with the Journal two years ago. When their shift ended, many walked off the job, he said—even if the lines were still running. Production would stop, and people would just be standing there until the next person arrived and the shift could resume, he said.

As demand for the Mac Pro tapered, Flex began laying people off, several former Flex employees said. By last year, they were down to a skeleton crew working just a quarter of one of the assembly lines and refurbishing already-made Mac Pros, said Jeff Gruger, a former vice president of product at Flex.

“They learned it’s very difficult to manufacture in America,” Mr. Hanrahan said of Apple in the 2017 interview.

Apple this year overhauled the Mac Pro to give it more power and a radically different silver, rectangular design. The design could be one of the last developed under the leadership of design chief Jony Ive, who Apple announced Thursday will leave the company later this year.

Manufacturing labor costs in China, though rising, still remain much lower than in the U.S., said Paul Gagnon, a consumer-electronics analyst with IHS Markit.

Taiwan-based Quanta has made MacBooks and Apple’s smartwatch for years. In addition to four facilities in China, it has a small facility in Fremont, Calif., where it works on custom desktops, according to one of the people familiar with its plans.

(Nikkei) ‘Today, Hong Kong; tomorrow, Taiwan:’ Resistance to China spreads

(Nikkei) TAIPEI — The Hong Kong government’s attempt to push an amendment to its extradition law through the legislature has further alienated its people from China and moved them closer to Taiwan.

It has also boosted Taiwan’s China-skeptic president and her Democratic Progressive Party in the run-up to a general election in January.

A march in Hong Kong on June 16, which organizers claim drew more than 2 million, was not the only demonstration that day: A much smaller protest in Taipei, which the coordinators say attracted 10,000, was the largest-ever public display of support for Hong Kong in Taiwan, which has emerged as the territory’s biggest champion.

The growing solidarity between Hong Kong and Taiwan is likely to be disconcerting for President Xi Jinping, China’s strongest leader since Mao Zedong. Taiwanese President Tsai Ing-wen and other officials have voiced their backing for Hong Kong on social media, with messages of sympathy and solidarity.

The recent solidarity between Taiwan and Hong Kong took root five years ago, when Taiwan’s Sunflower Movement — which derailed a trade agreement with China — in part inspired Hong Kong’s Umbrella Movement, which failed in its goal of making the territory more democratic.

“Ever since the Umbrella and Sunflower movements of 2014, Beijing has been alert to the potential for cooperation between pro-independence forces in Hong Kong and Taiwan,” said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies, a Washington-based think tank. “China is likely alarmed by recent developments and parallels that are being drawn between them.”

Taiwan and Hong Kong’s relationship has been generally economic, with the two separated by geography and history. But that has changed as a result of heavy-handed tactics by China’s Communist government, which has sovereignty over Hong Kong but has promised it a high degree of autonomy, and which claims Taiwan as part of its own territory.

When Hong Kong democracy activist Joshua Wong Chi-fung spoke to reporters on June 17 after his release from prison for an Umbrella-era infraction, he thanked the Taiwanese people for their support, and warned of Beijing’s threat to their free society. “Today Hong Kong, tomorrow Taiwan,” Wong said, repeating a phrase that has become increasingly common in Taiwan. “Thank you, Taiwan,” he said. “We will fight together.”

That same day, Taiwan’s Legislative Yuan passed a resolution in support of Hong Kong’s demonstrators, condemning the use of force at a protest on June 12 and urging Taipei to help politically persecuted Hong Kong people.

Meanwhile, Hong Kong people have a clear message for Taiwan: Don’t trust Beijing. At one march some protesters carried signs warning Taiwanese not to vote the China-friendly Kuomintang into power in January, claiming it would spell the end of Taiwan’s sovereignty. Until two weeks ago, there was a good chance the Kuomintang could retake the presidency and control of the legislature, but Hong Kong’s troubles have changed the political conversation in favor of Tsai and the DPP, who say that Taiwan is a separate country from China. Focus has switched from the economy to maintaining sovereignty.

As a result, candidates to become the Kuomintang presidential nominee have scrambled to denounce the “one country, two systems” framework that China uses to rule Hong Kong and that Xi has also proposed for Taiwan. Tech billionaire Terry Gou called the arrangement “a failure,” while the mayor of Kaohsiung, Han Kuo-yu, said that if he were elected, Taiwan would be subjected to it “over my dead body.”

How close Taiwan’s ties to China should be is the subject of heated debate among Taiwanese, but for the vast majority, talk of unification is a non-starter. Wang Ting-yu, chairman of the Legislative Yuan’s foreign affairs and national defense committee, said that what’s happening in Hong Kong has unified political discussion while silencing pro-China sentiment.

“We don’t want to be part of China,” Wang said. “Only two countries can have two systems.”

(BBC) G20 summit: All eyes on Trump-Xi trade war showdown

(BBC)

A woman takes a picture of a G20 Osaka design set up outside the venue for the G20 Osaka Summit in Osaka on June 26, 2019, ahead of the start of the summit later this week.
Image captionThe leaders of the US and China are due to meet at the G20 summit in Japan this week

Leaders from the Group of 20 nations (G20) will meet in Osaka from Friday in what is likely to be its most important summit since the global financial crisis.

When the G20 met in Washington one month after the Lehman Brothers crash in 2008, they were focused on a mammoth task: how to piece the world economy back together and avoid a future crisis.

A decade later the G20 nations face another huge challenge in resolving a US-China trade war that has rattled businesses around the world, and cast a shadow over the global economy.

That’s why the meeting between US President Donald Trump and Chinese President Xi Jinping on Saturday will be so closely watched.

They last met seven months ago at another G20 summit in Buenos Aires. Over grilled sirloin and caramel rolled pancakes, the pair agreed on a 90 day truce to their trade war.

Now, reports are emerging that another trade truce could be struck in Osaka.

While that would provide markets with some relief, it won’t mean the trade war is over.

In the months leading up to the G20 meeting in Japan, the trade clash between the world’s two largest economies has escalated.

The US tightened restrictions on Chinese telecom champion Huawei and four other Chinese tech firms by putting them on a trade “blacklist”.

US President Donald Trump (L) and China's President Xi Jinping speak during a joint statement in Beijing on November 9, 2017.
Image captionThe US reignited a trade war with China with tariff hikes in May

Beijing responded angrily with threats of its own trade ban, and in recent weeks has increased scrutiny on American firms operating in China, including FedEx.

If they don’t strike a trade deal, Mr Trump has threatened to impose tariffs on $300bn (£236.5bn) of Chinese goods – that would mean pretty much everything that China sells to the US would be subject to tariffs.

But while many US businesses approve of Mr Trump’s hardline stance on China, more tariffs is the last thing they want.

Companies have urged Mr Trump to end the trade war, warning of higher prices and risks to their future.

Both leaders are under pressure at home to show they are walking away with the best deal – so they won’t want to give too much ground.

But with China’s economy slowing, and Mr Trump heading into an election year, neither side can afford to let the trade war go on for much longer.

If a truce is announced, there will be relief from G20 nations too.

The trade war is having an impact on global growth, with the International Monetary Fund and others warning that escalating US-China trade tensions are among the biggest threats to the world economy.

Iran and the US

Rising tensions between the US and Iran is another issue likely to be on the minds of many at the G20 summit.

This week the US announced fresh sanctions on Iran and the country’s Supreme Leader Ayatollah Khamenei – moves Mr Trump said were a response to recent “aggressive behaviour” by the country.

Their spat has led to oil prices shooting up over fears of a conflict between Washington and Tehran.

Expect the US president to try to shore up support from allies for his sanctions on Iran – and expect Beijing to back Iran, albeit subtly.

Plastic waste and marine fears

Environmental issues are likely to get a fair amount of attention at the G20 meeting.

As the summit chair, Japan is hoping to get an agreement from G20 members on the reduction of plastic waste in the ocean.

The plastic waste abandoned on the beach of the sea of Naples.
Image captionIf current trends continue, oceans could contain more plastic than fish by 2050, UN says

The UN says that some 300 million tonnes of plastic waste is produced every year, and around 8 million tonnes ends up in our oceans, killing marine life and choking up our oceans with toxic chemicals.

By 2050, the UN says, if current trends continue our oceans could contain more plastic than fish.

So expect more efforts by Japan to get firm commitments from countries to ban single use plastic, and reduce plastic waste to zero in the oceans.

But also expect some resistance from the US, over concerns of what this could do to its petrochemicals and plastics industries.

Rising protectionism

One more issue to watch is how the leaders seek to position the G20 on free trade.

Part of the G20’s mandate is to “resist protectionism,” says John Kirton, founder of the G20 Research Group.

But at its last meeting in Buenos Aires, the group refrained from repeating that pledge due to pressure from the US.

It marked the first time a G20 communiqué had not contained that phrase.

Picture of world leaders at G20 summit in Argentina in 2018.
Image captionDiscussion of free trade and protectionism is expected at the G20

This time, Mr Kirton says the G20 is likely to affirm some kind of commitment to free trade, but may still drop the pledge to resist protectionism.

Still, he says as the US pushes ahead with protectionist policies, many nations are moving in the other direction.

“New free trade deals are breaking out all over,” he says.

It comes at a time of increasing recognition that the current international financial system is in need of reform because it hasn’t benefited everyone, so expect some discussion on that too.

Formed in the aftermath of the Asian financial crisis, the G20 came together in recognition of the fact that we live in an increasingly interconnected world.

So when there’s a currency crisis in a far flung part of South East Asia, there is the risk of contagion.

History has shown that coming together to solve the world’s problems has worked. What hurts one of us, could hurt the rest of us – so it makes sense to work together.

Indeed erecting trade barriers, instead of co-operating could lead to conflict. That will not help any of us.

(Economist) China hopes to beat America’s armed forces by copying them

(Economist)

But Xi Jinping’s reforms may stumble over his authoritarianism

OVER THE PAST decade, the People’s Liberation Army (PLA) has been lavished with money and weaponry. Chinese military spending rose by 83% between 2009 and 2018, by far the largest growth spurt of any big country. This splurge has enabled China to deploy precision missiles and anti-satellite weapons that challenge America’s supremacy in the western Pacific. China’s leader, Xi Jinping, says his “Chinese dream” includes a “dream of a strong armed forces”. That, he says, involves “modernising” the PLA by 2035 and making it “world-class”—in other words, America-beating—by mid-century. He has been making considerable progress.

Organisational reforms may be less eye-catching than missiles that fly at Mach 5, unmanned cargo planes and electromagnetically powered superguns (all of which China has tested in the past year). Yet Mr Xi has realised that there is little point in grafting fancy weapons onto an old-fashioned force. During the cold war the PLA evolved to repel the Soviet Union and America in big land wars on Chinese soil. Massed infantry would grind down the enemy in attritional battles. In the 1990s Chinese leaders, alarmed by American prowess in the Gulf war of 1991, decided to focus on enhancing the PLA’s ability to fight “local wars under high-technology conditions”. They were thinking of short, sharp conflicts on China’s periphery, such as over Taiwan, in which air and naval power would be as important as ground forces. Mr Xi decided that winning such wars required changing the armed forces’ structure. He has done more in the past three years to reform the PLA than any leader since Deng Xiaoping.Get our daily newsletter

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Mr Xi’s principal aim is to increase “jointness”. This term, borrowed from Western military jargon, refers to the ability of different services—army, navy and air force—to co-operate on the battlefield quickly and seamlessly. Jointness is especially important for fighting wars that break out abroad. It can be difficult for commanders at national headquarters to choreograph soldiers, sailors and pilots from a great distance. The different services must be able to work together without instruction from on high.

China’s model is the United States, which—under the Goldwater-Nichols Act of 1986—drastically reformed its own armed forces in order to achieve this goal. The Pentagon carved up the globe into “combatant commands”. No longer would services squabble among themselves. All soldiers, sailors and pilots in a given area, such as the Persian Gulf or the Pacific, would take orders from a single officer.

Mr Xi has followed suit. Before his reforms, army and navy commanders in the country’s seven military regions would report to their respective service headquarters, with little or no co-ordination. In February 2016 Mr Xi replaced the regions with five “theatres”, each under a single commander (see map). The eastern one based in Nanjing would prepare for war with Taiwan and Japan, for instance. The sprawling western theatre, in Chengdu, would handle India. The southern one in Guangzhou would manage the South China Sea.

As well as these geographic commands, two others were formed in 2015, each aimed at an American vulnerability. American forces depend on communications via satellites, computer networks and other high-tech channels. So Mr Xi created a new Strategic Support Force to target these systems. It directs space, cyber, electronic and psychological warfare. In 2018 it conducted exercises against five PLA units in what the Pentagon called a “a complex electronic warfare environment”. American military power in Asia also depends on a network of bases and aircraft carriers. Mr Xi took aim at these by establishing a new service called the PLA Rocket Force—an upgrade of what was previously known less rousingly as the Second Artillery Corps.

He has also been trimming the armed forces’ bloated ranks, though they remain over 2m-strong. Since 2015 the PLA has shed 300,000 men, most of them from the land forces, which have lost one-third of their commissioned officers and shrunk from 70% of the PLA’s total strength to less than half (though happily the army has kept its dance troupes, which it had been told it would lose). By contrast, the marines are tripling in size. Navy and air-force officers have gained more powerful posts, including leadership of two theatre commands. This reflects the PLA’s tilt towards the seas—and the skies above them.

It is hard to tell whether the new PLA is more proficient on the battlefield. China has not fought a war in four decades. The last Chinese soldiers with experience of a large-scale conflict—a war with Vietnam in 1979—will retire shortly.

But there is evidence that the PLA is getting better at jointness. Some of China’s growing number of forays beyond its borders, notably bomber flights around Taiwan and over the South China Sea, indicate increasing co-ordination between air and naval forces. “We see a lot of joint exercises to work out kinks in the system and get the services used to working with each other,” says Phillip Saunders of the National Defence University in Washington. Chinese war games were once highly scripted affairs. Now officers are assessed on the realism of their training, says Meia Nouwens of the International Institute for Strategic Studies in London. Before Mr Xi’s reforms the “blue team”, which simulates an adversary, would always ritually lose large-scale annual exercises known as “Stride” in Inner Mongolia. Now they usually win.

But China’s troops may still be ill-prepared for complex warfare. In America promotions depend on officers’ ability to work with other services. Their Chinese counterparts often spend their entire careers in one service, in one region and even doing the same job. Political culture is another problem. “The structures that China is trying to emulate are based on openness, on delegation of authority and collaboration,” notes Admiral Scott Swift of MIT, who retired last year as commander of America’s Pacific Fleet. He says modern warfare requires decentralised decision-making because cyber and electronic warfare can sever communications between commanders and units. “Militaries that are founded on democratic principles are going to be much more adept at adapting to that environment,” Admiral Swift suggests.

Mr Xi is an authoritarian who strives for centralised control. His predecessor, Hu Jintao, did not have a tight grip on the PLA, says Mr Saunders. That is because Mr Hu’s own predecessor, Jiang Zemin, had appointed the two vice-chairmen of the Central Military Commission, a powerful body that oversees the armed forces. They stayed throughout Mr Hu’s tenure, frustrating any efforts to reform the PLA and curb its endemic corruption and ill-discipline.

Mr Xi is determined not to suffer the same fate. His anti-corruption purges have ensnared more than 13,000 officers (three serving generals were demoted in June, according to the South China Morning Post, a newspaper in Hong Kong). Mr Xi slimmed down the military commission from 11 to seven members, kicking off the service chiefs and adding an anti-graft officer. The body was also given control of the paramilitary People’s Armed Police, which in turn absorbed the coast guard.

Predictably, the restructuring has generated resentment. Senior officers are irked at losing privileges. Demobilised soldiers sometimes take their grievances to the streets—one reason why Mr Xi founded a ministry of veterans’ affairs in 2016. But, says Ms Nouwens, younger ranks benefit from merit-based promotion, take pride in the growing prominence of the PLA in Chinese film and television, and admire Mr Xi’s “great rejuvenation of the Chinese nation”.

They will have an opportunity to show off on October 1st when a huge military parade will be staged in Beijing to mark the 70th anniversary of Communist rule. It will be the first such show in the capital since Mr Xi launched his reforms. Expect a world-class performance.

(Reuters) Inside the West’s failed fight against China’s ‘Cloud Hopper’ hackers

(Reuters)

Eight of the world’s biggest technology service providers were hacked by Chinese cyber spies in an elaborate and years-long invasion, Reuters found. The invasion exploited weaknesses in those companies, their customers, and the Western system of technological defense.

LONDON – Hacked by suspected Chinese cyber spies five times from 2014 to 2017, security staff at Swedish telecoms equipment giant Ericsson had taken to naming their response efforts after different types of wine.

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Pinot Noir began in September 2016. After successfully repelling a wave of attacks a year earlier, Ericsson discovered the intruders were back. And this time, the company’s cybersecurity team could see exactly how they got in: through a connection to information-technology services supplier Hewlett Packard Enterprise.

Teams of hackers connected to the Chinese Ministry of State Security had penetrated HPE’s cloud computing service and used it as a launchpad to attack customers, plundering reams of corporate and government secrets for years in what U.S. prosecutors say was an effort to boost Chinese economic interests.

The hacking campaign, known as “Cloud Hopper,” was the subject of a U.S. indictment in December that accused two Chinese nationals of identity theft and fraud. Prosecutors described an elaborate operation that victimized multiple Western companies but stopped short of naming them. A Reuters report at the time identified two: Hewlett Packard Enterprise and IBM.

Yet the campaign ensnared at least six more major technology firms, touching five of the world’s 10 biggest tech service providers.

WANTED: An FBI poster citing Zhu Hua and Zhang Shilong as Chinese hackers. Both were indicted on identify theft and other charges. Federal Bureau of Investigation/Handout via REUTERS.

Also compromised by Cloud Hopper, Reuters has found: Fujitsu, Tata Consultancy Services, NTT Data, Dimension Data, Computer Sciences Corporation and DXC Technology. HPE spun-off its services arm in a merger with Computer Sciences Corporation in 2017 to create DXC.

Waves of hacking victims emanate from those six plus HPE and IBM: their clients. Ericsson, which competes with Chinese firms in the strategically critical mobile telecoms business, is one. Others include travel reservation system Sabre, the American leader in managing plane bookings, and the largest shipbuilder for the U.S. Navy, Huntington Ingalls Industries, which builds America’s nuclear submarines at a Virginia shipyard.

“This was the theft of industrial or commercial secrets for the purpose of advancing an economy,” said former Australian National Cyber Security Adviser Alastair MacGibbon. “The lifeblood of a company.”

PENETRATED: Cyber spies attacked Hewlett Packard Enterprise. REUTERS/Brendan McDermid
VICTIMIZED: IBM was among those compromised by Cloud Hopper hackers. REUTERS/Sergio Perez

Reuters was unable to determine the full extent of the damage done by the campaign, and many victims are unsure of exactly what information was stolen.

Yet the Cloud Hopper attacks carry worrying lessons for government officials and technology companies struggling to manage security threats. Chinese hackers, including a group known as APT10, were able to continue the attacks in the face of a counter-offensive by top security specialists and despite a 2015 U.S.-China pact to refrain from economic espionage.

The corporate and government response to the attacks was undermined as service providers withheld information from hacked clients, out of concern over legal liability and bad publicity, records and interviews show. That failure, intelligence officials say, calls into question Western institutions’ ability to share information in the way needed to defend against elaborate cyber invasions. Even now, many victims may not be aware they were hit.

The campaign also highlights the security vulnerabilities inherent in cloud computing, an increasingly popular practice in which companies contract with outside vendors for remote computer services and data storage.

“For those that thought the cloud was a panacea, I would say you haven’t been paying attention,” said Mike Rogers, former director of the U.S. National Security Agency.

 ‘NO PANACEA:’ Former National Security Agency Director Mike Rogers said the case shows cloud computing can be compromised. REUTERS/Eric Thayer

Reuters interviewed 30 people involved in the Cloud Hopper investigations, including Western government officials, current and former company executives and private security researchers. Reporters also reviewed hundreds of pages of internal company documents, court filings and corporate intelligence briefings.

HPE “worked diligently for our customers to mitigate this attack and protect their information,” said spokesman Adam Bauer. “We remain vigilant in our efforts to protect against the evolving threats of cyber-crimes committed by state actors.”

A spokesman for DXC, the services arm spun off by HPE in 2017, said the company put “robust security measures in place” to protect itself and customers. “Since the inception of DXC Technology, neither the company nor any DXC customer whose environment is under our control have experienced a material impact caused by APT10 or any other threat actor,” the spokesman said.

NTT Data, Dimension Data, Tata Consultancy Services, Fujitsu and IBM declined to comment. IBM has previously said it has no evidence sensitive corporate data was compromised by the attacks.

The Chinese government has denied all accusations of involvement in hacking. The Chinese Foreign Ministry said Beijing opposed cyber-enabled industrial espionage. “The Chinese government has never in any form participated in or supported any person to carry out the theft of commercial secrets,” it said in a statement to Reuters.

Break-ins and evictions

For security staff at Hewlett Packard Enterprise, the Ericsson situation was just one dark cloud in a gathering storm, according to internal documents and 10 people with knowledge of the matter.

For years, the company’s predecessor, technology giant Hewlett Packard, didn’t even know it had been hacked. It first found malicious code stored on a company server in 2012. The company called in outside experts, who found infections dating to at least January 2010.

Hewlett Packard security staff fought back, tracking the intruders, shoring up defenses and executing a carefully planned expulsion to simultaneously knock out all of the hackers’ known footholds. But the attackers returned, beginning a cycle that continued for at least five years.

The intruders stayed a step ahead. They would grab reams of data before planned eviction efforts by HP engineers. Repeatedly, they took whole directories of credentials, a brazen act netting them the ability to impersonate hundreds of employees.

The hackers knew exactly where to retrieve the most sensitive data and littered their code with expletives and taunts. One hacking tool contained the message “FUCK ANY AV” – referencing their victims’ reliance on anti-virus software. The name of a malicious domain used in the wider campaign appeared to mock U.S. intelligence: “nsa.mefound.com”

Then things got worse, documents show.

After a 2015 tip-off from the U.S. Federal Bureau of Investigation about infected computers communicating with an external server, HPE combined three probes it had underway into one effort called Tripleplay. Up to 122 HPE-managed systems and 102 systems designated to be spun out into the new DXC operation had been compromised, a late 2016 presentation to executives showed.

An internal chart from mid-2017 helped top brass keep track of investigations codenamed for customers. Rubus dealt with Finnish conglomerate Valmet. Silver Scale was Brazilian mining giant Vale. Greenxmass was Swedish manufacturer SKF, and Oculus covered Ericsson.

Projects Kronos and Echo related to former Swiss biotech firm Syngenta, which was taken over by state-owned Chinese chemicals conglomerate ChemChina in 2017 – during the same period as the HPE investigation into Chinese attacks on its network. 

Ericsson said it does not comment on specific cybersecurity incidents. “Our priority is always to ensure that our customers are protected,” a spokesman said. “While there have been attacks on our enterprise network, we have found no evidence in any of our extensive investigations that Ericsson’s infrastructure has ever been used as part of a successful attack on one of our customers.”

A spokesman for SKF said: “We are aware of the breach that took place in conjunction with the ‘Cloud Hopper’ attack against HPE … Our investigations into the breach have not found that any commercially sensitive information was accessed.”

Syngenta and Valmet declined to comment. A spokesman for Vale declined to comment on specific questions about the attacks but said the company adopts “the best practices in the industry” to improve network security.

‘Drunken burglars’

The companies were battling a skilled adversary, said Rob Joyce, a senior adviser to the U.S. National Security Agency. The hacking was “high leverage and hard to defend against,” he said.

According to Western officials, the attackers were multiple Chinese government-backed hacking groups. The most feared was known as APT10 and directed by the Ministry of State Security, U.S. prosecutors say. National security experts say the Chinese intelligence service is comparable to the U.S. Central Intelligence Agency, capable of pursuing both electronic and human spying operations.

Two of APT10’s alleged members, Zhu Hua and Zhang Shilong, were indicted in December by the United States on charges of conspiracy to commit computer intrusions, wire fraud and aggravated identity theft. In the unlikely event they are ever extradited and convicted, the two men would face up to 27 years in an American jail.

Reuters was unable to reach Zhu, Zhang or lawyers representing the men for comment. China’s Foreign Ministry said the charges were “warrantless accusations” and it urged the United States to “withdraw the so-called lawsuits against Chinese personnel, so as to avoid causing serious harm to bilateral relations.”

The U.S. Justice Department called the Chinese denials “ritualistic and bogus.”

“The Chinese Government uses its own intelligence services to conduct this activity and refuses to cooperate with any investigation into thefts of intellectual property emanating from its companies or its citizens,” DOJ Assistant Attorney General John Demers told Reuters.

APT10 often attacked a service provider’s system by “spear-phishing” – sending company employees emails designed to trick them into revealing their passwords or installing malware. Once through the door, the hackers moved through the company’s systems searching for customer data and, most importantly, the “jump servers” – computers on the network which acted as a bridge to client systems.

After the attackers “hopped” from a service provider’s network into a client system, their behavior varied, which suggests the attacks were conducted by multiple teams with different skill levels and tasks, say those aware of the operation. Some intruders resembled “drunken burglars,” said one source, getting lost in the labyrinth of corporate systems and appearing to grab files at random.

Hotels and submarines

It’s impossible to say how many companies were breached through the service provider that originated as part of Hewlett Packard, then became Hewlett Packard Enterprise and is now known as DXC.

The HPE operation had hundreds of customers. Armed with stolen corporate credentials, the attackers could do almost anything the service providers could. Many of the compromised machines served multiple HPE customers, documents show.

One nightmare situation involved client Sabre Corp, which provides reservation systems for tens of thousands of hotels around the world. It also has a comprehensive system for booking air travel, working with hundreds of airlines and 1,500 airports.

CYBER CENTER: A building registered to Huaying Haitai Science and Technology Development Co in Tianjin, China, the alleged employer of two Chinese nationals indicted by the United States on hacking charges. REUTERS/Thomas Peter

A thorough penetration at Sabre could have exposed a goldmine of information, investigators said, if China was able to track where corporate executives or U.S. government officials were traveling. That would open the door to in-person approaches, physical surveillance or attempts at installing digital tracking tools on their devices.

In 2015, investigators found that at least four HP machines dedicated to Sabre were tunneling large amounts of data to an external server. The Sabre breach was long-running and intractable, said two former HPE employees.

HP management only grudgingly allowed its own defenders the investigation access they needed and cautioned against telling Sabre everything, the former employees said. “Limiting knowledge to the customer was key,” one said. “It was incredibly frustrating. We had all these skills and capabilities to bring to bear, and we were just not allowed to do that.”

“The security of HPE customer data is always our top priority,” an HPE spokesman said.

Sabre said it had disclosed a cybersecurity incident involving servers managed by an unnamed third party in 2015. Media reports at the time said the hackers were linked to the Chinese government but did not name HP.

A Sabre spokeswoman said an investigation of the breach “concluded with the important finding that there was no loss of traveler data, including no unauthorized access to or acquisition of sensitive protected information, such as payment card data or personally identifiable information.” The spokeswoman declined to comment on whether any non-traveler data was compromised.

Uninvited guests

The threat also reached into the U.S. defense industry.

In early 2017, HPE analysts saw evidence that Huntington Ingalls Industries, a significant client and the largest U.S. military shipbuilder, had been penetrated by the Chinese hackers, two sources said. Computer systems owned by a subsidiary of Huntington Ingalls were connecting to a foreign server controlled by APT10.

BIG WORRY: Huntington Ingalls feared hackers accessed data from its biggest operation, the Newport News shipyard where it builds nuclear-powered subs. It’s not clear if data was stolen. U.S. Navy/John Whalen/Huntington Ingalls Industries/Handout via REUTERS

During a private briefing with HPE staff, Huntington Ingalls executives voiced concern the hackers could have accessed data from its biggest operation, the Newport News, Va., shipyard where it builds nuclear-powered submarines, said a person familiar with the discussions. It’s not clear whether any data was stolen.

Huntington Ingalls is “confident that there was no breach of any HII data” via DXC or HPE, a spokeswoman said.

Another target was Ericsson, which has been racing against China’s Huawei Technologies to build infrastructure for 5G networks expected to underpin future hyper-connected societies. The hacking at Ericsson was persistent and pervasive, said people with knowledge of the matter.

Logs were modified and some files were deleted. The uninvited guests rummaged through internal systems, searching for documents containing certain strings of characters. Some of the malware found on Ericsson servers was signed with digital certificates stolen from big technology companies, making it look like the code was legitimate so it would go unnoticed.

TELECOMS GIANT: Worker Chris Viens installs an Ericsson 5G antenna system in San Diego. Ericsson fought a long battle against hackers. REUTERS/Mike Blake/File Photo

Like many Cloud Hopper victims, Ericsson could not always tell what data was being targeted. Sometimes, the attackers appeared to seek out project management information, such as schedules and timeframes. Another time they went after product manuals, some of which were already publicly available.

“The reality is that most organizations are facing cybersecurity challenges on a daily basis, including Ericsson,” Chief Security Officer Pär Gunnarsson said in a statement to Reuters, declining to discuss specific incidents. “In our industry, and across industries, we would all benefit from a higher degree of transparency on these issues.”

White Wolf

In December 2018, after struggling to contain the threat for years, the U.S. government named the hackers from APT10 – Advanced Persistent Threat 10 – as agents of China’s Ministry of State Security. The public attribution garnered widespread international support: Germany, New Zealand, Canada, Britain, Australia and other allies all issued statements backing the U.S. allegations against China.

Even so, much of Cloud Hopper’s activity has been deliberately kept from public view, often at the urging of corporate victims.

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In an effort to keep information under wraps, security staff at the affected managed service providers were often barred from speaking even to other employees not specifically added to the inquiries.

In 2016, HPE’s office of general counsel for global functions issued a memo about an investigation codenamed White Wolf. “Preserving confidentiality of this project and associated activity is critical,” the memo warned, stating without elaboration that the effort “is a sensitive matter.” Outside the project, it said, “do not share any information about White Wolf, its effect on HPE, or the activities HPE is taking.”

The secrecy was not unique to HPE. Even when the government alerted technology service providers, the companies would not always pass on warnings to clients, Jeanette Manfra, a senior cybersecurity official with the U.S. Department of Homeland Security, told Reuters.

“We asked them to notify their customers,” Manfra said. “We can’t force their hand.”

(ZH) “It Would Be An Earthquake” – Three Chinese Banks Tumble After US Threatens To Cut Them Off From SWIFT

(ZH) In news that initially did not receive much prominence, on Monday a US judge found three large Chinese banks — reportedly the state-owned Bank of Communications, China Merchants Bank, and Shanghai Pudong Development Bank — in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations. This could open the door for them to be cut off from the US financial system, i.e. SWIFT.

Should it occur, to say that China will not take that well is as large an understatement as one can conceive of. It would be an earthquake”, commented Rabobank’s Michael Every.

The stunning development follows a May district judge order that three Chinese banks comply with U.S. investigators’ demands that they hand over records connected to the alleged movement of tens of millions of dollars in violation of international sanctions on North Korea. The publicly released court document did not name the banks, the Hong Kong company, or the North Korean entity at that time.

As the WaPo adds, according to a 2017 ruling by the US DOJ, the banks were accused of working with a Hong Kong company, which allegedly laundered more than $100 million for North Korea’s sanctioned Foreign Trade Bank. The newspaper said the bank at risk of losing access to U.S. dollars appeared to be Shanghai Pudong Development Bank, whose ownership structure, limited U.S. presence and alleged conduct with other banks matched with the details disclosed in the court rulings.

Shanghai Pudong Development Bank doesn’t have U.S. branch operations but maintains accounts in that country to handle dollar transactions, the report said, adding the subpoena battle will go before a federal appeals court in Washington on July 12.

“The ruling means that Attorney General William P. Barr or Treasury Secretary Steven Mnuchin can terminate the bank’s U.S. account and ability to process U.S. dollar transactions,” the Post said.

Shanghai Pudong Development Bank, asked about the report that it could lose access to the U.S. financial system, said in a statement that it will strictly abide by the relevant laws and regulations. Meanwhile, China Merchants Bank told Reuters on Tuesday it complies with related United Nations resolutions and Chinese laws, and is not involved in any investigations related to possible violations of sanctions.

Bank of Communications, China’s fifth-largest bank, said the case involved U.S. courts seeking to obtain customer information that is stored outside the United States from Chinese commercial banks.

Needless to say, the stock prices of all three Chinese banks – which are listed on the Shanghai Stock Exchange – tumbles with shares of China Merchants Bank closed down 4.82%, after being off 8.5% earlier in the day, while Shanghai Pudong Development Bank declined 3.08% and Bank of Communications dropped 3.02%.

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YUAN TALKS@YuanTalks

China Merchants Bank, Bank of Communications & Shanghai Pudong Development Bank said they complies with UN resolutions and Chinese laws, not involved in any investigations related to possible violations of sanctions.197:49 AM – Jun 25, 201917 people are talking about thisTwitter Ads info and privacy

Some more details from the original report:  The subpoenas targeting thre three banks were issued in December 2017 as part of a U.S. investigation into violations of sanctions targeting North Korea’s nuclear weapons program, including money laundering and contravention of the U.S. Bank Secrecy Act.

Geng Shuang, a spokesman at the Chinese foreign ministry, said “We ask our companies and overseas branches to abide by local regulations and laws and operate within the framework of law, and cooperate with the local judicial and law enforcement bodies. At the same time, we are against U.S. so-called long arm jurisdiction on Chinese companies. We hope the U.S. will step up bilateral cooperation on finance with other countries,” Geng said at a daily briefing in Beijing.

Currently, there’s no conclusive information that Chinese banks will be sanctioned, PBOC publication Financial News reported on Tuesday, citing an unnamed industry veteran. Chinese banks will not lose their U.S. dollar clearance qualifications, and the market should not over-interpret this, the same person was quoted as saying.

The news that the US may use SWIFT as leverage against China comes just days before the G-20 summit in Japan this weekend, which will be the first meeting between U.S. President Donald Trump and Chinese President Xi Jinping since trade talks between the two countries broke off in May. They will discuss issues such as tariffs, subsidies, technology, intellectual property and cyber security, among others.

The U.S. government has put some Chinese firms including telecoms equipment maker Huawei Technologies Co Ltd on a trade blacklist while China is also drawing up its own “Unreliable Entities List” of foreign firms, groups and individuals.

M.P.O. (ejinsight) Hong Kong’s contentious extradition bill spurs capital flight

…As per my written and published yesterday.

M.P.O. (GUA) Sound of Hong Kong’s defiance reverberates in Beijing


M.P.O.

To mix water with olive oil is impossible.

Every Portuguese knows this.

The Special Status of Hong Kong is effectively incompatible with Mainland China’s current system.

Now and in the future.

I have no idea what the outcome will be.

But one thing i think i know.

These problems are going to became worst and worst with time.

If the credibility of Hong Kong is affected a massive capital flight will occur, in proportions never seen before anywhere around the World.

And Mainland China has already a severe capital flight problem.

In the case of this happening it will be a severe blow to several of Beijing’s aspirations.

Only then the future will be clear.

Thank you for your patience.

Francisco (Abouaf) de Curiel Marques Pereira



(EJinsight) The Hong Kong government has decided to suspend the controversial extradition bill following massive demonstrations and clashes between protesters and police. 

But the issue’s negative impact on the local economy will not simply go away. First of all, more mainland billionaires may decide to move their money out of the city.

To some extent, the former British colony has become a safe haven for fugitives, which is one of the main reasons why Chief Executive Carrie Lam Cheng Yuet-ngor had tried to push her legislative initiative. But that’s one of the main attractions of Hong Kong.

Mainland China’s legal system remains immature, while there are many gray areas in the economic sector. Businessmen may find themselves in trouble as a result.

That’s why not a few mainland billionaires have obtained citizenship in Hong Kong and moved part of their assets here to diversify the risk.

However, their assets in Hong Kong could be frozen or confiscated under the proposed Mutual Legal Assistance in Criminal Matters Ordinance that forms part of the extradition bill.

That means that upon the request of the central government, the Department of Justice could ask the court to grant an injunction to freeze or confiscate certain assets.

Local tycoons and those from other Asian countries who have assets here are also spooked.

Many billionaires have set up family offices in the city for worldwide allocation of their assets. But they might feel Hong Kong is no longer an ideal destination for such offices and consider moving elsewhere.

Singapore, which also boasts low tax rates, a common law system and a complete wealth management industry chain, is likely to be the biggest winner.

The Hong Kong SAR government pledges that there is no timetable to relaunch the suspended legislation, but Chief Executive Lam insists that she is doing “the right thing” and plans to relaunch the bill after proper consultation. 

That is hardly reassuring for anybody.