Broadcast live, Friday, June 8, 8 to 10 pm Eastern, on http://Revolution.Radio
First hour: Jeff Brown, author of China Rising.’
Second hour: Peter Myers of MailStar.net.
Topic: Peter Myers recently sent out the following email digest:
China using Facial Recognition to control Uighurs, trapdoor in computers it supplied to African Union
(1) The China Threat meets US hegemony
(2) China using Facial Recognition to control Uighurs in Xinjiang
(3) China has turned Xinjiang into a police state like Palestine, with Apartheid too
(4) China planted a trapdoor in computers it supplied to headquarters of African Union
(5) China’s ‘debtbook diplomacy’ a means of Colonisation
(6) Chinese Acquisition program has Germany on the Defensive
(7) How Can Europe Stand Up to China?
(8) Chinese CIA officer helped China dismantle United States spying operations
(9) Killing C.I.A. Informants, China Crippled U.S. Spying Operations
(10) Hacking Linked to China Exposes Millions of U.S. Workers
(11) Did China steal Japan’s high-speed train?
(12) Chinese have copied the German Maglev train and are now offering it to India
(13) Funding Infrastructure: Why China Is Running Circles Around America – Ellen Brown
(14) US & India try to oust pro-China President from Maldives
(1) The China Threat meets US hegemony
Peter Myers, June 3, 2018
In the space of 30 years, China has been transformed from a basket case into a new imperial power, the biggest the world has seen. It is a threat to friend and foe alike – just like Israel.
China’s ascent happened because Western and Japanese companies handed over their crown jewels, not dreaming that China would clone their technology and then export its products, undercutting their prices.
China’s rise shows similarities with the British Empire, but also with Nazi Germany. Its minorities are not Jews but Tibetans and Uighurs.The New Silk Road is a bigger version of Germany’s autobahns reaching to the borders, along which mechanised armies later marched.
The West has let this happen, because it was distracted by Israel’s war on Islam. From Israel, Neocons imported it into United States foreign policy.
The Victimhood propaganda emanating from Israel’s two lobbies – Netanyahu’s Zionists and Soros’ Open Society – has paralysed the West.
But Japan and China are immune to Holocaust propaganda. Japan had its own holocaust, at Hiroshima and Nagasaki. China had the Opium Wars, Western Humiliation, and the Japanese invasion. These atrocities have immunised them to the Israeli Victimhood narrative.
The West made a strategic blunder in turning against Russia – at the behest of the two Israel lobbies. This forced Russia into dependence on China, instead of uniting with Europe.
The same mistake was made with Sri Lanka during its civil war. Western countries refused to supply aircraft with which to defeat the Tamil Tigers. China filled the breach, and has since acquired a port / base there.
The same mistake is currently being made with Iran: the future of the West is being sacrificed for the future of Greater Israel.
Similarly, Western pressure on Myanmar is undermining its new government, and risks losing it to China.
The US and India are currently trying to oust a pro-China President from the Maldives.
China’s imperium is a threat to many countries. But this does not mean that US hegemony is beneficial. At the end of the Cold War, the West could have joined with Russia and imposed a peaceful World Order. Instead, US governments embraced the Neocons selling a ‘New American Century’. They are the ones who have got us into the current mess.
China’s ascendancy is very dangerous, because the USA will not accept defeat gracefully. And a defeat for the USA would also be a defeat for Israel.
Part of the problem is our illusions about the Cold War. It ended not because the Soviet Union was defeated, but because Gorbachev is a Globalist in the Soros ‘Green Left’ camp. He dismantled the Soviet Union.
In economic terms, the Cold War was won by Japan, whose ‘Asia Model’ was copied from the ‘German Model’. China later copied both of these models, while retaining substantial socialist ownership of the economy.
This was also a feature of Japan’s ‘Miracle’ economy. Privatisation only occurred since the Basel Accord, by which western bankers, forcing Japan to raise its Capital Adequacy Ratio, crashed the miracle. They did something similar in the ‘Asia Crisis’ of 1997, but have not been able to take down China’s finance system.
We are now in an epic battle between Chinese finance and Jewish finance. Both groups are old hands, and tight-knit. The Chinese merchants were known as the ‘Jews’ of South-East Asia.
copyright Peter Gerard Myers June 3, 2018. May be reproduced if uncut.
(2) China using Facial Recognition to control Uighurs in Xinjiang
China Uses Facial Recognition to Fence In Villagers in Far West
January 18, 2018, 7:00 AM GMT+10
New system alerts authorities when targets leave ‘safe areas’ Western region of Xinjiang serves as surveillance laboratory China’s state surveillance apparatus is trying out a new tool in one of its favorite test beds, the restive region of Xinjiang.
The Muslim-dominated villages on China’s western frontier are testing facial-recognition systems that alert authorities when targeted people venture more than 300 meters (1,000 feet) beyond designated “safe areas,” according to a person familiar with the project. The areas comprise individuals’ homes and workplaces, said the person, who requested anonymity to speak to the media without authorization.
“A system like this is obviously well-suited to controlling people,” said Jim Harper, executive vice president of the libertarian-leaning Competitive Enterprise Institute and a founding member of the U.S. Department of Homeland Security’s Data Privacy and Integrity Advisory Committee. “‘Papers, please’ was the symbol of living under tyranny in the past. Now, government officials don’t need to ask.”
The alert project is another example of how Xinjiang — a region boarding Pakistan and Afghanistan that’s home to about 10 million Muslim ethnic Uighurs — has become a laboratory for technologies that track large groups simultaneously. Spurred on by President Xi Jinping’s orders to “strike first” against Islamist extremism after deadly attacks involving Uighurs in 2013 and 2014, as well as reports of some fighting in Syria, the region has become one of the world’s most heavily policed places.
Land of Checkpoints
The Alaska-sized Xinjiang is a land of checkpoints, police stations and security cameras. Local governments have been ordering residents to install satellite-tracking systems in their cars. People must submit to facial scans to enter markets, buy fuel or visit places such as the capital Urumqi’s main bus terminal.
Xinjing’s regional publicity department didn’t respond to faxed requests for comment this week. The Ministry of Public Security in Beijing also didn’t respond to requests for comment.
Facial recognition is a big part of China’s two-year-old domestic surveillance upgrade campaign called Xue Liang, a reference to a Chinese idiom about the public’s collective observation power. While other countries are experimenting with the technology — the Federal Bureau of Investigation is, for instance, developing a database of Americans’ photographs — China is at the vanguard.
The country is on track to represent 46 percent of the $17.3 billion global video surveillance market by year end, and three-quarters of all deep learning-enabled servers for analyzing the data, according to Jon Cropley, a senior principal analyst at IHS Markit. All told, China earmarked 938 billion yuan ($146 billion) for domestic security in 2015 — the last time such figures were released — more than its military budget at the time.
The Xinjiang alert project is being led by China Electronics Technology Group, a state-run defense contractor that has parlayed its experience building radar and space systems into domestic security initiatives, the person said. It’s part of the Beijing-based company’s effort to develop software to collate data on jobs, hobbies, consumption habits, and other behavior of ordinary citizens to predict terrorist acts before they occur.
China Electronics Technology Group didn’t respond to an emailed request for comment.
Establishing control over Xinjiang — located closer to Baghdad than Beijing — has vexed China since an emperor sat in the capital. The current Communist Party-led government blames “separatist” forces that reject Chinese rule for fomenting unrest. […]
— With assistance by Keith Zhai, and Edwin Chan
(3) China has turned Xinjiang into a police state like Palestine, with Apartheid too
Apartheid with Chinese characteristics
China has turned Xinjiang into a police state like no other
Totalitarian determination and modern technology have produced a massive abuse of human rights
May 31st 2018 | HOTAN, XINJIANG PROVINCE
“THE prophet Sulayman approached his son and said to him, ‘I have received a message from God. I want you to circle the Earth and see if there are more people who are alive in spirit or more people who are dead in spirit.’ After a period the son returned and said, ‘Father I went to many places and everywhere I went I saw more people who were dead than those who were alive.’”
Hasan shared that message on a WeChat social-messaging group in 2015, when he was 23. Born in Yarkand, a town in southern Xinjiang, Hasan had moved to the provincial capital, Urumqi, to sell jade and shoes and to learn more about Islam. He described himself to Darren Byler, an anthropologist from the University of Washington, as a Sufi wanderer, a pious man with a wife and small daughter, who prayed five times a day and disapproved of dancing and immodesty.
But in January 2015 the provincial government was demanding that everyone in Urumqi return to their native home to get a new identity card. “I am being forced to go back,” Hasan complained to Mr Byler. “The Yarkand police are calling me every day. They are making my parents call me and tell me the same thing.” Eventually, he and his family boarded a bus for the 20-hour journey home. It was hit by a truck. Hasan’s wife and daughter were killed. He was hospitalised. “It was the will of Allah,” he said.
Hasan hoped the authorities would allow him to return to Urumqi because of his injuries. No chance. Having lost wife, child and livelihood, Hasan lost his liberty, too. A fortnight after his accident, he was sent to a re-education camp for an indefinite period. There, for all his relatives know, he remains.
Hasan is one of hundreds of thousands of Uighurs, a Turkic-language people, who have disappeared in Xinjiang, China’s north-western province. It is an empty, far-flung place; Hasan’s home town of Yarkand is as close to Baghdad as it is to Beijing. It is also a crucial one. The region is China’s biggest domestic producer of oil and gas, and much of the fuel imported from Central Asia and Russia passes through on its way to the industries of the east coast. It is now a vital link in the Belt and Road Initiative, a foreign policy which aims to bind the Middle East and Europe to China with ties of infrastructure, investment and trade.
But on top of that it is the home of the Uighurs, the largest Muslim group in the country, and ethnically quite distinct from the Han Chinese. A recent history of Uighur unrest—in particular bloody inter-ethnic violence in Urumqi in 2009 that followed the murder of Uighurs elsewhere in China—and subsequent terrorism have sent the government’s repressive tendencies into overdrive. Under a new party boss, Chen Quanguo, appointed in 2016, the provincial government has vastly increased the money and effort it puts into controlling the activities and patrolling the beliefs of the Uighur population. Its regime is racist, uncaring and totalitarian, in the sense of aiming to affect every aspect of people’s lives. It has created a fully-fledged police state. And it is committing some of the most extensive, and neglected, human-rights violations in the world.
The not-quite-Gulag archipelago
The government is building hundreds or thousands of unacknowledged re-education camps to which Uighurs can be sent for any reason or for none. In some of them day-to-day conditions do not appear to be physically abusive as much as creepy. One released prisoner has said he was not permitted to eat until he had thanked Xi Jinping, the Chinese president, and the Communist Party. But there have been reports of torture at others. In January, 82-year-old Muhammad Salih Hajim, a respected religious scholar, died in detention in Urumqi.
Kashgar, the largest Uighur city, has four camps, of which the largest is in Number 5 Middle School. A local security chief said in 2017 that “approximately 120,000” people were being held in the city. In Korla, in the middle of the province, a security official recently said the camps are so full that officials in them are begging the police to stop bringing people.
As a result, more and more camps are being built: the re-education archipelago is adding islands even faster than the South China Sea. Adrian Zenz of the European School of Culture and Theology in Kortal, Germany, has looked at procurement contracts for 73 re-education camps. He found their total cost to have been 682m yuan ($108m), almost all spent since April 2017. Records from Akto, a county near the border with Kyrgyzstan, say it spent 9.6% of its budget on security (including camps) in 2017. In 2016 spending on security in the province was five times what it had been in 2007. By the end of 2017 it was ten times that: 59bn yuan.
For all this activity, the government has not officially confirmed that the camps exist. They are not governed by any judicial process; detentions are on the orders of the police or party officials, not the verdict of a court. A woman working as an undertaker was imprisoned for washing bodies according to Islamic custom. Thirty residents of Ili, a town near the Kazakh border, were detained “because they were suspected of wanting to travel abroad,” according to the local security chief. Other offences have included holding strong religious views, allowing others to preach religion, asking where one’s relatives are and failing to recite the national anthem in Chinese.
A significant chunk of the total Uighur population is interned in this way. If the rate of detention in Kashgar applied to the province as a whole, 5% of the Uighur population of 10m would be detained. Other evidence suggests that this is quite possible. In February Radio Free Asia (RFA), a broadcaster financed by an independent agency of the American government, cold-called 11 families at random in Araltobe, in the north of the province, far from the Uighurs’ heartland. Six said family members had been sent to camps. In a village later visited by Agence France Presse in Qaraqash county, near Hotan, a fifth of adults had been detained over four months.
Maya Wang of Human Rights Watch, an advocacy group, reckons the overall number detained may be 800,000. Timothy Grose, a professor at Rose-Hulman University in Indiana, puts the total between 500,000 and 1m, which would imply that something like a sixth to a third of young and middle-aged Uighur men are being detained, or have been at some point in the past year.
The Chinese government argues that harsh measures are needed to prevent violence associated with Uighur separatism. In 2013 a Uighur suicide-driver crashed his car into pedestrians in Tiananmen Square in Beijing. In 2014 a knife-wielding Uighur gang slaughtered 31 travellers at a train station in Kunming, Yunnan province, an incident some in China compared to the September 11th 2001 attacks on America. Unrest in Yarkand later that year led to a hundred deaths; an attack at a coal mine in Aksu killed 50 people. Kyrgyzstani authorities blamed Uighur terrorists for an attempt to blow up the Chinese embassy in Bishkek; Uighurs have been blamed for a bombing which killed 20 at a shrine in Bangkok popular with Chinese tourists.
There are worrying links, as the Chinese authorities are keen to point out, between Uighur separatism and global jihad, especially in the Uighur diaspora, which is based in Turkey. Chinese and Syrian officials say 1,500 Uighurs have fought with Islamic State (IS) or Jabhat al-Nusra (part of al-Qaeda) in Syria. A group called the Turkestan Islamic Party, which demands independence for Xinjiang, is banned under anti-terrorist laws in America and Europe. In 2016 a defector from IS provided a list of foreign recruits; 114 came from Xinjiang.
In the grid
But the system of repression in the province goes far beyond anything that would be justified by such proclivities and affiliations. In Hotan there is a new police station every 300 metres or so. They are called “convenience police stations”, as if they were shops—and in fact they do offer some consumer services, such as bottled water and phone recharging. The windowless stations, gunmetal grey, with forbidding grilles on their doors, are part of a “grid-management system” like that which Mr Chen pioneered when he was party boss in Tibet from 2011 to 2016. The authorities divide each city into squares, with about 500 people. Every square has a police station that keeps tabs on the inhabitants. So, in rural areas, does every village.
At a large checkpoint on the edge of Hotan a policeman orders everyone off a bus. The passengers (all Uighur) take turns in a booth. Their identity cards are scanned, photographs and fingerprints of them are taken, newly installed iris-recognition technology peers into their eyes. Women must take off their headscarves. Three young Uighurs are told to turn on their smartphones and punch in the passwords. They give the phones to a policeman who puts the devices into a cradle that downloads their contents for later analysis. One woman shouts at a policeman that he is Uighur, why is he looking at her phone?
There can be four or five checkpoints every kilometre. Uighurs go through them many times a day.
Shops and restaurants in Hotan have panic buttons with which to summon the police. The response time is one minute. Apparently because of the Kunming knife attack, knives and scissors are as hard to buy as a gun in Japan. In butchers and restaurants all over Xinjiang you will see kitchen knives chained to the wall, lest they be snatched up and used as weapons. In Aksu QR codes containing the owner’s identity-card information have to be engraved on every blade.
Remarkably, all shops and restaurants in Hotan must have a part-time policeman on duty. Thousands of shop assistants and waiters have been enrolled in the police to this end. Each is issued with a helmet, flak jacket and three-foot baton. They train in the afternoon. In the textile market these police officers sit in every booth and stall, selling things; their helmets and flak jackets, which are uncomfortable, are often doffed. A squad of full-time police walks through the market making sure security cameras are working and ordering shop assistants to put their helmets back on. Asked why they wear them, the assistants reply tersely “security”.
At the city’s railway station, travellers go through three rounds of bag checks before buying a ticket. On board, police walk up and down ordering Uighurs to open their luggage again. As the train pulls into Kashgar, it passes metal goods wagons. A toddler points at them shouting excitedly “Armoured car! Armoured car!” Paramilitary vehicles are more familiar to him than rolling stock.
Uniformed shop assistants, knife controls and “convenience police stations” are only the most visible elements of the police state. The province has an equally extensive if less visible regime that uses yet more manpower and a great deal of technology to create total surveillance.
Improving lives, winning hearts
Under a system called fanghuiju, teams of half a dozen—composed of policemen or local officials and always including one Uighur speaker, which almost always means a Uighur—go from house to house compiling dossiers of personal information. Fanghuiju is short for “researching people’s conditions, improving people’s lives, winning people’s hearts”. But the party refers to the work as “eradicating tumours”. The teams—over 10,000 in rural areas in 2017—report on “extremist” behaviour such as not drinking alcohol, fasting during Ramadan and sporting long beards. They report back on the presence of “undesirable” items, such as Korans, or attitudes—such as an “ideological situation” that is not in wholehearted support of the party.
The watchful and the watched
Since the spring of 2017, the information has been used to rank citizens’ “trustworthiness” using various criteria. People are deemed trustworthy, average or untrustworthy depending on how they fit into the following categories: 15 to 55 years old (ie, of military age); Uighur (the catalogue is explicitly racist: people are suspected merely on account of their ethnicity); unemployed; have religious knowledge; pray five times a day (freedom of worship is guaranteed by China’s constitution); have a passport; have visited one of 26 countries; have ever overstayed a visa; have family members in a foreign country (there are at least 10,000 Uighurs in Turkey); and home school their children. Being labelled “untrustworthy” can lead to a camp.
To complete the panorama of human surveillance, the government has a programme called “becoming kin” in which local families (mostly Uighur) “adopt” officials (mostly Han). The official visits his or her adoptive family regularly, lives with it for short periods, gives the children presents and teaches the household Mandarin. He also verifies information collected by fanghuiju teams. The programme appears to be immense. According to an official report in 2018, 1.1m officials have been paired with 1.6m families. That means roughly half of Uighur households have had a Han-Chinese spy/indoctrinator assigned to them.
Such efforts map the province’s ideological territory family by family; technology maps the population’s activities street by street and phone by phone. In Hotan and Kashgar there are poles bearing perhaps eight or ten video cameras at intervals of 100-200 metres along every street; a far finer-grained surveillance net than in most Chinese cities. As well as watching pedestrians the cameras can read car number plates and correlate them with the face of the person driving. Only registered owners may drive cars; anyone else will be arrested, according to a public security official who accompanied this correspondent in Hotan. The cameras are equipped to work at night as well as by day.
Because the government sees what it calls “web cleansing” as necessary to prevent access to terrorist information, everyone in Xinjiang is supposed to have a spywear app on their mobile phone. Failing to install the app, which can identify people called, track online activity and record social-media use, is an offence. “Wi-Fi sniffers” in public places keep an eye, or nose, on all networked devices in range.
Next, the records associated with identity cards can contain biometric data including fingerprints, blood type and DNA information as well as the subject’s detention record and “reliability status”. The government collects a lot of this biometric material by stealth, under the guise of a public-health programme called “Physicals for All”, which requires people to give blood samples. Local officials “demanded [we] participate in the physicals,” one resident of Kashgar told Human Rights Watch, an NGO. “Not participating would have been seen as a problem…”
A system called the Integrated Joint Operations Platform (IJOP), first revealed by Human Rights Watch, uses machine-learning systems, information from cameras, smartphones, financial and family-planning records and even unusual electricity use to generate lists of suspects for detention. One official WeChat report said that verifying IJOP’s lists was one of the main responsibilities of the local security committee. Even without high-tech surveillance, Xinjiang’s police state is formidable. With it, it becomes terrifying.
In theory, the security system in Xinjiang applies to everyone equally. In practice it is as race-based as apartheid in South Africa was. The security apparatus is deployed in greatest force in the south-west, where around 80% of Uighurs live (see map). In a city like Shihezi, which is 95% Han, there are far fewer street checkpoints, if any, and a normal level of policing. Where there are checkpoints, Han Chinese are routinely waved through. Uighurs are always stopped.
The minarets torn down
Islam is a special target. In Hotan, the neighbourhood mosques have been closed, leaving a handful of large places of worship. Worshippers must register with the police before attending. At the entrance to the largest mosque in Kashgar, the Idh Kha—a famous place of pilgrimage—two policemen sit underneath a banner saying “Love the party, love the country”. Inside, a member of the mosque’s staff holds classes for local traders on how to be a good communist. In Urumqi the remaining mosques have had their minarets knocked down and their Islamic crescents torn off.
Some 29 Islamic names may no longer be given to children. In schools, Uighur-language instruction is vanishing—another of the trends which have markedly accelerated under Mr Chen. Dancing after prayers and specific Uighur wedding ceremonies and funerary rites are prohibited.
Unlike those of South Africa, the two main racial groups are well matched in size. According to the 2010 census, Uighurs account for 46% of the province’s population and Han Chinese 40% (the rest are smaller minorities such as Kazakhs and Kirgiz). But they live apart and see the land in distinct ways. Uighurs regard Xinjiang as theirs because they have lived in it for thousands of years. The Han Chinese regard it as theirs because they have built a modern economy in its deserts and mountains. They talk of bringing “modern culture” and “modern lifestyle” to the locals—by which they mean the culture and lifestyle of modern Han China.
So how have the Han and Uighur reacted to the imposition of a police state? Yang Jiehun and Xiao Junduo are Han Chinese veterans of the trade in Hotan jade (which the Chinese hold to be the best in the world, notably in its very pale “mutton-fat” form). Asked about security, they give big smiles, a thumbs-up and say the past year’s crackdown has been “really well received”. “In terms of public security, Urumqi is the safest it has ever been,” says Mr Xiao, whose family came to the province in the 1950s, when the People’s Liberation Army and state-owned enterprises were reinforcing the border with the Soviet Union. “The Uighurs are being helped out of poverty,” he avers. “They understand and support the policy.”
Not all Han Chinese in Xinjiang are quite as enthusiastic. Tens of thousands came to the province fairly recently, mostly in the 1990s, to seek their fortunes as independent traders and business people, rather than being transferred there by state-owned companies or the army. They approve of better security but dislike the damage being done to the economy—for example, the way movement controls make it harder to employ Uighurs. So far, this ambivalence is not seriously weakening the support among the Han and, for the government in Beijing, that is all that matters. It sees Xinjiang mainly as a frontier. The Han are the principal guarantors of border security. If they are happy, so is the government.
The Uighur reaction is harder to judge; open criticism or talking to outsiders can land you in jail. The crackdown has been effective inasmuch as there have been no (known) Uighur protests or attacks since early 2017. It seems likely that many people are bowing before the storm. As Sultan, a student in Kashgar, says with a shrug: “There’s nothing we can do about it.”
But there are reasons for thinking resentment is building up below the surface. According to anthropological work by Mr Byler and Joanne Smith Finley of Newcastle University in Britain, a religious revival had been under way before the imposition of today’s harsh control. Mosques were becoming more crowded, religious schools attracting more pupils. Now the schools and mosques are largely empty, even for Friday prayers. It is hard to believe that religious feeling has vanished. More likely a fair bit has gone underground.
And the position of Uighurs who co-operate with the Han authorities is becoming untenable. The provincial government needs the Uighur elite because its members have good relations with both sides. The expansion of the police state has added to the number of Uighurs it needs to co-opt. According to Mr Zenz and James Leibold of La Trobe University in Melbourne, 90% of the security jobs advertised in 2017 were “third tier” jobs for low-level police assistants: cheap, informal contracts which mainly go to Uighurs (see chart). But at the same time as needing more Uighurs, the authorities have made it clear that they do not trust them. Part of the repression has been aimed at “two-faced officials” who (the party says) are publicly supporting the security system while secretly helping victims. Simultaneously recruiting more Uighurs and distrusting them more creates an ever larger pool that might one day turn against the system from within.
A Han businessman who travels frequently between Urumqi and Kashgar says he used to feel welcome in the south. “Now it has all changed. They are not afraid. But they are resentful. They look at me as if they are wondering what I am doing in their country.” One of the few detainees released from the camps, Omurbek Eli, told RFA that the authorities “are planting the seeds of hatred and turning [detainees] into enemies. This is not just my view—the majority of people in the camp feel the same way.”
China’s Communist rulers believe their police state limits separatism and reduces violence. But by separating the Uighur and Han further, and by imposing huge costs on one side that the other side, for the most part, blithely ignores, they are ratcheting up tension. The result is that both groups are drifting towards violence.
Before he disappeared, Hasan, the self-styled Sufi wanderer, expressed Xinjiang’s plight. “To be Uighur is hard,” he wrote on WeChat in 2015. “I don’t even know what I am accused of, but I must accept their judgment. I have no choice. Where there is no freedom, there is tension. Where there is tension there are incidents. Where there are incidents there are police. Where there are police there is no freedom.”
This article appeared in the Briefing section of the print edition under the headline “Apartheid with Chinese characteristics”
(4) China planted a trapdoor in computers it supplied to headquarters of African Union
Beijing accused of bugging African Union HQ for years
IT experts found a portal in computers supplied by China was sending data to servers in Shanghai. Wiretaps were also hidden under tables and inside walls
By ASIA TIMES STAFF JANUARY 31, 2018 5:14 PM (UTC+8)
China planted a portal in computers at the headquarters of the African Union in the Ethiopian capital of Addis Ababa that sent secret data back to servers in Shanghai for five years, France’s Le Monde reported.
The newspaper said that after the building opened in 2012 technicians noticed a spike in data usage between midnight and 2am every day, when the building was empty, and brought in IT experts.
An Algerian team discovered that the Chinese-supplied computers had a portal that gave hackers backdoor access to files and other documents. They saw data being copied and transferred and were able to trace the transmissions to servers in Shanghai, some 8,800 kilometres away.
Experts also found sensitive wiretapping devices hidden beneath tables and inside walls throughout the 132,000 square-metre complex, which consists of a conference centre and a 20-storey office tower.
China’s ambassador to the AU, Kwang Weilin, dismissed the reports as “absurd” and “preposterous,” and warned they would “create problems for China-Africa relations”. Kwang said they were another example of the West’s belief that China was pulling strings in Africa.
China offered to help upgrade the firewalls, but not surprisingly its offer was politely turned down
The bugs are believed to have been planted during construction of the US$200 million complex, which was funded entirely by Chinese capital and built by the China State Construction Engineering Corp. All IT and encrypted communication systems had to be reinstalled in January 2017, the newspaper reported. China offered to help upgrade the firewalls, but not surprisingly its offer was politely turned down.
News of the apparent cybersecurity breach was hushed up for almost a year until the exposé by Le Monde, which said it had been tipped off by sources within the African Union.
The opening ceremony in 2012 was attended by Jia Qinglin, the then-chairman of the Chinese People’s Political Consultative Conference and the Chinese Communist Party’s fourth highest-ranking official. National leaders from African countries were also present.
Built to house representatives of all 55 countries on the continent, the project was included in a slew of aid programs announced by former Chinese President Hu Jintao in 2006 that were designed to symbolize his country’s growing presence and influence in Africa.
The African Union’s new chairman, Rwandan President Paul Kagame, said he was unaware of Beijing’s apparent eavesdropping and that he did not think China usually spied on its friends. Kagame also said the union had “had no secrets” since its establishment in 2001.
(5) China’s ‘debtbook diplomacy’ a means of Colonisation
Warning sounded over China’s ‘debtbook diplomacy’
Academics identify 16 countries loaned billions that they can’t afford to repay
Helen Davidson @heldavidson
Tue 15 May 2018 16.12 AEST Last modified on Tue 15 May 2018 17.08 AEST
China’s “debtbook diplomacy” uses strategic debts to gain political leverage with economically vulnerable countries across the Asia-Pacific region, the US state department has been warned in an independent report.
The academic report, from graduate students of the Harvard Kennedy school of policy analysis, was independently prepared for the state department to view and assessed the impact of China’s strategy on the influence of the US in the region.
The paper identifies 16 “targets” of China’s tactic of extending hundreds of billions of dollars in loans to countries that can’t afford to pay them, and then strategically leveraging the debt.
It said while Chinese infrastructure investment in developing countries wasn’t “inherently” against US or global interests, it became problematic when China’s use of its leverage ran counter to US interests, or if the US had strategic interests in a country which had its domestic stability undermined by unsustainable debt.
The academics identified the most concerning countries, naming Pakistan and Sri Lanka as states where the process was “advanced”, with deepening debt and where the government had already ceded a key port or military base, as well places including Papua New Guinea and Thailand, where China had not yet used its amassed debt leverage.
Papua New Guinea, which “has historically been in Australia’s orbit”, was also accepting unaffordable Chinese loans. While this wasn’t a significant concern yet, the report said, the country offered a “strategic location” for China, as well as large resource deposits.
While there was a lack of “individual diplomatic clout” in Cambodia, Laos and the Philippines, Chinese debt could give China a “proxy veto” in Asean, the academics said.
They also warned that the 2023 expiration of the compact of free association between Micronesia, Palau and the Marshall Islands could “threaten the unfettered basing access and right of strategic denial the US has enjoyed since world war two, and help the Chinese navy extend its reach past the first island chain into the blue-water Pacific”, it said.
China’s methods were “remarkably consistent”, the report said, beginning with infrastructure investments under its $1tn belt and road initiative, and offering longer term loans with extended grace periods, which was appealing to countries with weaker economies and governance.
Construction projects, which the report said had a reputation for running over budget and yielding underwhelming returns, make debt repayments for the host nations more difficult.
“The final phase is debt collection,” it said. “When countries prove unable to pay back their debts, China has already and is likely to continue to offer debt-forgiveness in exchange for both political influence and strategic equities.”
As a case study, the report cited specific concerns about Sri Lanka granting China an 85% stake in a 99-year lease on a major port in Hambantota.
The deal, which the report described as “opaque and contentious”, came after a decade of deepening debt ties with China. In 2007 China offered financing for the $361m port at a time when other entities were concerned about human rights and commercial viability, and then loaned a further $1.9bn for upgrades and an airport.
By 2017, when the port deal was signed, Sri Lanka owed more than $8bn to Chinese-controlled firms. The port, which was yet to generate a profit, became a “debt trap”.
“Once Sri Lanka made the initial commitment, the sunk cost and need to generate profit to pay off the original loans drove it to take out additional loans, a cycle that repeated itself until it was finally cornered into giving up the port in a debt-for-equity swap,” it said.
“This has sparked fears that Hambantota could one day become a Chinese naval hub, and sent a worrying signal to other debt-strapped developing nations.”
China has invested in or financed infrastructure developments across the Asian and Pacific regions, including large-scale projects representing sizeable portions of host nations’ GDP. The loans often require that Chinese companies build the projects, and complaints that locals are overlooked for a fly-in Chinese workforce are frequent.
It has also sought to expand its military presence, prompting warnings for nearby countries including Australia. Australia’s major parties have also voiced concern about the country’s diminishing influence in the Pacific.
The report recommended that the US target and streamline its investments, strengthen alliances and manage debt burdens, including through bolstering India’s role as a regional leader.
Last year India warned against China’s expanding BRI and urged financial responsibility with projects that didn’t create “unsustainable debt burden for communities”.
Beijing said in response that the initiative “is not and will never be neocolonialism by stealth”.
“Nor will China use the success of the initiative to undermine the influence of others and jeopardise the regional stability upon which the nation’s astonishing successes have been built.”
(6) Chinese Acquisition program has Germany on the Defensive
Part 1: Chinese Expansion Has Germany on the Defensive
The German economy has grown dependent on China in a development that is now coming back to haunt it. With a global trade war brewing, it will be impossible for the government in Berlin to please both Beijing and Washington. It’s time for a new strategy.
By DER SPIEGEL Staff
May 24, 2018 06:03 PM
China has already taken a significant step into Germany. In the Rheinhausen district of Duisburg, trains are now rolling across the site where steelworkers once fought unsuccessfully to save their mill in 1987 while shipyard cranes stack up containers on the banks of the Rhine River. This is the precise point where the New Silk Road, China’s massive infrastructure project, comes to an end.
The site in Duisburg is known as Logport I and it is one of the largest container ports in Europe. Twenty-five trains arrive each week at Terminal DIT, also known as the China Terminal, after having traveled the more than 10,000 kilometers from Chongqing across Kazakhstan, Russia, Belarus and Poland.
Four years ago, Chinese President Xi Jinping visited the inland port. The engine of a train that arrived from China that day was decorated with red paper dragons for the occasion and Erich Staake, CEO of the Duisburg port, was also on hand.
Staake, who, like the Chinese president, was born in 1953, sees the rail connection as a boon both for the port and for the entire region, which badly needs it. “We want to grow,” he says. “China and the New Silk Road offer us great potential.” One way of seeing it is that the trade route brings China and Germany that much closer together.
There is, though, another way of seeing it: Namely that the multibillion-dollar project provides the Chinese with a kind of bridgehead in Europe from which they are pushing their expansion across the Continent and broadening their economic influence.
So which is it? An opportunity or a threat?
It isn’t easy to find an answer to that question — and that itself is telling. Chancellor Angela Merkel’s visit to China this week will have a different flavor to it than her previous 10 visits to the country. The relationship between the two countries has changed in the interim and is no longer as balanced as it once was.
Until recently, the relationship had seemed almost symbiotic and the roles were clear: Germany sold high-end machinery and vehicles in China, including more than 5 million automobiles in 2017 alone. In return, China exported furniture, refrigerators and electronic devices to Germany at unbeatably low prices. But now, China has reached adulthood much more quickly than expected.
Not all that long ago, China was a developing economy, seen by industrialized countries in the West as a gigantic market where they could sell their goods. Then, it became the world’s factory, a place with inexhaustible resources. Now, however, it has matured into a powerful competitor capable of leaving Germany in its dust. Chinese companies are developing intelligent machinery and production facilities; they are building cars, many of them with electric motors; and they’re making inroads into sectors that used to be Germany’s private domain. China has figured out how to copy Germany’s successful model and is now becoming a danger to the original.
‘The Mechanics Have Changed’
Mikko Huotari was one of the first to identify this development several years ago. Huotari is a scholar at the Mercator Institute for China Studies (merics), a think tank in Berlin. The old logic which held that “China needs us” is no longer true. In fact, he says, the situation has flipped: Germany is increasingly reliant on China as the country increasingly becomes a driver of global innovation. “The entire mechanics of the system have changed.”
Just how confident, or perhaps even aggressive, the Chinese have become can be seen when they buy companies in Germany. They used to target second-tier firms, but in recent years, the focus has increasingly shifted to key industrial players. “Germany is home to around 1,000 mid-sized companies that are global leaders in their sectors. The Chinese want access to them,” says Kai Lucks, head of the Federal Association of Mergers & Acquisitions in Germany.
Recently, Chinese buyers have even shown an appetite for companies listed on the DAX, Germany’s blue-chip stock index. In February, billionaire Li Shufu quietly acquired a 10 percent stake in Daimler. Dieter Zetsche, the company’s chairman of the board, believes that an additional large Chinese investor may also acquire a stake in the company: the state-owned firm BAIC, Daimler’s Chinese partner. Politicians and executives are beginning to wonder what large company might be targeted by Chinese investors next.
Along with those investments, uncertainty has been growing. And it’s not just coming from the Far East. Reliant as it is on exports, the German economy is sensitive to shifting trends in global trade and Merkel’s visit to China this week is coming right in the middle of a period of transition. China is growing stronger, America has become unreliable and Germany has to figure out what its new role will look like. […]
There is a date that marks the turning point in Chinese-German relations: May 18, 2016. That was the day that the Chinese company Midea announced its intention to takeover KUKA, a global leader in industrial robotics. Union leader Armin Kolb says that the news initially terrified him. “I’d by lying if I said otherwise,” he says. […]
The deal was a wake-up call for economic policymakers in Germany. It wasn’t the first time that Chinese buyers had gone on a shopping spree in the country, with companies from China already having acquired such big-name and highly specialized firms as KraussMaffei and Putzmeister. But the KUKA sale triggered widespread angst. […]
KUKA is a German company that pays its taxes here, the CEO insists, the only difference being that it has a Chinese owner. During the trade fair in Hannover in April, the chancellor once again dropped by the KUKA stand, which Reuter welcomes as “an important signal.” Naming former SAP head Henning Kagermann to the supervisory board, with his excellent political connections, can also be seen as a trust-building measure.
On the other hand, though, the robotics company will be investing primarily in Shunde in the coming years, in the form of a new, 400-million-euro production facility. KUKA will develop new products at the site and produce around 75,000 robots per year there by 2024 — three times as many as in Augsburg.
The future of robotics — and of KUKA — it seems, is in China. That much is clear, even if the deal with Midea to retain the company’s current headquarters in Augsburg runs for another five years.
THROWING DOWN THE GAUNTLET
KUKA is exactly the kind of company that China is looking for. After all, the country has a plan. Few in Germany took much notice when Beijing announced it in the form of a document called “Made in China 2025.” Written in the rather unwieldy terminology of communism, it describes how China intends to become an economic superpower. It was essentially the equivalent of throwing down the gauntlet to the West.
The plan calls for transforming China into a “major manufacturing power” by 2025, reaching an “intermediate level among world manufacturing powers” by 2035 and becoming “the leader among the world’s manufacturing powers” by 2049, the centennial of the founding of the People’s Republic. The master plan does not allow for potential economic crises. “Advanced technology is the sharp weapon of the modern state,” President Xi said in a 2013 speech that offers a powerful expression of the country’s new industrial strategy. “Our technology still generally lags (behind) that of developed countries, and we must adopt an asymmetrical strategy of catching up and overtaking.”
What he means is that he wants to make more rapid progress than others in 10 key fields: information technology, automation and robotics, aerospace and aeronautics, oceanographic engineering and high-tech shipping, high-speed rail, electric vehicles, electric power equipment, agricultural machinery, new materials, pharmaceuticals and medical equipment.
In contrast to previous long-term plans, the 2025 strategy seeks a global reach. Its goal is that of leaving behind Western competitors and transforming domestic companies into international champions. It is a blueprint for restructuring the country’s economy, from the factories to the laboratories, from industrial production to the service sector, from state-owned factories to privately owned businesses.
(7) How Can Europe Stand Up to China?
Part 2: How Can Europe Stand Up to China?
May 24, 2018 06:03 PM
Other countries have pursued similar strategies in the past, including South Korea, Japan and, perhaps most significantly, Germany, whose industrial history Chinese experts studied closely before presenting China’s own plan. “The catch phrase ‘Industry 4.0’ hit China like a bomb,” says Changfeng Tu, who is a partner at the law firm Hengeler Mueller. It provided the blueprint for “Made in China 2025.”
The difference is that China is governed by an authoritarian system and the country is vast in size. If the Chinese leadership wants to, it can revamp entire economic sectors, as it did previously in the steel and solar industries. And now, it is doing the same in the automobile industry, Germany’s preeminent economic sector. […]
Even at BMW, a pioneer when it comes to e-mobility, there is growing concern. Works council head Manfred Schoch warns of looming Chinese dominance over the market. “We have superior know-how when it comes to diesel and gasoline engines,” he says. “But in e-mobility, the Chinese are challenging our technological leadership.” He says they have planned much further into the future and taken consequential steps to make that future a reality.
Beijing has purchased mines in Africa to secure supplies of lithium and cobalt, both essential raw materials in the production of batteries. Companies like BYD and CATL, which are hardly known in the West, are building one battery factory after the next. And what are the Germans doing? Bosch, a major supplier of components to the automobile industry, decided against building its own battery production facility. The investment risk, allegedly as high as 20 billion euros, was too large for the company. But the result is that the German automobile industry is in danger of becoming reliant on suppliers from East Asia for the most important component of electric vehicles.
China is also aiming to take the lead when it comes to digitally networked vehicles. The consulting firm McKinsey forecasts that by 2030, the country will become the largest market in the world for self-driving cars and related mobility services. The Chinese companies behind this development are Alibaba and Tencent. Each tech company is worth almost $500 billion, seven times the value of BMW. The gap clearly shows where investors see the future.
THE HIGH-TECH LABORATORY
This week, the chancellor can see for herself the technological expectations the Chinese have and the progress they have already made. When Merkel visits the high-tech metropolis of Shenzhen in southern China on Friday, she will see firsthand one of the most spectacular airport structures in the world. The new terminal at Bao’an Airport stretches into the Pearl River Delta like a gigantic octopus. The building is symbolic of the ambitions of the city, with its 12 million inhabitants, as it seeks to become a high-tech hub in China.
Shenzhen is already home to mobile telephone giant Huawei, the online service provider Tencent and global market leaders like the drone manufacturer DJI. It is a place where startup founders and venture capitalists come together to test the boundaries of what is technologically and financially possible. Just over a quarter hour’s drive from the airport, a modern office tower is nearing completion. Once it is finished, it will form the nucleus of the “exemplary Chinese-German industrial zone of Bao’an,” as it says in an online brochure.
The concept for the project was developed at the Hannover Trade Fair two years ago. In Bao’an, the initiators hope to link Germany’s “Industry 4.0” concept with the “Made in China 2025” strategy. The industrial park is set to open its doors early next year, complete with a Chinese restaurant on the fifth floor and a German restaurant on the fourth. And there is to be a screening area where people can watch German football matches together.
Like Germany since the Industrial Revolution, Shenzhen is a place that combines technical know-how with industrial application — a high-tech laboratory that still has the sheen of novelty. “The possibilities that Shenzhen offers are almost limitless,” says German engineer Jens Höfflin.
Wearing shorts and flipflops, Höfflin can be found at the startup community HAX. Together with his American partner, the 36-year-old developed a mobile magnetic resonance tomography device in Boston that will help heart and kidney patients avoid constant hospital visits. At HAX in Shenzhen, they have received funding to do an initial production run. Höfflin says it is easy to find whatever you might need in Shenzhen, whether it be circuit boards or die casting components. “Within a radius of just a few kilometers, you can find the right factory for production,” he says.
At the next desk, a startup founder from Australia is examining a prototype of a device that enables the monitoring of large herds of sheep. It is already the third iteration of his product, he says, adding that he returns to Shenzhen each time he makes an upgrade.
Protection Against Regime Access
It used to be that Shenzhen’s low prices were the city’s main selling point, Höfflin says. “Now, though, it is its huge selection of suppliers.” The Chinese target young German entrepreneurs to bring to Shenzhen, hoping to profit from their know-how. But they also head to Germany themselves.
Last year in Munich, for example, Huawei opened its second research and development center. Around 300 experts are currently working on G-5 technology at the site, the next generation in mobile telephony. They are developing specialized antennas and semiconductors for smartphones. “Huawei sees Europe as a second domestic market and Germany is the heavyweight,” says Torsten Küpper, an executive at the German branch of Huawei.
No other company in Europe applied for more patents last year — not even Bosch or Siemens. When it comes to information and communication technology, Küpper believes that Huawei is the global leader. Now, though, the company is focusing its attentions on connecting industry in addition to connecting people, he says, which is why it has come to the Munich region, which is home to many mechanical engineering and automobile supply companies.
As a network supplier for German industry, Huawei finds itself privy to sensitive company data and has deep access to the technological nervous systems of its clients. Many have reservations about allowing a Chinese company such access and part of Küpper’s job is to dispel those fears. “Of course, we respect patent and data protection laws, just as we ourselves wish to be respected,” the executive says. He adds that Huawei resembles a large cooperative and that the company belongs to its employees.
Still, such an ownership structure does not provide protection against regime access from Beijing. Companies like Huawei are closely watched in the West. The Trump administration cut off ZTE, a Huawei competitor, from U.S. suppliers from one day to the next because it violated sanctions on North Korea. A few days ago, Trump struck a more moderate tone when it came to the company’s future, but whether it ultimately survives is dependent completely on the moods of a moody president.
Huawei isn’t nearly as exposed in America as ZTE, but Europe too could ultimately reach the conclusion that mobile telephone networks are of systemic importance. Mistrust is growing, particularly as it becomes increasingly clear how strategically China is expanding its economic influence into Europe. And it is doing so by way of the New Silk Road.
Chinese President Xi presented the idea for a new world order shortly after entering office in 2013. The Silk Roads Initiative is a network of trade and energy corridors, pipelines, railway lines and shipping lanes that are to span the entire Eurasian region by the middle of the century — and all of them begin in China. […]
From central China to the EU’s external border, though, the journey only takes six to seven days. But the short final leg, which makes up just a 10th of the entire journey, takes that much time again. Staake says there are many reasons for the delays, some of which have to do with rigid rules on working hours, others with bureaucracy. Either way, he’s not impressed. […]
Germany, though, cannot go it alone. Berlin needs to ally with other European countries and develop a common industrial policy.
The rail industry has demonstrated in recent years how that could work. When China merged two manufacturers to create CRRC, the world’s largest railway group, its competitors in Europe were quick to respond. Germany’s Siemens (the manufacturer of the ICE high-speed train) and its French competitor Alstom (the maker of the TGV) announced they were merging their rail manufacturing operations. Their plan is to create a kind of “Airbus on rails,” a European champion that would sell high-speed trainsets on the global market as an alternative to CRRC.
A similar approach could also be conceivable in the battery industry. Batteries represent by far the most expensive elements in electric cars and China has invested billions in manufacturing plants, taking the lead on the global market in the process. If the European automobile industry wants to remain a player and keep its hands on this part of the value creation chain, it will have no choice but to manufacture batteries itself.
Just a Supplier
BMW works council head Schoch is calling for a master plan, one that would be backed by Berlin and Brussels. “If we don’t build battery factories for electric cars in Europe, then the Chinese will,” he says. His idea is for BMW, Daimler and Volkswagen to join forces to build the first major plant. Doing so, according to his calculations, would cost a maximum of 1.5 billion euros.
If the plant is successful, others could follow. “Those who don’t master this future technology will find themselves out of the game at some point,” Schoch warns.
Not much time is remaining for the creation and application of a China strategy. The country is indefatigable when it comes to climbing further up the ladder of progress. A recent survey conducted by the German Chamber of Commerce for Greater China found that more than 40 percent of German companies represented in the country believe that China would rise to become an innovations leader in their respective industry within five years. The organization’s office in Shenzhen has been equipped with a special team to observe developments in the city in what it describes as “technology scouting” for the Mittelstand, as the small- and medium-sized companies that form the backbone of the German economy are called.
Chamber of Commerce head Jan Hildebrandt notes that it’s not as if everything that China undertakes translates into an automatic success. Industrial parks like the one in Bao’an have also produced disappointments. But the Chinese aren’t afraid of setbacks. Just a few kilometers from Bao’an, the city is building the world’s largest trade fair center — in a country that already hosts some of the world’s largest industry trade fairs.
Hildebrandt says it’s good that Chancellor Merkel is visiting Shenzhen because the city will give her a good sense of how quickly the “world’s factory” has transformed into a center of innovation. But she will also be forced to realize that Beijing’s “Made in China 2025” plan has assigned Germany a role it isn’t accustomed to. “At present, we are just a supplier,” Hildebrandt says.
By Simon Hage, Martin Hesse, Alexander Jung, Peter Müller, Gerald Traufetter and Bernhard Zand
(8) Chinese CIA officer helped China dismantle United States spying operations
Ex-C.I.A. Officer Suspected of Compromising Chinese Informants Is Arrested
By ADAM GOLDMAN
JAN. 16, 2018
WASHINGTON — A former C.I.A. officer suspected by investigators of helping China dismantle United States spying operations and identify informants has been arrested, the Justice Department said on Tuesday. The collapse of the spy network was one of the American government’s worst intelligence failures in recent years.
The arrest of the former officer, Jerry Chun Shing Lee, 53, capped an intense F.B.I. inquiry that began around 2012, two years after the C.I.A. began losing its informants in China. Investigators confronted an enduring mystery: How did the names of so many C.I.A. sources, among the agency’s most dearly held secrets, end up in Chinese hands?
Some intelligence officials believed that a mole inside the C.I.A. was exposing its roster of informants. Others thought that the Chinese government had hacked the C.I.A.’s covert communications used to talk to foreign sources of information.
Still other former intelligence officials have also argued that the spy network might have been crippled by a combination of both, as well as sloppy tradecraft by agency officers in China. The counterintelligence investigation into how the Chinese managed to hunt down American agents was a source of friction between the C.I.A. and F.B.I.
Mr. Lee, who left the C.I.A. in 2007, has been living in Hong Kong and working for a well-known auction house. He was apprehended at Kennedy Airport in New York on Monday and charged in federal court in Northern Virginia with the unlawful retention of national defense information. He appeared in Brooklyn federal court on Tuesday and is being held there while awaiting transfer to Virginia. He does not have a lawyer, a Justice Department official said. The F.B.I. apparently learned that Mr. Lee was traveling to the United States and scrambled to charge him on Saturday.
Jerry Chun Shing Lee, a former C.I.A. officer, is suspected of identifying agency informants to the Chinese government, helping to cripple the United States’ intelligence operations in China. Read the affidavit supporting charges against him.
Mr. Lee had previously traveled to the United States in 2012 to live with his family in Virginia. It was during that trip that F.B.I. agents searched his luggage during hotel stays in Hawaii and Virginia and found two small books with handwritten notes that contained classified information. He later made his way back to Hong Kong after being questioned by F.B.I. agents in 2013.
It is unclear why Mr. Lee decided to risk arrest by coming to the United States this month.
In the books the agents found, Mr. Lee had written down details about meetings between C.I.A. informants and undercover agents, as well as their real names and phone numbers, according to court papers. Prosecutors said that material in the books reflected the same information contained in classified cables that Mr. Lee had written while at the agency.
More than a dozen C.I.A. informants were killed or imprisoned by the Chinese government. The extent to which the informant network was unraveled, reported last year by The New York Times, was a devastating setback for the C.I.A.
Officials said the number of informants lost in China rivaled losses in the Soviet Union and Russia during the betrayals of both Aldrich Ames and Robert Hanssen, formerly of the C.I.A. and the F.B.I. They divulged intelligence operations to Moscow for years.
The C.I.A. declined to comment on Mr. Lee’s arrest.
According to court documents, Mr. Lee served in the United States Army from 1982 to 1986 and joined the C.I.A. in 1994 as a case officer. Former agency officials said he also served in China during his career. Those who knew him said he left the agency disgruntled after his career plateaued.
Prosecutors said that both before and after he and his family moved back to the United States in 2012, Mr. Lee met with former C.I.A. colleagues and other government employees.
As the agency began losing assets in China, it was not clear at first that the losses were systematic, but as the disappearances mounted, the American intelligence community eventually realized it had a major problem.
The case had frustrated counterintelligence officials in the F.B.I. and C.I.A. as they sought to determine how the Chinese had disrupted agency operations in the country.
The F.B.I. suspected an insider had revealed sensitive information to the Chinese government, a theory not initially embraced by the C.I.A. Mr. Lee eventually became a prime suspect in the hunt for a traitor.
Former intelligence officials said that the F.B.I. lured Mr. Lee back to the United States as part of a ruse and he was interviewed five times in May and June 2013. The authorities said he never disclosed the two books, described as an address book and a datebook, to investigators.
Formers officials said they were surprised that Mr. Lee came back to the United States in 2012, knowing he might be under F.B.I. suspicion. Details about the F.B.I. operation to lure him back were tightly held, but former intelligence officials said he returned with the promise of a possible contract with the C.I.A. Many former agency officers leave the agency and then return on contract. At some point after the F.B.I. interviewed him, Mr. Lee returned to Hong Kong.
Why the F.B.I. did not arrest Mr. Lee after originally finding the classified material in his notebooks remains unclear. The F.B.I. declined to comment.
Officials are concerned that Mr. Lee’s case and at least one other represent a troubling pattern of Chinese intelligence targeting former agency officials, an easier task than trying to recruit current C.I.A. operatives.
In June, a former C.I.A. officer was charged with providing classified information to China and making false statements. Prosecutors said that the former officer, Kevin Patrick Mallory, 60, of Leesburg, Va., had top-secret documents and incriminating messages on a communications device he brought back from Shanghai.
In March, prosecutors announced the arrest of a longtime State Department employee, Candace Marie Claiborne, accused of lying to investigators about her contacts with Chinese officials. According to the criminal complaint against Ms. Claiborne, who pleaded not guilty, Chinese agents wired cash into her bank account and lavished her with thousands of dollars in gifts.
A version of this article appears in print on January 17, 2018, on Page A1 of the New York edition with the headline: F.B.I. Detains Man Suspected in Fall Of Spies for U.S.
(9) Killing C.I.A. Informants, China Crippled U.S. Spying Operations
By MARK MAZZETTI, ADAM GOLDMAN, MICHAEL S. SCHMIDT and MATT APUZZO
MAY 20, 2017
WASHINGTON — The Chinese government systematically dismantled C.I.A. spying operations in the country starting in 2010, killing or imprisoning more than a dozen sources over two years and crippling intelligence gathering there for years afterward.
Current and former American officials described the intelligence breach as one of the worst in decades. It set off a scramble in Washington’s intelligence and law enforcement agencies to contain the fallout, but investigators were bitterly divided over the cause. Some were convinced that a mole within the C.I.A. had betrayed the United States. Others believed that the Chinese had hacked the covert system the C.I.A. used to communicate with its foreign sources. Years later, that debate remains unresolved.
But there was no disagreement about the damage. From the final weeks of 2010 through the end of 2012, according to former American officials, the Chinese killed at least a dozen of the C.I.A.’s sources. According to three of the officials, one was shot in front of his colleagues in the courtyard of a government building — a message to others who might have been working for the C.I.A.
Still others were put in jail. All told, the Chinese killed or imprisoned 18 to 20 of the C.I.A.’s sources in China, according to two former senior American officials, effectively unraveling a network that had taken years to build.
Assessing the fallout from an exposed spy operation can be difficult, but the episode was considered particularly damaging. The number of American assets lost in China, officials said, rivaled those lost in the Soviet Union and Russia during the betrayals of both Aldrich Ames and Robert Hanssen, formerly of the C.I.A. and the F.B.I., who divulged intelligence operations to Moscow for years.
The previously unreported episode shows how successful the Chinese were in disrupting American spying efforts and stealing secrets years before a well-publicized breach in 2015 gave Beijing access to thousands of government personnel records, including intelligence contractors. The C.I.A. considers spying in China one of its top priorities, but the country’s extensive security apparatus makes it exceptionally hard for Western spy services to develop sources there. […]
A version of this article appears in print on May 21, 2017, on Page A1 of the New York edition with the headline: Killing C.I.A. Informants, China Stifled U.S. Spying.
(10) Hacking Linked to China Exposes Millions of U.S. Workers
By DAVID E. SANGER and JULIE HIRSCHFELD DAVISJ
UNE 4, 2015
WASHINGTON — The Obama administration on Thursday announced what appeared to be one of the largest breaches of federal employees’ data, involving at least four million current and former government workers in an intrusion that officials said apparently originated in China.
The compromised data was held by the Office of Personnel Management, which handles government security clearances and federal employee records. The breach was first detected in April, the office said, but it appears to have begun at least late last year.
The target appeared to be Social Security numbers and other “personal identifying information,” but it was unclear whether the attack was related to commercial gain or espionage. The announcement of the intrusion came on the same day The New York Times reported that the National Security Agency had expanded warrantless surveillance of foreign hackers, an effort that could sweep up the information of innocent Americans.
There seemed to be little doubt among federal officials that the attack was launched from China, but it was unclear whether it might have been state sponsored. The administration did not publicly identify Chinese hackers as the culprits because it is difficult to definitively attribute the source of cyberattacks and to back up such an attribution without divulging classified data. […]
A version of this article appears in print on June 5, 2015, on Page A1 of the New York edition with the headline: Data Breach Tied to China Hits Millions .
(11) Did China steal Japan’s high-speed train?
By MICHAEL FITZPATRICK April 15, 2013
FORTUNE — One China defender recently claimed his countryman’s “bandit innovators” could be good for the world. That was small consolation for the Japanese, who say that China pirated their world-famous bullet train technology.
“Don’t worry too much about Chinese companies imitating you, they are creating value for you down the road,” said Li Daokui, a leading Chinese economist at the Institute for New Economic Thinking’s conference. Such “bandit innovators,” he expanded, would eventually grow the market, leading to benefits for everybody.
Kawasaki Heavy Industries (KHI), maker of Japan’s legendary Shinkansen bullet trains, bitterly disagrees. After signing technology transfers with CSR Sifang, the builder of China’s impressive, new high-speed rail, KHI says it deeply regrets its now-dissolved partnership. It planned to sue its previously junior partner for patent infringement, but it backed down recently.
Risk analyst Michal Meidan of Eurasia Group believes KHI is wise to drop the IP suit and stay out of China. “Every firm working in the high-tech space in China should be aware of the risks related to weak IP protection in the country but often has few choices but to go into these agreements if it wants to gain market share there,” she says. “The intense competition prompts companies to make concessions on technology transfers, as the Chinese are very good at playing off the competition.”
What could drive the normally unlitigious Japanese into such a frenzy? Not only did China copy their technology, say the Japanese, after patenting remarkably similar high-speed-rail (HSR) tech, CSR now wants to sell it to the rest of the world — as Chinese made. Both Japanese and European rail firms now find themselves frozen out and competing with their former Chinese collaborators for new contracts, inside and outside China.
With a diminishing domestic market, Japan’s train industry is hoping to pick up orders abroad for its HSR. Before China stepped in, undercutting Japanese offers by about half, Japan looked very attractive to foreign buyers with its record for fast, reliable train systems.
With more than 300 million annual riders, Japan’s Shinkansen — 50 years old next year — trains carry more passengers than those of any other HSR system. It has suffered no fatal accidents. The U.K. was impressed enough to complete a 540 billion yen deal with Hitachi, which also builds Shinkansen, to supply bullet trains by 2016.
The Motherland of train travel is not alone. Everyone is shopping around for high-speed solutions including the U.S., as the $180 billion global rail industry continues to boom.
Outside of Britain, Japan could easily find itself edged out by the Chinese competition. This makes KHI’s Harada Takuma, who worked on the Chinese collaboration, very angry. Under the licensing agreements with KHI, China’s use of the expertise and blueprints to develop high-speed railway cars was to be limited to domestic application, he explains. “We didn’t think it was not risky. But we took on the project because terms and conditions under the tech transfer should have been binding. We had a legal agreement; we felt safe.”
The Chinese authorities, for their part, see no problem. As Beijing busies itself filing for HSR patents abroad, it claims China developed her own HSR based on Japanese and German technologies which it claims were merely “digested.” When it was suggested that China trains were mere knockoffs at a press conference in China recently, the Ministry of Railways spokesman asserted that China’s HSR was far superior to Japan’s Shinkansen, and that the two “cannot be mentioned in the same breath.”
Others, such as a few Chinese engineers, have admitted no real innovation. That they were “just standing on the shoulders of giants” as one rail technician put it. Wherever the truth lies exactly, KHI’s train technology transfer saga is unlikely to be over soon.
(12) Chinese have copied the German Maglev train and are now offering it to India
Rise of the clones: Chinese knockoffs undercut Russian arms exports
Moscow is taking a calculated gamble that the strategic benefits of exporting weapons to Beijing will outweigh the risk of Chinese copying.
Defence exports to China provide Russia with a bunch of strategic benefits. Besides bringing in bucket loads of quick cash, Russian weapons generate a strategic spinoff by counterbalancing US military power in Asia. Beijing’s insatiable appetite for advanced weaponry keeps the Russian defence industry ticking along nicely and forces the Americans to divert substantial offensive and defensive resources to check China. This reduces pressure on Russia’s European flanks. However, Russian arms exports to China come with a major downside. The Chinese often buy limited quantities or ‘samples’, take them apart, and then reverse engineer the weapons. These knock-offs are then peddled cheap as chips overseas, undercutting Russian exports. As the Chinese defence industry grows in sophistication, Moscow sees its market share under threat.
In the arms trade, everyone is a copycat. The Russians reverse engineered the B-29 bomber and produced the Tu-4, which was hard to tell apart from the American original. The Germans copied the sloping armour of Russia’s T-34, the finest tank of WWII. Early American missiles were copies of Germany’s V-2 rockets that had flattened London.
But the Chinese have taken reverse engineering to a different level. They have copied the German Maglev train and are now offering it to India. Their hackers stole the blueprints of France’s TGV. Chinese J-20 and J-30 stealth fighters are based on technology purloined from American companies that developed the F-35 and F-22. Virtually every missile, tank, artillery system and gun used by the Chinese military is a knockoff of a Russian original.
Take the legendary AK-47 assault rifle. During the bonhomie of the 1950s, the Russians allowed the Chinese to build a local version, but after the licensing agreement ended, Beijing – like Hungary, Slovakia and the US among others – started producing illegal AKs. While the original Russian rifle can cost up to $1500 on the US market, a Chinese version can be bought for $400.
Cheap Kalashnikov knockoffs were, however, the least of Moscow’s worries. For, the Chinese had graduated to clone the crown jewels of Russia’s defence export sector such as the Su-27 Flanker fighter bomber, the aircraft carrier-based Su-33 jet, S-300 air defence system, and the popular Smerch anti-aircraft system. Interestingly, Russia hadn’t exported the Su-33 or the Smerch to China; Beijing had acquired them on the sly from third parties such as perennially troublesome Ukraine.
The Chinese, on the other hand, deny they copy foreign technology. Whether it is the Maglev, TGV or Flankers, they claim to have made considerable improvements to the original basic design and hardware. China’s spokesman of the Ministry of National Defense, Geng Yansheng, responded to these allegations in November of 2012, saying, “The world’s military affairs have an objective law of development. Many weapons have the same design principle and some command and protection methods are also similar. Therefore, it is non-professional to conclude that China copied the aircraft carrier technology of other countries only by simply comparison.”
But experts disagree. There is no doubt the J11B and J15 fighters are clones of the Su-27 and Su-33 respectively. According to Flight Global, the Chinese do not understand – or care about – the concept of intellectual property. “All the Chinese have done is performed what amounts to a mid-life update to the reverse engineered Su-33 design, but the airframe, at its core, remains a Flanker. Simply upgrading a design after stealing the intellectual property does not make an original design,” it says.
Implications for Russia
After reverse engineering for decades, China is now in a position to encroach upon Russia’s traditional export markets. And like Russia, which sweetens big-ticket defence deal with soft loans, China can use its massive stockpile of export earnings to offer even better terms to cash-poor nations such as Pakistan.
“The result is not only decreasing sales from Russia to China, but Russia also loses sales to other countries that are now buying Chinese produced weapons,” say Nikolas Gvosdev and Christopher Marsh in Russian Foreign Policy: Interests, Vectors and Sectors. “This leaves Russia bitter not only about China’s illegal copying of Russia’s military technology but also over the loss of sales of those weapons to third countries. Russia is faced with a dilemma: It can sit back and take the hit, or it can sell even more advanced weaponry to the Chinese to make up for the sales shortfall (and risk that they will copy those designs too and then export them).”
In fact, the Chinese are beginning to sound increasingly confident – or brazen. In May, China’s state-owned Norinco, which makes the VT-4 tank, took aim at the T-14 Armata, the new Russian tank described as revolutionary by arms experts worldwide. Posting on Norinco’s official social media account, the Chinese company wrote: “The T-14’s transmission is not well-developed, as we saw through a malfunction taking place during a rehearsal before the May 9 parade. The VT-4 has never encountered such problems so far. Our tanks also have world-class fire-control systems, which the Russians are still trying to catch up with.”
Russia needs to export
The former Soviet Union’s defence industry was of such a gargantuan scale that Russia simply could not sustain all of it. Even today’s much reduced Russian defence sector – albeit larger than the combined defence industries of China and India – cannot survive for long without export orders.
“Russia needs to sell weapons to keep its military employees working (to help generate high-tech manufacturing employment) to generate revenue to use in defence R&D, and to generate seed funds for its next generation of military technology. So Russia must sell its weapons, and China is the biggest potential market out there,” Gvosdev and Marsh explain.
There’s nothing wrong with such a policy. Following the demise of the Soviet Union it was the new Chinese market that proved to be a lifeline. In 1993, Russian defence industries were operating at just 10 per cent of their capacity, says Andrew T.H. Tan in The Global Arms Trade: A Handbook. “Half the defence firms were closed due to bankruptcy,” Tan says.
International orders were not being fulfilled – because of the disruption of the supply chain that ran through the various ethnic republics – or had dried up. The Chinese monetary transfusion was essential for these industries to survive and revive. Tan points out that during that decade China alone provided half of all sales income for the Russian defence sector. Therefore, arms sales to China cannot be said to be suicidal for Russia.
Also, with India – once almost completely dependent on Russian weapons – now buying multi-billion dollar platforms from American defence majors – as a way to improve strategic ties with the US – Moscow is making every sale count.
According to Tan, since 2002 both Russia and China have tried to overcome the trust deficit in order to move their arms business to a new stage of development. “One major bilateral initiative is to sign an intellectual property agreement as part of a regulatory regime to safeguard Russia’s interests and narrow the grey areas in technological transfers.
“For instance, when China acquired the production licence to assemble Su-27s, it was not clarified whether the aircraft engines that China would produce under the agreement could be used for other Chinese aircraft, still less, for Chinese export of its aircraft with the engines produced under the licence. This has been a persistent dispute in the Sino-Russian arms trade.
“In December 2008 the two countries finally signed an intellectual property rights agreement that imposes restrictions on Beijing’s export of arms originating from Russian models, but does not prevent China from producing them for its own use. This agreement has lessened Russia’s concerns that potentially China may copy Russian weapons without prior Russian consent and Chinese military hardware may flood the global marketplace, eroding Russia’s hard won market share.” The agreement – along with President Vladimir Putin’s executive decision – has cleared a major obstacle to further military cooperation between the two countries. The Russian side was initially reluctant to sell the latest S-400 air defence systems and the Su-35 multirole fighters. Beijing apparently was interested in the Su-35’s AL-41 engines, which have a life of 4000 hours compared with the 1500 hours of the AL-31 engines on the Su-27 and Su-30.
However, the complexity of advanced Russian aircraft engines has proved to be the biggest constraint on Beijing’s copycat industry. This – along with the inking of stronger intellectual property protection agreements – has reassured Moscow about proceeding with the sale of advanced weaponry.
Sukhoi’s deputy director Sergey Sergeyev summed it up: “It’s one thing to make a good quality copy of a spoon, but quite another to make one of an aircraft.”
In 2013, Putin cleared the sale of the S-400 and the Su-35. These platforms will provide China with the means to take on the American stealth fighters, the F-22 and F-35, until its own stealth jets come online in the next decade.
Also, facing western economic sanctions, Russia is looking towards China for military micro-electronics and other cutting-edge technologies in which Moscow lags.
China’s Russia syndrome
While there will always be an element of risk in exporting weapons to China, there is another key advantage that accrues to Moscow. According to Tan, “Russia’s influence on China through arms sales is not limited to its control over supply of important parts and hardware. Every year, the PLA sends up to 800 officers to Russia to study military science and learn how to operate the Russian arms it has bought. It is logical to assume that some of the PLA trainees would develop pro-Russia sentiments or a favourable view of the Russian model of military transformation vis-a-vis the West. This may have fostered a kind of personal affinity of PLA commanders who once studied in Russia. Generals Liu Huaquing and Cao Gangchun (Defence Minister 2002-07), who studied in Russia were strong advocates of importing more Russian arms. Moreover, education experience in Russia has become a useful credential for promotion.”
Arms trade provides the foundation of Russia-China ties in the 21st century. Both countries need each other. China is still at least two decades behind the West in weapons technology and it can catch up only with Russian assistance. Russia has got its back covered by China, which is now its go-to partner for cash, markets and diplomatic comfort. So expect military sales and ties to continue, but with Moscow keeping a close eye on China’s copycats.
(13) Funding Infrastructure: Why China Is Running Circles Around America – Ellen Brown
From: “Ellen Brown” (Ellen.Brown@PublicBankingInstitute.org) Subject: Funding Infrastructure: Why China Is Running Circles Around America
2/28/2018 at 17:06:41
Funding Infrastructure: Why China Is Running Circles Around America
By Ellen Brown
“One Belt, One Road,” China’s $1 trillion infrastructure initiative, is a massive undertaking of highways, pipelines, transmission lines, ports, power stations, fiber optics, and railroads connecting China to Central Asia, Europe and Africa. According to Dan Slane, a former advisor in President Trump’s transition team, “It is the largest infrastructure project initiated by one nation in the history of the world and is designed to enable China to become the dominant economic power in the world.” In a January 29th article titled “Trump’s Plan a Recipe for Failure, Former Infrastructure Advisor Says,” he added, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”
On Monday, February 12th, President Trump’s own infrastructure initiative was finally unveiled. Perhaps to trump China’s $1 trillion mega-project, the Administration has now upped the ante from $1 trillion to $1.5 trillion, or at least so the initiative is billed. But as Donald Cohen observes in The American Prospect, it’s really only $200 billion, the sole sum that is to come from federal funding; and it’s not even that after factoring in the billions in tax cuts in infrastructure-related projects. The rest of the $1.5 trillion is to come from cities, states, and private investors; and since city and state coffers are depleted, that chiefly means private investors. The focus of the Administration’s plan is on public-private partnerships, which as Slane notes are not suitable for many of the most critical infrastructure projects, since they lack the sort of ongoing funding stream such as a toll or fee that would attract private investors. Public-private partnerships also drive up costs compared to financing with municipal bonds.
In any case, as Yves Smith observes, private equity firms are not much interested in public assets; and to the extent that they are, they are more interested in privatizing existing infrastructure than in funding the new development that is at the heart of the president’s plan. Moreover, local officials and local businessmen are now leery of privatization deals. They know the price of quick cash is to be bled dry with user charges and profit guarantees.
The White House says its initiative is not a take-it-or-leave-it proposal but is the start of a negotiation, and that the president is “open to new sources of funding.” But no one in Congress seems to have a viable proposal. Perhaps it is time to look more closely at how China does it . . . .
China’s Secret Funding Source: The Deep Pocket of Its State-owned Banks
While American politicians argue endlessly about where to find the money, China has been forging full steam ahead with its mega-projects. A case in point is its 12,000 miles of high-speed rail, built in a mere decade while American politicians were still trying to fund much more modest rail projects. The money largely came from loans from China’s state-owned banks. The country’s five largest banks are majority-owned by the central government, and they lend principally to large, state-owned enterprises.
Where do the banks get the money? Basically, they print it. Not directly. Not obviously. But as the Bank of England has acknowledged, banks do not merely recycle existing deposits but actually create the money they lend by writing it into their borrowers’ deposit accounts. Incoming deposits are needed to balance the books, but at some point these deposits originated in the deposit accounts of other banks; and since the Chinese government owns most of the country’s banks, it can aim this funding fire hose at its most pressing national needs.
China’s central bank, the People’s Bank of China, issues money for infrastructure in an even more direct way. It has turned to an innovative form of quantitative easing in which liquidity is directed not at propping up the biggest banks but at “surgical strikes” into the most productive sectors of the economy. Citigroup chief economist Willem Buiter calls this “qualitative easing” to distinguish it from the quantitative easing engaged in by Western central banks. According to a 2014 Wall Street Journal article:
“In China’s context, such so-called qualitative easing happens when the People’s Bank of China adds riskier assets to its balance sheet — such as by relending to the agriculture sector and small businesses and offering cheap loans for low-return infrastructure projects — while maintaining a normal pace of balance-sheet expansion [loan creation]. . . .
“The purpose of China’s qualitative easing is to provide affordable financing to select sectors, and it reflects Beijing’s intention to dictate interest rates for some sectors, Citigroup’s economists said. They added that while such a policy would also put inflationary pressure on the economy, the impact is less pronounced than the U.S.-style quantitative easing.”
Among the targets of these surgical strikes with central bank financing is the One Belt, One Road initiative. According to a May 2015 article in Bloomberg:
“Instead of turning the liquidity sprinkler on full-throttle for the whole garden, the PBOC is aiming its hose at specific parts. The latest innovations include plans to bolster the market for local government bonds and the recapitalisation of policy banks so they can boost lending to government-favoured projects. . . .
“Policymakers have sought to bolster credit for small and medium-sized enterprises, and borrowers supporting the goals of the communist leadership, such as the One Belt, One Road initiative developing infrastructure along China’s old Silk Road trade routes.”
“Non-Performing Loans” or “Helicopter Money for Infrastructure”? Money that Need Not Be Repaid
Critics say China has a dangerously high debt-to-GDP ratio and a “bad debt” problem, meaning its banks have too many “non-performing” loans. But according to financial research strategist Chen Zhao in a Harvard review called “China: A Bullish Case,” these factors are being misinterpreted and need not be cause for alarm. China has a high debt to GDP ratio because most Chinese businesses are funded through loans rather than through the stock market, as in the US; and China’s banks are able to engage in massive lending because the Chinese chiefly save their money in banks rather than investing it in the stock market, providing the deposit base to back this extensive lending. As for China’s public “debt,” most of it is money created on bank balance sheets for economic stimulus. Zhao writes:
“During the 2008-09 financial crisis, the U.S. government deficit shot up to about 10 percent of GDP due to bail-out programs like the TARP. In contrast, the Chinese government deficit during that period didn’t change much. However, Chinese bank loan growth shot up to 40 percent while loan growth in the U.S. collapsed. These contrasting pictures suggest that most of China’s four trillion RMB stimulus package was carried out by its state-owned banks. . . . The so-called “bad debt problem” is effectively a consequence of Beijing’s fiscal projects and thus should be treated as such.”
China calls this government bank financing “lending” rather than “money printing,” but the effect is very similar to what European central bankers are calling “helicopter money” for infrastructure — central bank-generated money that does not need to be repaid. If the Chinese loans get repaid, great; but if they don’t, it’s not considered a problem. Like helicopter money, the non-performing loans merely leave extra money circulating in the marketplace, creating the extra “demand” needed to fill the gap between GDP and consumer purchasing power, something that is particularly necessary in an economy that is contracting due to shrinking global markets following the 2008-09 crisis.
In a December 2017 article in the Financial Times called “Stop Worrying about Chinese Debt, a Crisis Is Not Brewing”, Zhao expanded on these concepts, writing:
“[S]o-called credit risk in China is, in fact, sovereign risk. The Chinese government often relies on bank credit to finance government stimulus programmes. . . . China’s sovereign risk is extremely low. Importantly, the balance sheets of the Chinese state-owned banks, the government and the People’s Bank of China are all interconnected. Under these circumstances, a debt crisis in China is almost impossible.”
Chinese state-owned banks are not going to need a Wall Street-style bailout from the government. They are the government, and the Chinese government has a massive global account surplus. It is not going bankrupt any time soon.
What about the risk of inflation? As noted by the Citigroup economists, Chinese-style “qualitative easing” is actually less inflationary than the bank-focused “quantitative easing” engaged in by Western central banks. And Western-style QE has barely succeeded in reaching the Fed’s 2 percent inflation target. For 2017, the Chinese inflation rate was a modest 1.8 percent.
What to Do When Congress Won’t Act
Rather than regarding China as a national security threat and putting our resources into rebuilding our military defenses, we might be further ahead studying its successful economic policies and adapting them to rebuilding our own crumbling roads and bridges before it is too late. The US government could set up a national infrastructure bank that lends just as China’s big public banks do, or the Federal Reserve could do qualitative easing for infrastructure as the PBOC does. The main roadblock to those solutions seems to be political. They would kill the privatization cash cow of the vested interests calling the shots behind the scenes.
What alternatives are left for cash-strapped state and local governments? Unlike the Fed, they cannot issue money directly; but they can establish their own banks. Fifty percent of the cost of infrastructure is financing, so having their own banks would allow them to cut the cost of infrastructure nearly in half. The savings on infrastructure projects with an income stream could then be used to fund those critically necessary projects that lack an income stream.
For a model, they can look to the century-old Bank of North Dakota (BND), currently the nation’s only publicly-owned depository bank. The BND makes 2 percent loans to local communities for infrastructure, far below the 12 percent average sought by private equity firms. Yet as noted in a November 2014 Wall Street Journal article, the BND is more profitable than Goldman Sachs and JPMorgan Chase. Before submitting to exploitation by public-private partnerships, state and local governments would do well to give the BND model further study.
This article was originally published on Truthdig.org.
(14) US & India try to oust pro-China President from Maldives
Maldives crisis: US-Indian strategic alliance forming
Hand-wringing about a ‘democracy deficit’ notwithstanding, the real aim is to counter China’s growing presence in the Indian Ocean
By M.K. BHADRAKUMAR
FEBRUARY 7, 2018 12:38 PM (UTC+8)
Developments in Maldives have begun unfolding according to script. India, the United States and Britain are spearheading the demand that Maldivian President Abdulla Yameen comply with the order by his country’s Supreme Court to release his political opponents from prison and reinstate 12 former lawmakers as members of Parliament.
The script has a striking resemblance to what happened in Sri Lanka in 2014, with some minor variations on the fundamental theme – regime change. Thus, as in Sri Lanka, sworn enemies who had been at each other’s throats for decades suddenly made strange bedfellows to oust the strongman in the presidential palace, and as dawn broke one fine day, the ground beneath the regime shifted dramatically.
In the earlier case, a defecting faction of the ruling Sri Lanka Freedom Party aligned with its sworn enemy, the United National Party, undermining thereby the towering incumbent president Mahinda Rajapaksa’s grip on power. Now a similar realignment has happened in Maldives, which now threatens President Yameen’s continuance in power.
This latest unholy alliance is between two former presidents, Maumoon Abdul Gayoom (a cousin of the incumbent president) and a man who once overthrew Gayoom, Mohamed Nasheed. Gayoom and Nasheed have been sworn enemies. What adds to the intrigue is the mysterious role by the chief justice of the Supreme Court, Abdullah Saeed – who was, incidentally, appointed to the top court in 2009 by Nasheed when he was in power.
To what extent external powers promoted this opportunistic alliance to dethrone Yameen is a moot point. The US ambassador (based in Colombo) has been working closely with New Delhi to “promote” democracy. Nasheed and Saeed have visited Delhi in recent months at India’s invitation. Nasheed even addressed a panel at Brookings India to present his case for regime change in his country. Nasheed is a cult figure in London and Washington.
In sum, there is close coordination between New Delhi and Washington to get rid of Yameeen, who is branded as “pro-China.” Indeed, geopolitics is at the root of the current crisis in Maldives.
The missing link has been the secret move by the administration of US president Barack Obama in early 2013 to negotiate with Maldives about a Status of Forces Agreement (SOFA), which would have led to increased military cooperation between the two countries, possibly including US bases there. But someone leaked a draft of the agreement to the press, and the US was forced to concede that such talks were indeed going on.
The real US-Indian game plan is to create a ‘second island chain’ connecting Maldives with Diego Garcia and Seychelles to curb the presence of Chinese submarines in the Indian Ocean and to control the sea lanes through which China conducts the bulk of its foreign trade The negotiations got derailed when Yameen was elected president in November 2013 by narrowly defeating Nasheed. If Nasheed returns to power, the negotiations for the conclusion of the SOFA would be back on the table. Despite China’s firm and repeated denials that it has any intention of setting up a military base in Maldives, the China bogey has been whipped up by India. […]
As part of the overall US-Indian strategy, New Delhi signed a Bilateral Agreement for Navy Cooperation with Singapore last November that provides Indian Navy ships temporary deployment facilities and logistics support at Singapore’s Changi naval base, which is near the disputed South China Sea, enabling India to engage in more activity in the Strait of Malacca through which China’s oil and natural-gas imports pass.
India also maintains a big naval base in the Bay of Bengal in the Andaman and Nicobar Islands near the Strait of Malacca. Clearly, institutionalized mechanisms are being put in place to monitor Chinese naval activities in both the Strait of Malacca and the Arabian Sea – and to develop “chokepoints” to strangulate the Chinese economy in the event of a confrontation.
Suffice to say, control of the Maldivian atolls is a crucial template of the overall US-Indian strategy to counter China’s rapidly growing blue-water navy and its capacity to project power in the Indian Ocean. […]
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