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What Do China and North Korea Think About One Another? It’s Not Good

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By Ryan Pickrell. Chinese and North Korean forces once fought side by side on the battlefield, but ties have since frayed, possibly beyond repair.

China has a complicated relationship with North Korea, which simultaneously serves as both a strategic asset and a liability. However, it has become more the latter than the former in recent years. North Korea’s frequent provocations frustrate Beijing, and China’s decisions to pressure North Korea in concert with the U.S. greatly angers Pyongyang. China and North Korea’s top leaders absolutely despise one another, according to individuals close to the respective governments.

When Chinese President Xi Jinping took power five years ago, he presented a grand vision for China known as the “Chinese Dream,” an ambitious plan to restore China’s great power status and make the country a responsible and respected global leader. Since North Korean dictator Kim Jong-un took control following the death of his father, the young ruler has advanced the country’s nuclear and ballistic missile programs at an accelerated rate, creating instability on China’s doorstep with frequent tests, drills, and intentionally aggressive and hostile provocations.

The only time former U.S. Ambassador to China Max Baucus has ever heard the professional Chinese president use “undiplomatic language” was when he was talking about Kim, Baucus revealed to the British Broadcasting Network. (Read more from “What Do China and North Korea Think About One Another? It’s Not Good” HERE)

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Japan PM Shinzo Abe Promises to Deal With North Korea Threat

By BBC. Japanese Prime Minister Shinzo Abe has promised to “deal firmly” with North Korea after exit polls suggested he won a clear victory in Sunday’s election.

Mr Abe had called an early election for an increased mandate to deal with “crises” facing Japan, including the threat from Pyongyang.

Local media report Mr Abe’s ruling coalition has retained its two-thirds majority in parliament . . .

The prime minister has previously called for the existence of the country’s armed forces to be formalised, a controversial move which he says is needed to strengthen Japan’s defence but which critics say is a step towards re-militarisation. (Read more from “Japan PM Shinzo Abe Promises to Deal With North Korea Threat” HERE)

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China ‘Will Stop’ U.S. From Toppling North Korean Regime

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If North Korea launches an attack that threatens the United States then China should stay neutral, but if the United States attacks first and tries to overthrow North Korea’s government China will stop them, a Chinese state-run newspaper said on Friday.

President Donald Trump ratcheted up his rhetoric toward North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.

China, North Korea’s most important ally and trading partner, has reiterated calls for calm during the current crisis. It has expressed frustration with both Pyongyang’s repeated nuclear and missile tests and with behavior from South Korea and the United States that it sees as escalating tensions.

The widely read state-run Global Times, published by the ruling Communist Party’s official People’s Daily, wrote in an editorial that Beijing is not able to persuade either Washington or Pyongyang to back down. (Read more from “China ‘Will Stop’ U.S. From Toppling North Korean Regime” HERE)

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Russia and China Declare All out War on US Petrodollar — Prepare for Exclusive Trade in Gold

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The formation of a BRICS gold marketplace, which could bypass the U.S. Petrodollar in bilateral trade, continues to take shape as Russia’s largest bank, state-owned Sberbank, announced this week that its Swiss subsidiary had begun trading in gold on the Shanghai Gold Exchange.

Russian officials have repeatedly signaled that they plan to conduct transactions with China using gold as a means of marginalizing the power of the dollar in bilateral trade between the geopolitically powerful nations. This latest movement is quite simply the manifestation of a larger geopolitical game afoot between great powers.

According to a report published by Reuters:

Sberbank was granted international membership of the Shanghai exchange in September last year and in July completed a pilot transaction with 200 kg of gold kilobars sold to local financial institutions, the bank said.

Sberbank plans to expand its presence on the Chinese precious metals market and anticipates total delivery of 5-6 tonnes of gold to China in the remaining months of 2017.

Gold bars will be delivered directly to the official importers in China as well as through the exchange, Sberbank said.

Russia’s second-largest bank VTB is also a member of the Shanghai Gold Exchange.

To be clear, there is a revolutionary transformation of the entire global monetary system currently underway, being driven by an almost perfect storm. The implications of this transformation are extremely profound for U.S. policy in the Middle East, which for nearly the past half century has been underpinned by its strategic relationship with Saudi Arabia.

THE RISE & FALL OF THE PETRODOLLAR

The dollar was established as the global reserve currency in 1944 with the Bretton Woods agreement, commonly referred to as the gold standard. The U.S. leveraged itself into this power position by holding the largest reserve of gold in the world. The dollar was pegged at $35 an ounce — and freely exchangeable into gold.

By the 1960s, a surplus of U.S. dollars caused by foreign aid, military spending, and foreign investment threatened this system, as the U.S. did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued.

America temporarily embraced a new paradigm in 1971, as the dollar became a pure fiat currency (decoupled from any physical store of value), until the petrodollar agreement was concluded by President Nixon in 1973.

The quid pro quo was that Saudi Arabia would denominate all oil trades in U.S. dollars, and in return, the U.S. would agree to sell Saudi Arabia military hardware and guarantee the defense of the Kingdom.

A report by the Centre for Research on Globalization clarifies the implications of these most recent moves by the Russians and the Chinese in an ongoing drive to replace the US petrodollar as the global reserve currency:

Fast forward to March 2017; the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade. This would be done by finalizing the issuance of the first federal loan bonds denominated in Chinese yuan and to allow gold imports from Russia.

The Chinese government wishes to internationalize the yuan, and conduct trade in yuan as it has been doing, and is beginning to increase trade with Russia. They’ve been taking these steps with bilateral trading, native trading systems and so on. However, when Russia and China agreed on their bilateral US$400 billion pipeline deal, China wished to, and did, pay for the pipeline with yuan treasury bonds, and then later for Russian oil in yuan.

This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold. The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts – basically a barter system or trade.

The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil. The world’s top importer (China) and exporter (Russia) are taking steps to convert payments into gold. This is known. So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.

All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on. This will fundamentally threaten the petrodollar.

According to a report by the Russian government media, significant progress has been made in promoting bilateral trade in yuan, between the two nations, as the first step towards an even more ambitious plan—using gold to make transactions:

One measure under consideration is the joint organization of trade in gold. In recent years, China and Russia have been the world’s most active buyers of the precious metal.

On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

In April, Sberbank expressed interest in financing the direct import of gold to India—also a BRICS member. Make no mistake that a BRICS gold marketplace could be used to bypass the dollar in bilateral trade, and undermine the hegemonic control enjoyed by the US petrodollar as the global reserve currency.

“In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today,” according to strategic risk consultant F. William Engdahl.

Russia and China are now creating a new paradigm for the world economy and paving the way for a global de-dollarization.

“A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed Renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money,” Engdahl concludes. (For more from the author of “Russia and China Declare All out War on US Petrodollar — Prepare for Exclusive Trade in Gold” please click HERE)

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China’s Intelligence Networks in United States Include 25,000 Spies

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Beijing’s spy networks in the United States include up to 25,000 Chinese intelligence officers and more than 15,000 recruited agents who have stepped up offensive spying activities since 2012, according to a Chinese dissident with close ties to Beijing’s military and intelligence establishment.

Guo Wengui, a billionaire businessman who broke with the regime several months ago, said in an interview that he has close ties to the Ministry of State Security (MSS), the civilian intelligence service, and the military spy service of the People’s Liberation Army (PLA).

“I know the Chinese spy system very, very well,” Guo said, speaking through an interpreter, in his first American interview. “I have information about very minute details about how it operates.”

Guo said he learned about Chinese spy activities from Ma Jian, a former MSS vice minister, and Ji Shengde, former PLA military intelligence chief.

Ma was director of MSS’s No. 8 Bureau, in charge of counterintelligence against foreign targets—including diplomats, businessmen, and reporters—until he was swept up in a Beijing power struggle in December 2015. He was expelled from the Communist Party and imprisoned in January. (Read more from “China’s Intelligence Networks in United States Include 25,000 Spies” HERE)

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Former Government Worker Charged With Giving Top-Secret Info to China

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The Justice Department announced Thursday that it had arrested and charged a former US government employee for sharing top-secret information with a Chinese government agent.

The criminal complaint states that Kevin Mallory has been charged with delivering defense information to aid a foreign government and making false statements to investigators. The Justice Department said Mallory could face a life sentence if convicted . . .

The criminal complaint says Mallory met with a Chinese national in Shanghai during March and April 2017 who “represented himself” as working for a think tank the FBI has said is intertwined with Chinese intelligence. Mallory consented to an interview with FBI agents in late May, where he told them about a communication device the Chinese national had provided him with. He allowed the FBI to examine the device, and the Justice Department said the FBI found classified information on it, including a document marked top-secret. (Read more from “Former Government Worker Charged With Giving Top-Secret Info to China” HERE)

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China Is ‘Sticking’ to the Paris Agreement in Name Only, Its Plans Show a Much Different Intent

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As President Donald Trump prepared to withdraw the U.S. from the Paris Agreement on climate change, the media is rife with stories about how China pledged to fully implement its global warming pledge.

China did vow to keep its Paris Agreement commitments, but that won’t really mean much given it pledged to increase greenhouse gas emissions for the foreseeable future.

The New York Times reported Chinese Premier Li Keqiang vowed Thursday that “his country remained committed to the fight against climate change and to participating in international efforts for a greener world.”

Two days earlier, the Times reported China was “poised to take the lead on climate,” and it’s more likely we’ll see “China pushing the United States to meet its commitments and try to live up to the letter and spirit of the 2015 Paris Agreement, even if Mr. Trump has signaled he has no intention of doing so.”

Environmentalists and Democratic politicians used the talking point as well. They argue the U.S. has ceded leadership on global warming to China. (Read more from “China Is ‘Sticking’ to the Paris Agreement in Name Only, Its Plans Show a Much Different Intent” HERE)

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Despite the Rhetoric, US Trade Deficit With China Is Not a Big Problem. Here’s Why.

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When we discuss international trade and balance of payments, there are two types of accounts.

There is the current account, which includes goods and services imported and exported and receives the most political attention.

In 2016, the American people imported $479 billion worth of goods and services from Chinese producers, and we sold $170 billion worth of goods and services to Chinese customers.

That made for a $309 billion current account deficit. In other words, we purchase more goods and services from Chinese producers than Chinese consumers purchase from American producers.

How much of a problem is it when there is a deficit, or a negative imbalance, on current accounts? Let’s look at it.

I buy more from my grocer than he buys from me. Our Department of Defense buys more from General Dynamics than General Dynamics buys from our Department of Defense.

With just a bit of thought, one could come up with thousands of examples in which one party buys more from another than that party buys from it—creating deficits in current accounts.

But a current account deficit is always offset by a surplus somewhere else. That somewhere else is known as the capital, or financial, account.

This account consists of direct foreign investment, such as the purchase or construction of machinery, buildings, or whole manufacturing plants. The capital account also consists of portfolio investment, such as purchases of stocks and bonds.

In our capital account, the U.S. has a huge surplus with China. That means money is flowing into our country from China.

In other words, Chinese people are investing more money into the U.S.—in the forms of home and factory purchases, stocks, and bonds—than Americans are investing in China.

Of necessity, the deficit that we have with China on our current account, ignoring timing issues, must equal the surplus we have with China on our capital account.

It turns out that foreigners own $30 trillion worth of U.S. assets, such as stocks, Treasury bonds, manufacturing plants, and real estate.

One of the reasons that foreigners hold so much U.S. capital is that our country is one of the world’s most attractive places to invest.

Secondly, our capital markets, unlike our goods markets, are open to foreigners. Foreigners can buy and sell any U.S. asset in any quantity, except in cases in which national security is an issue.

One of the troubling aspects of foreign confidence in America is that foreigners invest so much in U.S. Treasury bonds. That in turn gives the U.S. Congress greater latitude to engage in profligate spending.

Japan owns $1.1 trillion worth of U.S. Treasury bonds, and China owns $1 trillion.

What about President Donald Trump’s call to reduce our current account trade deficit?

By the way, we know that we’re being deceived when a politician talks only about the current account deficit, without a word about the capital account surplus.

If foreigners sell us fewer goods, they will earn fewer dollars. With fewer dollars, they will be able to make fewer investments in America.

But that’s fine with politicians. The beneficiaries of trade restrictions are visible. Tariffs on tires, clothing, and electronics will mean more profits and jobs and more votes for politicians.

The victims of trade restrictions, such as people in the real estate market and other areas where foreigners are investing, are less visible.

Last year, Chinese citizens alone purchased record amounts of residential and commercial real estate, bringing their five-year real estate investment total to more than $110 billion.

Let’s put trade deficits into historical perspective.

If trade deficits were something for a president to fret about, every U.S. president from 1790 to today ought to have been fretting. For most of our history, we have had current account deficits.

I should say every president except Herbert Hoover and Franklin D. Roosevelt, whose administrations ushered in the Great Depression. Nine out of the 10 years of the economic downturn of the 1930s, our nation had a current account trade surplus.

Should we reproduce the economic policies of that era and recreate the “wonderful” trade surplus? (For more from the author of “Despite the Rhetoric, US Trade Deficit With China Is Not a Big Problem. Here’s Why.” please click HERE)

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Cause for Alarm? China Put in Charge of Iranian Nuclear Site

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China and Iran have signed a deal to modify an integral part of the latter’s nuclear program at the Arak heavy water nuclear site. The news comes just one day after the Trump administration certified that Iran has committed to its responsibilities under the nuclear agreement signed by the former Obama administration and the Iranian regime in 2015. On the same day that President Trump verified Iran’s compliance in the agreement, the Iranian Supreme Leader declared the United States an “enemy” nation.

A heavy water plant is an essential element in producing the material needed to developing a nuclear weapons program. Iran insists that the Arak reactor is purposed with producing “isotopes for cancer and other medical treatments.” However, heavy water reactors are needed to cool down reactors that churn out plutonium, which can be used to create a nuclear bomb.

The Arak plant was uncovered thanks to 2002 satellite images from the Institute for Science and International Security.

As part of the Joint Comprehensive Plan of Action (JCPOA) agreed to by Iran and world powers, Iran is supposed to modify the heavy water reactor so it could not produce weapons-grade plutonium.

Whether the United States can trust China to lead the project is a matter of concern. Most geopolitical observer recognize that China views Iran as an ally and the United States as an adversary.

Moreover, China has previously helped supply the Iranian regime with nuclear material and advanced missile technology that would have been otherwise likely impossible to produce internally. Since the early 80s, the Chinese government has clandestinely and overtly helped the Mullahs develop their nuclear program.

International agencies such as the United Nations have been tasked with verifying compliance. No American inspectors are allowed on any of the Iranian nuclear sites, thanks to terms agreed to by the Obama administration. Therefore, whether or not Iran is cheating on the nuke deal is left completely to foreign bodies.

Iran has already breached the material limits used by the nuclear reactor that were imposed under the JCPOA. The IAEA, the U.N.’s nuclear watchdog, said Tehran exceeded the limit twice last year.

Beijing is looking forward to beginning the project. “The signing of this contract will create good conditions for substantively starting the redesign project,” said China Foreign Ministry spokesman Lu Kang. (For more from the author of “Cause for Alarm? China Put in Charge of Iranian Nuclear Site” please click HERE)

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4 Issues Trump Will Likely Confront Chinese Leader About

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North Korea will be the top agenda item for President Donald Trump when he meets Friday with Chinese President Xi Jinping.

“As you know, I’ll be meeting with the president of China very soon in Florida, and that’s another responsibility we have, and that’s called the country of North Korea,” Trump said Wednesday during a Rose Garden press conference with King Abdullah II of Jordan.

Trump suggested his predecessor, President Barack Obama, allowed North Korea to grow stronger.

“We have a big problem. We have somebody that is not doing the right thing and that’s going to be my responsibility,” Trump said, referring to North Korean dictator Kim Jong Un. “But I’ll tell you, that responsibility could have been made a lot easier if it was handled years ago.”

White House officials said there were a number of other items the two leaders will discuss—one being trade and commerce—paramount during Trump’s campaign, where he frequently took shots at the Chinese.

The meeting Friday and Saturday at Trump’s Mar-a-Lago estate in Florida will be a significant chance for both leaders to learn about one another, said Fred Fleitz, a former State Department official in the George W. Bush administration.

“China is coming here to try to figure Trump out. He’s not like a president they’ve ever seen before. He’s not a president they can walk all over like Obama was,” said Fleitz, now a senior vice president for the Center for Security Policy, a national security think tank.

Here are the four key issues Trump and Xi will likely be discussing.

1.) North Korea

North Korea initiated a missile test this week aimed at Japanese waters, but the test reportedly failed. The country previously conducted a missile test in February, and several in 2016. North Korea leader Kim is reportedly seeking to produce a long-range nuclear weapon capable of hitting the continental United States in a few years.

“Trump is going to be forceful with China over North Korea. He is not going to ask for help anymore. We are going to demand help,” said Walter Lohman, director of the Asian Studies Center at The Heritage Foundation. “The time for talk is over. The U.S. can impose secondary sanctions on Chinese companies if China doesn’t cooperate.”

A senior White House official told reporters the matter is urgent and “the clock is now very, very quickly running out.”

“Because of the amount of leverage that China has economically, the best outcome would be one in which China very thoroughly implements the U.N. sanctions and resolutions,” the official said. “That is really what we’re working toward.”

China has blocked U.N. Security Council resolutions against North Korea. After South Korea deployed the Terminal High Altitude Area Defense, or THAAD, missile defense system, China threatened South Korea with economic, diplomatic, and military measures.

2.) Trade

The administration recognizes it is economically interdependent with China, but will insist that all bilateral trade be “mutually beneficial,” according to a White House official.

“President Trump is very concerned about how the imbalance in our economic relationship affects American workers, and wants to address these issues in a candid and productive manner,” a senior White House official said. “President Trump will convey to President Xi the importance of establishing an economic relationship that is fair … We want to work with the Chinese in a constructive manner to reduce the systemic trade and investment barriers that they’ve created that lead to an uneven playing field for U.S. companies.”

A report by the U.S. trade representative in March said the U.S. trade deficit more than doubled from 2000 to 2016, from $317 billion to $648 billion, and that “[o]ur trade deficit in goods and services with China soared from $81.9 billion in 2000 to almost $334 billion in 2015.”

China joined the World Trade Organization in 2001.

3.) South China Sea

Late last year, China expanded artificial islands and seized an unmanned underwater drone belonging to the U.S. Navy in the South China Sea.

“The United States will certainly continue to fly and sail where international law allows. I would not be surprised if that came up in conversation,” a senior White House official told reporters. “It’s no secret that the president was disturbed by activities that took place under the last administration. He and his Cabinet members have been on the record as saying that has got to stop.”

This is again a matter in which the Obama administration allowed China to show too much assertiveness, Fleitz noted.

“China will look at American leadership. The lack of leadership has been very destructive,” Fleitz said.

4.) Religious Freedom and Human Rights

Fleitz also said that Trump should make a strong statement about China’s mistreatment of the Uyghur community in Xinjiang, which human rights groups have criticized.

He said there are several issues to address specifically, but hopes Trump speaks broadly about China’s abysmal human rights record in the meeting.

A White House official said this will likely come up.

“I’m not going to pre-speak the president’s talking points, but human rights are integral to who we are as Americans,” the senior official said. “It is the reason we have alliances at the end of the day, one of the reasons, other than they serve our security and prosperity here at home. Human rights issues I would expect will continue to be brought up in the relationship.” (For more from the author of “4 Issues Trump Will Likely Confront Chinese Leader About” please click HERE)

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Women’s Rights Activist Slam UN Agency’s Support of China’s Forced Abortions

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. . .One of [WRWF Founder and President, Reggie Littlejohn,] recommendations regarding how the UN can help the women and babies of China is by investigating UNFPA’s activities in China, demanding transparency, and in the case of a lack of cooperation, defunding UNFPA. Littlejohn states: “The United States Secretary of State should investigate and evaluate UNFPA’s activities in China, and the President should de-fund them under the Kemp-Kasten Amendment, which ‘prohibits funding for any organization or program that, as determined by the President, supports or participates in the management of a program of coercive abortion or involuntary sterilization.’”

“UNFPA has been found to be complicit with coercive population control in China in the past, and I have no doubt that any unbiased investigation would find them complicit again. I have long advocated for the defunding of UNFPA. The U.S. cut off funding to UNFPA in 2002 because an investigation, headed by then Secretary of State Colin Powell, found that UNFPA was complicit with the Chinese Family Planning officials in coercive implementation of China’s one-child policy. The Obama administration restored this funding. The UNCSW – as the advocate for women’s rights within the United Nations – should press relentlessly on the UNFPA to be fully transparent and accountable regarding its ‘family planning’ activities in China. I believe that any independent, unbiased investigation into UNFPA’s activities in China will lead to the inescapable conclusion that they are complicit with China’s population control practices, which include forced abortion and involuntary sterilization. To the extent that the global community is funding the UNFPA, the blood of Chinese women and babies is on our hands.” (Read more from “Women’s Rights Activist Slam UN Agency’s Support of China’s Forced Abortions” HERE)

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