Tag Archives: China

Japan, South Korea urge China to do more to halt North Korea’s weapons programs

Japan, South Korea urge China to do more to halt North Korea's weapons programs

By Kiyoshi Takenaka

TOKYO (Reuters) – U.S. allies Japan and South Korea urged China to do more to get North Korea to end its nuclear and missile programmes, Japanese Foreign Minister Taro Kono said on Tuesday amid a tense standoff between North Korea and the United States.

Reclusive North Korea has boasted of developing a missile capable of carrying a nuclear warhead and reaching the mainland United States in defiance of U.N. Security Council resolutions and international condemnation, including from its lone major ally, China.

“We agreed that it is necessary to ask China to play even more of a role,” Kono said after talks with South Korean Foreign Minister Kang Kyung-wha.

Kono said China was implementing Security Council resolutions on North Korea but said it could do more, including adding “pressure” on Pyongyang.

North Korea has regularly threatened to destroy the United States, Japan and South Korea and has fired missiles over Japan in recent tests. China routinely says it is meeting its Security Council obligations on North Korea and urges “all sides” in the dispute to pursue dialogue.

The United States has also pressured China and other nations to cut trade and diplomatic ties with North Korea as part of international efforts to dry up Pyongyang’s illegal cash flows that could fund its weapons programmes.

The U.S. Navy’s top officer said on Tuesday said that vessels from eastern Pacific could be brought forward to reinforce U.S. naval power in Asia as Washington contends with increased threats in the region.

North Korea has defended its weapons programmes as necessary to counter U.S. aggression and sees the military drills the United States holds with South Korea and Japan as preludes to invasion. The United States stations 28,500 troops in the South, a legacy of the 1950-53 Korean War.

China and Russia have proposed that the United States and South Korea stop major military exercises in exchange for North Korea halting its weapons programmes.

U.S. President Donald Trump and North Korean leader Kim Jong Un have exchanged bellicose rhetoric in recent weeks, with Trump threatening to destroy North Korea if provoked, while U.S. diplomats have stressed the importance of diplomacy.

Trump on Monday unveiled a new national security strategy, again saying Washington had to deal with the challenge posed by North Korea.

Japan and South Korea are seeking to boost cooperation over North Korea, despite lingering tension between them over the issue of “comfort women”, a Japanese euphemism for women – many of them Korean – forced to work in Japanese military brothels before and during World War Two.

Researchers say a series of recent cyber attacks has netted North Korean hackers millions of dollars in virtual currencies like bitcoin, with more attacks expected as international sanctions drive the country to seek new sources of cash.

North Korea’s government-backed hackers have been blamed for a rising number of cyber attacks, including the so-called WannaCry cyber attack that crippled hospitals, banks and other companies across the globe this year.

(Additional reporting by Josh Smith in Seoul and Jeremy Wagstaff in Singapore; Writing by Linda Sieg and Nick Macfie)

While focus is on North Korea, China continues South China Sea buildup: think tank

While focus is on North Korea, China continues South China Sea buildup: think tank

By David Brunnstrom

WASHINGTON (Reuters) – While attention in Asia has been distracted by the North Korean nuclear crisis in the past year, China has continued to install high-frequency radar and other facilities that can be used for military purposes on its man-made islands in the South China Sea, a U.S. think tank said on Thursday.

Chinese activity has involved work on facilities covering 72 acres (29 hectares) of the Spratly and Paracel islands, territory contested with several other Asian nations, according to the Asia Maritime Transparency Initiative of Washington’s Center for Strategic and International Studies. The report cited satellite images.

The United States and its allies oppose China’s building of artificial islands in the South China Sea and their militarization, given concerns Beijing plans to use them to deny access to strategic routes.

“It’s completely normal for China to conduct peaceful construction and build essential defense equipment on its own sovereign territory,” China’s foreign ministry spokesman Lu Kang told a regular press briefing on Friday, in response to a question about the report.

“We believe certain people who have ulterior motives are making mountains out of molehills and stirring up trouble.”

The report said that in the last several months China had constructed what appeared to be a new high-frequency radar array at the northern end of Fiery Cross Reef in the Spratlys.

Subi Reef had seen tunnels completed that were likely for ammunition storage and another radar antenna array and radar domes, the report said.

Construction on Mischief Reef included underground storage for ammunition and hangars, missile shelters and radar arrays.

Smaller-scale work had continued in the Paracel Islands, including a new helipad and wind turbines on Tree Island and two large radar towers on Triton Island.

It said the latter were especially important as waters around Triton had been the scene of recent incidents between China and Vietnam and multiple U.S. freedom-of-navigation operations, which the U.S. navy has used to assert what it sees as its right to free passage in international waters.

Woody Island, China’s military and administrative headquarters in the South China Sea, saw two first-time air deployments “that hint at things to come at the three Spratly Island air bases farther south,” the report said.

At the end of October, the Chinese military released images showing J-11B fighters at Woody Island for exercises, while on Nov. 15, AMTI spotted what appeared to be Y-8 transport planes, a type that can be configured for electronic surveillance.

The Pentagon has conducted several patrols near Chinese-held South China Sea territory this year, even as it has sought China’s help in northeast Asia to press North Korea to give up its nuclear weapons program.

On Tuesday, U.S. Secretary of State Rex Tillerson reiterated a call for a “freeze” in China’s island building and said it was unacceptable to continue their militarization.

(Reporting by David Brunnstrom; Additional reporting by Sue-Lin Wong in BEIJING; Editing by James Dalgleish)

China says war must not be allowed on Korean peninsula

China says war must not be allowed on Korean peninsula

By Ben Blanchard

BEIJING (Reuters) – War must not be allowed to break out on the Korean peninsula and the issue must be resolved through talks, Chinese President Xi Jinping said on Thursday, while U.N. Secretary-General Antonio Guterres warned of the danger of “sleepwalking” into conflict.

Xi made his comments to visiting South Korean President Moon Jae-in just days after U.S. Secretary of State Rex Tillerson offered to begin direct talks with North Korea without pre-conditions.

But the White House said on Wednesday that no negotiations could be held with North Korea until it improved its behavior. The White House has declined to say whether President Donald Trump, who has taken a tougher rhetorical line toward North Korea, approved Tillerson’s overture.

Russian President Vladimir Putin said Tillerson’s offer of direct contacts with North Korea was “a very good signal”, while warning that a U.S. strike on the North would have catastrophic consequences.

North Korea tested its most advanced intercontinental ballistic missile on Nov. 29, which it said could put all of the United States within range, in defiance of international pressure and U.N. sanctions.

While South Korea and China share the goal of getting North Korea to give up its nuclear weapons and stop testing increasingly sophisticated long-range missiles, the two have not seen eye-to-eye on how to achieve this.

Meeting in Beijing’s Great Hall of the People, Xi told Moon that the goal of denuclearising the Korean peninsula must be stuck to, and that war and chaos cannot be allowed to happen, state media said.

“The peninsula issue must in the end be resolved via dialogue and consultation,” Xi was cited as saying.

China and South Korea have an important shared interest in maintaining peace and stability, and China is willing to work with South Korea to prevent war and promote talks, Xi added.

China would support North and South Korea to improve relations as this was good for easing tension, he said.

Xi’s warm tone followed nearly a year of tense relations between the two countries.

‘DRAMATIC CIRCUMSTANCES’

China has been furious about the deployment of the U.S.-made Terminal High Altitude Area Defence (THAAD) anti-missile system in South Korea, saying its powerful radar can see far into China and will do nothing to ease tension with North Korea.

China and South Korea agreed in late October that they would normalize exchanges and move past the dispute over THAAD, which froze trade and business exchanges, and Moon has been keen to put the dispute behind them.

Xi reiterated China’s position on THAAD and said he hoped South Korea would continue to “appropriately handle” the issue.

Guterres, speaking to reporters in Tokyo after meeting Japanese Prime Minister Shinzo Abe, said Security Council resolutions on North Korea’s nuclear and missile programs must be fully implemented by Pyongyang and other countries.

“It is very clear that the Security Council resolutions must be fully implemented, first of all by North Korea, but by all other countries whose role is crucial to … achieve the result we all aim at, which is the denuclearization of the Korean peninsula,” Guterres said.

He added that Security Council unity was also vital “to allow for the possibility of diplomatic engagement” that would allow denuclearization to take place.

“The worst possible thing that could happen is for us all to sleepwalk into a war that might have very dramatic circumstances,” Guterres said.

He said he expected a meeting of the U.N. Security Council on Friday would deliver a strong expression of unity and the need for diplomacy to resolve the issue.

Japan says now is the time to keep up maximum pressure on North Korea, not start talks on its missile and nuclear programs.

China and Russia, however, have welcomed Tillerson’s overture.

Russian President Vladimir Putin said a strike on North Korea by the United States would have catastrophic consequences and that he hoped to work with Washington eventually to resolve the crisis on the Korean peninsula.

Russia does not accept North Korea’s nuclear status, Putin told an annual news conference. But he also said that some of Washington’s past actions had provoked North Korea into violating a 2005 pact to curb its nuclear program.

“We believe the two sides should now stop aggravating the situation,” Putin said.

North Korea justifies its weapons programs as necessary defense against U.S. plans to invade. The United States, which has 28,500 troops in South Korea, a legacy of the 1950-53 Korean war, denies any such intention.

(Additional reporting by Linda Sieg in TOKYO,; Denis Pinchuk in MOSCOW and Christine Kim in SEOUL; Writing by Robert Birsel; Editing by Clarence Fernandez)

China warns of imminent attacks by “terrorists” in Pakistan

China warns of imminent attacks by "terrorists" in Pakistan

BEIJING (Reuters) – China on Friday warned its nationals in Pakistan of plans for a series of imminent “terrorist attacks” on Chinese targets there, an unusual alert as it pours funds into infrastructure projects into a country plagued by militancy.

Thousands of Chinese workers have gone to Pakistan following Beijing’s pledge to spend $57 billion there on projects in President Xi Jinping’s signature “Belt and Road” development plan, which aims to link China with the Middle East and Europe.

Protecting employees of Chinese companies, as well as individual entrepreneurs who have followed the investment wave along what is known as the China-Pakistan Economic Corridor, has been a concern for Chinese officials.

“It is understood that terrorists plan in the near term to launch a series of attacks against Chinese organizations and personnel in Pakistan,” the Chinese embassy in Pakistan said in a statement on its website.

The embassy warned all “Chinese-invested organizations and Chinese citizens to increase security awareness, strengthen internal precautions, reduce trips outside as much as possible, and avoid crowded public spaces”.

It also asked Chinese nationals to cooperate with Pakistan’s police and the military, and to alert the embassy in the event of an emergency.

It did not give any further details.

Pakistan’s foreign ministry could not be reached immediately for comment.

China has long worried about disaffected members of its Uighur Muslim minority in its far western region of Xinjiang linking up with militants in Pakistan and Afghanistan.

At the same time, violence in Pakistan’s southwestern Baluchistan province has fueled concern about security for planned transport and energy links from western China to Pakistan’s deepwater port of Gwadar.

The Taliban, sectarian groups linked to al Qaeda and the Islamic State all operate in Baluchistan, which borders Iran and Afghanistan and is at the center of the “Belt and Road” initiative.

In addition, separatists there have long battled the government for a greater share of gas and mineral resources, and have a long record of attacking energy and other infrastructure projects.

Islamic State claimed responsibility for killing two kidnapped Chinese teachers in Baluchistan in June, prompting the government in Islamabad to pledge to beef up security for Chinese nationals.

It had already promised a 15,000-strong army division to safeguard projects along the economic corridor.

China’s security concerns abroad have grown along with its global commercial footprint.

In 2016, a suspected suicide car bomber rammed the gates of the Chinese embassy in the Kyrgyz capital Bishkek, killing the attacker and wounding at least three people.

(Reporting by Michael Martina; Editing by Robert Birsel)

North Korea says U.S. threats make war unavoidable as China urges calm

North Korea says U.S. threats make war unavoidable as China urges calm

By Soyoung Kim and Heekyong Yang

SEOUL (Reuters) – Two American B-1B heavy bombers joined large-scale combat drills over South Korea on Thursday amid warnings from North Korea that the exercises and U.S. threats have made the outbreak of war “an established fact”.

The annual U.S.-South Korean “Vigilant Ace” exercises feature 230 aircraft, including a range of the U.S. military’s most advanced stealth warplanes, and come a week after North Korea tested its most powerful intercontinental ballistic missile (ICBM) to date which it says can reach the mainland United States.

A spokesman for the North’s foreign ministry blamed the drills and “confrontational warmongering” by U.S. officials for making war inevitable.

“The remaining question now is: when will the war break out?” the spokesman said late on Wednesday in a statement carried by North Korea’s official KCNA news agency.

“We do not wish for a war but shall not hide from it.”

China, North Korea’s neighbor and lone major ally, again urged calm and said war was not the answer.

“We hope all relevant parties can maintain calm and restraint and take steps to alleviate tensions and not provoke each other,” Chinese Foreign Ministry spokesman Geng Shuang said in a statement.

“The outbreak of war is not in any side’s interest. The ones that will suffer the most are ordinary people.”

Tensions on the Korean peninsula have risen markedly in recent months after North Korea’s latest missile and nuclear tests, conducted in defiance of U.N. Security Council resolutions and international condemnation.

STRATEGIC BOMBERS

On Wednesday, a U.S. B-1B bomber flew from the Pacific U.S.-administered territory of Guam to join the exercises, which will run until Friday.

The flights by the B-1B, one of America’s largest strike aircraft, have played a leading role in Washington’s attempts to increase pressure on North Korea to abandon its weapons program.

In September, B-1Bs were among a formation of U.S. military aircraft that flew further north up North Korea’s coast than at any time in the past 17 years, according to the U.S. Pacific Command.

That prompted North Korea’s foreign minister, Ri Yong Ho, to warn that the North could shoot down the U.S. bombers even if they did not enter North Korean airspace.

“B1-B bombers have been regularly dispatched to the Korean peninsula over the past years; however, it seems that the U.S. Air Force might have enhanced its training to better prepare for actual warfare,” said Yang Uk, a senior fellow at the Korea Defence and Security Forum.

While B-1Bs are no longer equipped to carry nuclear weapons of their own, they would be key to any strike targeting major North Korean facilities, he said.

“That’s why North Korea has been making such a big deal when B1-B bombers are flying overhead.”

ESCALATING TENSIONS

Both sides insist they don’t want war, but blame each other for provocations while saying they will act to defend themselves.

White House national security adviser H.R. McMaster said over the weekend that the possibility of war with North Korea was “increasing every day”.

U.S. Republican Senator Lindsey Graham urged the Pentagon on Sunday to start moving U.S. military dependants, such as spouses and children, out of South Korea, saying conflict with North Korea was getting close.

The Pentagon said it has “no intent” to move any dependants out of the country.

North Korea regularly threatens to destroy South Korea and the United States and says its weapons program are necessary to counter U.S. aggression. The United States stations 28,500 troops in the South, a legacy of the 1950-53 Korean War.

“Recently, as the U.S. is conducting the largest-ever joint aerial drill on the Korean peninsula targeting the Democratic People’s Republic of Korea, its high-level politicians are showing alarming signs by making bellicose remarks one after another,” the North’s foreign ministry spokesman said, using North Korea’s official name.

“These confrontational war-mongering remarks cannot be interpreted in any other way but as a warning to us to be prepared for a war on the Korean peninsula,” he said.

North Korea’s latest missile test prompted a warning from the United States that North Korea’s leadership would be “utterly destroyed” if war were to break out, a statement that drew sharp criticism from Russia.

U.S. President Donald Trump has said the whole of North Korea would be destroyed in the event of war.

The rising tensions coincide with a rare visit to the isolated North by United Nations political affairs chief Jeffrey Feltman this week, the highest-level U.N. official to visit North Korea since 2012.

Feltman met North Korean Foreign Minister Ri on Thursday, following his meeting with the vice foreign minister a day earlier, KCNA said.

(Additional reporting by Hyonhee Shin and Josh Smith in Seoul and Christian Shepherd in Beijing; Editing by Nick Macfie)

U.S. trade hits nine-month high; oil prices lift imports

U.S. trade hits nine-month high; oil prices lift imports

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. trade deficit increased to a nine-month high in October due to rising oil prices and the widening of America’s long-standing deficits with China and Mexico.

The worsening trade deficit came even as exports to China and Mexico were the strongest in more than three years, which some economists said challenged the Trump administration’s argument that the United States was being disadvantaged in its dealings with trade partners.

“This leaves the Trump economics team empty handed when it comes to its mission to improve the unfair terms of trade which sent factories offshore starting a couple of decades ago,” said Chris Rupkey, chief economist at MUFG in New York.

The Commerce Department said on Tuesday the trade gap widened 8.6 percent to $48.7 billion, the highest level since January. The politically sensitive U.S.-China trade deficit increased 1.7 percent to $35.2 billion and the deficit with Mexico surged 15.9 percent to $6.6 billion.

Economists polled by Reuters had forecast the overall trade deficit rising to $47.5 billion in October. U.S. financial markets were little moved by the large trade shortfall, which was flagged in an advance report last week.

Republican President Donald Trump has blamed the trade deficit for the massive loss of U.S. manufacturing jobs as well as moderate economic growth. Trump has ordered the renegotiation of the North American Free Trade Agreement (NAFTA), which was signed in 1994 by the United States, Canada and Mexico.

He told a group of pro-NAFTA Republican senators during lunch on Tuesday that the United States had trade deficits with “everybody.”

“And that’s going to be changing – it’s already changing – but it’s going to be changing fast,” Trump said, adding that NAFTA negotiations were “going to be very successful.”

NAFTA talks have stalled, with Mexico and Canada rejecting a U.S. proposal to raise the minimum threshold for autos to 85 percent North American content from 62.5 percent as well as to require half of vehicle content to be from the United States.

TRADE DRAG

When adjusted for inflation, the trade deficit increased to $65.3 billion, also the largest since January, from $62.2 billion in September. The so-called real trade deficit in October was above the third-quarter average of $62.0 billion, suggesting that trade could subtract from gross domestic product in the October-December quarter.

The government reported last month that trade contributed 0.43 percentage point to the economy’s 3.3 percent annualized growth pace in the third quarter. The Trump administration believes a smaller trade deficit, together with deeper tax cuts could boost annual GDP growth to 3 percent on a sustained basis.

Republicans in the U.S. Congress have approved a broad package of tax cuts, including slashing the corporate income tax rate to 20 percent from 35 percent. But the planned fiscal stimulus will come at a time when the economy is at full employment, which will boost imports and widen the trade gap.

“While U.S. domestic demand will strengthen, foreign producers will supply an increased share,” said Mickey Levy, chief economist Americas and Asia at Berenberg Capital Markets in New York. “We project the U.S. trade and current account deficits will widen.”

Imports of goods and services increased 1.6 percent to a record $244.6 billion in October. Goods imports were the highest since May 2014 amid a $1.5 billion increase in crude oil imports. Imported oil prices averaged $47.26 per barrel in October, the highest since August 2015.

The country’s import bill was also boosted by food imports, which were the highest on record. There were also increases in imports of cellphones and other goods. Imports from China and Mexico were the highest on record in October.

Exports of goods and services were unchanged at $195.9 billion in October as a surge in shipments of industrial supplies and petroleum was offset by sharp declines in and civilian aircraft exports.

Exports to China hit their highest level since December 2013, while those to Mexico were the highest in three years.

A separate report on Tuesday showed activity in the services sector slowed in November amid a sharp moderation in both new and export orders.

The Institute for Supply Management (ISM) said its non-manufacturing index fell to a reading of 57.4 last month from 60.1 in October. A reading above 50 in the ISM index indicates an expansion in the services sector, which accounts for more than two-thirds of the U.S. economy.

Last month, a gauge of new orders received by services industries dropped to 58.7 from a reading of 62.8 in October. A measure of new export orders fell 3.0 points while imports rose 0.5 point.

(Reporting By Lucia Mutikani; additional reporting by Roberta Rampton; Editing by Andrea Ricci)

South Korea, U.S. launch aerial drills amid North Korean warnings of nuclear war

The South Korean army's K-55 self-propelled artillery vehicles take part in a military exercise near the demilitarised zone separating the two Koreas in Paju, South Korea, November 29, 2017.

By Christine Kim and Philip Wen

SEOUL/BEIJING (Reuters) – The United States and South Korea went ahead with large-scale joint aerial drills on Monday, a move North Korea had said would push the Korean peninsula to “the brink of nuclear war”, ignoring calls from Russia and China to call them off.

The drills come a week after North Korea said it had tested its most advanced intercontinental ballistic missile capable of reaching the United States as part of a weapons program that it has conducted in defiance of international sanctions and condemnation.

Chinese Foreign Minister Wang Yi said it was “regrettable” that all parties had not “grasped the window of opportunity” presented by two months of relative calm before the North’s most recent test.

China and Russia had proposed that the United States and South Korea stop major military exercises in exchange for North Korea halting its weapons programs. Beijing formally calls the idea the “dual suspension” proposal.

The annual U.S.-South Korean drill, called Vigilant Ace, will run until Friday, with six F-22 Raptor stealth fighters to be deployed among the more than 230 aircraft taking part.

North Korea’s Committee for the Peaceful Reunification of the Country called U.S. President Donald Trump “insane” on Sunday and said the drills would “push the already acute situation on the Korean peninsula to the brink of nuclear war”.

F-35 fighters will also join the drills, which will include the largest number of 5th generation fighters ever to have taken part, according to a South Korea-based U.S. Air Force spokesman.

Around 12,000 U.S. service members, including from the Marines and Navy, will join South Korean troops. Aircraft taking part will be flown from eight U.S. and South Korean military installations.

South Korean media reports said B-1B Lancer bombers could join the exercise this week. The U.S. Air Force spokesman could not confirm the reports.

Trump said last week that additional major sanctions would be imposed on North Korea after Pyongyang’s intercontinental ballistic missile test.

Earlier last month, Trump put North Korea back on a list of state sponsors of terrorism, a designation that allows the United States to impose more sanctions.

Russia has accused the United States of trying to provoke North Korean leader Kim Jong Un into “flying off the handle” over his missile program to hand Washington a pretext to destroy his country.

Speaking at a news briefing in Beijing, Wang said China consistently opposed any behavior that elevated tensions.

“And measures that don’t abide by or are outside the UN Security Council resolutions lack basis in international law and damage the rights of United Nations members,” Wang said when asked about the prospect of further U.S. sanctions against North Korea.

China’s Air Force said on Monday that its surveillance aircraft had in recent days conducted drills in the Yellow Sea and East China Sea to “improve combat-readiness and safeguard the country’s strategic interests”.

The aircraft took a flight path not previously flown to regions they had never previously operated in, and coordinated with fighter jets, alert aircraft and guided missile forces, spokesman Shen Jinke said, according to a post on the Air Force’s official microblog.

The joint exercises between South Korea and United States are designed to enhance readiness and operational capability and to ensure peace and security on the Korean peninsula, the U.S. military had said before the drills began.

The North’s KCNA state news agency, citing a foreign ministry spokesman, said on Saturday the Trump administration was “begging for nuclear war by staging an extremely dangerous nuclear gamble on the Korean peninsula”.

North Korea regularly uses its state media to threaten the United States and its allies.

North Korea has tested dozens of ballistic missiles and conducted its sixth and largest nuclear bomb test in September, in violation of U.N. Security Council resolutions.

It has said its weapons programs are a necessary defense against U.S. plans to invade. The United States, which has 28,500 troops stationed in South Korea, a legacy of the 1950-53 Korean War, denies any such intention.

 

 

(Reporting by Christine Kim in SEOUL and Philip Wen in BEIJING; Additional reporting by Michael Martina in BEIJING; Editing by Nick Macfie)

 

China pushing billions into Iranian economy as Western firms stall

China pushing billions into Iranian economy as Western firms stall

By Mark Bendeich and Parisa Hafezi

ROME/ANKARA (Reuters) – China is financing billions of dollars worth of Chinese-led projects in Iran, making deep inroads into the economy while European competitors struggle to find banks willing to fund their ambitions, Iranian government and industry officials said.

Freed from crippling nuclear sanctions two years ago, Iran is drawing unprecedented Chinese funding for everything from railways to hospitals, they said. State-owned investment arm CITIC Group recently established a $10 billion credit line and China Development Bank is considering $15 billion more.

“They (Western firms) had better come quickly to Iran otherwise China will take over,” said Ferial Mostofi, head of the Iran Chamber of Commerce’s investment commission, speaking on the sidelines of an Iran-Italy investment meeting in Rome.

The Chinese funding, by far the largest statement of investment intent of any country in Iran, is in stark contrast with the drought facing Western investors since U.S. President Donald Trump disavowed the 2015 pact agreed by major powers, raising the threat sanctions could be reimposed.

Iranian officials say the deals are part of Beijing’s $124 billion Belt and Road initiative, which aims to build new infrastructure – from highways and railways to ports and power plants – between China and Europe to pave the way for an expansion of trade.

A source in China familiar with the CITIC credit line, which was agreed in September, called it “an agreement of strategic intent”. The source declined to give details on projects to be financed, but Iranian media reports have said they would include water management, energy, environment and transport projects.

An Iranian central bank source said loans under the credit line would be primarily extended in euros and yuan.

The China Development Bank signed a memorandum of understanding for $15 billion, Iranian state news agency IRNA said on Sept. 15.

The bank itself declined to comment, in line with many foreign investors and banks, including from China, who were reluctant to discuss their activities in Iran for this story. The web sites of banks and companies often carry little or no information on their Iran operations.

POWERHOUSE

With a population of 80 million and a large, sophisticated middle class, Iran has the potential to be a regional economic powerhouse. But with the risk of sanctions hanging in the air, more and more foreign investors want Tehran to issue sovereign guarantees to protect them in case the projects are halted.

Economic ties between Iran and Italy, its biggest European trade partner, have been affected.

Italy’s state-owned rail company, Ferrovie dello Stato, is a consultant in the building of a 415-km (260-mile) high-speed north-south rail line between Tehran to Isfahan via Qom by state-owned China Railway Engineering Corp.

The Italian firm is separately contracted to build a line from Qom west to Arak, but it needs 1.2 billion euros in financing. Though backed by the state’s export insurance agency, it says it needs a sovereign guarantee.

“We are finalizing the negotiations and we are optimistic about moving forward,” said Riccardo Monti, chairman of Italferr, the state firm’s engineering unit, adding that the financing should be finalised by March next year.

Prime Minister Matteo Renzi’s promise in Tehran last year to oil the wheels of trade with a 4 billion euro credit line from Italy’s state investment vehicle is effectively dead, a source in Italy familiar with the matter said.

Cassa Depositi e Prestiti (CDP) risked losing the confidence of its many U.S. bond-holders who could sell down their holdings if the credit line went ahead, the source said.

A few European banks have deepened trade ties with Iran this year — Austria’s Oberbank <OBER.VI> inked a financing deal with Iran in September.

South Korea has also proved a willing investor, with Seoul’s Eximbank signing an 8 billion euros credit line for projects in Iran in August, according to Chinese state news agency Xinhua.

But China is the standout.

Valerio de Molli, head of Italian think tank European House Ambrosetti, reckons China now accounts for more than double the EU’s share of Iran’s total trade.

“The time to act is now, otherwise opportunities nurtured so far will be lost,” de Molli said.

A MOVING TRAIN

Iranian officials attending this week’s meeting in Rome sought to goad European firms and their bankers into action by talking up the Chinese financing and investments.

“The train is going forward,” said Fereidun Haghbin, director general of economic affairs at Iran’s foreign ministry. “The world is a lot greater than the United States.”

Some Iranian officials remain concerned that investment could become lop-sided and are looking at creative ways to maintain investment links with the West, however.

The Iran chamber is encouraging Western firms to consider transferring technology as a way of earning equity in Iranian projects rather than focusing on capital.

It was also seeking approval to set up a 2.5-billion-euro offshore fund, perhaps in Luxembourg, as an indirect way for foreigners to invest in Iran, especially small and medium-sized Iranian enterprises, Mostofi said.

The fund would issue the financial guarantees that foreigners want in return for a fee, effectively stepping in where banks now fear to tread. Most of the fund’s capital would come from Iran, Mostofi said.

For now, however, big Western firms remain stuck.

Italian power engineering firm Ansaldo Energia, controlled by state investor CDP and part-owned by Shanghai Electric Group <601727.SS>, has been in Iran for 70 years.

Its chairman, Giuseppe Zampini, told Reuters at the Rome conference there were many opportunities for new contracts but his hands were tied for now, partly because Ansaldo bonds were also in the hands of U.S. investors.

“My heart says that we are losing something,” Zampini said.

(Additional reporting by Shu Zhang in BEIJING, Stefano Bernabei in ROME, Parisa Hafezi in ANKARA and Jonathan Saul in LONDON; Editing by Sonya Hepinstall)

Chinese police detain teacher in kindergarten abuse inquiry

BEIJING (Reuters) – Beijing police investigating alleged child abuse at a kindergarten run by RYB Education Inc said on Saturday they had detained a teacher, in the latest scandal to hit China’s booming childcare industry.

Police in the Chaoyang district said it will further investigate claims of abuse after China’s official Xinhua news agency reported this week they were checking allegations that children at the nursery were “reportedly sexually molested, pierced by needles and given unidentified pills”.

Chaoyang district police said in an online posting on Saturday they had detained a 22-year-old teacher, surnamed Liu from the Hebei province adjacent to Beijing.

Police have also arrested another person, also surnamed Liu, for allegedly disrupting social order by spreading false information about the alleged kindergarten abuse, it said in a separate posting.

RYB’s New York-listed shares plunged 38.4 percent on Friday as the scandal sparked outrage among parents and the public.

The second woman, 31, and a Beijing native, was arrested on Thursday, police said.

Parents said their children, some as young as three, gave accounts of a naked adult male conducting purported “medical check-ups” on unclothed students, other media said.

RYB provides early education services in China and at the end of June was operating 80 kindergartens and had franchised an additional 175, covering 130 cities and towns in China.

Meanwhile, Beijing city authorities have urged RYB to remove the head of the kindergarten, Xinhua reported.

The Chaoyang district has launched an investigation into all childcare facilities in its area, the report said.

(Reporting by Shu Zhang and Josephine Mason; Editing by Christian Schmollinger and Clelia Oziel)

South Korea fears further missile advances by North this year in threat to U.S.

A flag is pictured outside the Permanent Mission of North Korea in Geneva, Switzerland, November 17, 2017.

By Hyonhee Shin

SEOUL (Reuters) – North Korea may conduct additional missile tests this year to polish up its long-range missile technology and ramp up the threat against the United States, South Korea’s spy agency said on Monday, adding that it was monitoring developments closely.

North Korea is pursuing nuclear weapons and missile programs in defiance of U.N. Security Council sanctions and has made no secret of its plans to develop a missile capable of hitting the U.S. mainland. It has fired two missiles over Japan.

The reclusive state appears to have carried out a recent missile engine test while brisk movements of vehicles were spotted near known missile facilities, Yi Wan-young, a member of South Korea’s parliamentary intelligence committee which was briefed by Seoul’s National Intelligence Service, said.

No sign of an imminent nuclear test had been detected, Yi noted. The third tunnel at the Punggye-ri complex remained ready for another detonation “at any time”, while construction had recently resumed at a fourth tunnel, making it out of use for the time being.

“The agency is closely following the developments because there is a possibility that North Korea could fire an array of ballistic missiles this year under the name of a satellite launch and peaceful development of space, but in fact to ratchet up its threats against the United States,” the lawmakers told reporters after a closed-door briefing by the spy agency.

North Korea defends its weapons programs as a necessary defense against U.S. plans to invade. The United States, which has 28,500 troops in South Korea, a legacy of the 1950-53 Korean war, denies any such intention.

Pyongyang is also carrying out a sweeping ideological scrutiny of the political unit of the military for the first time in 20 years, according to Kim Byung-kee, another lawmaker in the committee.

The probe was led by the ruling Workers’ Party’s Organisation and Guidance Department and orchestrated by Choe Ryong Hae, who once headed the General Political Bureau of the Korean People’s Army himself until he was replaced by Hwang Pyong So in May 2014.

As a result, Hwang and Kim Won Hong, who Seoul’s unification ministry said was removed from office in mid-January as minister of the Stasi-like secret police called “bowibu”, had been punished, the lawmaker said. He did not elaborate.

Choe, who was subjected to political “reeducation” himself in the past, appears to be gaining more influence since he was promoted in October to the party’s powerful Central Military Commission.

The National Intelligence Service indicated that Choe now heads the Organisation and Guidance Department, a secretive body that oversees appointments within North Korea’s leadership.

“Under Choe’s command, the Organisation and Guidance Department is undertaking an inspection of the military politburo for the first time in 20 years, taking issue with their impure attitude toward the party leadership,” the lawmaker, Kim, said.

Separately on Monday, South Korea approved a request by a South Korean to attend an event in the North marking the anniversary of the death of his mother who formerly led the Chondoist Chongu Party, a minor North Korean political party.

The son, identified only by his surname Choi, will be the first South Korean to visit the North since liberal President Moon Jae-in took office in May.

He is scheduled to arrive in Pyongyang via China on Wednesday and return on Saturday, according to Seoul’s unification ministry.

A senior Chinese official wrapped up a four-day visit to North Korea on Monday, apparently without meeting the country’s leader, Kim Jong Un.

Song Tao, head of the international department of the Chinese Communist Party, met senior officials from the Workers Party of Korea and “exchanged views on the Korean peninsula issue”, China’s official Xinhua news agency said.

“The ruling parties of China and the Democratic People’s Republic of Korea on Monday pledged to strengthen inter-party exchanges and coordination, and push forward relations,” it added, using North Korea’s official name.

Song had been in Pyongyang to discuss the outcome of the recently concluded Chinese Communist Party Congress in Beijing.

 

(Additional reporting by Christine Kim, and Ben Blanchard in BEIJING; Editing by Nick Macfie and Clarence Fernandez)