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Foreign Exchange Administration Bureau to Prevent Use of M&As to Transfer Capital Overseas

Chinese enterprises are accelerating the pace of their overseas mergers and acquisitions (M&As) as a whole. Guo Song, director of the Capital Management Department of the State Administration of Foreign Exchange (SAFE), said SAFE would support normal overseas M&As and would maintain a balance of international payments.

At a press conference on September 22, Guo said that [the Chinese government] will support real overseas investments, but will not allow false investments. Over the past year, [SAFE found] that some enterprises and individuals transferred assets through foreign investment channels. This will become the SAFE’s major focus in managing overseas M&A activities.

Given the background of the slowdown in China’s economic growth and the continuous devaluation of the RMB, cross-border M&As have become the choice of many Chinese enterprises to mitigate risks. According to statistics that the Zero2IPO Group has published, China completed 107 cross-border M&As in the first half of this year, with a transaction amount over 176.446 billion yuan (US$26.46 billion – both data represent record highs).

In the overseas M&As, the proportion of central enterprises has continued to decline. Zhang Ming, director of the International Investment Office of the World Economics and Politics Institute at the Chinese Academy of Social Sciences, pointed out that private enterprises completed nine out of the top ten overseas M&A deals announced in the second quarter (which was 99 percent of the total); three of them (accounting for 64 percent of the total amount) were due to the domestic private parent company injecting capital into overseas subsidiaries. The specific purpose of the injection and the final destination were not very clear.

Source: Caixin, September 22, 2016

Survey Shows that 90 Percent of the Japanese Have a Poor Impression of China

On September 23, BBC Chinese reported that a non-profit organization known as the “Speech NPO” conducted a survey of residents of Japan. The survey done in 2016 showed that 90 percent of the Japanese respondents had a poor impression of China which was compared to the results from the previous year.

The organization has published reports on such public opinion surveys between China and Japan for the past 12 years.

On the Japanese side, the survey company sent out questionnaires to 2,000 business operators, academicians, media workers and civil servants. The results from 477 respondents were analyzed. On the Chinese side, the results were based on telephone interviews of 612 people.

Among the Japanese respondents, 91.6 percent of those respondents surveyed had a poor perception of China, a slight increase from 88.8 percent the previous year; 76.7 percent of the Chinese respondents did not feel good about Japan, which was down slightly from 78.3 percent the previous year.

The main reason for the poor perception from both sides is the territorial dispute.

Source: BBC Chinese, September 23, 2016

PLA Major General: The More We Prepare for a War, the Farther Away the War Will Be from Us

One September 19, 2016, Huanqiu (the Chinese version of Global Times), Communist China’s official mouthpiece, published an article on the intention and motivation of the United States regarding the South China Sea dispute and the THAAD system in South Korea. The author of the article is Qiao Liang, a Chinese People’s Liberation Army Major General who is also a professor at the PLA National Defense University in China.

Viewing the United States as a major enemy of the People’s Republic of China, Qiao Liang criticized the U.S. for continually making trouble using geopolitical means. The United States will build the THAAD system in South Korea in order to damage the China and South Korea free trade agreement. To drive capital out of China and get it to the US, the United States navy sent two aircraft carriers into the South China Sea. However, if China and the United States really get into a war, capital will leave both China and the USA, which is not consistent with the Americans’ interests and aspirations. Therefore, Americans will not fight a battle with China. China does not have to worry about a war. For the United States, the purpose of a war is to strive to maximize its national interests rather than occupy a territory.

If China wants to be a superpower, China should learn from the United States. We will take the Diaoyu or Huangyan Island back tomorrow if not today. But the historical opportunity for China to become the world’s largest economy and ultimately revive the Chinese nation could be gone any time. China cannot act “tough” as Putin does, because China relies on both imports and exports. However, we can also make trouble for the United States, Japan, and the Philippines, aiming at the soft underbelly of our opponents. China’s large foreign exchange reserves are a powerful geopolitical weapon. “As long as we think carefully, we should know how to manipulate it.”

Now China and Russia need to rely on each other to resist the United States. They will use a united front as that has helped the Chinese Communist Party grow from a small and weak to a big and strong Party.

The article concluded that, though China’s neighborhood situation is grim, there will be no war. However, Chinese military troops must be ready for a war at any time. The more we prepare for a war, the farther away the war will be from us.

Source: Huanqiu, September 19, 2016

People’s Daily: The U.S. Is Not an Outsider, nor a Magistrate on the North Korean Nuclear Issue

China’s state media People’s Daily published an article commenting on the U.S.’s attitude and position on North Korea’s nuclear test.

The article said, “The United States has created too much trouble with its shortsightedness and recklessness. When it creates an issue, it is difficult to deal with it and the U.S. is increasingly inclined to address itself as an outsider and complain and blame others. America’s approach not only violates international morality; it also adds a huge obstacle to solving the problem.”

The article continued, “A few days ago, North Korea conducted its fifth nuclear test in spite of the widespread opposition of the international community. This act undermines the nuclear non-proliferation system and threatens regional peace and stability. It requires all of the concerned parties to deal effectively with each other while avoiding further mutual stimulation. However, regarding the relevant news, Washington has ignored the complexity and grimness of the problem, once again throwing out the unfounded ‘Chinese responsibility theory.’

“On the North Korea nuclear issue, what qualifies the United States to be an outsider and what qualifications does it have to shift the responsibility for this aggravated situation to other countries arbitrarily? The history of the Korean Peninsula nuclear issue is clearly displayed. Is it not the United States that is the origin and crux of the problem? Otherwise, why has North Korea consistently been pursuing a nuclear strike capability directed at the United States?

“The United States has a sufficient understanding of the truth of the nuclear issue on the Korean Peninsula. It is hard to imagine that Washington really believes in the ‘Chinese responsibility theory’ that it has presented. There is reason to doubt whether Washington really has the will to push the North Korean nuclear issue in the direction of solution. At the beginning of this year, after North Korea’s fourth nuclear test, the U.S. strongly promoted the deployment of the THAAD anti-missile system in South Korea at the expense of the national strategic security interests of others in the region. The United States certainly does not really believe that the deployment of THAAD can solve the nuclear issue on the Korean Peninsula once and for all.

“In recent years, the United States’ ability to provide effective public goods has been declining in many international affairs, but its effort to make trouble has not diminished. The nuclear issue on the Korean Peninsula is just one example.

“In East Asia, since the launch of the “Asia-Pacific rebalancing” strategy, the United States has always regarded the South China Sea issue as an important safeguard for its regional hegemony and its strategic containment of China, blatantly provoking dissension among the countries concerned. At the same time, it also appears as the “guardian of the rules” constantly blaming China.

“Being the manufacturer of the problem but acting as the ‘outsider’ to blame other countries, the United States is not only violating international morals but it is also adding a huge obstacle to solving practical problems. On the Korean Peninsula nuclear issue, we need to advise Washington that it is very risky to have the mentality of trying one’s luck, having a wait-and-see attitude, or being opportunistic in this protracted problem. It will make the peninsula situation even more tense and make the problem more difficult to solve if it continues any selfish agenda while ignoring the overall situation.”

Source: People’s Daily, September 14, 2016

People’s Daily: Liaoning Election Bribery Case Resulted in Large Scale Terminations

People’s Daily recently reported that the National People’s Congress (NPC) Standing Committee held a full member meeting on September 13. The meeting concluded that 45 national Congressmen elected in the 2013 election were illegal due to the bribery activities that had taken place. A total of 523 involved provincial Congressmen from Liaoning Province were terminated or resigned. There are 38 Liaoning provincial Congressmen in the 62-member provincial Congress Standing Committee who were removed from the Committee. The result was that the Liaoning Provincial Congress ceased to function due to a lack of members who met the minimum that the law required. This is the first time in the history of the current Republic that a provincial legislative branch could not serve. The National Congress decided to establish a Preparatory Group of the Liaoning Congress to play a temporary role. Zhang Dejiang, the Chairman of the NPC Standing Committee, held the meeting.

Source: People’s Daily, September 13, 2016