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China Investigates North Korea Kwangson Banking and China Dandong Hongxiang Group for Supporting North Korea’s Nuclear Program

On September 26, 2016, Hong Kong Economic Journal and Radio Taiwan International published a news report based on South Korean Central Daily (JoongAng Daily) saying that China is investigating both North Korea Kwangson Banking Corp (KKBC) and Dandong Hongxiang Industrial Development Co. (DHID) for supporting North Korea’s nuclear program.

In March 2016, because of the sanctions of the United Nations in response to North Korea’s nuclear tests, North Korea Kwangson Banking closed its office in China. However, it continued operating underground in Dandong China, a border city close to North Korea. Kwangson Banking’s Dandong branch office is located on the 13th floor in the building of Dandong Hongxiang Industrial Development Company. The Dandong Hongxiang Group has secretly traded with Kwangson Banking, exporting materials related to nuclear development to North Korea.

After the U.S. and South Korea exposed the fact that the Hongxiang Group has exported nuclear materials to North Korea, China’s Foreign Ministry and the Liaoning Province Police announced that the Hongxiang Group has been involved in a number of serious economic crimes. In August 2016, the Chinese authorities arrested Ma Xiaohong, the owner of the Dandong Hongxiang Industrial Development Company and several other executives. Ma Xiaohong’s family members and over 20 officials who have helped Ma Xiaohong are all being investigated.

Sources: Hong Kong Economic Journal, September 26, 2016                                  BF%E6%9F%A5%E6%B6%89%E6%A0%B8%E8%A8%88%E5%8A%83%E5%8C%97%E9%9F%93%E9%8A%80%E8%A1%8C                         Radio Taiwan International, September 26, 2016                                                                                                   

China has Four Counter Measures for the Joint Japan-U.S. South China Sea Patrol

Well-known Chinese news site Sina recently published an in-depth analysis on the strategy against the newly announced Japanese plan to join the U.S. South China Sea naval patrol. The Chinese central command had long expressed the position that China wouldn’t just not take any action on the U.S led “joint patrol.” The article suggested four immediate actions that China can take. First, China can quickly militarize the islands in the region. Second, if the “joint patrol” becomes intensified, China can announce the establishment of the South China Sea Air Defense Identification Zone. The third approach is to focus on Japanese vessels by flying aircraft over them at low altitude. The last mechanism is to mount higher pressure on Japan by increasing the frequency of law enforcement patrols near the Diaoyu Islands. The article called the strategy the new “protracted war,” which was the strategy China applied to win against Japan in the Second World War.

Source: Sina, September 19, 2016

People’s Daily: Why the U.S. Got Stuck in the Shooting-Protest Dead Loop

People’s Daily recently published a commentary suggesting that the U.S. is suffering the “dead loop” of having shooting tragedies followed by violent protests every month and it seems there is no way out. The article started with a discussion of “yet another shooting” which occurred recently in Charlotte, North Carolina. An unarmed black man was just one of the tens of thousands of innocent lives lost under police guns. Just in 2015, 986 innocent people died due to “over law enforcement.” That covered all 50 U.S. states except Rhode Island. Of those who died, 40 percent were African American. The U.S. always labels itself as the leader of democracy and human rights. However, even the democratically elected black President Obama regretted that there have been too many tragedies caused by a “disease” in the justice system – racial discrimination. The violent and over-done law enforcement process in the U.S. has made the nation’s human rights record “rustic,” and brought the total number of current prisoners to 2.2 million, which makes the U.S. number one in the world. Minorities can do nothing but protest. The author concluded that racial discrimination and injustice in the justice system bought the U.S. a one-way ticket to go deeper and deeper into the “shooting-protest dead loop.”

Source: People’s Daily, September 22, 2016

In August, Russia Became China’s Largest Oil Supplier

Well-known Chinese news site Sina recently reported that, according to data provided by Chinese Customs, in August, Russia replaced Angola to become China’s largest oil supplier. China increased oil imports mainly due to the stocking needs of China’s independent oil refiners. In August, the volume that Russia supplied increased by 50.2 percent, month-over-month. Angola was the largest supplier in July and Saudi Arabia used to hold the top seat. Statistics also showed that, in the first eight months, China’s total import volume from Russia increased by 30 percent, year-over-year. So far, Saudi Arabia is still China’s largest overall oil supplier, However, as of now, China’s imports from Saudi Arabia this year only saw a one percent increase, year-over-year. Currently Saudi Arabia’s supply level to China is 997,520 barrels per day, and Russia’s daily level is 977,330 barrels.

Source: Sina, September 22, 2016

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