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US risks enraging China by easing limits on Taiwan relations

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Mike Pompeo, US secretary of state, has lifted longstanding restrictions that limit US diplomatic relations with Taiwan, in a move that is likely to incense China days before the Biden administration takes power.

Washington cut ties with Taiwan in 1979 in favour of those with China, which sees the self-governing and democratic island as its own territory. While successive US administrations have loosened diplomatic restrictions and sold weapons to the island, Mr Pompeo’s action goes further than any in the past.

“Today I am announcing that I am lifting all of these self-imposed restrictions,” Mr Pompeo said in a statement on Saturday. He added that government agencies should consider all such “contact guidelines” previously issued by the Department of State to be “null and void”.

While the US has no official diplomatic relations with Taiwan, contacts between the two are governed by an unpublished set of codes that limit where officials can meet and even how correspondence is conducted. 

“The United States government took these actions unilaterally, in an attempt to appease the Communist regime in Beijing,” Mr Pompeo added. “No more.”

Mr Pompeo, who is due to visit Europe next week to hammer home his concerns over China, has led the Trump administration’s hawkish turn against Beijing, demanding allies side with the US and declaring an end to “blind engagement” with the Asian power.

China did not immediately comment on the move. But it has condemned this week’s announcement that Kelly Craft, US ambassador to the UN, would visit Taiwan next week as “crazy provocation”. It suggested the US was playing with fire.

The twin moves appeared to mark a victory for Taiwan, which has spent months lobbying for closer ties. Taiwan’s diplomatic office in Washington said the state department’s action reflected “the strength and depth” of the Taiwan-US relationship and that it looked forward to “broadening” the partnership in the months and years ahead. 

Elbridge Colby, one of the architects of the Trump administration’s tougher stance against China, said the move freed the relationship from “anachronistic bureaucratic structures” and argued it would enable the pair to work “more effectively” in defence. Both the Trump and Obama administrations sold large weapons packages to the island.

But Evan Medeiros, a former Obama official who worked on US-China relations, described the decision as a “public relations stunt of the first order” that would inflame Beijing and harm relations with Taiwan.

“It does nothing two weeks before inauguration but politicise the Taiwan issue — to Taiwan’s detriment,” he said. “If Pompeo feels so strongly why didn’t he do this a year ago and stay to manage the fallout?”

Mr Medeiros added that Beijing would probably wait to see what the incoming Biden administration did before taking any retaliatory move.

Bonnie Glaser, Asia expert at the Center for Strategic and International Studies, described the policy change as “a precedent-setting decision” that an outgoing administration should not take during its final days in office.

“Taking it now seems intended to box in the Biden team,” she said.

Critics have accused the Trump administration of attempting to hamper the Biden team’s room for manoeuvre. The US last month broke with convention by recognising Western Sahara and is reportedly considering designating Cuba as a state sponsor of terrorism and Yemen’s Houthi rebels as a terrorist organisation, a move some say would complicate efforts to resolve the conflict.

David Stilwell, top Asia official at the state department, told the Financial Times the Taiwan decision was the result of a lengthy review of the relationship. He denied the decision was rushed out in the waning days of the administration. “It’s been busy. We’ve had a lot to do,” he said.

“We have been trying to rectify the overall US-China relationship and this is one more step in that direction,” he added. He urged the Biden administration, which has vowed to take a tougher line on China than previous Democratic administrations, to maintain the new policy.

A Biden transition official said the president-elect had made it clear on the campaign trail that he was committed to the 1979 Taiwan Relations Act, which has defined relations with the country, and to the one-China policy.

“Once in office, he will continue to support a peaceful resolution of cross-strait issues consistent with the wishes and best interests of the people of Taiwan,” the official said.

“He has long said that American support for Taiwan must remain strong, principled, and bipartisan, and he plans to work to ensure that.”



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China lands spacecraft on Mars

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China has landed a spacecraft containing a rover on Mars, according to state media, in a further sign of its bold ambitions in the sphere.

The rover was part of the Tianwen-1 unmanned mission launched in July last year. Tianwen means “questions to heaven” and was named after a poem by Chinese poet Qu Yuan.

The mission, which was described by Chinese media as a “new major milestone” and the “first step in China’s planetary exploration of the solar system”, was intended to match the US by successfully landing on the red planet.

The Global Times reported that the lander and the rover from the Tianwen-1 probe reached a plain on Mars called Utopia Planitia on early Saturday morning local time, citing information from the China National Space Administration.

The Tianwen-1 probe’s lander and rover separated with the orbiter at about 4am, after which it had a three hour flight before entering Mars’ atmosphere, according to the newspaper.

The spacecraft then “spent around nine minutes decelerating, hovering for obstacle avoidance and cushioning, before its soft landing”. The rover is named Zhurong after a Chinese god of fire, and is 1.85m and weighs 240kg. It is expected to transverse the planet for about 92 days.

The probe was launched into space on July 23 by the Long March 5 rocket from the Wenchang launch pad in Hainan province, in the south of the country.

The achievement of the Mars landing is part of a wider expansion of China’s space programme. The country’s engineers launched the first part of its permanent space station into the Earth’s orbit late last month.

In 2018, China for the first time launched more vessels into orbit than any other nation.

The US views China’s efforts in space in strategic terms. “Beijing is working to match or exceed US capabilities in space to gain the military, economic and prestige benefits that Washington has accrued from space leadership,” according to the annual threat assessment published by the office of the US director of national intelligence.



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Iron ore sinks from record high on concerns over China crackdown

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The scorching rally that propelled the price of steel-making commodity iron ore to a record high came to a shuddering halt on Friday on concerns China will crack down on speculative activity.

The main iron ore futures contract in Singapore fell as much as 14 per cent to $190 a tonne before recovering to $209, while there were also big drops in China where the most active contract on the Dalian Commodity Exchange slumped almost 8 per cent.

The sell-off came as the local government in Tangshan, China’s main steel-making city, said it would examine illegal behaviour and suspend production at mills found to be manipulating market prices by spreading rumours and hoarding material, according to reports from Reuters and Bloomberg.

“China’s central government seems to be very concerned about this major input for its steel-intensive economy,” said Tom Price, head of commodities strategy at Liberum. “I think what the pullback reflects is the government trying to rein in prices.”

Line chart of $ per tonne showing Iron ore prices have fallen after a strong rally

Authorities in China have sought to cool hot commodity markets, with Premier Li Keqiang calling this week for stable prices. Iron was trading at $90 a tonne a year ago and hit a record high of $230 this week. Tangshan, which accounts for 14 per cent of China’s steel output, has introduced production curbs as part of a crackdown on pollution.

However, these measures have been slow to take effect as mills in the rest of the country have rushed to crank up output to take advantage of reduced capacity in Tangshan and cash in on record domestic steel prices. A decision to remove the export tax rebate for some steel products on June 1 has also led to other mills increasing production.

As a result, China’s steel production hit a record level in March, with output up 19 per cent year on year to 94m tonnes, according to financial group ANZ. The firm said production was even higher in April, with exports up 20 per cent year on year. That in turn boosted iron ore, which climbed 35 per cent over the past month.

“What the Chinese government is trying to do is incrementally contain the steel market, mindful of the fact they have spent a fortune resurrecting their economy over the past 12 months and they don’t want to kill the recovery,” said Price. “The measures are quite clever.”

Iron ore has led a broad advance in commodity markets over the past year, fanning talk that another “supercycle” — a long period of high prices — has arrived.

That has been a boon for big iron producers such as Anglo-Australian company BHP and its Brazilian rival Vale, which require a price of just $50 a tonne to break even.

However, most analysts think the iron ore market will remain tight and prices elevated for the rest of the year. That view is based on rising steel demand outside China as big economies accelerate and while important producers in Australia are operating at full capacity.

“While the price has been thumped in the past couple of days, demand remains robust, helped by the fantastic margins the steel industry is enjoying,” said Andrew Glass, Singapore-based founder of Avatar Commodities.

Elsewhere, copper was set for its first weekly loss in more than a month amid worries that a tightening of credit in China could hit demand for the metal, used in everything from household goods to electric vehicles. Copper, which started the week at $10,412 a tonne, was trading at $10,245 on Friday.



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Biden says ‘strong reason’ to believe pipeline hackers are in Russia

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Joe Biden said the US government has “strong reason” to believe the hackers behind a massive cyber attack that shut the Colonial petroleum pipeline were based in Russia, as he urged Americans to not panic over temporary fuel shortages.

“We do not believe the Russian government was involved in this attack. But we do have strong reason to believe that the criminals who did the attack are living in Russia. That is where it came from,” the US president said in a speech on Thursday afternoon at the White House.

“We have been in direct communication with Moscow about the imperative for responsible countries to take decisive action against these ransomware networks,” he added, noting he hoped to discuss the issue with Russia’s president Vladimir Putin.

The 5,500-mile pipeline system has capacity for 2.5m barrels a day of liquid fuels such as petrol diesel and jet fuel, which it carries from Gulf Coast refineries to major hubs in the north-east. The FBI has indicated that the shutdown was caused by a ransomware attack by hacking group DarkSide.

Cyber experts claim Russia tacitly allows ransomware gangs to operate in the country and will not prosecute them. In return, those criminals do not attack Russian companies and can be called upon to share their access to victims’ systems, experts say.

Last month, the US Treasury accused one of Russia’s intelligence services, the FSB, of “cultivating and co-opting” the notorious ransomware group Evil Corp, which has been sanctioned.

The Colonial pipeline — responsible for carrying almost half of the motor fuel used on the US east coast — began the process of fully reopening on Wednesday evening, five days after it was hit by a cyber attack that triggered a spate of panic-buying by motorists across the US south-east.

Biden said the US government expected a “region by region return to normalcy beginning this weekend and continuing into next week”. He urged Americans to avoid panic-buying petrol, and said he had called on state governors and local authorities to keep a lookout for any illegal price gouging by businesses.

“Don’t panic, number one. I know seeing lines at the pumps or gas stations with no gas can be extremely stressful, but this is a temporary situation,” Biden said. “Do not get more gas than you need in the next few days.”

Shortages at filling stations triggered by panic-buying continued on Thursday, with 70 per cent of stations in North Carolina running dry and about half in Virginia, Georgia and South Carolina, according to GasBuddy, a data provider.

The situation in some major urban hubs was beginning to improve, however. The amount of stations without fuel in Atlanta fell from a peak of 73 per cent overnight to 68 per cent by Thursday afternoon.

Colonial on Thursday morning said it had made “substantial progress” in bringing its operations back online and that all of its markets would begin receiving product by the afternoon.

Prices at the pump have continued to rise. National average petrol prices rose to $3.03 on Thursday, according to the AAA, an automobile association. They crossed the $3 a gallon threshold on Wednesday for the first time since 2014.

Gasoline futures retreated on the news of Colonial’s reopening, as traders anticipated supplies returning to normal. Contracts for June delivery slipped 7 cents to $2.08, their lowest level since April in Thursday afternoon trading.



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