Chinese Peril

China is becoming an election issue in Asia. And that's bad news for Beijing
By James Griffiths

Hong Kong -- Two years ago, Indonesian President Joko Widodo -- also known as Jokowi -- stood shoulder to shoulder with Xi Jinping for a group photo to celebrate the Chinese leader's Belt and Road project.
Yet now, as Jokowi seeks re-election, he appears to be distancing himself from Beijing and downplaying the importance of Chinese-funded projects in Indonesia.
It's a pattern emerging across southeast Asia and beyond, and one that will be of great concern for Beijing as Chinese investment and ties become an awkward -- if not downright toxic -- election issue.
The growing skepticism over Xi's signature Belt and Road Initiative (BRI) risks exacerbating existing tensions many countries in the region have with Beijing over territorial disputes, as both China and the US continue to jockey for power amid a drawn-out trade war.

Vladimir Putin, Chinese dictator Xi Jinping, Indonesia's President Joko Widodo and other delegation heads pose for a group photo as they attend the Belt and Road Forum for International Cooperation at the Yanqi Lake venue on May 15, 2017, on the outskirts of Beijing, China.

Better deal
"It is not true if people think President Jokowi has special preference for China-funded projects," his spokesman Ace Hasan Syadzily said last week.
If Widodo's camp sounds defensive, it's because his ties to Beijing have become a key attack line for rival Prabowo Subianto.

After Jokowi undercut Prabowo's criticisms of him being not Muslim enough by selecting an Islamist cleric as his running mate, the retired general has gone hard after Chinese investments in Indonesia once touted by the President.

In January, Prabowo -- echoing US President Donald Trump -- vowed to get a "better deal" from Beijing, and called for Jakarta to review its trade policies with China.
Anwita Basu, an analyst at the Economist Intelligence Unit, said that "over the course of the campaign period, anti-China rhetoric has been on the rise."
"The Chinese community in Indonesia -- who have mainly been business owners and traders -- have long faced resentment and discrimination for controlling large amounts of wealth," she told CNN by email. 

"These issues are touted and popularized during election periods and this year, (Prabowo) has used them as a means to question Jokowi's loyalty to his own nation."
China is Indonesia's biggest trading partner by far, according to the World Bank. 

In the first two months of this year, trade between the two countries was worth more than $10.4 billion.
Under Jokowi, Indonesia has joined both the China-led Asian Infrastructure Investment Bank as well as Xi's BRI. 

The initiative has come under increasing criticism in recent months, amid claims it saddles poorer countries with unsustainable debts and projects that benefit Beijing more than host nations.
Beijing has funded major infrastructure projects in Indonesia, most notably a $6 billion high-speed railway linking Jakarta with the city of Bandung, the capital of West Java.
That project is due to be completed next year. 

But it has come under criticism for budget overruns, poor planning and construction delays. 

Even supporters of greater Chinese investment in Indonesia have turned on it -- Tom Lembong, the country's investment chief, told Bloomberg it "represents everything that's wrong with Belt and Road."
"It's opaque and non-transparent -- even us cabinet members are having trouble getting data and information," Lembong said.

Running on anti-China
While the Indonesian election still seems Jokowi's to lose, and a Prabowo presidency appears to be a long shot, recent history shows Beijing can little afford to be complacent.
Chinese investment and influence played a role in Malaysia's elections last year.
And while it was not the driving factor in Mahathir Mohamad's upset victory in May, the 93-year-old has followed through on promises to be tougher on Beijing since becoming President.
Nor were such concerns limited to the Malaysian election.
During a poll in the Maldives last year, incumbent and eventual loser Abdulla Yameen was repeatedly attacked over his close ties to Beijing.
In January 2018, former President Mohamed Nasheed accused Yameen of allowing China to stage a "land grab" in the country. 
After his Maldivian Democratic Party took power, it pledged to end "China's colonialism" and renegotiate loans with Beijing.
Other countries, such as Myanmar, have scaled back BRI projects amid concerns over debt and sustainability.
Beyond Asia, Kenyan President Uhuru Kenyatta faced claims that a key port in Mombasa was at risk of being seized by Beijing over unpaid debts.
The public relations storm was sparked by an actual move by China to take over Sri Lanka's Hambantota port, after the country could not pay back the billions of dollars it owed Beijing.

Losing its sheen
As China prepares for a key Belt and Road summit later this month, there are signs Beijing is looking to overhaul the initiative in an attempt to address some of its most pressing issues and defuse criticisms from foreign partners.
While she felt the backlash against China in countries such as Indonesia and Malaysia was outweighed by others like the Philippines moving closer to Beijing, EIU analyst Basu predicted "many countries will remain cautious over the lack of transparency in the terms of funding offered" for BRI deals.
The backlash against BRI, which appears to have caught Chinese leaders off guard, has highlighted that beyond investment, Beijing has little to offer its neighbors -- many of which are either neutral or opposed to it on key foreign policy issues.
"China's increasingly assertive policy in the South China Sea since 2009 has reinforced concerns about whether the country's rise will continue to be peaceful, especially in light of Beijing's perceived role in undermining Asean unity," Jakarta-based political analyst Dewi Fortuna Anwar wrote last month.
Both Indonesia and Malaysia have territorial disputes with China, and in December Jokowi oversaw the opening of a military base on the Natuna Islands at the southern tip of the South China Sea. Malaysia too has expressed concern over Beijing's sprawling claims in the disputed waters.
Governments in the two Muslim-majority countries are also facing increasing pressure to stand up to China over its treatment of the Uyghur minority, hundreds of thousands of whom have been sent to "re-education" camps amid a wider crackdown on Islam.
As it attempts to balance an increasingly hostile US -- and ward off the ill effects of a temporarily paused trade war with Washington -- China is finding that its traditional methods of winning friends in Asia is losing its sheen.
And the closer it gets to superpower status, the more its influence and power can be used against it.

China Is Spying On Israel to Steal U.S. Secrets

Benjamin Netanyahu ignored the Chinese intelligence operations for too long. Now, the Israeli government is finally paying attention, but it could be too late.
BY YOSSI MELMAN
Israeli Prime Minister Benjamin Netanyahu talks with soldiers as he stands near a naval Iron Dome defense system installed on a Sa'ar 5 Lahav Class corvette of the Israeli Navy fleet, in the northern port of Haifa on Feb. 12.

This month, Israel’s National Security Council (NSC) will present the cabinet with its recommendations on foreign investments in Israel. 

Because of the sensitivity of the issue, no one in the cabinet is prepared to talk about the elephant in the room. 

Nevertheless, it is clear that the policy review and the report are primarily focused on China.
In the past decade, Beijing has increased its economic and military investments and interests in the Middle East, including Israel.
In the past decade, Beijing has increased its economic and military investments and interests in the Middle East, including Israel. 

The Israeli government ignored China’s behavior for too long, but lately it has begun to pay attention. The National Security Council has to reconcile two contradictory policies, both of which are important to the Israeli economy and its national-security interests.
The first is a policy embraced by all government across the political spectrum for decades: encouraging foreign investment, privatization of national assets and utilities, and the expansion of international markets for Israeli goods. 

In recent years, like many other exporters, Israeli firms have looked eastward to the growing and developing economies of Asia—and China’s in particular.
A recent survey by the Israeli intelligence community that is not in the public domain shows that Chinese investment in the Middle East rose by 1,700 percent between 2012 and 2017. 

Altogether, the Chinese have invested $700 billion in the region. 

Nearly half of it is in the energy sector, $150 billion in research and development, $113 billion in industry, $103 billion in transportation, $68 billion in the military field, $4 billion in financial loans, and only $155 million in humanitarian aid.
From 1992 to 2017, China’s bilateral trade with Israel has grown from $50 million to $13.1 billion, making it Israel’s largest trading partner in Asia and its third-largest trading partner in the world after the European Union and the United States. 

In the first half of 2018, China’s imports from Israel reached $2.77 billion, an increase of 47 percent compared with the same period in 2017.
The second policy is to defend national and strategic assets and infrastructure from being controlled and taken over by foreign governments and corporations, even if they are not hostile to Israel. Because of its high-tech economy, Israel also faces the delicate problem of foreign spying and theft of its advanced technologies and know-how. 

Russia and China have in recent years enhanced their espionage efforts in Israel, particularly to obtain access to both state-owned and private-sector Israeli tech companies, and through them to the United States
Russia and China have in recent years enhanced their espionage efforts in Israel, particularly to obtain access to both state-owned and private-sector Israeli tech companies, and through them to the United States, a close ally of Israel.
China has targeted Israel’s two largest arms exporters, Israel Aerospace Industries and the arms manufacturer Rafael, along with the company Elbit Systems. 

The first two are state-owned corporations, and all three have subsidiaries in the United States that help manufacture Israel’s most advanced weapons, including missiles and avionics. 

These designs and trade secrets are coveted by intelligence agencies and governments throughout the world.
Investigations by Israeli counterintelligence agencies discovered that Chinese hackers were particularly interested in the Israeli companies’ ties with U.S. defense contractors. 

The Israeli firms are collaborating with their U.S. counterparts such as Raytheon, Boeing, and Lockheed Martin in the joint projects, which include F-16 and F-35 warplanes and the Arrow anti-ballistic missile defense systems. 

Clearly, China perceives Israel as a back door through which it can access and penetrate secret U.S. programs.
Israel is an international powerhouse when it comes to cyberwarfare, which is of the utmost importance to Moscow and Beijing. 

If they can steal state-of-the art technologies, it could create havoc in the United States and other Western democracies.
It’s no wonder that both countries have large embassies in Tel Aviv, which serve as hubs to advance their interests. 

Until recently, China was interested in purchasing a chunk of land in the posh neighborhood of Herzliya Pituach for its new embassy. 

It is located very close to Mossad headquarters and those of the military intelligence agency Unit 8200 at the Glilot Junction, north of Tel Aviv.
In their attempts to penetrate defense installations and steal security-related technologies, Russia and China have faced a fierce, determined, and skillful rival—the Shin Bet, Israel’s domestic security service, which specializes in counterintelligence and information protection.
Huawei has deep ties to the Chinese government. 

Berlin might let it build the country’s next generation of communications infrastructure anyway.
But the civilian sector, especially firms producing technologies that can be used for both peaceful and military purposes, is less protected. 

For many years, consecutive Israeli governments neglected and ignored the security risks posed by China. 

On the contrary, they encouraged Chinese businessmen to invest in Israel and purchase Israeli assets. But when it comes to China, the so-called private sector is a fiction. 

The government controls the economy. 

Whoever deviates from party guidelines is severely punished.
And so over the last 15 years, Chinese companies have invaded Israel. 

They purchased Tnuva, a household name and the country’s largest producer of dairy products. 

They won tenders to build roads, light rail lines in Tel Aviv, and the Carmel Tunnels in Haifa. 

China has also expressed intentions to buy Israeli insurance companies and banks, to lease huge tracts of land in the Negev Desert to grow avocados and wheat, and to build a railroad from Tel Aviv to Eilat.
Chinese construction companies are now enlarging Israel’s two major ports in Haifa and Ashdod, which handle most of Israel’s trade. 

Even more worrisome is the fact that Chinese companies have gained the concessions to operate and run the new harbors for 25 years. 

Both ports are also the bases for the Israeli navy, including heavily fortified marine infrastructure which houses the Israeli submarine fleet. 

The decision to build the Haifa marina was a result of the 2006 war in Lebanon. 

During the war, Hezbollah rockets hit Haifa aiming at the port and navy vessels.
The five-strong submarine fleet (the sixth submarine is due to arrive next year from Germany, where all of them were constructed) reportedly carries nuclear-tipped missiles, thus providing Israel with a second-strike nuclear capability, if and when Iran obtains its own nuclear bombs.
For years, Prime Minister Benjamin Netanyahu and his deputy, Transportation and Intelligence Minister Yisrael Katz—who is now also acting foreign minister—encouraged the Chinese to gain access to the Israeli market and boasted about their achievements.
Only a few officials tried to warn Netanyahu and the cabinet, including the Shin Bet’s leaders and Efraim Halevy, the former head of Mossad. 

But their warnings were not taken seriously. 

Even Shaul Chorev, a former rear admiral and commander of the submarine fleet from 1980-1985, who was also a defense ministry official and the director general of the Israel Atomic Energy Commission (IAEC), seemed not to be bothered and kept silent.
Now as the head of the Haifa Research Center for Maritime Policy and Strategy at the University of Haifa, Chorev has expresses some concerns about the new Chinese neighbors of the submarine fleet. “I admit that I was insufficiently interested in the topic because as the director of the IAEC I was too busy with other important issues,” he told Foreign Policy. 

“But now I and the center are actively raising awareness of the problem.”
Israel’s bureaucratic negligence was reversed only because of external pressure. 

The U.S. administration perceives China as its main rival and has turned its attention from the Middle East to Asia, the Pacific, and the Korean Peninsula.
U.S. President Donald Trump has declared a trade war on China and is trying to limit its economic and military expansion. 

One of the United States’ major concerns was Chinese involvement in the Haifa port, which is a host to frequent visits by the ships of the U.S. Sixth Fleet, including aircraft carriers.
That’s why Chinese involvement in Israel got Washington’s attention. 

The Trump administration asked Israel to reduce its ties with China, and U.S. National Security Advisor John Bolton directly requested it. 

Israel doesn’t want to insult or humiliate China, which is sensitive in terms of its pride and would undoubtedly retaliate. 

But Israel can’t ignore a request, which is really a demand, from its most important strategic ally.
In the past, when it came to relations involving the three nations, Israel has bowed to U.S. pressure because it had to comply. 

It is almost certain that past failures and negligence, especially in the harbors, can’t be fixed. 

The contracts given to Chinese firms cannot be canceled. 

In case of war, the submarines will go to sea, but they and the U.S. fleet could still be vulnerable to a surprise attack.
The forthcoming Israeli National Security Council report is therefore likely to focus on the future and seek a solution that satisfies Washington without offending Beijing—offering a set of recommendations to the cabinet that addresses economic needs while defending essential strategic installations and interests in the fields of water, land, energy, food, telecommunications, and finance.
One thing is clear: If the report leads to new laws or regulations, they will employ generic language that will avoid singling out any specific country. 

They will refer to all foreign governments and corporations— although everyone now knows that the main targets will be Russia and China.

Italian Horse

A Forgotten Port Could Become a Chinese Gateway to Europe
By Jason Horowitz

Tourists in Trieste, Italy, this month. A brand-new cruise ship, built in nearby shipyards expressly for Chinese passengers, is docked in the central waterfront piazza, preparing to set sail on Marco Polo’s path to the Far East.

TRIESTE, Italy — For centuries, this cosmopolitan port city at the northern tip of Italy’s Adriatic coast acted as a geographic pivot point between empires.
Then, for nearly 70 years, Trieste’s geopolitical star dimmed and its old world mishmash of central European cultures grew stale, like an old strudel in one of its elegant cafes.
Now, courtesy of a rising China, Trieste appears ready to return to the center of a realigning world.
This week, Xi Jinping arrives in Rome for a state visit in which Italy is expected to become the first Group of 7 nation to participate in China’s vast One Belt, One Road infrastructure project.
The symbolism is striking — a powerful China drives a crack in the economic alliance that once dominated the globe and delivers a major blow to a Trump administration that has been critical of the Belt and Road Initiative.
For Italy, the deal would open the country to greater Chinese infrastructure investment, particularly in ports like Trieste.
Officials here say they expect Beijing-backed conglomerates, such as the China Communications Construction Company, to bid hundreds of millions of euros for infrastructure concessions.

The old port in Trieste. 

For China, having a toehold in one of Europe’s historic ports would bring favorable customs conditions, a faster trade route to the heart of the Continent and direct access to railroads for moving its goods into the European Union.
“Fundamentally, what’s happening is that the port of Trieste is returning to the logistical role for Europe that it had for the old Austro-Hungarian empire,” said Zeno D’Agostino, the president of the Trieste port authority, whose office is sprinkled with gifts from Chinese delegations and a book about European-Chinese cultural relations.
To walk through Trieste is to witness how the city has already opened to China.
Chinese tourists shop for the city’s trademark Illy coffee and take pictures with their Huawei phones of the elegant Caffè Degli Specchi.
A brand-new cruise ship, built in nearby shipyards expressly for Chinese passengers, is docked in the central waterfront piazza, preparing to set sail on Marco Polo’s path to the Far East.
Most significant, construction workers in scuba gear have been laying foundations near the site where a new pier is expected to become China’s home in the industrial port.
In the years after World War II, the Americans held great sway in Trieste, and Washington has now sought, so far unsuccessfully, to stop Italy’s deal with Xi, characterizing the Belt and Road Initiative as an economic and potentially military threat.
While other members of the European Union, including France and Germany, have also expressed reservations about the deal with China, supporters in Italy say that there is nothing to worry about and that the critics are merely upset that Trieste — and other Italian ports, like Genoa and Palermo — are going to cut in on their business.
They reject comparisons to the port of Piraeus in Greece, which China essentially bought, and say Italian law makes such an acquisition or the laying of Chinese debt traps impossible.

Construction on a platform at the Trieste port, one of the projects that could benefit from a Chinese-Italian economic accord.

Michele Geraci, an Italian economic development minister who is running the negotiations with Beijing, said in an interview that Chinese ships carrying materials from home or its vast network of interests in Africa through the Suez Canal simply needed to get their goods to central European markets as quickly as possible.
“Trieste meets that requirement swiftly,” he said.
Italian officials say their American counterparts initially seemed disinterested in the deal.
Deputy Prime Minister Luigi Di Maio, the leader of the Five Star Movement, has made several trips to China in recent months, nearly signing the accord during a November visit to Beijing, they said. After the fact, American diplomats began making their case, but the Italians said the deal was noticeably not on the American radar during recent high-level meetings in Washington.
But this month, Garrett Marquis, spokesman for the American national security adviser, John R. Bolton, sharply attacked the deal in a Twitter post and in several interviews, while the National Security Council’s official Twitter account also issued a reproach on March 9.
“Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people,” the tweet stated, referring to the Belt and Road Initiative.
The Americans have also tried to pressure leaders of the nationalist League party, which is part of the governing coalition in Italy.
This month, Trump administration officials and, separately, the former White House official Stephen K. Bannon, met with party leaders; Mr. Bannon said that he had warned his Italian allies in the League against what he called China’s “British East India Company model of predatory capitalism.”

The Piazza Unità d’Italia, the main square in Trieste. Participating in Beijing’s vast Belt and Road Initiative would open Italy to greater Chinese infrastructure investment.

Awakened to the growing Chinese influence, American officials have had more success pushing Italy to avoid using the new 5G networks of the Chinese electronics giant Huawei, which Washington warns could be used by Beijing to disrupt and spy on communications networks.
In recent days, the Italians have excised any mention of technology and communications from the Belt and Road agreement, people familiar with the negotiations said.
In Trieste, city leaders are focused on the economic benefits to the port.
Beyond its convenient location, the city on Monday celebrated the 300th anniversary of Emperor Charles VI of Austria declaring it a “free port.”
That status still confers special privileges, with no customs charges or time limits on storage for goods.
If the deal goes through, proponents say they envision Chinese companies working with Italian counterparts, hiring local laborers to assemble imported goods before putting them on trains to the rest of Europe or on ships back to China.
If the amount of work and components used measure up to customs requirements, those products could be labeled Made in Italy.
But some business leaders say that fully embracing the Belt and Road program would bring risks and could complicate efforts to bring other investment to Trieste.
Vittorio Petrucco, chairman of I.CO.P, a construction company doing work in the port, said he and a former Microsoft consultant in Trieste, which has a vibrant research sector, had begun exploring his “dream” of building an underwater data center that would cool the servers of American tech giants.

A warehouse in Trieste. Michele Geraci, an Italian economic development minister, said Chinese ships needed to get their goods to central European markets as quickly as possible. “Trieste meets that requirement swiftly,” he said.

“I prefer to look West instead of East,” Mr. Petrucco said of his project, planned for an area near an old ironworks factory that looms above the pier envisioned for use by the Chinese.
He added that both projects would take years to build and worried that all the American opposition and controversy surrounding the Belt and Road agreement would poison the waters for his proposal.
“It’s sad,” he said, “but there’s nothing I can do about it.”
Roberto Dipiazza, the mayor of Trieste, said that the United States could scuttle the deal if it really wanted to.
He said that his city had much to gain from closer ties to China, but that the Chinese had even more to gain from his port’s deep harbors, customs benefits and rail yards.
“We will find a point of agreement between China and the U.S.,” he said, showing off a Make America Great Again cap signed by President Trump that he had received as a gift.
Italy, he noted, was caught “in the middle.”
Some of Trieste’s most entrenched political players think Italy is compromised by such a position.
Giulio Camber, a veteran lawmaker considered by many to be the political boss of Trieste, said he no longer had any interests in the port, and that his opposition to the deal was motivated by his distrust of what he called China’s Communist dictatorship.
As light sliced in through the closed curtains of his office, illuminating his cigarette smoke, gilded furniture and oil paintings, Mr. Camber said the Chinese were behind many of the Turkish businesses exporting goods into the port. 
Beijing, he said, would feast on the Italians just as they did on the Greeks before them.
“They are the weakest,” he said of the Mediterranean countries.
Mr. Camber dismissed the local and national assurances about Chinese expansion, saying that Beijing would easily outmaneuver officials in Rome.
“It’s like the world champion in chess playing with a couple of guys who play for fun at the Caffè Degli Specchi,” he said, referring to the famous cafe in Trieste’s main square, the Piazza Unità d’Italia.
“You can’t imagine what the world’s best chess player is up to.”

Sinica Pecunia Olet

In New Slap at China, U.S. Expands Power to Block Foreign Investments

By Alan Rappeport

The Treasury Department said it would expand its reviews of Chinese investments in the United States, using new powers approved by Congress.

WASHINGTON — The Trump administration said on Wednesday that it would more aggressively police foreign investment in the United States, outlining a rigorous review system that is aimed primarily at preventing China from gaining access to sensitive American technology.
The investment restrictions will allow the United States to block a far wider array of Chinese transactions that are deemed a threat to national security, including minority stakes and joint ventures in technology, telecommunications and other cutting-edge companies.
While Congress passed the expanded review system into law this summer, the administration signaled that it would apply its new authority very broadly and would review any foreign transaction involving a business that designs or produces technology related to 27 industries, including telecom, semiconductors and computers. 

Foreign investors will be required to submit declarations notifying the panel of their intentions when making a bid and could be assessed a fine up to the value of the transaction if they fail to comply.
The toughened investment regime will apply to all countries but is aimed largely at China, which President Trump has accused of trying to gain access to valuable American technology through nefarious means. 

The White House has criticized China for trying to obtain trade secrets by investing in United States companies, pressuring domestic firms doing business in China to hand over intellectual property and committing outright cyberespionage.
On Wednesday, a Chinese intelligence official was arrested in Belgium and brought to the United States to face espionage charges, further escalating the China crackdown. 

Law enforcement officials said the official tried to steal trade secrets from GE Aviation.
The administration has already taken several steps to stop Beijing from harnessing American technology in critical sectors, such as the next generation of 5G wireless technology, and to thwart China’s strategic plan to dominate cutting-edge industries, known as Made in China 2025. 

It has imposed tariffs on $250 billion worth of Chinese goods as a form of punishment and has threatened to tax all Chinese imports if Beijing does not change its trade practices.
But the foreign investment review takes things up a notch and threatens to exacerbate tensions between the world’s two largest economic powers, which have engaged in a tit-for-tat trade war and increasingly harsh exchanges about each other’s policy and approach.
Chinese officials canceled a trip to Washington late last month to resume trade talks after President Trump moved ahead with a second round of tariffs. 

On Monday, China’s foreign minister, Wang Yi, chided the Trump administration for “ceaselessly elevating” trade tensions and “casting a shadow” over relations between the two countries. 

Secretary of State Mike Pompeo, who was visiting Beijing for talks, said the United States had a “fundamental disagreement” with China on the issues that it raised.
The Treasury Department said on Wednesday morning that it would begin a pilot program using new powers under the Foreign Investment Risk Review Modernization Act. 

The law expanded the purview of the Committee on Foreign Investment in the United States, or Cfius, an interagency panel led by the Treasury Department that can block acquisitions on national security grounds, and the department is moving swiftly to take advantage of its new tools.

Until now, only takeovers and controlling stakes in American companies could be reviewed. 

Under the pilot program, Cfius will be able to review a much wider array of deals, including joint ventures and smaller investments by Chinese in American businesses that make technology deemed critical for national security reasons.
Beginning on Nov. 10, the panel can review — and block — a deal if a Chinese investor takes a stake in a business that makes sensitive technology and if that investor gains potential access to nonpublic technical information or can engage in substantial decision-making over the company, such as getting a board seat.
The new law, which passed with bipartisan support, gave the Treasury Department 18 months to develop rules to put the panel’s new powers into effect, but the program announced on Wednesday will allow it to be put in place more quickly.
“These temporary regulations address specific risks to U.S. critical technology while informing the development of final regulations that will fully implement Firrma,” Steven Mnuchin, the Treasury secretary, said, referring to the Foreign Investment Risk Review Modernization Act.
China has increasingly been looking to invest in high-tech industries in the United States. 

According to data from Public Citizen, a liberal advocacy group and think tank, 56 percent of Chinese investments in the United States last year were in industries that Beijing defines as “strategic,” such as aviation, biotechnology and new-energy vehicles — up from 25 percent in 2016.
But the administration’s trade measures have already chilled Chinese investment in the United States, which fell more than 90 percent from the first half of 2017 to the first half of 2018, to its lowest level in seven years, according to tracking by Rhodium Group.
The panel has already stepped up its scrutiny of deals under the Trump administration as the president looks to employ a more protectionist “America First” agenda.
Earlier this year, Cfius scuttled a proposed takeover of Qualcomm, the San Diego-based chip maker, by Broadcom, a rival that at the time had headquarters in Singapore, over concerns that it would pose a national security risk by depriving the United States of a telecom leader. 

It also refused to approve a $1.2 billion deal between MoneyGram, a money transfer company based in Dallas, and Ant Financial, a Chinese electronic payments company.
Republicans and Democrats in Congress have been generally united in their desire to crack down on Chinese theft of American intellectual property.
At a Senate hearing on homeland security on Wednesday, Senator Rand Paul, Republican of Kentucky, called on Cfius to review Broadcom’s proposed $18.9 billion acquisition of CA Technologies. 

He noted that the network systems of CA Technologies were deeply embedded in critical infrastructure facilities and national security agencies.
Nicole Lamb-Hale, head of the Cfius advisory practice at the risk management firm Kroll, said that the global nature of the new pilot program could have a chilling effect on businesses seeking foreign investment and that it would create additional hurdles for transactions. 

However, she acknowledged, with recent reports that Chinese spies have been using chips to infiltrate American companies, there is greater urgency to protect American intellectual property.
“I think that really brings into focus the concern that we are at a point where if we don’t do something very quickly, we’re going to be in a position where from a national security standpoint we’re at risk,” said Ms. Lamb-Hale, who previously handled Cfius matters at the Commerce Department.
President Trump was considering a more draconian plan that would have imposed sweeping investment restrictions on China last summer, but instead decided to support the proposal to grant Cfius more power. 

That decision was seen as a win for Mr. Mnuchin, who has been working behind the scenes to defuse the trade dispute.
But Mr. Mnuchin has also been showing signs of being less accommodating recently. 

In an interview with The Financial Times that was published on Wednesday, he said he was closely monitoring China’s currency, the renminbi, and noted that it had been falling this year. 

The administration has been concerned that China has been manipulating its currency to mitigate the effects of the tariffs, and he said the issue of competitive devaluations should be part of the broader trade negotiations.
Mr. Mnuchin is traveling this week to the annual meeting of the World Bank and the International Monetary Fund in Bali, Indonesia, where he will have the chance to explain the new changes to his counterparts from countries around the world in person.

Losing China-backed projects positive for Malaysia: report

By Edward White in Taipei

Prime minister Mahathir Mohamad

Malaysia’s threat to cancel a suite of Chinese-backed infrastructure projects could ultimately be positive for the south-east Asian country’s economy despite probably slowing the pace of headline growth, according to one economist.
 Malaysia’s new prime minister Mahathir Mohamad has promised to review all Chinese projects and renegotiate any “unequal treaties”.
This move has threatened to destroy the image of Malaysia as a key pillar of Xi Jinping’s Belt and Road initiative. 
 “If the projects are cancelled, investment growth would drop sharply, and GDP growth would likely slow. But cancelling the projects may actually be in Malaysia’s best interests,” said Alex Holmes, Asia economist for Capital Economics, in a research note on Monday. 
 Mr Holmes said that because the Malaysian economy was already growing at respectable year-on-year pace of 5.4 per cent in the first quarter, the additional investments from China “could have caused the economy to overheat, leading to a rise in inflation”. 
 The proposed Chinese investments, which included ports and rail projects, could also lead to the country being “saddled with bad debts”, weighing on an already-poor fiscal situation, he said. 
 And he added: “some of these projects are of dubious economic value. Malaysia already has good infrastructure, equivalent to what you’d expect in a developed economy, and much better than countries at a similar income level.”

The Necessary War

U.S. readies secret weapon in trade war with China

By RACHEL LAYNE

Fears of a U.S. trade war with China have focused on the threat of $150 billion in tariffs, risk to American industries like farming and potentially higher prices on a wide range of products.
But with U.S. and Chinese officials concluding trade talks in Beijing in early May without a major breakthrough, a broader effort with bipartisan support is gaining steam in Congress that could have a far bigger impact on relations — and on the American economy. 

The push involves increasing the authority of a government panel, little known to the public, that oversees foreign acquisitions of American companies.
Legislation in both the House and Senate seeks to stem China's access to U.S. intellectual property gained by acquiring and investing in domestic companies. 

Proponents of the measures say limiting Chinese control over U.S. players, especially in key sectors like technology and telecommunications, is a matter of national security.
"There is now strong support among both parties for curbing Chinese investment in the U.S., and for slowing or reversing the pace of technological integration between the two countries," Arthur Kroeber, head of research for Gavekal Research, said in a research note, adding that "the battle over investment has only just begun."
At the same time, President Trump has asked the Treasury Department to offer recommendations on tariffs by May 21, and that report may also include ways to limit foreign investment in the U.S. Combined, the initiatives represent the most aggressive government effort in decades to blunt the influence of a foreign power: China.

"Serious concerns"
In one stark example of unconventional steps the U.S. can take to target Chinese businesses, the Commerce Department in April imposed a seven-year sales ban on Beijing-based ZTE after finding that it had violated sanctions on doing business with Iran and North Korea. 

The telecom said Thursday that it has halted its main operations because of the move, which cut off access to key components, like microchips, made in the U.S.
Yet the bills wending their way through Congress -- both called the Foreign Investment Risk Review Modernization Act of 2017, or FIRRMA -- could give the government far more firepower to disrupt foreign businesses seeing to operate in the U.S. 

The measures aim to strengthen the Committee on Foreign Investment in the United States, or CFIUS, a panel created by President Gerald Ford in 1975.
CFIUS, which includes representatives from the departments of Treasury, Defense, State, Commerce, Energy and Homeland Security, reviews individual acquisitions by foreign entities in the U.S.. 

And historically, the panel has blocked relatively few such purchases. 

That reticence is consistent with the long-held view of most American political leaders and economic officials that free trade, including investment from around the globe, makes for a more dynamic economy.
The legislation aims to better protect U.S. intellectual property in artificial intelligence, robotics and other domains by giving CFIUS broader authority to block foreign acquisitions.
The House Financial Services Committee this week postponed a vote on FIRRMA amid concern from businesses about differences between the Treasury and Defense departments on the legislation, Politico reported on Friday.
"The acquisition of a Silicon Valley startup or even a health care provider may raise just as serious concerns from a national security perspective as the acquisition of some defense or aerospace companies, CFIUS's traditional area of focus," Heath Tarbert, an assistant secretary of the Treasury, said in April in written testimony before a House subcommittee.
CFIUS has already stepped up restrictions on foreign-based transactions, most notably recommending in March that Mr. Trump block a proposed $117 billion deal by Singapore's Broadcom for U.S. telecom parts manufacturer Qualcomm.
China is accused of swiping inventions covered by U.S. patents, trademarks and copyrights for everything from aviation equipment to software as it turbocharges its economy. 

Yet its status as the world's second-biggest economy makes it an obvious market for U.S. corporations.
"It's tricky business," said Matt Gold, an adjunct professor of law at Fordham University and a former deputy assistant U.S. trade representative for North America. 

"You can't stop all American capital from creating jobs overseas. And you don't want to stop all foreign capital from creating jobs here."

Indeed, experts fear that tightening the spigot on Chinese investment could deprive American companies of an ample source of capital — funding needed to drive growth and employment.
Some 2.6 million U.S. jobs rely on the U.S.-China trade relationship, according to Oxford Economics, with at least 43,000 tied to direct Chinese investment. 

At their peak in 2016, Chinese companies spent $62.8 billion on buying U.S. firms, a roughly 100-fold rise from 2000, according to Dealogic.
Between 2000 and 2017, more than 1,500 deals have involved Chinese companies investing in the U.S., according to Rhodium Group. 

Chinese companies have made direct acquisitions in most U.S. states.
The U.S. companies in which Chinese firms hold large stakes run the gamut. 

They include technology giants such as IBM and Tesla; automaker General Motors; agriculture giant Smithfield Foods; and fast-growing startups such as Uber, Lyft, Snap, Grindr and Airbnb.
That tide of funding may soon slow to a trickle. 

With Treasury set to outline a plan to curb outside investment, the Senate bill has been fast-tracked. Analysts speculate it could reach the floor by August.

The Malaysian election result could hit Chinese investments

• A stunning win by the opposition bloc in Malaysia's general election on Wednesday could have implications for the nation's ties with China.
• Mahathir Mohamad said the country could renegotiate several agreements that had been struck with China.
• Mahathir criticized the previous administration for selling out to China.

By Cheang Ming | Huileng Tan

A stunning win by the opposition bloc in Malaysia's general election on Wednesday could have implications for the Southeast Asian nation's ties with China, a major invsetor.
Mahathir Mohamad, a former Malaysian prime minister who led his opposition alliance to victory over the ruling coalition, said Thursday the country could renegotiate several agreements that had been struck with China.
Mahathir said he had no problem with China's Belt and Road Initiative (BRI), a wide-reaching infrastructure investment program, but added that "we would not like to see too many warships in this area, because [a] warship attracts other warships," Reuters said on Thursday.
Those comments come on the back of warmer ties between Malaysia and China in recent years under the administration of Prime Minister Najib Razak.
Malaysia was the fourth-largest recipient of China's overseas direct investment last year, a 2017 report from the Economist Intelligence Unit said. 

That compared to the country's position of 20th place in the 2015 ranking.
That came as China seeks to expand its influence overseas, spurring concerns internationally about the reach of the Chinese Communist Party.
Mahathir took issue with vast mainland Chinese investments under Najib's administration during his campaign, arguing that his country has been selling out to Beijing.
In Malaysia, a number of major port and rail projects have been scheduled for development. 

A Citi report estimated they would receive as much as 400 billion ringgit ($101 billion) in Chinese investments over the next two decades.
The Alibaba-led Digital Free Trade Zone, also regarded as part of the BRI, was established in Kuala Lumpur earlier this year in a bid to improve trade between China and the Southeast Asian region.
A project that has been singled out by Mahathir in the lead up to the general election for being wasteful is the East Coast Rail Link in peninsular Malaysia. 

A 688-kilometer (430-mile) rail project costing $13 billion, it is being built by China Communications Construction and is also considered part of the Belt and Road Initiative.
The necessity of that project would be reviewed and its development halted if it is found inessential, Mahathir was quoted as saying by the state-run Bernama news agency in April.
"It wouldn't be particularly surprising if this is the first project they review," Brian Tan, Southeast Asia economist at Nomura, told CNBC.
While there will be greater uncertainty over Mahathir's coalition's targeting of Chinese infrastructure projects, Tan said the alliance had been careful to emphasize that it was reviewing, rather than immediately calling off, those projects.
Fidelity International said in a note that the new government was likely to go back to the drawing board over large-scale infrastructure projects: "Mahathir in the past has said he will scrap the large 'unnecessary' mega projects such as the [high speed rail] as he disagreed with the large debt taken to fund these projects."
Mahathir has also taken issue with a massive private residential project from a Chinese company in the state of Johor, just north of Singapore. 

Most Malaysian's, he has said, cannot afford the apartments there.
Responding to the election results in Malaysia, Chinese international real estate website Juwai.com was upbeat about opportunities under the incoming government, but acknowledged that some Chinese buyers may hold back if there are uncertainties.
However, current policies regarding visa, home-buying and education remain "very appealing," said Juwai.com CEO, Carrie Law said an email.
Law said Chinese buyer inquiries on Malaysian properties in the first three months of 2018 were up 103 percent from the same time a year ago. 

Inquiries in April rose 120 percent from a year ago, she added.
"If there is no change, we expect Chinese investment in Malaysian property to continue to grow in the months and years to come. Chinese acquisitions could at least double by 2025," she added.

Checkbook Diplomacy

China dangled $3 billion to grab Taiwan ally Dominican Republic

By Jess Macy Yu, Ben Blanchard
A police officer stands next to the Dominican Republic flag (L) inside the Taiwan's Ministry of Foreign Affairs in Taipei, Taiwan, May 1, 2018. 

TAIPEI/BEIJING -- China offered the Dominican Republic a $3.1 billion package of investments and loans to get them to sever ties with Taiwan, a Taiwan official said on Tuesday, after the Caribbean nation switched allegiance to China in a diplomatic blow to the self-ruled island.
China said there were no economic pre-conditions.
Taiwan, claimed by China as its own, has formal relations now with only 19 countries, many of them poor nations in Central America and the Pacific like Belize and Nauru. 

China says Taiwan is simply a wayward province with no right to state-to-state ties.
China and Taiwan have tried to poach each other’s allies over the years, often dangling generous aid packages in front of developing nations, though Taipei struggles to compete with an increasingly powerful China.
Panama ended its long-standing relationship with Taiwan last year in a major diplomatic victory for China. 

The Vatican is next on the list, as the Holy See and China edge closer to an accord on the appointment of bishops in China.
The news on the Dominican Republic switch, announced in both Beijing and Santo Domingo, drew strong and swift condemnation from Taiwan Foreign Minister Joseph Wu.
“President Danilo Medina of the Dominican Republic has ignored our long-term partnership, the wishes of the people of the Dominican Republic, and the years of development assistance provided by Taiwan, to accept false promises of investment and aid by China,” Wu told reporters.
“(Taiwan) strongly condemns China’s objectionable decision to use dollar diplomacy to convert Taiwan’s diplomatic allies. Beijing’s attempts at foreign policy have only served to drive a wedge between the people on both sides of the Taiwan Strait, erode mutual trust and further harm the feelings of the people of Taiwan.”
A Taiwan Foreign Ministry official, speaking on condition of anonymity, told Reuters that, according to initial calculations, China dangled at least a $3.1 billion package of investments, financial assistance and low-interest loans for the Dominican Republic, which shares an island with Haiti to the west.
That included $400 million for a new freeway, $1.6 billion for infrastructure projects and $300 million for a new natural gas power plant.
“It was a cost that Taiwan could not match,” the official said.
China’s Foreign Ministry said the move was a political one with no economic pre-conditions, but that now they have established ties, China will “proactively promote mutually beneficial cooperation in all areas”.
A person who answered the telephone at the Dominican Republic’s Beijing representative office said it did not know about the situation and declined further comment.
China has stepped up the pressure on Taiwan since the 2016 election of Tsai Ing-wen, from the pro-independence Democratic Progressive Party, as president. 

Beijing fears she will push for Taiwan’s formal independence, but Tsai says she wants to maintain the status quo.
The Dominican Republic had been a diplomatic ally of the Republic of China -- Taiwan’s official name -- for 77 years, including when the government ruled all of China before being forced to Taiwan in 1949 after losing a civil war to the Communists.
Taiwan’s presidential office said that despite the severe challenges, the government would not bow its head in pressure to Beijing, and vowed to do all it could to protect Taiwan’s interests.
The Taiwan official said the Dominican Republic move was not unexpected.
“We’ve always known things were not looking rosy here,” the official said.

The Chinese government’s top diplomat, State Councillor Wang Yi, lauded the decision as in line with the trend of the times and history, in comments to reporters in Beijing at a hastily arranged news conference.
“This important and correct decision by the Dominican Republic absolutely accords with the basic interests of the country and its people,” Wang said. 

“We highly appreciate this.”
The Dominican Republic said it had taken the decision after a long process of consultation, taking its needs and potential into account, according to a statement on the president’s website.
It said that even without formal diplomatic ties, China was already its second largest supplier of imported products.
“Of course we know that now we’re establishing diplomatic relations, the growth potential of our trade links is immense,” presidential legal adviser Flavio Dario Espinal said.
Espinal said that the government was grateful to Taiwan.
“We are deeply grateful for the cooperation we’ve shared for years,” he said. 

“However, history and the socioeconomic reality force us now to change direction.”
In Taipei, Wu said China had failed to follow through on its promises to former Taiwan diplomatic allies, including $140 million in aid to the small West African country of Sao Tome and Principe in late 2016.
“Developing nations should be aware of the danger of falling into a debt trap when engaging with China,” he said.
Neither Wang, nor Dominican Republic Foreign Minister Miguel Vargas Maldonado, who stood by his side at the Beijing news conference, took questions from reporters.
Speaking in March, Wang said it was in the best interests of Taiwan’s few remaining diplomatic allies to recognize an “irresistible trend” and ditch Taipei in favor “one China” ruled by Beijing.

Chinese Peril: President Trump Weighs Use of Emergency Law to Curb Chinese Takeovers

Goal is to clamp down on acquisitions of sensitive technology
President Trump asked Treasury secretary to act on Chinese investments

By Andrew Mayeda, Saleha Mohsin, and David McLaughlin

The Trump administration is considering a crackdown on Chinese investments in technologies the U.S. deems sensitive by invoking a law reserved for national emergencies, among other options, according to people familiar with the matter.
Treasury Department officials are working on plans to identify technology sectors in which Chinese companies would be banned from investing, such as semiconductors and so-called 5G wireless communications, according to four people with knowledge of the proposal, who spoke on the condition of anonymity.
The investment curbs would be the latest step in President Donald Trump’s plan to punish China for violations of American intellectual-property rights. 

The president asked Treasury Secretary Steven Mnuchin to consider investment restrictions on Chinese firms after the administration released the results of its probe into China’s IP practices last week.
While investors have so far focused on President Trump’s plan to impose tariffs on Chinese imports, new restrictions could deepen a slowdown in Chinese investments in the U.S. since President Trump took office.

“There will be limitations on Chinese investment,” Commerce Secretary Wilbur Ross said Tuesday in an interview on Fox Business Network. 

Pending legislation in the Senate and House to bulk up the Committee on Foreign Investment in the U.S., the panel that currently reviews foreign takeovers, will be part of the response, Ross said, adding that Trump will take “other action.”
The S&P 500 Index dropped 1.7 percent Tuesday, extending this month’s decline, on concern about heightened trade tensions between the world’s largest economies. 

Asian equity markets retreated Wednesday.
“The trade issue and uncertainty related to that is not going to fade in one day because all of a sudden we started thinking that we would reach some sort of a settlement with China,” said Krishna Memani, chief investment officer at OppenheimerFunds Inc. 

“This is going to be somewhat of a long process for things to settle down.”
Earlier this month, the U.S. president rejected Broadcom Ltd.’s hostile takeover of Qualcomm Inc., sending a message that his administration won’t look kindly on any deal that would give China an edge in critical technology. 

Although Broadcom is based in Singapore, China loomed large in the decision, because Qualcomm is locked in a race with China’s Huawei Technologies Co. to dominate the development of next-generation wireless technology.
Last year, President Trump blocked the takeover of chipmaker Lattice Semiconductor Corp. by a private-equity firm backed by a Chinese state-owned asset manager.

If conflicts escalate, China may consider reciprocal measures on more agricultural products, aircraft, automobiles and semiconductors from the U.S., the official Economic Daily reported Wednesday, citing Gu Xueming, director of the Commerce Ministry’s Chinese Academy of International Trade and Economic Cooperation.
President Trump gave Mnuchin 60 days from March 22 to propose executive actions the president can take to address concerns about Chinese investments in industries or technologies “deemed important” to the U.S.
Treasury officials are looking at ways to impose tougher conditions on Chinese firms using legislation that underlies CFIUS, which currently vets foreign takeovers on a case-by-case basis. 

But they are also weighing the use of a law that enables the president to regulate commerce in a national emergency, two of the people said.
The International Emergency Economic Powers Act, enacted in 1977, allows the president to declare a national emergency in response to an “unusual and extraordinary threat.” 

After declaring such an emergency, the president can block transactions and seize assets.
“It’s never been used in connection with unfair trade practices, but it’s broad enough that you could put restrictions on a wide variety of transactions,” said Christian Davis, an international trade lawyer at Akin Gump Strauss Hauer & Feld LLP in Washington.

Strict Reciprocity
The Trump administration is considering enforcing strict reciprocity on Chinese acquisitions, meaning U.S. regulators would only approve deals in sectors in which American companies are allowed to invest, according to two of the people familiar with the matter. 

China restricts or bans foreign investment in a range of industries, from car manufacturing to telecommunications providers and rare-earth exploration.
The Trump administration hasn’t finalized its plans, and the options under consideration could still change, the people familiar with the matter said.
Enforcing sweeping bans on Chinese investment would mark a major departure from the existing CFIUS process, which reviews individual transactions to determine if it threatens U.S. national security. 

The administration could use CFIUS legislation to declare a policy that Chinese investment won’t be allowed in entire industries deemed sensitive, such as microchips and telecommunications, said Davis, the Akin Gump lawyer.
“The question is how different is that from what CFIUS is doing already with respect to Chinese investments in sensitive sectors,” he said. 

“Depending on how these restrictions are implemented, the answer may be not much.”
Republican Senator John Cornyn and Republican House member Robert Pittenger have introduced legislation that would expand the power of CFIUS to review foreign investments. 

Mnuchin has been supportive of the bill, which would broaden the scope of reviewable technologies to include investments in “critical” technologies.
Acquisitions by Chinese firms in the U.S. fell to $31.8 billion last year from $53 billion the year before, according to data compiled by Bloomberg.

Chinese Peril

Africa should avoid forfeiting sovereignty to China over loans: Tillerson
By Aaron Maasho

African Union (AU) Commission Chairman Moussa Faki, of Chad, and U.S. Secretary of State Rex Tillerson hold a news conference after their meeting at African Union headquarters in Addis Ababa, Ethiopia March 8, 2018.

ADDIS ABABA -- U.S. Secretary of State Rex Tillerson said on Thursday that African countries should be careful not to forfeit their sovereignty when they accept loans from China, the continent’s biggest trading partner.
Tillerson is using his first diplomatic trip to the continent to bolster security alliances on a continent increasingly turning to Beijing for aid and trade.
He may also seek to smooth relations after U.S. President Trump reportedly dismissed some African nations as “shithole countries” in January. 

Trump later denied making the comment.
“We are not in any way attempting to keep Chinese dollars from Africa,” Tillerson told a news conference in the Ethiopian capital. 

“It is important that African countries carefully consider the terms of those agreements and not forfeit their sovereignty.”
The United States is the leading aid donor to Africa but China surpassed it as a trade partner in 2009. Beijing has pumped billions into infrastructure projects, though critics say the use of Chinese firms and labor undermines their value.
Tillerson said Chinese investments “do not bring significant job creation locally” and criticized how Beijing structures loans to African government.
If a government accepts a Chinese loan and “gets into trouble”, he said, it can “lose control of its own infrastructure or its own resources through default.” 

He did not give examples.
The growing Chinese lending to the continent has also attracted criticism from some Africans, who say China’s agenda is to feed its appetite for African raw materials like oil, timber and minerals, and secure contracts for its firms.
Russian Foreign Minister Sergei Lavrov, visiting Zimbabwe on Thursday, told reporters it was inappropriate for Tillerson to criticize China’s relationship with African countries.
“It was not appropriate to criticize the relations of his hosts — when he was a guest there — with another country,” he said. 

Many African governments enjoy close ties with both Washington and Beijing.
Kenya, for example, inaugurated a $3.2 billion railway funded by China last year. 

For the last three years, Kenya has received more than $100 million annually in U.S. security assistance.
Asked about Tillerson’s criticism of China’s approach on the continent, Kenya’s foreign affairs minister Monica Juma said: “This country is engaging with partners from across the world driven by our own interests and for our own value.”

OPAQUE CONTRACTS
Tillerson arrived in Ethiopia, Africa’s second most populous nation, on Wednesday and visited the African Union headquarters on Thursday. 

The complex was funded and built by China and is seen as a symbol of Beijing’s thrust for influence and access to the continent’s natural resources.
Ethiopia is home to some of Beijing’s biggest investments, from a railway to Djibouti that opened last year to factories and industrial parks.
Earlier this week, Tillerson criticized China’s approach to Africa which encouraged dependency through opaque contracts and predatory loan practices.
Ethiopia’s prime minister resigned suddenly last month and a state of emergency was imposed but protests in the restive Oromia region have continued.
The secretary of state met Hailemariam Desalegn, who resigned as prime minister but is still acting in the post awaiting a replacement. 

Details of their discussions were not released.
Tillerson said after meeting his Ethiopian counterpart Workneh Gebeyehu that the answer to political turmoil in Ethiopia was greater freedoms.
“It is important that the country moves on past the state of emergency as quickly as possible,” he said.
Tillerson reiterated previous calls for African states to cut ties with North Korea.
North Korea has more than a dozen embassies on the continent. 

The Trump administration has said that Pyongyang earns hard currency from arms deals with African government and the trafficking of wildlife parts from Africa.
Tillerson is due to fly to Djibouti, host to military bases owned by the U.S., China, Japan, France, and Italy.
He will then visit Kenya, a key U.S. ally in the fight against al Shabaab Islamist militants in Somalia, before traveling to Chad and Nigeria, which are also battling to contain Islamist insurgents.
Analysts say Trump has focused mainly on security concerns in Africa at a time when China, Turkey and other nations are ramping up diplomatic and business links.
“When you look at the set of countries that are being visited I think it kind of reinforces the perception that security, indeed, is the overwhelming focus,” said Brahima Coulibaly, the director of the Africa Growth Initiative at Brookings Institution.

China's Satellite

Cambodia’s embrace of China stirs local tension 
By John Reed in Sihanoukville, Cambodia

Sihanoukville has seen a casino boom accompanied by an influx of Chinese tourists 

Casinos including the Oriental Pearl and the New Macau line the streets of Sihanoukville, a Cambodian port and resort town.
 This city of fewer than 100,000 people will soon boast 30 casinos, with 10 built last year alone, according to local officials.
 But with Cambodians prohibited from gambling, the complexes primarily serve Chinese tourists and employ Chinese staff, angering locals in a poor country where jobs are scarce.
An estimated 120,000 Chinese visited Sihanoukville last year, double the number of 2016. Sihanoukville’s casino boom is one of the most vivid consequences of the forthright embrace of China by Hun Sen, the prime minister.
Beijing backs the authoritarian leader politically and has extended loans for the construction of dams and roads, even as his crackdown on the opposition, media and civil society groups has been condemned by the EU and the US. 
 The Chinese tourist influx has boosted the city’s property prices and spawned a growing number of high-rise buildings but it has also brought problems.
 “The Chinese don’t go out in the daytime; they go out at night,” says Sok Song, a Cambodian hotel owner and vice-president of the Sihanouk Province Chamber of Commerce.
While he stresses that the Chinese presence is “more positive than negative”, he says that “at night, sometimes they have a drink and they fight and shout at each other”.
 Ma Lin, a manager at a beachfront café whose lease will be taken over by a Chinese investor at the end of this month, says that because she “can’t speak Chinese . . . it’s hard for me to get a job with Chinese owners”.
 Expanding Chinese influence is a fact of life across Southeast Asia.
China is the biggest source of tourists in Thailand, and Beijing is financing infrastructure projects from Myanmar to the Philippines.

Cambodia is not alone in weighing the mixed blessings of Chinese investment, which elsewhere has been welcomed for its scale and relative lack of conditions attached but criticised for leaving construction and other jobs in Chinese hands.
 What is unusual about Sihanoukville’s transformation is that tension in the town has coalesced into a public backlash — unusual in a country where personal freedoms are fading — and drawn a stern response from Cambodian authorities as well as from China’s ambassador.
 Xiong Bo, Beijing’s envoy, this month acknowledged that “a small amount of low-educated people” from his country were breaking Cambodian laws.
His rare press conference came after a document emerged in which the governor of the province where Sihanoukville sits listed both the “positive” and “negative” impacts of Chinese money and people.
 “The price of renting rooms has risen, and that affects the standard of living of government officials, workers, and other people,” he wrote in a letter to the interior minister that was leaked to Cambodian media.
He said “mafia groups” were behind kidnappings and “insecurity in the province”, and that tension between Chinese visitors and locals would give the opposition ammunition to attack the Cambodian-Chinese relationship, or to claim that Sihanoukville was becoming “a second Shanghai”.
 “We want them to invest but we need more local people to have a chance to work, to get more money from this growth,” says Tang Sochetkresna, director of the provincial tourism department.
He says the city is eager for investment beyond casinos and hotels, in attractions that can draw in tourists from other countries.
Sok Song, the chamber of commerce official, says Chinese companies are building garment, footwear and other factories in Sihanoukville’s special economic zone.
 He says Cambodia’s interior ministry dispatched a task force to the town to study the problem of visitors who “do not obey the law”, and met Chinese embassy officials in January.
 The Chinese are only the latest group of foreign tourists to throng Southeast Asia’s beach towns, bringing welcome money but also tension to poor countries with conservative societies.
Western travellers engaging in behaviour deemed lewd or disrespectful continue to create periodic scandals from Cambodia and Laos to Malaysia and Thailand.
 But the Chinese presence has a stronger geopolitical component, given China’s growing economic foothold in Cambodia and its continued support for Hun Sen at a time when he is flouting democratic rights.
 “There is a narrative at the elite level that points out the positive effects of the relationship with China but you are seeing some cracks in the enforcement of this overarching narrative,” says a western diplomat in Phnom Penh.
“Sihanoukville is a one-country town, so it’s a stark example.”

Chinese bid for mapping company falls at US hurdle

Chinese seeking stake in Europe-based Here told to ‘apply directly’ to Trump 
By Yuan Yang in Beijing

Chinese investors seeking to buy a stake in a European mapping company were told to “apply directly” to the US president after their €241m offer failed to win regulatory approval, according to one of the bidders.
Beijing-based NavInfo, a mapping provider for tech giant Tencent, together with Tencent and Singapore’s sovereign wealth fund GIC agreed last year to buy a 10 per cent stake in Amsterdam-headquartered Here to provide high-resolution maps of China for autonomous cars.
The mapping technology company is owned by German carmakers Audi, BMW and Daimler, and US chipmaker Intel.
The Committee on Foreign Investment in the US weighed in on the deal, which received the green light from German regulators in January, due to Here’s assets in Chicago.
Cfius made NavInfo and its fellow investors go through multiple hoops, but did not ultimately approve the deal.
“[Cfius] didn’t stop us from reapplying again, and actually recommended we apply directly to US President Donald Trump,” said NavInfo.
“We think there are two main reasons: the whole atmosphere after the election has changed at Cfius, and we hear there are not enough employees,” the company added, suggesting the new and smaller team at Cfius was more likely to withhold approval. 
The Here decision comes at a time when China-US relations have been strained by Mr Trump’s harsh rhetoric against Chinese trade, as well as foreign policy disagreements over North Korea.
Mr Trump earlier this month blocked a $1.3bn plan by Canyon Bridge, a China-backed private equity group, to acquire Lattice Semiconductor.
Financial holdings company China Oceanwide is in the midst of re-filing an application to Cfius to acquire Virginia-based insurer Genworth Financial for $2.7bn.
As Beijing has moved to rein in an ambitious spate of offshore dealmaking by private groups, Chinese outbound investment by government-backed groups soared in the first half of the year to $28.7bn, despite scrutiny overseas over national security concerns.
“For the past six months [Cfius] has continuously asked us to change our application, but even the emails they gave us were very vague, and just mentioned ‘national security reasons’,” NavInfo said on Wednesday.
NavInfo said Cfius had told the consortium to refile its application, which it did, giving up investor rights such as shareholder votes, but the group still did not receive approval and does not understand why.
The consortium decided to drop the deal rather than apply directly to the US president, NavInfo said. The company added that although the decision changes its plans for shareholding, it will not affect its mapping projects with Here, with which it has a joint venture in China.
NavInfo said it will cancel the loan it had arranged with BNP Paribas to finance its part of the acquisition.
Tencent and GIC did not immediately respond to requests for comment.

China is helping redevelop what was once the US’s largest overseas military base

By Therese Reyes

Holding down the fort. 

Clark Freeport Zone, Philippines
It has been 26 years since the US military, prodded by a volcanic eruption, left Clark Air Base in the Philippines. 

But signs of its stay, which lasted over eight decades, remain. 

The site follows city planning established by Americans, complete with barn-style houses lining some roads. 

Still present are old barracks, the parade grounds, and a veterans’ cemetery for US and Filipino soldiers and their families.Old military barn houses. 

“A lot has changed, but the basics are there,” said Noel Flores, a 47-year-old local lawyer. 

“If you’ve been to areas in California or particularly in New Jersey, the atmosphere is quite similar.”
But looks can be deceiving. 

While Clark was once the largest overseas American base, today the site is being transformed into a new business district that will one day rival Manila. 

And it’s China, not the US, whose presence is increasingly felt in the area.
Last October, Philippine president Rodrigo Duterte surprised many by announcing his “separation” from the US while he “aligned” with China. 

Beijing, for its part, pledged to invest heavily in badly needed infrastructure improvements in the Philippines—including ones that will help transform Clark and its surrounds.
Given the base’s once key role in the US projecting power in Southeast Asia, China’s hand in its transformation is a sharp reminder of Beijing’s growing influence in the Philippines and beyond.

New friends
Not everyone was surprised by Duterte’s October 2016 announcement, which he delivered while on a state visit to Beijing. 

To political analyst Ramon Casiple, the move was about normalizing relations not just with China, but with the US as well.
“It is not to break relations with the US, but to put [Duterte], the administration, and the country in a position that has leverage against both,” Casiple said. 

In his mind, the US went from having a “preferential” relationship with the Philippines to a normal one “on the same level as China.”
Another reason for Duterte’s embrace of China is his desire to decentralize power away from Manila. To do so, he’ll need to vastly improve—with financial help from the outside—the infrastructure of other parts of the nation. 

Clark is one of the more promising places to do that, thanks to its size, location, and the infrastructure previously installed by the US. (Japan, ever wary of China’s moves, is also getting involved, offering to fund a railway link between the airports in Clark and Manila.)

Pampanga province. 

During its heyday, Clark Air Base had a population of 15,000 and encompassed about 600 sq km (230 sq miles) of land, including a military reservation.
Today the site, located about 80 km (50 miles) northwest of Manila in the provinces of Pampanga and Tarlac, is home to the Clark Freeport Zone. 

With tax-free importing and other incentives, the zone lures companies from a wide variety of industries. 

They in turn employ tens of thousands of local residents from the surrounding areas.
But bigger plans are afoot for the former base. 

An urban development called New Clark City, estimated to be completed by 2021, will be located next to the freeport zone, and offer the same financial breaks. 

While such plans have been hindered in the past by politics and business rivalries, Duterte is pushing them forward.

China steps in
When he returned from Beijing last year, Duterte brought with him $24 billion worth of investments and pledges. 

According to the Philippines trade ministry, at least three projects relate to developments in Clark, including an industrial park in New Clark City (sometimes called Clark Green City) and a cargo rail link between Clark and Subic Bay. 

The latter is also a freeport zone and home to a former US naval base. 

Another project calls for China’s Huawei to build tech infrastructure in the area.
Such investments are in line with China’s “One Belt, One Road” initiative, which aims to link China (and its products) to countries in Asia, the Middle East, Africa, and Europe via new infrastructure projects, especially transportation-related ones.
Clark’s central location in Asia, its proximity to Manila, and its onsite international airport mean China won’t have to wait long to reap the benefits of helping the Philippines. 

In a few years its businesses will be able to take full advantage of the incentives on offer.
The projects will also benefit the Philippines, though the deals may not be as good as they seem. Some question the credibility of the Chinese investors. 

Such projects could make the Philippines heavily indebted to China, which in turn could weaken its ability to stand up to Beijing in the contested South China Sea. (It was the US military’s withdrawal from the Philippines, mainly Clark and Subic, that opened the way for China’s territorial aggression in that vital waterway.)

A welcome change
While China’s growing influence worries some, many area residents welcome the new developments at Clark. 

“There will be more tourists coming here, more job opportunities,” said Mark Felker, a 24-year-old working as a museum tour guide at the former base.
After the Americans left in 1991, Clark’s freeport status allowed it to transition into a destination for cheap imported goods. 

At one point, there were at least 10 duty-free shops at the former base, but by the mid-2000s, many had closed down.An upcoming business incubator in Clark.

The main concern for locals isn’t China, but something more pedestrian: the lack of public transportation in Clark. 

Because the zone operates independently from local governments, the jeepneys and motorized tricycles commonly used to get around in the Philippines are not allowed inside. 

A train system would benefit workers in Clark, Felker said, especially those working graveyards shifts in call centers. 

According to the Bases Conversion and Development Authority, charged with developing the former US base, the New Clark City project will include a train system that will also help ease traffic in the surrounding areas.
Clark today is a work in progress. 

New buildings for business incubators and call centers are cropping up near abandoned strip malls. 

A sprawling compound that once housed a hotel, villas, and a casino is now under new management and undergoing an overhaul. 

Roads are being widened and bridges reconstructed, slowing down traffic.
For Flores, all that’s left to do is wait for the promised improvements. 

“I would really have to trust that the officials administering the zone know what they’re doing and that they have it in their heart to look after the greater interests of the future generations.”

An unbreakable bond
Meanwhile, even as China’s presence grows, the ties between the US and the Philippines remain strong.
The Clark Museum, a modest building with three floors of galleries about Clark’s history, has a wing dedicated to its days as a US air base. 

Memorabilia like uniforms and dinnerware (donated by the families of veterans) are displayed in large wooden cabinets, making them look even more like personal heirlooms. 

Many of the museum’s visitors are Filipino-Americans.
Felker, who works at the museum, hails from nearby Angeles City and knows about Clark’s history only from books and anecdotes passed on by his family. 

But like many from the surrounding area, he has an affinity for the place. 

“I was a product of this base because my grandfather was an American,” he said.The Clark veterans cemetery, with renovations in the distance. 

The connection between the Philippines and the US is a difficult one to break because it is ingrained in policies, culture, and, in cases like Felker’s, family. 

The latest US census report shows that Filipinos are the second-largest Asian group in the US. 

And in the Philippines, there are as many as 250,000 people who are part American.
Political links also run deep. 

Thanks in large part to a mutual defense treaty signed in 1951, the US is now assisting the Philippine military in its effort to reestablish control of Marawi, a city on the southern island of Mindanao that was overtaken in late May by terrorists linked to ISIL. 

Such assistance comes despite Duterte’s proclaimed “separation” from the US.
“Filipinos are America’s No. 1 fan club,” Casiple said. 

“Our relation with the US is too deep historically. It’s beyond Duterte.”