Replies to post #216627 on $Stock*Shop*Charts*News*Option$

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ATimes: China's show of strength ups military ante

By Willy Lam
Dec 1, 2007

Large-scale air and naval maneuvers off China's southeast coast last week demonstrated the post-17th Party Congress leadership's determination to project hard power in view of tension in the Taiwan Strait. The week-long war games, which coincided with Beijing's sudden cancellation of the USS Kitty Hawk battle group's Hong Kong port call, are also meant to convey Beijing's displeasure with Washington's recent decision to sell weapons to Taiwan and to honor the Dalai Lama.

Moreover, this show of force reflects the commitment of President Hu Jintao, who was re-elected chairman of the Central Military Commission (CMC) at the congress, to speed up the modernization of the People's Liberation Army's (PLA) already formidable arsenal.

The military drills, which started on November 19, covered a wide swath of the Pacific, including sensitive terrain east of Taiwan and north of the Philippine archipelago. While official PLA media have been reticent about the exercises, Hong Kong papers and military-related websites in China noted that their purpose was to simulate a "pincer attack" on Taiwan as well as a naval blockade.

Elite battalions from PLA Air Force units under the Guangzhou and the Nanjing Military Regions, as well as the East and South China Sea Fleets, were involved. They deployed hardware including Russian-made Kilo-class submarines, Sovremmy-class destroyers and indigenously developed Flying Leopard jet-fighters. Among new weapons tested at the maneuvers were 022 stealth missiles and Russian-made SS-N-27 "Club" anti-ship cruise missiles.

Several hundred commercial flights along China's southeast coast - the majority of which originated from airports in Shanghai and Guangzhou - were postponed during the exercises. It was not until last Saturday that the East China Civil Aviation Bureau lifted the highly disruptive aviation control (People's Daily, November 26). Li Jingao, an official of the CAAC East China Air Traffic Management Bureau, claimed: "The delay resulted from a backlog caused by the control in previous days." Military analysts noted that PLA authorities did not want the Kitty Hawk battle group - whose 8,000-odd sailors had earlier planned to spend Thanksgiving in Hong Kong - to be in the vicinity.

This is despite the fact that during his visit to Beijing earlier this month, US Defense Secretary Robert Gates and his hosts made new pledges to boost confidence-building measures, including establishing a military-to-military hotline. On a deeper level, the Kitty Hawk incident reflected Beijing's anger at Washington's plan to sell Taiwan a $940 million upgrade to its Patriot II anti-missile shield. Beijing apparently also wanted to protest President George W Bush's presence at a congressional ceremony last month honoring the Dalai Lama, leader of Tibet's pro-independence movement and deemed a "separatist" by Beijing.

There are also indications that this stupendous muscle-flexing was targeting more than the usual suspects; for examples Taiwan and the United States. Parts of the exercises took place close to the disputed Paracel Islands, including the Hoang Sa and Truong Sa archipelagos in the South China Sea, a few islets whose sovereignty is claimed by Vietnam. Last Friday, the Vietnamese Foreign Ministry pointed out that the war games were a "violation of Vietnam's sovereignty".

Le Dung, the Vietnamese ministry's spokesman, said, "It is not in line with the common perception of senior leaders of the two countries as well as the spirit of the recent meeting between the two prime ministers on the sidelines of the 13th ASEAN Summit in Singapore."

A Beijing source close to the Taiwan policy establishment said the Central Military Commission and the Communist Party's Leading Group on Taiwan Affairs - which is also headed by Hu - were worried about possible "tricks" by the Democratic Progressive Party (DPP), the pro-independence ruling party in Taiwan, in the run-up to the presidential elections scheduled for next March.

The source said that Beijing was most worried that the Taiwan military might engineer a "military crisis" with the PLA, which would then serve as a pretext for the DPP administration to postpone the elections or even to impose martial law. Last Sunday, Taiwanese President and DPP chairman Chen Shui-bian indicated that proclaiming martial law was an option if the opposition Kuomintang (KMT, or Nationalist Party) continues to side-step electoral procedures for the upcoming Legislative Yuan elections.

While Chen later withdrew his threat, Beijing remained concerned that the DPP leadership might again resort to wild cards given the fact that the KMT presidential candidate, Ma Ying-jeou, has consistently outpolled the DPP's Frank Hsieh in island-wide surveys.

The Chinese civilian leadership has largely assumed a low profile on the Taiwan issue. In his address to the 17th Congress, President Hu even dangled the possibility of a "peace accord" with Taiwan. Yet the post-17th Congress leadership has been at the same time hedging its soft bet on the KMT by making thorough preparations for what Hu called "military struggles" against pro-independence elements on the island. As outgoing Defense Minister General Cao Gangchuan put it earlier this

month: "Should Chen Shui-bian be bold enough to concoct major events [in the direction] of independence, we shall take drastic measures to uphold national sovereignty and territorial integrity at any cost."

The two most powerful bodies in the polity - the Politburo Standing Committee (PSC) and the CMC - are filled with cadres and generals with long-standing expertise on Taiwan. Three PSC members have served as either governor or party secretary of Fujian, the "frontline province" opposite Taiwan. They are Chairman of the Chinese People's Political Consultative Conference Jia Qinglin, Secretary of the Central Commission for Disciplinary Inspection He Guoqiang, and fifth-generation rising star Xi Jinping, the front-ranked secretary of the Central Committee Secretariat.

The CMC is replete with Taiwan Strait specialists. This include Defense Minister designate General Liang Guanglie, a veteran commander of war games off the Taiwan coast; the newly promoted Chief of General Staff, General Chen Bingde, a former commander of the Nanjing Military Region; Air Force Commander General Xu Qiliang, who was once based in Fujian; and Naval Commander Admiral Wu Shengli, a former vice-chief of the East Sea Fleet. Since becoming CMC chief in late 2004, Hu has promoted a large number of alumni of the Nanjing Military Region, which has "jurisdiction" over the strait.

On a larger scale, last week's provocative exercises tally with the overall pattern of power projection that began early this year with the destruction of an old weather satellite by state-of-the-art PLA missiles. The feat, which apparently signaled Beijing's readiness to join the militarization of space, was followed by the country's successful effort late last month to put a Chinese-made satellite into the moon's orbit.

Moreover, the PLA has for the past year deviated from its past practice of keeping newly developed weapons under wraps. Semi-official military websites regularly run stories and pictures that showcase the prototypes or just-completed versions of soon-to-be-deployed hardware ranging from the Jin-class submarine - which is capable of carrying nuclear-tipped cruise missiles - to the nation's first aircraft carrier.

Apart from telling Taiwan independence forces - and their sympathizers in the United States and Japan - that Beijing has the wherewithal to maintain national unity, Beijing is flexing its military muscle in a fashion befitting an emerging quasi-superpower. Referring to the 17th Congress, Chinese Academy of Social Sciences strategist Hong Yuan pointed out that "the [defense] concerns of the new leadership and the force projection of China's military have gone way beyond the Taiwan Strait".

Hong sees the coming five years as "a period of rapid development in areas ranging from the PLA's establishment, institutions and hardware to the extent and means of force projection".

Moreover, the display of the country's new-found achievements in weaponry and aeronautics serves to strengthen internal cohesiveness, a long-standing Communist Party goal. As Premier Wen Jiabao put it on Monday while displaying China's first close-up satellite pictures of the moon: the feat is a "major manifestation of the increase in our comprehensive national strength and the ceaseless enhancement of our innovative ability". Wen added, "[The project] will have a tremendous significance toward boosting the cohesiveness of the people."

Chinks in the Chinese armor, however, have become apparent in the course of Beijing's bold display of military prowess. The latest war games have demonstrated poor coordination among the Communist Party, government and military departments. For example, it was not until November 21 that the Chinese Ministry of Foreign Affairs delivered its snub to the Kitty Hawk (suggesting the delay may be the result of policy discrepancy); however, the ministry reversed itself a day later by saying that the Chinese had now granted permission to the port call for "humanitarian reasons".

This was in apparent reference to the hundreds of the crew's family members who had flown into Hong Kong in anticipation of Thanksgiving festivities. The battle group, however, was well on its way back to its Japan home base, and there was no question of it turning back to Hong Kong.

The Kitty Hawk affair has cast a pall over seemingly positive developments in US-Chinese military relations. Most notably, there is the issue of military transparency, which was raised by Secretary Gates during his visit to China. The military drills were not reported by any official Chinese media. There are also indications that the PLA did not alert relevant Chinese government departments, let alone countries in the Asia-Pacific region, of the maneuvers.

These developments may also cast a shadow over the Chinese navy's first-ever port call in Japan this week. The Shenzhen missile destroyer will be in Japan for four days in what the two countries hope will be a symbolic confirmation of the thaw in bilateral ties.

The increasing assertiveness of Hu and his generals, however, could potentially stoke the "China threat" theory in Japan, the United States, and Southeast Asian countries that still have territorial disputes with China.

Willy Wo-Lap Lam is a senior fellow at The Jamestown Foundation. He has worked in senior editorial positions in international media including Asiaweek news magazine, South China Morning Post and the Asia-Pacific Headquarters of CNN.

(This article first appeared in The Jamestown Foundation. Used with permission.)

(Copyright 2007 The Jamestown Foundation.)

[Stock Lobster]

NYT 2005: Chinese General Threatens Use of A-Bombs if U.S. Intrudes

By JOSEPH KAHN
Published: July 15, 2005

BEIJING, Friday, July 15 - China should use nuclear weapons against the United States if the American military intervenes in any conflict over Taiwan, a senior Chinese military official said Thursday.

"If the Americans draw their missiles and position-guided ammunition on to the target zone on China's territory, I think we will have to respond with nuclear weapons," the official, Maj. Gen. Zhu Chenghu, said at an official briefing.

General Zhu, considered a hawk, stressed that his comments reflected his personal views and not official policy. Beijing has long insisted that it will not initiate the use of nuclear weapons in any conflict.

But in extensive comments to a visiting delegation of correspondents based in Hong Kong, General Zhu said he believed that the Chinese government was under internal pressure to change its "no first use" policy and to make clear that it would employ the most powerful weapons at its disposal to defend its claim over Taiwan.

"War logic" dictates that a weaker power needs to use maximum efforts to defeat a stronger rival, he said, speaking in fluent English. "We have no capability to fight a conventional war against the United States," General Zhu said. "We can't win this kind of war."

Whether or not the comments signal a shift in Chinese policy, they come at a sensitive time in relations between China and the United States.

The Pentagon is preparing the release of a long-delayed report on the Chinese military that some experts say will warn that China could emerge as a strategic rival to the United States. National security concerns have also been a major issue in the $18.5 billion bid by Cnooc Ltd., a major Chinese oil and gas company, to purchase the Unocal Corporation, the American energy concern.

China has had atomic bombs since 1964 and currently has a small arsenal of land- and sea-based nuclear-tipped missiles that can reach the United States, according to most Western intelligence estimates. Some Pentagon officials have argued that China has been expanding the size and sophistication of its nuclear bombs and delivery systems, while others argue that Beijing has done little more than maintain a minimal but credible deterrent against a nuclear attack.

Beijing has said repeatedly that it would use military force to prevent Taiwan from becoming a formally independent country. President Bush has made clear that the United States would defend Taiwan.

Many military analysts have assumed that any battle over Taiwan would be localized, with both China and the United States taking care to ensure that it would not expand into a general war between the two powers.

But the comments by General Zhu suggest that at least some elements of the military are prepared to widen the conflict, perhaps to persuade the United States that it could no more successfully fight a limited war against China than it could against the former Soviet Union.

"If the Americans are determined to interfere, then we will be determined to respond," he said. "We Chinese will prepare ourselves for the destruction of all the cities east of Xian. Of course the Americans will have to be prepared that hundreds of cities will be destroyed by the Chinese."

General Zhu's threat is not the first of its kind from a senior Chinese military official. In 1995, Xiong Guangkai, who is now the deputy chief of the general staff of the People's Liberation Army, told Chas W. Freeman, a former Pentagon official, that China would consider using nuclear weapons in a Taiwan conflict. Mr. Freeman quoted Mr. Xiong as saying that Americans should worry more about Los Angeles than Taipei.

Foreign Ministry officials did not immediately respond to requests for comment about General Zhu's remarks.

General Zhu said he had recently expressed his views to former American officials, including Mr. Freeman and Adm. Dennis C. Blair, the former commander in chief of the United States Pacific Command.

David Lague of The International Herald Tribune contributed reporting for this article.

http://www.nytimes.com/2005/07/15/international/asia/15china.html?_r=1&oref=slogin

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Helium: Assessing the Chinese nuclear threat in light of ballistic missle testing 2007

by Leah Panton
From Russia to China

One of the US military programs that is most credited with the eventual collapse of the Soviet Union was Ronald Reagan's "Star Wars" missile defense system. The US never actually even put it up - the mere threat was enough.
"Star Wars" envisioned using satellites to pinpoint and shoot down incoming nuclear ICBM's, rendering the doctrine of Mutually Assured Destruction obsolete.

For forty years, the doctrine of Mutually Assured Destruction guaranteed both the Soviets and the West that the other side would not use its nuclear arsenal because it would mean their own national suicide.

Mutually Assured Destruction was appropriately known by its acronym, "MAD" but a US missile shield would theoretically nullify a Soviet nuclear retaliation.

The Soviet Union collapsed because it couldn't afford to build a system that could defeat "Star Wars" making it vulnerable to a US first-strike. The Soviets faced a choice; dissolution or destruction. They chose the former, and the rest, as they say, is history.

Yesterday, China changed all that. The Chinese fired a ballistic missile into space, targeting an obsolete Chinese weather satellite orbiting roughly 530 miles above the earth.

First, let's make sure we are all on the same page in understanding what a 'ballistic' missile is.

"A ballistic missile is a missile, usually with no wings or fins, with a prescribed course that cannot be altered after the missile has burned its fuel, whereafter its course is governed by the laws of ballistics" according to the dictionary.

In other words, a bullet is a type of ballistic missile. It has no guidance after it has expended the fuel that propels it from the muzzle. One in flight, it goes where it was aimed before it was fired.

Let that sink in for a second. What China did, in essence, was take aim at a four foot by four foot weather satellite traveling at seventeen thousand miles per hour in its orbit 530 miles above the earth.

The KT-2 missile is little more than a giant, unguided bullet that goes where it is aimed. But China scored a bull's eye with its first shot.

Although "Star Wars" never got off the ground, the US is currently developing a next-generation version, called the US National Missile Defense program. It is a network of rocket interceptors and computers guided by satellites and designed to protect America from incoming missile attack.

The "Star Wars" program was scrapped after the collapse of the Soviet Union because it was deemed no longer necessary.

In the 1990's the Clinton administration admitted that Reagan's "Star Wars" project wouldn't have worked anyway against the vast Soviet arsenal of more than 27,000 nuclear weapons.

But the new program, nicknamed "Son of Star Wars" was ordered by the Bush administration as a defense against nuclear attack by rogue nations like North Korea or Iran. Or China, whose nuclear arsenal is currently believed to number only in the teens.

Unless China blinds us first.

Assessment:

In 1989, as part of a sanctions package meant to punish Beijing for the massacre of students in Tiananmen Square, Senator Al Gore sponsored legislation barring U.S.-made satellites from being launched on Chinese rockets-unless the President declared such a launch to be in the national interest.

In 1996, an American company, the Loral Corporation, requested a presidential waiver after a Chinese-made rocket carrying a Loral satellite into space exploded in flight.

In the aftermath, Loral and another firm, Hughes Electronic Corp., gave information to the Chinese that, according to the Pentagon, fixed a major guidance system problem that also affected China's ICBM arsenal.

The Chinese military obtained encrypted radiation hardened chips from Loral, post-boost vehicle technology from Lockheed, telemetry systems from Motorola and nose cone technology from Hughes.

The Chinese generals made huge profits from the advanced rocket and satellite deals - and so did Loral.

Loral's chairman, Bernard Schwartz, was the largest individual donor to the D.N.C. in 1996, responsible for more than $600,000 in soft-money donations to the Clinton-Gore campaign, requested a waiver - after the fact - to protect Loral from criminal prosecution for transferring the technology.

Clinton was warned in a Feb. 18 decision memo that Justice believed that if the Loral investigation ever went to trial, "a jury likely would not convict" the company if it received another presidential waiver: how serious could the breach be if the White House approved yet another technology transfer?

By signing the waiver, Clinton handed his donor's company what amounted to a get-out-of-jail-free card and handed China the ability to destroy America.

The Loral-supplied technology represented a major breakthrough for the Chinese military and it has been expanding its military capabilities ever since.

Since the mid-1990's China has expanded its short and medium range ballistic missile systems for use against US aircraft carriers. China has also invested heavily in nuclear submarines, having launched more than sixty new subs in the past five years.

It is currently constructing an aircraft carrier. Chinese military spending more than doubled since the Clinton waiver was granted in 1996 and is estimated to be second only to the United States in the percentage of its GDP spent on military development.

China has been strengthening ties with America's enemies, particularly Iran and North Korea. The majority of Third World ballistic missile arsenals are based on designs proliferated by China.

The test shows that the Chinese could soon have the capability to destroy the array of commercial satellites operated by the US, Europe, Israel, Russia and Japan.

Testifying before Congress last week, Lt Gen Michael Maples, head of the US Defense Intelligence Agency, warned that "Russia and China continue to be the primary states of concern regarding military space and counter-space programs".
Other countries, he said, "continue to develop capabilities that have the potential to threaten US space assets, and some have already deployed systems with inherent anti-satellite capabilities, such as satellite-tracking laser range-finding devices and nuclear-armed ballistic missiles".

The Chinese test means that Beijing can now hit US spy satellites at will, since they are in an even lower orbit than the weather satellite that China hit with its first shot.

The Chinese military also makes no secret of the fact that it would welcome a nuclear war with the United States - a war that China believes it could win.

According to an August 1999 policy document published by the People's Liberation Army Office of the Central Military Command, "unlike Iraq and Yugoslavia, China is not only a big country, but also possesses a nuclear arsenal that has long since been incorporated into state warfare system and play a real role in our national defense."

"In comparison with the U.S. nuclear arsenal, our disadvantage is mainly numeric, which in real wars the qualitative gap will be reflected only as different requirement of strategic theory," says the Chinese military document.

"In terms of deterrence, there is not any difference in practical value. So far we have built up the capability for the second and third nuclear strikes and are fairly confident in fighting a nuclear war. The PCC [communist Party Central Committee] has decided to pass though formal channels this message to the top leaders in the U.S."

And the overwhelming assessment by officials in the region, including Australia, Japan and South Korea, is that the US military could not defeat China. Although most Asian officials have kept their assessments private, Tokyo Governor Shintaro Ishihara has gone public, warning that the United States would lose any war with China.

"In any case, if tension between the United States and China heightens, if each side pulls the trigger, though it may not be stretched to nuclear weapons, and the wider hostilities expand, I believe America cannot win as it has a civic society that must adhere to the value of respecting lives," Mr. Ishihara said in an address to the Washington-based Center for Strategic and International Studies.

Ishihara said U.S. ground forces would be unable to stem a Chinese conventional attack. Indeed, he asserted that China would not hesitate to use nuclear weapons against Asian and American citieseven at the risk of a massive U.S. retaliation.

The governor said the U.S. military could not counter a wave of millions of Chinese soldiers prepared to die in any onslaught against U.S. forces.

China could afford to lose as many as 200,000,000 men and would still have more forces in reserve than the US military has in total.

"And the number of the army of the horsemen were two hundred thousand thousand: (200 million) and I heard the number of them. . . By these three was the third part of men killed, by the fire, and by the smoke, and by the brimstone, which issued out of their mouths." (Revelation 9:16,19)

According to the majority of military and intelligence analysts, war with China is not a case of 'if' but rather, a case of 'when'.

And America will most likely lose.

http://www.helium.com/tm/134652/russia-chinaone-military-programs

[Stock Lobster]

Reuters: PayPal customers' cash exposed to illiquid assets

12.01.07, 1:29 AM ET
(Adds comment from PayPal in paragraphs 5, 13-14)
By Tim McLaughlin

NEW YORK (Reuters) - Illiquid assets in a portfolio investing the cash of eBay Inc (nasdaq: EBAY - news - people ) customers surged 39 percent in the third quarter, exposing them to a larger chunk of troubled corporate debt, U.S. regulatory filings show.

The money market fund of PayPal, eBay's online pay service, invests cash parked by Internet shoppers in a portfolio that holds $1.63 billion in illiquid assets, or 5.5 percent of total holdings, according to the filings. That's up from $1.17 billion, or 4.6 percent of holdings, in the second quarter.

The illiquid tag means the named assets, or some of them, can't be sold for the value they carry in the portfolio. Besides illiquid assets, the PayPal fund is invested in a portfolio that includes short- and medium-term paper issued by corporate debt vehicles.

Those vehicles, known as structured investment vehicles (SIVs), have been targeted for emergency multibillion-dollar bailouts by some of the world's largest banks, namely HSBC Holdings Plc (nyse: HBC - news - people ) and Citigroup Inc. (nyse: C - news - people )

PayPal, which allows consumers to send and receive payments online, said it is confident in the quality of the portfolio's investments.

Its money market fund is popular with customers seeking better returns on cash idled between transactions.

Customers can either sweep the cash into the fund or a federally insured bank account. To attract money to the fund, PayPal said it pays some fund-related costs to help boost yields for customers.

Money market funds are seen as safe because of their long track record of keeping their shares' net asset value at $1.

BARCLAYS MASTER FUND

While it's rare for any money market fund to "break the buck," investors are learning that some of them have strong ties to the subprime mortgage crisis gripping credit markets.

Florida officials Thursday suspended withdrawals from a state-run, short-term investment fund that has shrunk to $15 billion from $26 billion in two weeks. They made the move to delay panicked local government investors yanking money.

The nearly $1 billion PayPal money market fund invests substantially all of its assets in a $29.4 billion master portfolio run by Barclays (nyse: BCS - news - people ) Global Fund Advisors, a unit of Britain's third-largest bank, Barclays Plc.

That portfolio's illiquid assets include the commercial paper and medium-term notes of troubled SIVs. Barclays declined to comment.

In a statement, PayPal spokeswoman Amanda Pires said the PayPal fund "invests in a well-diversified portfolio of high-quality, short-term money market instruments."

"The assets deemed illiquid are well within the regulatory guidelines of 10 percent," she said. "We are confident in the quality of these investments and continue to be confident in the managers' abilities to manage the fund going forward."

SIVs sell commercial paper to buy long-term assets such as bonds backed by risky subprime mortgages, whose escalating defaults in the United States have roiled markets worldwide. Investors worry that SIVs will lose access to funding, forcing the debt vehicles to unload assets at deep discounts.

One investment deemed illiquid by the portfolio is $153.4 million in commercial paper issued by Harrier Finance Funding LLC, a SIV run by German state-owned lender WestLB AG . Moody's (nyse: MCO - news - people ) Investors Service this month placed the Harrier SIV on review for possible downgrade, reflecting the deterioration of its assets.

The master portfolio also holds $1.5 billion in paper issued by SIVs sponsored by Citigroup and HSBC, U.S. regulatory filings show.

HSBC Monday unveiled an emergency plan to fund its two SIVs -- Cullinan and Asscher - with up to $35 billion to avoid forced asset sales. That's good news for the portfolio holding PayPal money. At the end of September, the portfolio held $275 million in paper issued by the two HSBC SIVs, filings show.

The portfolio is also exposed to more than $1 billion in Citigroup-sponsored SIVs. Citigroup this month disclosed that it pumped $7.6 billion into the SIVs to shore up their assets. (Editing by Braden Reddall)

Copyright 2007 Reuters, Click for Restriction