China Stages Military Exercises Along Myanmar Border June 06, 2015 3:22 PM Shen Hua China has launched live-fire air-ground training exercises along the China-Myanmar border, an area where Kokang rebels have been fighting Myanmar's army for months.

China’s Foreign and Defense ministries announced that the military exercises were taking place inside the country's Yunnan province.

The Global Times, under the auspices of the People's Daily, reported that the Chinese military provided precise coordinates of the area of the exercises but gave no clear indication of when the drill would end.

The newspaper said it would be contingent upon the situation and level of effectiveness on the ground. The Global Times called the drill “unusual” while stressing it was “a promised act to protect the safety and properties of the Chinese people.”

Eric Shin, coverage chief at Taiwan’s Defense International magazine, agreed.

“Isn’t it the goal of the People’s Liberation Army to protect its people, sovereignty and territories?” Shih asked. “The PLA has to have a drill at least to demonstrate to its people, especially after Myanmar has crossed the border multiple times to combat the rebels and its bombs were found within the Chinese border.”

June Dreyer, professor of political science at the University of Miami, told VOA only Beijing knows the true intentions of such a drill, which she read as a sign of deteriorating relations between the governments of China and Myanmar, formerly known as Burma.

“Since [opposition leader] Aung San Suu Kyi was freed, there have been a number of protests in Burma against Chinese development projects that the local people feel are impacting badly on them," she said. "Also, there are a number of people in Burma who resent so much Chinese economic presence in their country. Relations between the governments of Burma and China have not been as good as they used to be under the old military dictatorship.”

Cross-border bombings

In March, the conflict in Myanmar between the ethnic Chinese Kokang rebels and the Burmese army began spilling over into Yunnan, China. Two incidents of reported casualties and damage from bombings by the Burmese inside China drew a sharp reaction from Beijing.

Myanmar said the incidents were unintentional, but the Chinese have demanded Myanmar investigate the bombings, apologize and pay indemnities to the victims.

Some analysts believe Beijing may also be seeking to push to expand its power through the ongoing dispute in the South China Sea with neighboring countries, including the Philippines and Vietnam.

Peter Huessy, senior fellow in national security affairs at the American Foreign Policy Council, said, “The Chinese are sending signals, and the signals they are sending are: We are powerful, we are big, and no one should interfere with what we want to do, and that is unmistakable.”

However, Shih, the military expert from Taiwan, sees that as a bit farfetched. He stressed the two areas are fundamentally different.

“The U.S. and China are testing each other’s intentions on the South China Sea issues,” Shih said. “That is different from what has happened on the China and Myanmar borders. Chinese were killed from the Burmese bombs that fell onto the Chinese territories. If the PLA didn’t act on it, the Chinese government would fall short of satisfying its domestic public.”

Will South China Sea Dispute Lead to World War? June 03, 2015 10:17 PM Shen Hua WASHINGTON — Will South China Sea issues trigger a third world war? While American scholars and New York investors are paying close attention to the political, military and economic aspects of the South China Sea conflict, others find the speculation unconvincing.

The U.S. and China have increasingly argued in recent days over Beijing's artificial island building, turning underwater land into airfields, in the South China Sea. U.S. Defense Secretary Ash Carter said on Saturday that the U.S. opposes “any further militarization” of the disputed lands, while one of China’s top ranking military officials has defended building artificial islands in contested waters, saying the land reclamation is “justified, legitimate and reasonable.”

Gordon Chang, author of The Coming Collapse of China, recently claimed that the South China Sea could become the next “Great War Zone.”

Chang said last week at a panel discussion held by the U.S. Air Force Association that it will not be long before the U.S. takes initiatives to respond to China’s unyielding attitude and behavior in the South China Sea. He said the time frame is now.

“The U.S. Navy is clearly going to test China’s claims of exclusion of the South China Sea,” Chang said. “We have to do that, because if there has been any consistent American foreign policy over the course of two centuries, it has been the defense of freedom of navigation.”

“Now China is infringing on that notion at this time,” Chang added. “I think we probably will act in a very short time frame.”

Chang called it “a classic zero-sum game” for China to challenge the U.S. in the South China Sea. He said China sees the South China Sea as one of its core interests with no room for negotiation, while the U.S. has been the influential maritime power for the past two centuries. Both could concede on the South China Sea issues, Chang said, but they will not abandon their long-held positions.

Rick Fisher, senior research fellow at the International Assessment and Strategy Center, told VOA that attention should also be paid to the development of nuclear weapons in China and North Korea. He said that although North Korea stays quiet for now, it is likely to take advantage of the South China Sea disputes in the foreseeable future.

“As soon as North Korea can demonstrate that it can fire a nuclear missile, then North Korea becomes a factor because North Korea itself can decide to take a period of high confrontation in the South China Sea and put greater pressure on the United States in order to obtain concessions from South Korea or the U.S. itself.” So, Fisher said, “as soon as there is a crisis, North Korea could become a very dangerous element.”

Fisher said although Kim Jong Un has rifts with the Chinese government, both share and act by the same communist ideology.

Well-known American investor George Soros also expressed concerns about the Chinese aggression in the South China Sea in recent months. He said at a recent World Bank forum that if China suffers economically, it is likely to initiate a third world war in order to achieve national solidarity and to get itself out of the economic difficulties. Even if China and the U.S. do not engage in a war directly, Soros said, there is a high possibility of military conflicts between China and one of the U.S. security partners, Japan. World War III could follow as a result, Soros said.

Tad Daley, director of the project on abolishing war at the Center for War/Peace Studies, disagrees with the notion that the South China Sea issues are having a strong impact on Chinese nuclear weapon strategies. He said China seems to only want to maintain nuclear deterrence, keeping its second-strike capability without taking the pre-emptive strike, or the first strike.

Daley said China achieved its second-strike capability many decades ago.

“Maybe in 1975, when China said you’d better not launch nuclear strikes on us, because probably a few nuclear warheads would remain, and we could take out Los Angeles and San Francisco,” Daley said. “That situation existed for many decades.”

All these Chinese nuclear developments, he said, have not changed that “in any kind of meaningful way.”

President Barack Obama on Monday also sternly warned China that its land reclamation projects in the South China Sea are counterproductive and a threat to Southeast Asian prosperity.

IMF Says China's Yuan No Longer Undervalued May 27, 2015 9:47 PM Xiao Xun China’s currency is no longer undervalued given its recent appreciation, but the government should pick up the pace in loosening controls on the exchange rate, the International Monetary Fund said.

Economists critical of the IMF’s assessment said it did not reflect the real value of the Chinese yuan, and that the IMF was being pressured by Beijing to help clear the way for the yuan to be added to the Special Drawing Rights basket.

The IMF said in a statement in Beijing on Tuesday that “our assessment now is that the real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued.”

An IMF mission is visiting China this week, including its first deputy managing director, David Lipton. Speaking at the conclusion of an annual review of the Chinese economy, Lipton said the yuan had appreciated against most other currencies in recent months, helping China to reduce its “very large” current account surplus and slow its accumulation of foreign reserves. He said all these indicated that the yuan was no longer undervalued.

According to statistics cited by Bloomberg, the yuan rose against all 31 major currencies over the past 12 months, while the Russian ruble and Brazilian real depreciated the most.

Toward a floating rate

While dropping its long-held view that the yuan was undervalued, the IMF continued to urge China to “make rapid progress toward greater exchange rate flexibility.”

Lipton said China should strive to realize a floating exchange rate within two to three years, because such a move would be helpful for the government to weather continued upward pressure on the yuan as productivity increases.

Yuan appreciation against the currencies of China’s major trading partners, especially the U.S., has been a subject of hot debate for years. The U.S. accuses China of keeping the yuan low to encourage exports, an accusation China denies.

The U.S. Treasury Department suggested in its semiannual report to Congress last month that the yuan was still “significantly undervalued.” Treasury Secretary Jacob Lew reiterated last week that China should make more progress on exchange rate reforms.

Economists in Washington reacted differently to the IMF assessment of the yuan. William Cline, an economist at the Peterson Institute for International Economics, gave the same conclusion recently in his independent research. His colleague, Gary Hufbauer, senior fellow at the Peterson Institute, agreed. “I think we can conclude right now the Chinese yuan is appropriately valued,” he said. “I know it’s a big issue in recent years, but right now it’s not been an issue.”

IMF assessment "out of date"

Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute, disagreed. He called the IMF’s assessment “out of date and mistaken.”

“The fact is that China is still intervening heavily in the foreign currency market,” he said. “It simply stopped engaging in traditional purchases of foreign exchange reserves held by the Central Bank.” What China has done instead, he said, "is switch over to a great increase of its holdings of sovereign wealth funds — government-controlled investment in private stocks, bonds, commodities, lands and real estate abroad.”

Scott said China’s holding in early 2015 in the sovereign wealth fund reached nearly $1.5 trillion. “There’s a very strong correlation between foreign investment and accumulation of the large, growing current account surpluses,” he said. “So China is intervening, and China has large and growing current account surpluses.”

Although Beijing reduced its financial control and is concerned about the subsequent economic damage of having greater flexibility in the yuan’s foreign exchange rates, it is very active in seeking the yuan’s greater influence in the international financial system, including adding the yuan to the SDR basket.

The IMF’s Lipton said in Beijing that the fund welcomed “Chinese efforts in this regard.” Markus Rodlauer, IMF’s deputy director of the Asia and Pacific Department, said the IMF would work closely with China to include the yuan in the SDR basket. He added that it was not a matter of “if” but “when.”

Every five years, the IMF reviews the SDR basket, which currently includes the U.S. dollar, the euro, the Japanese yen and the British pound. The IMF will review the basket composition later this year.