M. Ulric Killion: 2011

Tuesday, December 6, 2011

The Role of the Chinese Renminbi in the Future of Global Finance – The Internationalization of the Chinese Currency

By M. Ulric Killion

People’s Bank of China Governor Zhou Xiaochuan answers a question during a press conference in March 2010. The International Monetary Fund on Friday said it will hold a high-level conference of central bank governors in Shanghai next week to discuss ways to address the global financial crisis; Photo / Xinhua / Chen Jianli.

As earlier mentioned, “China Central Bank Governor Zhou Xiaochuan’s earlier call to replace the US dollar with a new global currency seems to be slowly gaining support in the international community” (M. Ulric Killion, Growing support for China Bank Gov. Zhou’s call for new “Global Currency”, April 1, 2009).

This month the Council on Foreign Affairs (CFA), in the “Beijing Papers” or CGS/IIGG Working Papers, presents, “A collection of papers examining the internationalization of the Chinese currency, the renminbi, as written for a symposium co-sponsored by the Council on Foreign Relations and the China Development Research Foundation in November 2011.”

As for the subject matter of the symposium, it was a much-needed venting of the issues and controversy surrounding the internationalization of the Chinese currency, the renminbi (RMB, international code id CNY, Chinese Yuan). While many Western experts may not take the issue seriously, many Chinese experts deem the internationalization of China’s national currency, the renminbi, as inevitable.

Quoting from an earlier article,

According to the economist Jing Li (Capital University of Economics and Business, China), the internationalization of the RMB is inevitable. This arguable inevitability may well be mostly attributable to the reality, as described by Jing (2006), that, “The integration of Asia, and the growth of RMB as a regional key currency will challenge the current imbalanced international monetary system. This will improve the global currency structure, reduce the overdependence on USD, and promote the resource allocation efficiency in developing countries” (M. Ulric Killion, The “Big Three” Credit Rating Agencies plus the Chinese Dagong Global – A new Asian and International Reality, 2011; Jing Li, RMB as a Regional International Currency: Cost-benefit Analysis and Roadmap, Centre for European Studies, Fudan University, May 12, 2006.).

Additionally, the Chinese domestic currency once internationalized will have far-reaching influence. For example, some of these influences will widely range from affecting on-going debt crises and/or sovereign debt crises of developed countries, to challenging the efforts of the Bretton Woods Institutions, especially the International Monetary Fund (IMF), in assisting these struggling economies. One should also add that it will also inevitably challenge the credibility of the “Big Three” credit rating agencies (CRAs), which are Standard & Poor’s (S&P), Moody’s Corporation, and Fitch ratings (Killion, 2011).

Moreover, many Western experts see merit in China Central Bank Governor Zhou Xiaochuan’s earlier call to replace the US dollar with a new global currency (Killion, 2009, presenting a fuller discussion of Governor Zhou’s proposal).

For instance, some of the earlier growing support for replacing the U.S. currency included Joseph Stiglitz, a Columbia University economics professor; Marc Chandler, who is a currency strategist at Brown Brothers Harriman; and even U.S. Treasury Secretary Timothy F. Geithner, when earlier expressing some openness about a new reserve system based on the IMF’s special drawing rights (SDRs) (Killion, 2011).

There is also C. Fred Bergsten (Director of the Peterson Institute for International Economics), who also earlier saw the merits of Governor Zhou’s proposal, especially the creation of an open-ended SDR-denominated fund.

According to Bergsten,

The substitution account would be a winning proposition for all concerned. The dollar holders would obtain instant diversification. The United States would avoid the risk of a free fall of the dollar. Europe would prevent a sharp rise in the euro. The global system would eliminate a potential source of great instability. These benefits call for the use of a global asset to make up any losses to the account from future falls in the dollar, such as creation of additional SDR or the IMF's gold holdings (including the sizeable US share of them). The main argument against such an account is that China has accumulated its dollar hoard of more than $1,000 billion by keeping its currency substantially undervalued, through massive intervention in the foreign exchange markets, and thus deserves no sympathy if it takes losses on those dollars. One might even suspect that the Chinese have mentally booked such losses as the implicit cost of the subsidy to exports and jobs achieved through their currency manipulation. But there is no sign that China will stop intervening, or that its surpluses will abate, even though the US external deficit has declined sharply, and its reserve build-up is thus likely to become even more threatening. Moreover, this is an ideal issue for China and the United States to develop the informal "G-2" partnership that is needed to provide global economic leadership to pass needed reforms at the existing multilateral institutions (M. Ulric Killion, Bergsten - We Should listen to Beijing's Currency Idea, April 15, 2009; C. Fred Bergsten, We Should listen to Beijing's Currency Idea, April 8, 2009 (Co-Ed in the Financial Times).

In these respects, the symposium sponsored by the CFR and the China Development Research Foundation on the subject matter of the internationalization of China’s domestic currency, the renminbi, lends additional credibility or a degree of seriousness to the issues and controversy surrounding China’s national currency. While doing so, the symposium on the internationalization of China’s domestic currency, though perhaps unintentionally, also lends credibility to the plausibility of its inevitability.

For all of these reasons and more, the following “Beijing Papers” or CGS/IIGG Working Papers warrant serious consideration. This is because the “Beijing Papers” are a must read for anyone interested in the issues and controversy surrounding the internationalization of China’s domestic currency, the renminbi.

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The “Beijing Papers” - CGS/IIGG Working Papers - 2011

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November 2011

What Drives CNH Market Equilibrium?

Author: Peter Garber, Global Strategist, Global Markets Research, Deutsche Bank

Overview

The recent rapid growth of the offshore renminbi market presents a puzzle for analysts of China’s development strategy. By allowing renminbi to flow offshore uncontrolled before loosening government controls over internal financial markets, Chinese officials are straying from the normal sequence of steps toward currency internationalization. Why might that be? In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Peter Garber seeks to answer that question by investigating what drives offshore renminbi markets and how they are evolving.

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November 2011

Historical Precedents for Internationalization of the RMB

Author: Jeffrey A. Frankel, James Harpel Chair for Capital Formation & Growth, Harvard University

Overview

The twentieth century saw the rise of the U.S. dollar, the German mark, and the Japanese yen as international currencies. Now the Chinese renminbi is on a similar course toward reserve currency status, but its path is deviating from those of its predecessors in both aim and intent. In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Professor Jeffrey Frankel explains how the renminbi’s ascent is without historical precedent and why China might be pursuing such an unorthodox strategy.

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November 2011

Renminbi Internationalization and China's Financial Development Model

Author: Robert N. McCauley, Senior Adviser, Monetary and Economic Department, Bank for International Settlements

Overview

Internationalization was a spontaneous outcome of the marketplace for the rest of the world’s major currencies, but China is breaking with history by making it official policy to steer the renminbi on a path toward reserve currency status. However, this managed internationalization occurs at a time when China’s financial development is still in a transitional phase featuring capital controls and other constraints on credit growth and allocation. In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Robert McCauley explores the policy challenges facing Chinese authorities as their pursuit of an internationalized renminbi threatens to undermine the effectiveness of their domestic financial market controls.

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November 2011

The Internationalization of the RMB: Opportunities and Pitfalls

Author: Takatoshi Ito, Professor, Graduate School of Economics and Graduate School of Public Policy, University of Tokyo

Overview

China is making swift strides toward internationalizing its currency, the renminbi, but it must be careful when sequencing these changes. Without the proper reforms, wide-open Chinese financial markets would be vulnerable to massive flows of foreign capital that could send China into the throes of financial crisis. In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Professor Takatoshi Ito examines the progress of the renminbi’s march toward international status and evaluates the possible paths forward.

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November 2011

The Future of International Liquidity and the Role of China

Author: Alan M. Taylor, Souder Family Professor of Arts and Sciences, Department of Economics, University of Virginia

Overview

Financial crises in the 1930s and 1970s showed the world that economic instability results when demand for international liquidity allows a small number of countries to run up massive debts in their own currencies. Named for the economist who first described the scenario in the 1960s, this “Triffin Paradox” threatens the global financial system again today as demand for reserves has skyrocketed among emerging market economies. In this Center for Geoeconomic Studies Working Paper, produced in association with CFR’s International Institutions and Global Governance program, Professor Alan Taylor considers whether China might play a larger role in stabilizing the world economy by supplying a reserve asset of its own—an internationalized renminbi.

Beijing Papers - Council on Foreign Relations

Monday, December 5, 2011

China’s economic growth model – A recipe for growing too fast?

By M. Ulric Killion

While China’s economic growth since 1990 is astonishing, China has a long way to go before it can beat or overtake the US economy. Despite the strong growth the Chinese economy still is relatively small compared to the US economy. So in that sense it may be premature to call China as the rising superpower. Emerging markets in Asia, Africa, etc. may not be able to consume as much of the Chinese goods as the US did simply because consumers in those markets do not have the purchasing power as Americans do. Chinese Exports: Can Emerging Markets Replace the U.S. Consumer?, Seeking Alpha, November 13, 2009; Photo / Source: Der Spiegel.

There is a recent (December 2, 2011) posting of an interesting article by Adam Ozimek, which is titled, “If there is a recipe for growing too fast forever, I have yet to see it”, at the Modeled Behavior blog. The article engendered a lively discussion on the Internet, and the comments also provide for interesting reading.

The focus of the article was on the sustainability of China’s burgeoning economic growth. For instance, an excerpt from the article reads,

Karl [Smith] defends Andy Stern on China by making a claim about economic growth that on the one hand I think is partly true, but I think he overstates the case. His argument is that it is possible for economies to grow too fast in some sense, because economic growth is not the same thing as welfare. You can take too much from current generations in the name of stimulating economic growth. Karl has made this point in the past more explicitly, pointing to China’s 40% savings rate outside the bounds of plausible optimal savings rate. This much I agree with, or at least I agree that it is possible and worth considering (I don’t know what the bounds of optimal savings are for China, or if they’re actually outside it). The problem is to use this to defend the notion that China can go too fast forever and use their current strategy to one day surpass us in per capita GDP.

As earlier stated the comments are also equally interesting because some of the comments even link the sustainability of Chinese economic growth with democracy. For example, according to one comment, “being a rich country requires democracy.”

For these reasons, both the article and comments are a compelling read; they also present several issues about the future sustainability of China’s economic growth.

First, the discussions challenge a seeming truism, if not tacit assumption, that China will overtake the U.S. economy in the new millennium. Quoting from an earlier article,

In the early 1990s, the World Bank predicted that in the early days of the new millennium, China would overtake the US as the largest economy in the world. In November 2006, as reported in the Wall Street Journal, former World Bank Chief James Wolfensohn warned Western countries of an economic future and altered balance of power dominated by China and India. Based on projections by investment bank Goldman Sachs, Wolfensohn predicted that within 25 years the combined GDP of China and India would exceed that of the G7 nations. China, by 2030 to 2040, would become the world’s largest economy. By 2050, “China’s current $2 tn GDP is set to balloon to $48.6 tn, while that of India, whose economy weighs in at under a trillion dollars, would hit $27 tn.” He also highlighted the recent and substantial investments of both China and India in Africa, as examples of how these two emerging giants are exercising their increasing global influence (M. Ulric Killion, “Regional Economic Integration: The Chinese Way,” The Analyst-Finance Magazine: Global Economy Special Issue, August 2008).

Second, the article and comments seem to ignore the reality that there are pristine models of neither capitalism nor socialism. All of which, in the real world, presents questions of how socialist “we” are, how capitalist “they” are, and vice versa. In this respect, there is also a problematic denial of the genuine possibility of what hails as a Beijing model, Beijing consensus, and even arguably the potential for China and its economic growth model actually presenting a possible evolution in the capitalist model (M. Ulric Killion, Post-global financial crisis: The measure of the “Beijing consensus” as a variety of capitalisms, MPRA Paper No. 26382, November 2010, discussing the varieties of capitalism theory in the context of the Chinese economy). In other words, China presents itself as a socialist-political polity pursuing capitalist-economic policies.

Third, the article and comments also arguably fail to recognize that China’s economic growth model, though many Western experts will disagree, stems from an inherent inevitability rather than choice in how best to modernize. This is because, “The initial choice of an open export-oriented strategy as the breakthrough point for reform had an inherent inevitability,” rather than being a blind imitation of other East Asian economies, and presumably other non-Asian economies (C. Pei and L. Peng, “Reform and opening up in the area of circulation: a retrospect,” Zhongguo Shehui Kexue [Soc. Sci. China], Vol. XXX, No. 1 (February 2009), 36-53).

Notwithstanding their detailed presentation regarding this inherent inevitability, Pei and Pang generally characterized both exported-oriented production and international capital investment as critical choices of China’s open strategy. Although China’s factor endowment advantage of labor (i.e., lower wages than neighboring economies) provided an incentive for international investors, the arrangements made in the course of trade system restructuring came to coincide with the investment strategies of international capital; thus, eventually presenting for China the historical opportunity of international capital’s industrial transformation (Pei and Pang, 2009).

Fourth and finally, there is the debt crisis of developed countries, which, as empirical studies suggest, will impact on the gross domestic product (GDP) of these countries. This also challenges the notion of what the article characterizes as China’s “catch up growth.” As Davide Furceri and Aleksandra Zdzienicka recently concluded, “Debt crises produce significant and long-lasting output losses, reducing output by about 10 percent after eight years. The results also suggest that debt crises tend to be more detrimental than banking and currency crises” (Davide Furceri and Aleksandra Zdzienicka, “How Costly Are Debt Crises?”, IMF Working Paper, No. 11/280, December 1, 2011).

For all of these reasons, in the end, one suspects that China will sustain its economic growth, while developed countries continue to struggle with debt crises and the aftermath of debt crises.

Sunday, November 20, 2011

The “Big Three” Credit Rating Agencies plus the Chinese Dagong Global – A new Asian and International Reality

by M. Ulric Killion

“Dagong Global Credit Rating Co. Ltd. (hereinafter referred to as "Dagong") is a specialized credit rating and risk analysis research institution founded in 1994 upon the joint approval of People‘s Bank of China and the former State Economic & Trade Commission, People’s Republic of China, and is also a key credit information and credit solution service provider in China. As the most influential founder of China‘s credit rating industry and market, Dagong has all franchise qualifications granted by the Chinese Government, and is an official institution providing credit rating services for all bond issuers in China.”; Photo / Dagong website.

In a recently written policy brief entitled, “What Can and Cannot Be Done about Rating Agencies”, Nicola Véron (2011), a visiting fellow at the Peterson Institute for International Economics, explored some of the modern problems of credit rating agencies (CRAs). He presented an excellent discussion of some of the critical problems surrounding these CRAs, especially the recent problems attendant to their often seemingly poor timing of downgrades (i.e., downgrading countries such as Greece and China).

A failing, if any, of his policy brief, or approach to examining the problems of CRAs is that he emphasized these issues in the context of the “Big Three” CRAs, which are Standard & Poor’s (S&P), Moody’s Corporations, and Fitch ratings.

In other words, his study or policy brief, though an excellent presentation, would have been more interesting with an inclusion of the issues and controversy surrounding China’s national currency—renminbi (RMB, international code id CNY, Chinese Yuan). This is because China and other countries are seeking to internationalize China’s national currency.

Véron admittedly did mention other CRAs; such as AM Best (US-based), Eagon Jones (US-based), Kroll Bond Rating Agency (US-based), Dominion Bond Rating Service (Canada-based), Japan Credit Rating Agency (Japan-based), and Rating & Investment Information (Japan-based), including the Chinese rating agency Dagong Global Credit Rating Co. (“Dagong Global”), which is the focus of this short writing.

However, Véron paid scant attention to the potential implications of the launch of Dagong Global. The only other mention of Dagong Global is in a footnote, which distinguishes Dagong Global from the other CRAs. This is because, unlike the other CRAs, it is not registered with the U.S. Securities and Exchange Commission (SEC).

Véron (2011) notes that,

Of this list, all except Dagong are registered with the US Securities and Exchange Commission (SEC), which designates them as Nationally Recognized Statistical Rating Organizations (NRSROs). A 2009 application for registration by Dagong was not accepted by the SEC (SEC 2011a, p.4). National units of AM Best, Dominion Bond Rating Service, Fitch, Japan Credit Rating Agency, Moody’s, and S&P are also registered in Europe and supervised by the European Securities and Markets Authority (ESMA).

“The European Commission has today released proposals to regulate Credit Ratings Agencies (CRAs). PES Press release 15/11/2011.” The Party of European Socialists (PES) have called the proposals ‘diluted’, with the main issue of establishing a European independent credit rating agency to oversee the agencies entirely absent from the final text. “Unchecked power and money is the big problem with Credit Rating Agencies”, said PES President Poul Nyrup Rasmussen. “Unfortunately, unchecked power and money is also a big part of EU lobbying, and it would seem that Ratings Agencies have been lobbying very hard to pre-emptively reduce the impact of the Commission’s proposals”; Photo, Worrying signs that Commission is already cowed by Credit Ratings’ Lobby as Barnier tables proposals | Europeans For Financial Reform, November 15, 2011.

Véron failed to mention, however, that the rejection by the US-SEC of the application of Dagong Global associates with allegations of bias. For this reason, both Dangong Global and the SEC issued press statements after the rejection of Dagong Global’s application for registration as a Nationally Recognized Statistical Rating Organization (NRSRO).

On September 25, 2010, Dagong Global issued a press statement “saying that its application for NRSRO status in the United States is rational and complies with rules and laws, and the contention by U.S. authorities that they are unable to handle cross-border oversight and regulation amounts to bias against Chinese credit-rating agencies. Dagong will not accept the NRSRO status at the price of betraying national sovereignty, according to the statement” (People’s Daily, 2010).

In reply, the SEC issued a statement on its official website; citing that the objection to Dagong Global’s application for registration as a NRSRO is because it cannot perform cross-border oversight and regulation of Dagong Global (People’s Daily, 2010).

On the issue of the cross-border oversight objection and/or problem, Dagong Global’s press statement also stated,

Dagong said that its application for the NRSRO status in the United States has completely been a type of market conduct. “We will absolutely not accept the one and only reason put forth by the SEC – that it cannot perform cross-border oversight and regulation.”

NRSRO refers to the qualification reviewed and approved by the SEC to allow a credit rating agency to conduct business in the United States.

Dagong said that the SEC has unreasonably denied the application of a Chinese credit rating agency that met application standards. It is not only against the rules of the American “Securities Exchange Act,” the “Oversight of Credit Rating Agencies Registered as Nationally Recognized Statistical Rating Organizations,” and related international rules and laws but also resulted in a huge loss for Dagong.

“Dagong will consider conducting activities at the right time to protect its rights, including seeking legal actions against the SEC,” the statement read.

The statement went on to point out that as the largest creditor country of the United States, China owns a huge amount of financial assets in the United States, so having China’s own say in credit rating in the United States is significant to safeguarding the security of China’s overseas financial assets.

“The SEC’s deliberate denial is evidently aimed at preventing Dagong from gaining influence in the international credit rating market, and at maintaining the monopoly of three U.S.-based major credit rating agencies,” the statement read (People’s Daily, 2010).

A problem of the allegation of bias against China is that, in the context of a global economy, China’s national currency and its trade, finance, and monetary mechanisms enjoy dire relevancy.

According to the economist Jing Li (Capital University of Economics and Business, China), the internationalization of the RMB is inevitable. This arguable inevitability may well be mostly attributable to the reality, as described by Jing (2006), that, “The integration of Asia, and the growth of RMB as a regional key currency will challenge the current imbalanced international monetary system. This will improve the global currency structure, reduce the overdependence on USD, and promote the resource allocation efficiency in developing countries.”

It should be noted that as early as 2009 there were aggressive rumblings from China and other countries, including in the United States; when many were advocating replacement of the US dollar with a new global currency. It was earlier observed that, “China Central Bank Governor Zhou Xiaochuan’s earlier call to replace the US dollar with a new global currency seems to be slowly gaining support in the international community” (Killion, 2009).

For example, some of the earlier growing support for replacement of the U.S. currency included Joseph Stiglitz, a Columbia University economics professor, and Marc Chandler, who is a currency strategist at Brown Brothers Harriman.

Additionally, although both the Federal Reserve Board Chairman Ben Bernanke and U.S. Treasury Secretary Timothy F. Geithner earlier rejected on March 31, 2009 the call to drop the dollar as the world’s key reserve currency” (Killion, 2009; Lesova, 2009), according to some news sources, Geithner earlier expressed some openness about a new reserve system based on the IMF’s special drawing rights (SDRs), though admittedly not specifically mentioning China’s national currency, the RMB.

Moreover, the failings of the “Big Three” for obvious reasons directly influence the receptivity of the RMB in the international monetary system, while also presenting a challenge to its receptivity.

Dai Daohua (Senior Economist at the Bank of China) earlier set forth both the major shortfalls of the “Big Three” and some of the choices available to China. In light of these shortfalls, according to Dai (2010), China faces two choices; China can either strengthen its own credit rating system or push for international credit rating reform.

For this reason, the success or failure of Dagong Global may have far-reaching implications, notwithstanding its potential to lure more Chinese investors (See, Cf., Tian, 2011; discussing Dagong Global’s first sovereign customer, which was the Republic of Belarus, and the potential lure of Chinese investors).

In other words, the growing role of China’s national currency in the international monetary system warrants serious consideration of the new Chinese CRA, the Dagong Global. This is because the launch of the China-sanctioned new Chinese CRA actually associates with growing responses to the failings of the “Big Three” CRAs, including, as Véron (2011) even recognized, the unreliability of the “Big Three.”

All of this speaks to the severity of the failings of the “Big Three” and China’s perception of the “Big Three,” while also prospectively serving to demonstrate that in future discussions about CRAs the potentiality of Chinese CRAs is due serious consideration.

References

Nicola Véron, What Can and Cannot Be Done about Rating Agencies, Peterson Institute for International Economics, Policy Brief – PB11-21, November 2011; A synopsis of his article reads:

The constantly developing global financial system needs better risk assessments than Credit Rating Agencies (CRAs) have been collectively able to deliver during recent crises. More comprehensive public disclosure by issuers on their financial risks, which would not require intermediation by CRAs, is the best chance for new and better risk assessment methodologies and practices to emerge. To put it in a simplistic but concise way, what is needed is “a John Moody for the 21st century.” CRAs themselves can perhaps be somewhat improved by adequate regulation and supervision, but public policy initiatives that focus only on CRAs are unlikely to adequately address the need for substantially better financial risk assessments. If real progress is to be made towards a better public understanding of financial risks, it will have to involve innovative approaches that even well-regulated CRAs, on the basis of recent experience, may not be the best placed to deliver.

M. Ulric Killion, Growing support for China bank official’s call for new global currency, M. Ulric Killion's space, April 1, 2009; Alternatively, see M. Ulric Killion: Growing support for China Bank Gov. Zhou's call for new "Global Currency," April 1, 2009.

Chinese credit-rating agency denied entry by US authorities, claims bias, People’s Daily Online, Sept 26, 2010.

Jing Li, RMB as a Regional International Currency: Cost-benefit Analysis and Roadmap, Centre for European Studies, Fudan University, May 12, 2006.

Polya Lesova, Geithner, Bernanke reject China currency proposal, MarketWatch, March 24, 2009.

Dai Daohua, Credit Rating Agencies’ Reform and China’s Choices, Hong Kong Trader, Jun 30, 2010.

Wei Tian, Dagong gets first nation client, China Daily, November 9, 2011.

Wednesday, November 9, 2011

Iran and nuclear enrichment – Iran’s response to the new IAEA Report

By M. Ulric Killion

A suspected uranium-enrichment facility near Qom in Iran. Photograph: Digital Globe/Reuters.

The following collection of articles is from the November 9, 2011 edition of the Tehran Times. This collection of articles stems from various official media sources in Iran. These articles present various responses and positions from Iran and its official media sources regarding the recent report of the International Atomic Energy Agency (IAEA), which addressed issues of Iran and nuclear enrichment. According to the IAEA, Iran had “accumulated more than 1,000 pages of documentation that led it to believe suspected nuclear weapons work was carried out under a "structured programme" until 2003, and that "some may still be ongoing” (Julian Borger, UN watchdog reveals 'serious concerns' about Iranian nuclear weapons research, guardian.co.uk, November 8, 2011).

-- M. Ulric Killion

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Tehran Times, Nov 9, 2011 --

Iran - Politics

Iran provides 20 answers to clarify ambiguities about its nuclear program

Political Desk - Wednesday, 09 November 2011

Iran's envoy to the IAEA Ali-Asghar SoltaniehIran's envoy to the International Atomic Energy Agency (IAEA) Ali-Asghar Soltanieh has offered the...

Iran rejects IAEA report as 'politically motivated'

Political Desk - Tuesday, 08 November 2011

Iran has rejected the International Atomic Energy Agency report about the country's nuclear program for being politically motivated."The report of the...

IAEA report thrives on laptop of lies

Ismail Salami - Tuesday, 08 November 2011

The 'DG [director General] of all states, but in agreement with us' was how the International Atomic Energy Agency (IAEA) chief Yukiya Amano was...

'US dictated new IAEA report to Amano'

PressTV - Tuesday, 08 November 2011

As the International Atomic Energy Agency (IAEA) Director General Yukiya Amano is set to release his latest report on Iran's nuclear case, an Iranian...

Amano's new report, repetition of unfounded claims

IRNA - Tuesday, 08 November 2011

Tehran, Nov 8, IRNA -- Western sources said about one month ago that the new report by the UN nuclear watchdog’s chief would include some evidence...

Iranian official in Moscow to discuss IAEA report, step-by-step proposal

Political Desk - Tuesday, 08 November 2011

TEHRAN – The deputy secretary of the Supreme National Security Council, Ali Baqeri, left Tehran for Moscow on Tuesday to hold talks with Russian...

Iran fully prepared to counter any attack: minister

Political Desk - Tuesday, 08 November 2011

TEHRAN – Iranian Defense Minister Ahmad Vahidi said on Tuesday that the Islamic Republic is in full preparedness to counter any military attack against...

Chances slim for stiffer sanctions against Iran

Political Desk - Tuesday, 08 November 2011

UNITED NATIONS (Reuters) - There is little chance that the UN Security Council will impose tough new sanctions on Iran anytime soon.The reason for...

Wednesday, November 2, 2011

China donates $1.5 million to Colombia for defense and military investments / China dona a Colombia 10 millones de yuanes para la defensa

by M. Ulric Killion

During a three-country tour of Latin America, General Guo Boxiong is promoting bilaterial ties between China and Latin American countries, while also donating millions of dollars (or yuan) for defense and military investments; Photo, October 28, 2011.

October 31, 2011 --

[During a three-country tour of Latin America, when visiting Cuba, Colonel General Guo Boxiong (Vice-President of China’s Central Military Commission) met with President Raúl Castro and military leaders. During his visit, General Guo promised to deepen bilateral ties, while also signing an agreement to donate $1.5 million (i.e., about 10 million yuan in Chinese currency) to the Colombian government for defense and military investments [“. . . . por parte de China a Colombia por valor de 10 millones de yuanes (un millón y medio de dólares.”)] -- Translation by M. Ulric Killion.

Los recursos serán destinados para la compra de equipos y material logístico.

[The funds will be used for the purchase of equipment and logistical material.] -- Translation by M. Ulric Killion

El ministro de Defensa, Juan Carlos Pinzón, se reunió este lunes en Bogotá con el Vicepresidente de la Comisión Militar Central de la República Popular China, Coronel General Guo Boxiong, con quien sostuvo una reunión en la que firmaron un acuerdo de cooperación entre Colombia y China.

En el encuentro entre los altos mandos militares y representantes diplomáticos de la República Popular China, se formalizó un acuerdo de asistencia militar gratuita por parte de China a Colombia por valor de 10 millones de yuanes (un millón y medio de dólares).

Se trata de un acuerdo similar a convenios anteriores que los Ministerios de Defensa de ambos países ya han ejecutado con los que las Fuerzas Militares de Colombia se han visto beneficiadas, teniendo en cuenta que los recursos donados son invertidos en dotación logística y material de intendencia. . . .

See China dona a Colombia 10 millones de yuanes para la defensa | ELESPECTADOR.COM

Wednesday, October 19, 2011

Chinese airlines, China’s market, and Boeing 787 cancellations

by M. Ulric Killion

The following photo, which was taken on October 17, 2011, shows the cabin of a China Southern Airbus 319/320 aircraft at Guangzhou Baiyun International Airport, People’s Republic of China (PRC); Photo by M. Ulric Killion.

According to Wang Wen (China Eastern cancels order for Boeing 787s|Companies|chinadaily.com.cn, October 19, 2011), Chinese airlines are electing to focus on the acquisition of smaller commercial aircraft rather the Boeing 787s to serve China’s market.

According to Wang, “China Eastern Airlines Corp, the country's second-largest carrier by aircraft numbers, announced on Monday night it was canceling its order for 24 Boeing 787 Dreamliners in favor of 45 smaller 737s, which will be delivered between 2014 and 2016.”

Boeing Co delivered its first 787 Dreamliners on Sept 25, three years after the original delivery date. China Southern Airlines Co Ltd, Air China Ltd and Hainan Airlines Co Ltd have confirmed orders for 35 Dreamliners. SeongJoon Cho / Bloomberg.

Further Wang wrote:

“China Eastern will also return five A340-300s to Airbus SAS in exchange for 15 smaller wide-body A330s, which could be operated on domestic routes, Bloomberg reported. The total value of the A330s is $2.53 billion, the carrier said.

China Southern Airlines Co Ltd, Air China Ltd and Hainan Airlines Co Ltd also have confirmed orders for 35 Dreamliners. China Southern may scrap its 10 orders for the 787 after delivery of the first plane was pushed back to July 2012.”

However, Wang failed to mention that prior to Chinese airlines electing to acquire the smaller Boeing 737s (i.e., Boeing 737-700/800 aircraft ) rather the “Boeing 787 – Dreamliners”, many Chinese airlines were arguably earlier pursuing this market strategy.

For instance, airlines such as China Southern are presently using a smaller variety of Airbus aircraft. An example of the smaller variety of commercial aircraft that some Chinese airlines are currently using is the Airbus 319/320.

Friday, October 7, 2011

Will China’s State Secrets Law again rear its ugly head – Cheating and the credibility of exams for professionals

by M. Ulric Killion

Song Fulai, who composed questions for the certified architect exam, was sentenced in Beijing in 2008 to 18 months in prison for leaking state secrets. The court found that he gave exam questions to his students during tutorials; Photo/provided to China Daily]; Cui Jia, Li Jing, and Duan Yan, Professional exams face credibility test, China Daily, September 30, 2011.

On September 30, 2011, the China Daily’s cover page reported a new level of unprecedented cheating via the internet for professional examinations. These are the professional examinations for certified public accountants (CPAs), doctors, lawyers, judges, and architects.

One suspects that level and intensity of the cheating on professionals exam is at least partially owing to the speed, depth, and perhaps even a certain degree of secrecy that associate with the mass communication naturally inherent in Internet communications.

Additionally, and presenting yet another force of influence, the seemingly growing level of cheating via the internet may also be attributable to low pass rates on professional exams. For instance, in China “the average pass rate for the full CPA exam is 10 to 15 percent” (Cui, Li, and Duan, 2011).

As for the National Judicial Examination for lawyers or judicial officers, during the past ten years, although “the passing rate has risen from 6.7 percent in 2002 to 20 percent last year” (Cui, Li, and Duan, 2011), the average pass rate of 20 percent is still a low rate.

The cover story also describes the various methods that employ in enabling cheating on these professional exams, while also noting the various costs, including the illegal profits.

Experts say there's an intricate chain of commercial interests behind professional qualification tests, and regulation is scattered among the ministries that oversee the different professions. The experts also say some individuals or companies are using those commercial interests to make illegal profits, in the process damaging the credibility of the exams (Cui, Li, and Duan, 2011).

It is even more noteworthy that despite the unprecedented level of cheating on professional exam, they have not been any recent arrest made in connection with cheating on professional exams. The latter admittedly may owe to the speed, convenient and secrecy of the Internet. For instance, as the China Daily reported,

But during the medical licensing examination, also on Sept 17 and 18, China Youth Daily reported that one Internet user received 20 questions from a source 90 minutes before a test on the second day and found them to be identical to questions in the test. Similar leaks had been reported in 2007 and 2009, the report said (Cui, Li, and Duan, 2011).

The cover page, although unintentionally, also provides a measure of Chinese law, in particular, China’s “Law on Guarding State Secrets” (i.e., State Secrets Law). This is due to professional qualification tests being governed by state regulations or laws, and administered by various state ministries in each profession such as the Ministry of Justice for lawyers, and the Ministry of Housing and Urban-Rural Development for architects.

The earlier mentioned conviction of Song Fulai provide a precedent for what will happen to those that persist in the illegal enterprise of cheating on professional exams. For Song, in 2008, the penalty was an eighteen (18) month prison sentence for leaking what the court in Chongqing characterizes as leaking state secrets.

Photo; Beijing Times via Leaked questions land exam writer in jail, December 18, 2008, Danwei.org).

According to the Beijing Times, on December 18, 2008, the designer of a certification exam was sentenced for a year and half for "deliberately leaking state secrets" (Beijing Times via Leaked questions land exam writer in jail, December 18, 2008, Danwei.org).

Song Fulai, a 55-year-old chief engineer at Beijing's Yicheng Municipal Engineering Company, took part in the design of the 2005 and 2006 National Construction Engineer Qualification Exam.

The court found that Song released exam questions to students in a study session he conducted in 2006 and was paid a total of 63,000 yuan. A fellow teacher received a year-long sentence that was suspended for one year (Danwei.org, 2008).

All of this actually presents the measure of Beijing’s enforcement of its infamous “Law on Guarding State Secrets” (i.e., State Secrets Law). Despite the 2010 amendment of the State Secrets Law, it continues to serve as a source of frustration for many. As earlier announced, the revised “Law on Guarding State Secrets” (i.e., State Secrets Law) went into effect on October 1, 2010. The National People’s Congress (NPC), on April 29, 2010, had earlier enacted the revised law.

The passing of the amended State Secrets Law, however, corresponded with a policy report on the Internet, which results in the amended State Secrets Law designedly intending to put in place broader and tighter controls over information stemming from the Internet and any other public information networks, notwithstanding other traditional forms of communication (HRIC | 中国人权 – 新《保密法》在当局发动全国性保密教育宣传运动中生效 / Nationwide State Secrets Education Campaign Launched as New Law Goes into Effect, October 1, 2010; M. Ulric Killion, China seeks public opinion on draft of new State Secrets Law, July 6, 2010).

The trials and tribulations of China’s “Law on Guarding State Secrets” have been many. For instance, the enforcement of the State Secrets Law associates with the Rio Tinto case (Qian Yanfeng, Employees in Rio Tinto case appeal terms, China Daily, April 8, 2010); the conviction and sentencing of Xue Feng, a U.S. geologist, to eight years in prison for buying confidential information about China’s oil industry (Theunis Bates, China Sentences US Geologist Xue Feng to 8 Years in Prison, July 5, 2010); and generally other bribery scandals in China (EO Editorial Board, EDITORIAL – The Nature of Bribery Scandals in China / 谁在播种商业贿赂恶之花, Economic Observer News, June 29, 2010).

From Song Fulai’s case, the Rio Tinto case, the trial of Liu Xiaobo, and now, again, the potential for new convictions for cheating on state exams via the State Secrets Law, we are witnessing the same problems with laws that suffer from overgeneralizations and over-broadness (i.e., the over-broadness of law) (M. Ulric Killion, China’s new censorship rules: text messaging and freedom of speech, January 18, 2010).

All of which is understandable, because laws designedly intending to extend broader and greater controls over information from the Internet and other forms of communication must necessarily compromise on issues of constitutionality, social and political legitimacy, and enforceability and efficiency in the administration of justice. For these reasons, the newly revealed instances of cheating on state exams and potential new convictions via the revised State Secrets Law may eventually serve as a certain measure of the revised State Secrets Law, especially concerning the issues of constitutionality, legitimacy, enforceability, and efficiency in the administration of justice.

This is because a recurrent theme or problem of an overgeneralized or over-broad law is that it, ultimately, never says what the “law is,”, notwithstanding legal issues such as fundamental fairness or due process of law.

Saturday, October 1, 2011

China’s struggle with political freedoms and Internet freedom

by M. Ulric Killion

On February 20, 2011, during “the anonymous call for a ‘jasmine revolution’ in China's major cities”, a man is arrested by police in front of Shanghai's Peace Cinema. Carlos Barria / Reuters; (Austin Ramzy, State Stamps Out Small ‘Jasmine’ Protests in China, Time Magazine, February 21, 2011).

A recent China Daily news article reported the keynote address of Wang Chen, Minister of the State Internet Information Office, at the opening of the 4th UK-China Internet Roundtable in Beijing on Sept 29, 2011. (Cao Yin and Zheng Jinran, Social network websites ‘pose a challenge’, China Daily, September 30, 2011).

The focus of Wang’s speech was the danger and/or new problems posed by social networking Internet sites such as Facebook and Twitter. According to Wang, the challenge of social networking via the Internet is that, “Many people are considering how to prevent the abuse of these networks following violent crimes that took place in some parts of the world this year” (Cao and Zheng, 2011).

A potential problem for China is that the Chinese-version of Twitter is the social networking site of Weibo, which presently enjoys a membership or enrollment of 300 million members or netizens. China’s total Internet users number more than 500 million, which, although only by innuendo, makes Weibo and its growing number of netizens a potential problem.

Further elaborating on the dangers of social networks, according to Wang, “Everyone involved should observe the law and safeguard the norms of social morality. The Internet should not be used to jeopardize the national or public interest, or the legitimate rights and interests of other citizens.”

Joining the chorus on the dangers of social networking was reportedly Xie Yungeng, a professor at Shanghai Jiao Tong University, whom also essentially agrees with Wang. Xie reportedly focused on the growing number of Internet users, especially teenagers or those young of age, turning to online and virtual worlds, thereby increasing the potential for them and/or the Internet to have a negative impact on real life (Cao and Zheng, 2011).

In all of this ceremony regarding the problems and dangers of the Internet, these spoke persons ignored the issues of freedom of choice and/or Internet freedom. Additionally, the association of the Internet with violent crimes that took place in other parts of the world (i.e., North Africa, Libya, Egypt, etc.) ignores the reality of the potential of the Internet or Internet freedom to promote democracy in action.

All of this leaves us with a reminder that what hails as the Tunisian revolution (a.k.a. “Jasmine Revolution”), which took place from December 2010 to January 2011, and ends with the ouster of longtime President Zine El Abidine Ben Ali is subject to different perspectives via different political preferences. From a Western perspective, especially Western media, the Tunisian revolution represented the struggle for better living conditions, and political freedoms such as freedom of speech, and impliedly Internet freedom.

Moreover, this is the gist of Wang’s concern with Internet freedom, especially a social network such as Weibo, which is the Internet home to about 300 million Chinese netizens. In February 2011, there were admittedly calls by activists to attempt to initiate a Chinese-version of a “Jasmine Revolution.” It was an unsuccessful call from activists, however.

As reported by the New York Times, the calls by activists did not hardly measure up to what earlier occurred in North African countries such as Tunisia and Egypt. First, the initial call by activists was for Chinese citizens to show or express their displeasure at the lack of reforms by silently meeting in front of department stores or other publics places (Ian Johnson, Calls for a ‘Jasmine Revolution’ in China Persist, The New York Times, February 23, 2011).

Secondly, and more importantly, unlike what happened in Tunisia and Egypt, during the weekend of silent meetings, China’s government “rounded up lawyers, activists and dissidents, increased online censorship and deployed massive numbers of police to quash any demonstrations” (Ramzy, 2011). Thus, putting an end to an intended “Jasmine Revolution” in China.

All of this ultimately leaves issues of greater political freedoms, democracy reforms, and Internet freedom on the back burner. In other words, earlier promises of greater democracy by many leaders remain pending, and in the far distant future.

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Friday, September 30, 2011

“Eggs Under A Red Flag,” authored by Ulric Killion

New Book Release!

List Price: $28.95

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Eggs Under A Red Flag

Authored by Ulric Killion

The book is a discussion about several aspects of Chinese culture. Even the title of the book, “Eggs under a Red Flag,” reflects the latter theme, because it presents an implied-query, which begs the question – so what about Chinese culture, the Chinese family system, and the Chinese people? The latter question also gives rise to a host of other issues and questions. One such issue or question is what the real stories behind the red flag are. For instance, these are the issues or questions that make us wonder why the Chinese people seem to excel in the sport of ping-pong, but not the sport of soccer; why Chinese cuisine seems to constitute an integral part of the lives of the Chinese people and their culture; why some Chinese men, officials or wealthy businessmen have second wives; and a host of other issues, questions, and stories. For these reasons, the book and its title, “Eggs under a Red Flag,” also presents the sub issue of what are the real stories behind the red flag. These are the issues, questions, and stores that actually penetrate the wall, symbol or symbolism of the red flag. Additionally, a penetration of the wall, symbol or symbolism of the red flag, inevitably reveals the real Chinese culture, Chinese family system, and Chinese people. As one source many years earlier wrote, “Young China, being wearied of the revolutionary ardors of its fathers, is going back to old China.” The latter may well be a truism because the real Chinese culture and Chinese people have always, although sometimes seemingly unrevealed or silent, stood behind the wall, symbol or symbolism of the red flag. From a Western perspective, the foregoing issues, questions, and stories also present issue of the successes of China in many facets of life, such as their successes in economics or burgeoning economic growth, and growing regional and international influence in both economics and diplomacy. This also presents issue of whether the West should learn more about Chinese culture, in order to more effectively engage China. This is because, in many of the critical aspects of life, society, politics, and economics, we ought to emulate many of China’s successes. The reasons are many such as the Chinese philosopher or Confucian Mengzi (Mencius) earlier advocating, “Rule a big country as you would fry a small fish.” Then in a more recent example, the former Singapore Prime Minister Lee Kuan Yew advising the United States to co-op Southeast Asian countries into its system via free trade agreements, while it has the bigger market, lest suffer the consequence of these countries drifting to China, which is where the real profits are. What all of this, at the end of the day, ultimately, says about Chinese culture is that the old is new again, as Chinese culture continues to regenerate itself throughout the generations to come. In other words, time changes, but actually nothing changes. The book explores Chinese culture, the Chinese family system, and the Chinese people.

Publication Date:

Sep 07 2011

ISBN/EAN13:

1466238178 / 9781466238176

Page Count:

180

Binding Type:

US Trade Paper

Trim Size:

5.25" x 8"

Language:

English

Color:

Black and White

Related Categories:

Social Science / Regional Studies

Eggs Under A Red Flag

Friday, June 24, 2011

The Spratly Islands Dispute – the South China Sea: China, Vietnam, and the Philippines

by M. Ulric Killion

Secretary of State Hillary Rodham Clinton and Philippines' Foreign Minister Albert del Rosario meet with reporters at the State Department in Washington Photo: AP. According to U.S. Secretary of State Hillary Rodham Clinton, “We are concerned that recent incidents in the South China Sea could undermine peace and stability” (US ready to arm Philippines against rise of China, The Telegraph, June 23, 2011).

The dispute concerning issues of sovereignty over the South China Sea has a long history, notwithstanding the dispute over the East China Sea – the Senkaku Islands or Diaoyutai Islands (Diaoyutai Qundao). The Spratly Islands comprise about forty-five (45) islands. These islands are also occupied by military units from Vietnam, China, Taiwan, and the Philippines. There is even occupancy, though not a military occupancy, of an island by Brunei, which claims an exclusive economic zone (EEZ) (i.e., the Law of the Sea) in the southeastern part of the Spratly Islands.

More recently, however, according to news media sources, the dispute presently centers on the sovereignty claims of China, Vietnam, and the Philippines.

For these claimants, the right of sovereignty symbolizes the right of access to much-needed natural resources, which includes the prize of access to potential oil and natural gas supplies. More accurately, these natural resources include fish, guano, and undermined oil and natural gas potentials.

The dispute between China and Vietnam is especially noteworthy, as both countries claim sovereignty over the Spratly archipelago (i.e., Spratly Islands). China is vehement in its stance that the claims of sovereignty by other countries to the Spratly Islands violate its sovereignty and maritime rights.

Photo / Dana Robert Dillon, U.S. Role in South China Sea Dispute, Paracel and Spratly Islands Forum, January 2008.

For this reason, Vietnam’s claim of sovereignty is noteworthy, and demonstrates the critical importance of access to natural resources. Although both Vietnam and China are communist regimes, the critical importance of access to potential natural resources still leaves them unable to resolve their differences concerning issues of sovereignty and maritime rights.

The dispute between China and Vietnam is especially interesting because, as the Oil & Gas Journal (2011) recently reported,

A subsidiary of Mitra Energy Ltd. has signed a production sharing contract with Petrovietnam Exploration Production Corp. for Block 45 on the eastern margin of the Malay-Tho-Chu basin off Vietnam.

Mitra’s subsidiary is operator with 70% interest in the block, which covers 4,677 sq km in 50 m of water 250 miles southwest of Ho Chi Minh city. Petrovietnam EP has 30% interest. The block is adjacent to Mitra’s existing PSCs on Blocks 46/07 and Block 51 in the well-established oil and gas province.

Acquisition of 270 sq km of 3D seismic was undertaken on Block 45 in April and May 2011 as part of the work program. Petrovietnam’s approval of the presignature seismic shoot allowed Mitra to take advantage of commercially attractive seismic vessel rates and optimum weather. Processing of the seismic data will take 6 months (Vietnam: Mitra gets Malay basin Block off Vietnam, Oil & Gas Journal, June 17, 2011).

Lying at the heart of this problem is that oil and natural gas exploration of the Spratley Islands is inevitable. In the search for much-needed access to oil and natural gas, while China and Vietnam are poised (i.e., resources and funding in place) to commence exploration and production, or joint E&P, the Philippines appear to be standing on the sideline as they did not take part in the earlier, though controversial, seismic survey.

File photo shows a Chinese national flag flying above structures built on stilts on Mischief Reef in the disputed Spratly Islands of the South China Sea. Hanoi normally treads carefully in its relations with its Chinese ideological ally, but the regional ambitions of its large neighbour have stoked a degree of apprehension in Vietnam. Photo / Vietnam, US display military ties amid China tension, France24, August 10, 2010.

In comparison, as early as 2006, the communist countries of Vietnam and China were even entertaining the prospect of a joint exploration and development of offshore blocks in the disputed Spratly Islands (PetroVietnam in Beijing, GlobalSecurity.org, September 13, 2006).

The Energy Tribune earlier described Beijing’s intended joint exploration and production as follows.

PetroChina holds 20 blocks in the South China Sea. They cover 127,000 square kilometers in the Qiongdongnan, Beibu Gulf, Zhongjiannan, South Weixi, and Beikang basins, some of which are subject to border disputes with Vietnam and Malaysia. The company has held back drilling plans in the Spratlys at the Huaguang Trough of the Qiongdongnan basin to avoid protest from Vietnam. China, which already battled with Vietnam in the area in 1974 and 1988, has been calling for the Spratly claimants to shelve their disputes and instead opt for joint exploration there (PetroVietnam in Beijing, Energy Tribune, September 13, 2001).

All of this, practically speaking, renders the claims of the Philippines increasingly tenuous. Then there is the issue of the United States, its support for the claims of the Philippines, and its geopolitical posturing concerning the Spratly Islands. On June 23, 2001, as news media resources reported, “The United States government is ready to provide assistance to strengthen the Philippine military, including external support for maritime defense, amidst the mounting friction with China on the disputed Spratly islands” (US ready to arm Philippines against rise of China, The Telegraph, June 23, 2011). According to U.S. Secretary of State Hillary Rodham Clinton, “We are concerned that recent incidents in the South China Sea could undermine peace and stability” (The Telegraph).

Map showing disputed island groups in the South China Sea. Last week, Vietnamese foreign ministry spokeswoman Nguyen Phuong Nga denounced China for sending ships to carry out seismic studies in the Paracels zone, which "violated Vietnam's indisputable sovereignty".Photo / Vietnam, US display military ties amid China tension, France24, August 10, 2010.

A problem for the U.S. stance, geopolitical posturing, or even revival of Cold War tactics, is that both Vietnam and China are already in position to commence E&P, while the Philippines stood idle. By doing so, the Philippines are hardly in a position to seriously play catch-up on the path to E&P with either Vietnam or China.

Additionally, there is the commonality between Vietnam and China, they are communist regimes. As communist regimes, they may yet resolve their differences, and this will eventually serve to further frustrate the efforts of both the Philippines and US geopolitical posturing.

From China’s perspective, “The US is in no position to intervene as an outsider of the area,” said Xu Liping of the Chinese Academy of Social Sciences, adding that Washington has never before voiced such opinions. And “the issue is between China and related Southeast Asian countries, and to internationalize it (will) only make the issue more complicated” (South China Sea issues are hurt by US: Experts, China Daily/Associated Press, September 20, 2010, June).

As one source earlier observed,

Although Beijing persists in reminding all other claimant countries that the South China Sea is Chinese sovereign territory, China has been very careful about not officially demarcating its specific maritime claims. Thus, other countries can only infer China's specific claims from Beijing's statements and actions, and China retains the option to change or redefine its maritime border according to the situation (Dana Robert Dillon, U.S. Role in South China Sea Dispute, Paracel and Spratly Islands Forum, January 2008).

Moreover, it is unlikely that US hard power (i.e., military power) will resolve the current crisis of the Philippines. This is because neither the Philippines nor United States will actually employ military force in resolving this dispute. In the end, as earlier mentioned, all of this, ultimately, renders the claims of the Philippines increasingly tenuous.

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