Ryan Pyle Blog: China is Funding Terrorism

Hello.

On December 20th 2010, the Shangdi Guanqun Investment Company signed a letter of intent to invest up to USD 2 Billion in to an port and industrial zone in the Northeast of North Korea. A similar investment was tried in the 1990s but didn't amount to much, but apparently this time around the deal was cemented during a visit by Wen Jiabao in 2009. Upwards and onwards.

So what does this mean? Well, apparently we live in a world where you (a pudgy dictator) can shell a democratic country, kill 40+ civilians and then be rewarded with a USD 2 Billion in investments from an emerging superpower, who is also the world's second largest economy. In other words, it means we live in a pretty sick time; an era of distaste and disbelief.

Make no bones about it, this money being invested will go nowhere. The port and industrial center will not develop and the money will be siphoned off or disappear. It will not help ordinary people in North Korea and will only create jobs that support either the military or the government directly. The Shangdi Guanqun Investment Company is a state-run company that specializes in natural resources and infrastructure development. Ownership, or should I say beneficiaries, of the company is opaque at best.

To me, a China watcher and long time resident of Shanghai, I would have to say that this deal simply amounts to state sponsored terrorism. Strong words, but what more can we believe. Basically a Chinese Government controlled entity is using cheap loans from a Government controlled bank to invest USD 2 Billion in a rouge state that holds most of Asia hostage with nuclear tipped missiles. If something sounds amiss, it's because it is. None of this adds up and it shows the true weaknesses of China: that leadership is fractured and it leaves one asking who is really in charge. Obvious Hu Jintao, while dining with President Obama, wouldn't have green-lit this investment to be announced during his state visit to the USA. Those who did make the deal public clearly wanted to damage Hu Jintao's reputation.

There are a lot of factions in China, all bumping in to each other in an attempt to carve out their own power centers. The political leadership is just one of those factions; the military is another. Former leaders, and their children, who run massive conglomerates and/or investment companies and LBO firms are another. As China becomes more powerful and more foreign investment enters the country having all these powers pushing for power, without a strict rule of law to govern them, will create chaos.

In the US the State governments push the Federal government, the Congress pushes the White House, the Supreme Courts keeps everyone in check. There are power centers and power does shift but there is a Rule of Law that keeps it all in check; and there is a free press that points out when one faction becomes too powerful. In China none of that exists. Some might say that is an advantage to getting things done quickly. That's true, and positive, when it comes to building infrastructure and things like low-income housing; but its clearly negative when it comes to propping up the North Korean regime with a USD 2 Billion investment.

China needs to decide which team it wants to play for: The one that sponsors terrorism or the one that doesn't. An article by the WSJ is below.

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The Wall Street Journal
Date: January 19 2011
Copyright: The Wall Street Journal
Original Link: Article

By: JAY SOLOMON And JEREMY PAGE

A Chinese firm has signed a letter of intent to invest $2 billion in a North Korean industrial zone, representing one of the largest potential investments in Kim Jong Il's authoritarian state and a challenge to U.S. policy in the region.

The agreement was signed with little fanfare in Pyongyang on Dec. 20—a day otherwise marked by pitched tension on the Korean peninsula following the North's shelling of a South Korean island—according to documents viewed by the Wall Street Journal. Confirmation of the deal comes as Chinese President Hu Jintao visits Washington this week in a bid to forge closer security and economic ties with the U.S.

U.S. officials said the administration is aware of the possible Chinese investment, but noted that previous projects haven't gone anywhere. "No investment project will enable North Korea to meet the needs of its people as long as its government continues its destabilizing behavior," said a senior administration official.


The letter of intent involves China's Shangdi Guanqun Investment Co. and North Korea's Investment and Development Group. An assistant to the managing director of Shangdi Guanqun, who identified himself only by his surname, Han, said his company's planned investment is focused on the Rason special economic zone, situated near North Korea's border with Russia.

The zone was called Rajin-Sonbong when it was established in 1991, but failed to attract sufficient investment. It was revived, and re-named Rason, following a visit there in 2009 by Mr. Kim.

Mr. Han said the plan is to develop infrastructure, including docks, a power plant and roads over the next two to three years, followed by various industrial projects, including an oil refinery, over the next five to 10 years. He said the company was waiting for a response from the North Korean government before applying for approval from China's Ministry of Commerce.

"It's all pending at this stage, and it's really up to the Korean side to make the decision," Mr. Han said. He added that the $2 billion figure was what the North Korean side had hoped for, not necessarily what his company could deliver.


Associated Press
North Korean leader Kim Jong Il endorsing a bottle

The company's Web site says the company was "under the administration" of a state-owned enterprise, Shangdi Purchase-Estate Corporation. Mr. Han, however, said his company was "100 percent private."

For the Obama administration, securing China's cooperation in restraining North Korea's military and nuclear-proliferation activities is a cornerstone of a warmer bilateral relationship. But the potential investment is a reminder of possible limits of Chinese cooperation.

The U.S. wants to step up sanctions to force Kim Jong Il to give up his nuclear-weapons arsenal and military activities. China, meanwhile, is increasingly promoting business projects and direct investment to influence the North, say Chinese and American analysts, arguing financial pressure hasn't worked.

China is North Korea's biggest trading partner and aid donor, but the scale of this deal raises concerns in Seoul that Beijing is running its own version of the "Sunshine" policy under which the South boosted investment in the North from 1998 to 2008.

This policy disconnect is expected to be one of the issues Chinese and U.S. officials discuss this week. "These types of deals pursued by China generally present a real challenge to the sanctions" being effective, said Victor Cha, a North Korea expert who helped oversee Asia policy in George W. Bush's National Security Council. "The net effect is that it does make it more difficult for these sanctions to have the desired effect."

Such deals have emerged in the past and have come to nothing, analysts said, and it is possible this one, too, could peter out. A number of similar North Korean economic zones have failed to live up to their billing because of poor infrastructure and corruption, and a lack of economic reform. News of the deal was first reported in the Korean-language press, including the Voice of America's Korean service.

It is unclear how long the agreement has been in the works. But its Dec. 20 signing came on the day South Korea conducted a closely watched artillery test from Yeonpyeong Island near North Korea.

The test marked a high point in tensions after North Korea's surprise late November shelling of Yeonpyeong, which killed four South Koreans. Pyongyang had threatened a swift military response should Seoul carry out an announced artillery test on Dec. 20. But the day's drill came and went amid high security in the South, with the North saying in a statement it "did not feel any need to retaliate."

Top administration officials have recently both praised and chided the Chinese over the North. On a trip to China last week, Defense Secretary Robert Gates commended the Chinese for their "constructive" role in reducing tensions on the peninsula after Pyongyang's recent shelling of a South Korean island. Secretary of State Hillary Clinton in a Friday speech pressed China to be more aggressive in helping tamp down the North's nuclear program.

The proposed investment is among the strongest evidence yet of China's strategy of using direct investment rather political pressure to push for change in North Korea. Chinese experts say that after North Korea's first nuclear test in 2006, China tried to make improved bilateral relations dependent on Pyongyang dismantling its nuclear program. But after a second test in 2009, China changed tack.

Beijing now believes, according to Chinese experts, that the North Korean regime won't respond to political pressure and could collapse completely if China cuts off aid and investment, triggering a flood of refugees into northeastern China, and bringing U.S. troops right up to the Chinese border.

The investment strategy was cemented when China's Premier Wen Jiabao visited North Korea in October 2009 and signed a slew of economic and trade agreements. One of those agreements was for China to fund construction of a $250 million bridge across the Yalu River that separates the two countries.

Construction of the bridge, which would link China with another North Korean special economic zone, had been slated to start in August. Local officials said in November it appeared to have been put on hold indefinitely. Now they say a ground-breaking ceremony was held Dec. 31.

U.S. officials are particularly concerned about how China's financial links to North Korea may be facilitating Pyongyang's weapons programs. In November, Pyongyang showed a visiting American scientist 2,000 centrifuges stationed at a cover site, drastically raising fears about the North's ability to expand its nuclear-weapons arsenal.

"China's increased economic support undercuts the rest of the region's efforts to convince Pyongyang that there will be consequences for further belligerence, nuclear weapons development or transfer of nuclear capabilities," said Michael Green, who also served as a senior official on Asia during the Bush administration.
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Ryan Pyle
Photographer
ryan@ryanpyle.com
Website: www.ryanpyle.com
Archive: http://archive.ryanpyle.com
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Ryan Pyle Blog: China & North Korea

Hello.

It's no surprise that North Korea is behaving badly, yet again. The collective leadership of the "Hermit Kingdom" know exactly what they are doing, and its incredibly destabilizing for not only Asia but the world. Sadly, trying to get North Korea to behave better or even stop their threatening actions seems impossible. Even leaked Chinese diplomatic cables sighted the North Korean leadership as collective acting like spoiled children.

An advanced ballistic missile program, a nuclear weapons program and now random attacks on South Korea. Who, out there in the diplomatic world, has the power to stop this insane behavior by this impoverished and heavily militarized country?

The only answer to this question is China. While South Korea and Japan bitch and moan all they want, they know any action towards North Korea would result in a backlash by China; and an escalation of military presence in the region. So, why doesn't China step up and squash this little country that is causing all the problems? I think many people could argue that the world would be a safer place, and the civilian population in North Korea would be much better off if the currrent regime were brought down. So why doesn't it happen?

The suggestion that ideological similarities keep China and North Korea in alliance is fodder. China is a global player and can't afford the bad press that comes along with supporting North Korea, so one must beg the question: Why does China continue to support this insane regime hell-bent on destabilizing Asia at least once a month?

Many have pointed out that a collapse of North Korea would send millions of refugee's in to northeastern China, which would not be helpful. Others have pointed out that a collapse of the regime in North Korea would leave the military and weapons systems in the hands of potential terrorists and individual players who might then launch attacks on South Korea and Japan. Those two points would lead to grave situations and they seem to keep the rest of the world bidding time and waiting, but waiting for what? The answer is for China to use its soft power and bring North Korea back into line.

China basically gives/sells North Korea all of its fuel, and food. There are a lot of cross-border businesses that are fairly lucrative for the Chinese; and according to some recent suggestions that tiny financial benefit is what is keeping China involved in propping up this regime. There were rumors in the news that a few lucrative contracts for business done in North Korea was given to some people close to Chinese Premier Wen.

When push comes to shove, the Chinese are all about pure hard cash. And what is the best environment for making money? The answer is stable growth. And that is what the Chinese are striving for within their own borders. North Korea challenges this in every way shape and form. I believe it is only a matter of time, one or two years, before China steps in and really disciplines North Korea. I can only hope there are reunification plans on the table for 2011, and that China does it's part and proves to the world that it is willing to flex its diplomatic muscles for good. I've written too many blogs about how screwed up North Korea is. Lets end the nightmare and shut down this bastard country and help some impoverished people. Below is a recent article about how China continues to defend North Korea. Clearly China needs to sort itself out first, the insanity continues.

Follow this LINK for original story on Reuters.

The story is also copied below. Copyright Reuters.
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China hits back at criticism over North Korea

Written By Sui-Lee Wee and Jeremy Laurence

BEIJING/ SEOUL (Reuters) - China hit back at the United States and its Asian allies on Tuesday for their refusal to talk to North Korea, saying dialogue was the only way to calm escalating tension on the divided Korean peninsula.

China took a more belligerent tone a day after U.S. Secretary of State Hillary Clinton hosted her South Korean and Japanese counterparts in Washington, calling a report that it was shielding Pyongyang's nuclear program an "irresponsible accusation."
Deputy Secretary of State Jim Steinberg will lead a U.S. delegation to China in the next week to try to persuade Beijing to put more pressure on Pyongyang despite Chinese fears that this may destabilize North Korea, a U.S. official said.

Washington, Seoul and Tokyo have been lukewarm toward Beijing's proposal for emergency talks between the six regional powers, worried that they could be seen as rewarding Pyongyang for its deadly attack on a South Korean island two weeks ago.
They want China to bring its ally North Korea to heel and hope that through their joint calls Beijing -- which has traditionally resisted outside pressure on its policies -- may be persuaded to act.

"The responsibility of maintaining peace and stability in Northeast Asia should be shouldered by all parties in the region," China's foreign ministry spokeswoman Jiang Yu told a news conference.

"All parties are stakeholders. We call on the parties to positively respond to our proposals to resolve the conflict through dialogue and negotiation."

"We need a clear indication from North Korea that it understands that this pattern of provoking and then hoping that people will reward it to stop the provocations is not one that we are going to sanction," said Steinberg, Clinton's principal deputy.
China, the host of stalled six-party talks with North Korea, has been trying to take a neutral line in the dispute. It was not invited to Monday's trilateral meeting in Washington which put the onus on Beijing to take action.

NUCLEAR TALKS

Clinton said she was open to resuming talks on the North's nuclear ambitions -- the six-party talks include the two Koreas, China, Japan, Russia and the United States -- but Pyongyang must first take steps to end its belligerence and keep its 2005 commitment to abandon its nuclear programs.

"I think the fact that it took (Chinese President) Hu (Jintao) and Obama 13 days even to talk about the attack shows what little chance there is of any real agreement," said Brian Myers, an expert on the North's ideology at Dongseo University.

"I agree with the South Korean consensus that the Chinese are simply trying to look like they're doing something for peace, without having to offend the North."

Analysts say Pyongyang will likely carry out more provocations following last month's attack and its latest revelations of nuclear advances for two reasons: to cement a father-to-son leadership transition and to win concessions at any international talks.
"The bottom line: North Korea isn't going to change is behavior any time soon, and the United States, South Korea and the world will have to live with this reality," said Andrew Scobell, a North Korea expert at the U.S. Army War College.

Analysts said China is reluctant to lean too hard on the North, which is undergoing a leadership transition, for fear of a collapse that could spark an exodus of refugees and allow U.S. troops in South Korea right up to the Chinese border.
"China is in a deepening dilemma: how to struggle with the balance between maintaining ties with Pyongyang and maintaining cooperation with Washington," said Zhu Feng, professor of international relations at Peking University.

"Maybe Beijing may be more motivated now to wake up to a new reality."

LIMITS TO POWER

But the United States also faces limits to the pressure it can apply on China. The two countries are enmeshed in a complicated economic relationship, with Washington looking to Beijing to help pull the global economy out of its slump.

"We hope that in increasing domestic consumption, China can become a catalyst for growth," Steinberg said, noting that better balanced U.S.-China economic ties would benefit both countries.

Senator John Kerry, the powerful Democrat who heads the Senate Foreign Relations Committee, said many in Washington were looking carefully at how Beijing handles both the North Korea issue and persistent tensions over its currency.

"This next year will define a lot of the next 10 years of our relationship with China," Kerry told a Washington think-tank audience.

Analysts say Beijing's relationship with Pyongyang provides a valuable communication bridge, but they consider China's influence over the North's as limited.

"China is not in control of North Korea. Most emphatically, it is not. It cannot do much, even if it wishes," said Andrei Lankov of Kookmin University in Seoul.

As South Korea staged live-fire drills around the country, Obama sent his top military officer, Admiral Mike Mullen, to Seoul.

South Korean President Lee Myung-bak said he wants to turn the island that was attacked last month, as well as four others nearby, into "military fortresses" and called for improved living conditions to encourage civilians to return.
His comments came amid worries that many of the residents of Yeonpyeong and the other islands west of North Korea will not return as the North increasingly resorts to violence to reassert its claim over the area.

(Additional reporting by Arshad Mohammed, Andrew Quinn and Jeff Mason in Washington; and Michael Martina and Sui-Lee Wee in Beijing; Editing by David Storey and Christopher Wilson)
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--
Ryan Pyle
Photographer
ryan@ryanpyle.com
Website: www.ryanpyle.com
Archive: http://archive.ryanpyle.com
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