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Philippines says protested against China arms buildup on South China Sea isles

MANILA (Reuters) – The Philippines has filed a diplomatic protest with China, its foreign minister said on Monday, over Beijing’s installation last year of anti-aircraft and anti-missile systems on its manmade islands in the disputed South China Sea.

The protest note was sent to the Chinese embassy in December, after confirmation of a report from the U.S.-based Center for Strategic and International Studies about a weapons buildup on seven artificial islands in the Spratlys.

One of those islands is located within the Philippines’ 200 nautical mile exclusive economic zone.

Foreign Secretary Perfecto Yasay told CNN Philippines it was important to raise concerns carefully, and not create a big row.

“I just want to assure the Filipino people that when we take action at engaging China in this dispute, we do not want to take such aggressive, provocative action that will not solve the problem,” he said.

China claims almost the entire South China Sea, through which about $5 trillion worth of goods passes every year. An international arbitration ruling last year invalidated those claims.

Speaking up about that has become a tricky issue for the Philippines since President Rodrigo Duterte turned its foreign policy upside down by seeking engagement and a new relationship with China. Until recently the Philippines had been one of the most outspoken critics of Beijing’s maritime assertiveness.

“We cannot engage China in a war,” Yasay added, but “when there are reports about the buildup of weapon systems in the area during our watch, we made sure that the interests and rights of the Philippines are properly protected.”

The Philippines this year chairs the Association of South East Asian Nations (ASEAN) and Yasay said last week he was confident a protracted code of conduct between the grouping and China could be finished by mid-year, after 15 years and limited progress.

China’s artificial islands became a hot issue last week when the U.S. nominee for Secretary of State, Rex Tillerson, told a Senate hearing that Beijing should be repelled from, and then denied access to, the controversial islets.

Yasay last week suggested the Philippines would play no part in that, and said of the United States, “Let them do it”.

(Reporting by Manuel Mogato; Editing by Martin Petty and Clarence Fernandez)

China will ‘take off the gloves’ if Trump continues on Taiwan, state media warns

Donald Trump at news conference discussing Taiwan relations

By Christian Shepherd

BEIJING (Reuters) – China will “take off the gloves” and take strong action if U.S. President-elect Donald Trump continues to provoke Beijing over Taiwan once he assumes office, two leading state-run newspapers said on Monday.

In an interview with the Wall Street Journal published on Friday, Trump said the “One China” policy was up for negotiation. China’s foreign ministry, in response, said “One China” was the foundation of China-U.S. ties and was non-negotiable.

Trump broke with decades of precedent last month by taking a congratulatory telephone call from Taiwan President Tsai Ing-wen, angering Beijing which sees Taiwan as part of China.

“If Trump is determined to use this gambit in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves,” the English-language China Daily said.

The Global Times, an influential state-run tabloid, echoed the China Daily, saying Beijing would take “strong countermeasures” against Trump’s attempt to “impair” the “One China” principle.

“The Chinese mainland will be prompted to speed up Taiwan reunification and mercilessly combat those who advocate Taiwan’s independence,” the paper said in an editorial.

Chinese Foreign Ministry spokeswoman Hua Chunying said the United States was clearly aware of China’s position on “One China”.

“Any person should understand that in this world there are certain things that cannot be traded or bought and sold,” she told a daily news briefing.

“The One China principle is the precondition and political basis for any country having relations with China.”

Hua added, “If anyone attempts to damage the One China principle or if they are under the illusion they can use this as a bargaining chip, they will be opposed by the Chinese government and people.

“In the end it will be like lifting a rock to drop it on one’s own feet,” she said, without elaborating.

TAIWAN MAY BE “SACRIFICED”

The Global Times said Trump’s endorsement of Taiwan was merely a ploy to further his administration’s short term interests, adding: “Taiwan may be sacrificed as a result of this despicable strategy.”

“If you do not beat them until they are bloody and bruised, then they will not retreat,” Yang Yizhou, deputy head of China’s government-run All-China Federation of Taiwan Compatriots, told an academic meeting on cross-straits relations in Beijing on Saturday.

Taiwan independence must “pay a cost” for every step forward taken, “we must use bloodstained facts to show them that the road is blocked,” Yang said, according to a Monday report on the meeting by the official People’s Daily Overseas Edition.

The United States, which switched diplomatic recognition from Taipei to Beijing in 1979, has acknowledged the Chinese position that there is only “One China” and that Taiwan is part of it.

The China Daily said Beijing’s relatively measured response to Trump’s comments in the Wall Street Journal “can only come from a genuine, sincere wish that the less-than-desirable, yet by-and-large manageable, big picture of China-U.S. relations will not be derailed before Trump even enters office”.

But China should not count on the assumption that Trump’s Taiwan moves are “a pre-inauguration bluff, and instead be prepared for him to continue backing his bet”.

“It may be costly. But it will prove a worthy price to pay to make the next U.S. president aware of the special sensitivity, and serious consequences of his Taiwan game,” said the national daily.

(Additional reporting by Ben Blanchard and John Ruwitch; Editing by Michael Perry and Randy Fabi)

China rejects U.S. trade claims, says outlook challenging, complicated

employees stand next to container ship, holding U.S. trade goods

BEIJING (Reuters) – China’s commerce ministry said on Thursday it will “try all methods” to stabilize trade in what it sees as a challenging and complicated trade outlook this year.

Commerce Ministry spokesman Sun Jiwen told a regular briefing in Beijing that China faced weak foreign demand and “intensifying trade protectionism.”

Sun’s comments came as China faces threats from incoming U.S. President Donald Trump to impose heavy import taxes on Chinese goods entering the United States, China’s largest trade partner.

The Commerce Ministry spokesman dismissed the U.S.-China Economic and Security Review Commission’s November 2016 Report to Congress, which accused China of violating global trade rules.

The report said: “China continues to violate the spirit and the letter of its international obligations by pursuing import substitution policies, imposing forced technology transfers, engaging in cyber-enabled theft of intellectual property, and obstructing the free flow of information and commerce.”

Sun insisted China had strictly adhered to World Trade Organization rules.

“The report’s understanding of problems in China-U.S. trade and investment, and the reasons behind it, are different from China’s. China can’t accept it,” Sun said.

“We hope for equal dialogues and cooperation to resolve conflicts.”

(Reporting by Yawen Chen and Michael Martina; Editing by Eric Meijer)

Chinese bomber flies round contested Spratlys in show of force: U.S. official

WASHINGTON (Reuters) – A Chinese H-6 strategic bomber flew around the Spratly Islands at the weekend in a new show of force in the contested South China Sea, a U.S. official said on Tuesday.

It was the second such flight by a Chinese bomber in the South China Sea this year. The first was on Jan. 1, said the official, who spoke on condition of anonymity.

The flight could be seen as a show of “strategic force” by the Chinese, the official said.

It comes after U.S. President-elect Donald Trump has signaled a tougher approach to China when he takes office on Jan. 20, with tweets criticizing Beijing for its trade practices and accusing it of failing to help rein in nuclear-armed North Korea.

Commander Gary Ross, a Pentagon spokesman, said he had no specific comment on China’s recent bomber activities, but added: “we continue to observe a range of ongoing Chinese military activity in the region‎.”

In December, China flew an H-6 bomber along the “nine-dash line” it uses to map its claim to nearly all of the South China Sea, a strategic global trade route. That flight also went around Taiwan, which China views as a renegade province.

In August, China conducted “combat patrols” near contested islands in the South China Sea.

Trump has enraged Beijing by breaking with decades of U.S. policy and speaking to the Taiwanese president by telephone.

A state-run Chinese newspaper warned Donald Trump on Sunday that China would “take revenge” if he reneged on the U.S. one-China policy, only hours after Taiwan’s president made a controversial stopover in Houston.

Last week China said that a group of Chinese warships led by its sole aircraft carrier was testing weapons and equipment in exercises this week in the South China Sea, where territory is claimed by several regional states.

U.S. warships conducted what they call “freedom of navigation” patrols through the South China Sea over the past year amid growing concern about Chinese construction of air strips and docks on disputed reefs and islands.

(Reporting by Idrees Ali and David Brunnstrom; Editing by James Dalgleish)

China’s choices narrowing as it burns through FX reserves to support yuan

By Nichola Saminather

SINGAPORE (Reuters) – As China’s foreign exchange reserves threaten to tumble below the critical $3 trillion mark, the biggest fear for investors is not whether Beijing can continue to defend the yuan but whether it will set off a vicious cycle of more outflows and currency depreciation.

Data this week is expected to show China’s forex reserves precariously perched just above $3 trillion at end-December, the lowest level since February 2011, according to a Reuters poll.

While the world’s second-largest economy still has the largest stash of forex reserves by far, it has been churning through them rapidly since August 2015, when it stunned global investors by devaluing the yuan <CNY=CFXS> and moving to what it promised would be a slightly freer and more transparent currency regime.

Since then, authorities have repeatedly intervened to support the yuan when it weakened too sharply, burning through half a trillion dollars of reserves and prompting them to sell some of their massive holdings of U.S. government bonds.

They also have put a tightening regulatory chokehold on individuals and businesses who want to move money out of the country, while denying they were imposing new capital controls.

Concerns over the speed with which China is depleting its ammunition are swirling, with some analysts estimating it needs to retain a minimum of $2.6 trillion to $2.8 trillion under the International Monetary Fund’s adequacy measures.

“There has been quite a bit of anxiety and speculation because the way many people in China talk about it is ‘will the government defend the 7-per-dollar level or the 3 trillion dollars’,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

China stepped into both its onshore and offshore yuan markets this week to shore up the yuan as it neared the 7 level, sparking speculation that it wants to regain a firm grip ahead of the Jan. 20 inauguration of U.S. President-elect Donald Trump, who has threatened to brand Beijing a currency manipulator.

But if forex reserves continue to be depleted at a fast pace and capital flight continues, some strategists believe China’s leaders may have little choice but to sanction another big “one-off” devaluation.

That could set off competitive currency devaluations by other struggling emerging economies, even as the world braces for greater trade protectionism under Trump.

MORE CONTROLS

To slow the yuan’s decline without depleting reserves at an ever faster pace, analysts and economists expect authorities to turn to even tighter regulatory measures, including more scrutiny of outbound investments, overseas lending and export revenues, and closing loopholes in existing capital controls.

But as fast as authorities jump to control one exit ramp, others may open up unless Beijing can reverse the market’s mind-set that the yuan is on a one-way depreciation path.

“It doesn’t matter if there’s actually enough reserves or not,” said Joey Chew, Asia foreign exchange strategist at HSBC, who believes China doesn’t need a buffer of more than $2 trillion.

“If people think there won’t be enough they’ll try to get out and it becomes a self-fulfilling mechanism.

“The authorities are already aware that trying to run down reserves will be counterproductive, which is why they’re relying on regulatory controls,” she added.

As recently as last week, authorities introduced requirements for financial institutions to report all single domestic and overseas cash transactions of more than 50,000 yuan ($7,212.72) from July onwards, down from 200,000 yuan previously.

The authorities also stepped up scrutiny on individual foreign currency purchases, although they kept the $50,000 annual individual quota in place.

“Previously, capital controls had been relatively loose and authorities had turned a blind eye to individual forex purchases because of abundant foreign exchange reserves,” said Jerry Hu, an economist at Shanghai Securities.

“But they are now strengthening supervision in order to change expectations.”

With regulators also pledging to increase scrutiny of major outbound deals, “it’s not impossible to see that we’ll see further moves in that area,” Kuijs said.

China could also encourage its domestic exporters to convert more of their earnings into yuan, HSBC’s Chew said.

Chew believes new capital controls are unlikely.

“There are a lot of controls already,” she said. “They were maybe not as strictly enforced, so they’ll focus on improving that. But the tweaks may not be enough. We still expect capital outflows and we still expect RMB depreciation.”

Dwyfor Evans, head of Asia-Pacific macro strategy at State Street Global Markets, also feared authorities may be limited in how they respond.

“Chinese officials have few policy options,” he said.

“If they allow faster depreciation, this will only spur pressures for greater outflows. And a one-off devaluation risks a repeat of the market turbulence evidenced twice in the past 18 months.”

(Additional reporting by Kevin Yao in BEIJING; Editing by Vidya Ranganathan and Kim Coghill)

Taiwan warns of increasing threat as Chinese warships conduct drill

A general view shows navy soldiers standing on China's first aircraft carrier "Liaoning" as it is berthed in a port in Dalian, northeast China's Liaoning province,

By J.R. Wu

TAIPEI (Reuters) – Taiwan warned on Tuesday that “the threat of our enemies is growing day by day”, as Chinese warships led by the country’s sole aircraft carrier sailed towards the island province of Hainan through the South China Sea on a routine drill.

China has given few details of what the Soviet-built Liaoning aircraft carrier is up to, save that it is on a routine exercise. Taiwan has said the aircraft carrier skirted waters outside of its eastern air defense identification zone.

The carrier is expected to arrive at a Chinese military base on the southern Chinese island of Hainan late on Tuesday, Taiwan’s defense ministry said.

The drill comes amid renewed tension over Taiwan, which China claims as its own and says is ineligible for state-to-state relations, following U.S. President-elect Donald Trump’s telephone call with the island’s president that upset Beijing.

“The threat of our enemies is growing day by day. We should always be maintaining our combat alertness,” Taiwan Defence Minister Feng Shih-kuan said. “We need to strengthen the training (of our soldiers) so that they can not only survive in battle but also destroy the enemy and accomplish the mission.”

Feng’s remarks were given in a speech Tuesday at a ministry event marking the promotion of senior military officers.

China’s air force conducted long-range drills this month above the East and South China Seas that rattled Japan and Taiwan. China said those exercises were also routine.

China claims most of the South China Sea, through which about $5 trillion in ship-borne trade passes every year. Neighbours Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

The Pentagon did not directly comment on the latest drill but said that the United States recognizes lawful use of sea and airspace in accordance to international law.

“We continue to closely monitor developments in the region. We do not have specific comments on China’s recent naval activities, but we continue to observe a range of ongoing Chinese military activity in the region‎,” Pentagon spokesman Gary Ross told Reuters.

The Liaoning has taken part in previous exercises, including in the South China Sea, but China is years away from perfecting carrier operations similar to those the United States has practiced for decades.

Last December, the defense ministry confirmed China was building a second aircraft carrier but its launch date is unclear. The aircraft carrier program is a state secret.

Beijing could build multiple aircraft carriers over the next 15 years, the Pentagon said in a report last year.

China has claimed sovereignty over Taiwan since 1949, when Mao Zedong’s Communist forces won the Chinese civil war and Chiang Kai-shek’s Nationalists fled to the island.

Beijing has vowed to bring Taiwan under its rule, by force if necessary.

(Reporting by J.R. Wu; Additional reporting by Tim Kelly in Tokyo; Writing by Ben Blanchard; Editing by Nick Macfie)

Taiwan loses another ally, says won’t help China ties

By J.R. Wu and Ben Blanchard

TAIPEI/BEIJING (Reuters) – Taiwan accused China on Wednesday of using Sao Tome and Principe’s financial woes to push its “one China” policy after the West African state ended ties with the self-ruled island, with Taiwan saying China’s action would not help relations across the Taiwan Strait.

China’s claim to Taiwan have shot back into the spotlight since U.S. President-elect Donald Trump broke diplomatic protocol and spoke with Taiwan President Tsai Ing-wen this month, angering Beijing.

Trump has also questioned the “one China” policy which the United States has followed since establishing relations with Beijing in 1979, under which the United States acknowledges that Taiwan is part of China.

The election of Tsai from the pro-independence Democratic Progressive Party this year infuriated Beijing, which suspects she wants to push for the island’s formal independence, though she says she wants to maintain peace with China.

Taiwan Foreign Minister David Lee said Taipei would not engage in “dollar diplomacy” after Sao Tome’s decision.

“We think the Beijing government should not use Sao Tome’s financing black hole … as an opportunity to push its ‘one China’ principle,” Lee told a news conference in Taipei on Wednesday.

“This behavior is not helpful to a smooth cross-Strait relationship.”

Tsai held emergency meetings with cabinet officials and security advisers on Wednesday, and told her ministers:

“Foreign diplomacy is not a zero-sum game,” according to her office spokesman, Alex Huang.

Tsai’s office said in a statement China’s use of Sao Tome’s financial woes to push its “one China” policy would harm stability across the Taiwan Strait.

“This is absolutely not beneficial to the long-term development of cross-Strait relations,” it said.

China says Taiwan has no right to diplomatic recognition as it is part of China, and the issue is an extremely sensitive one for Beijing.

In Beijing, China welcomed Sao Tome’s decision, without explicitly saying it had established formal relations with the former Portuguese colony or making any mention of a request for financial aid.

“We have noted the statement from the government of Sao Tome and Principe on the 20th to break so-called ‘diplomatic’ ties with Taiwan. China expresses appreciation of this, and welcomes Sao Tome back onto the correct path of the ‘one China’ principle,” the foreign ministry said in a statement.

Ministry spokeswoman Hua Chunying declined to comment when asked when the two countries may exchange ambassadors, and dismissed a question on how much China may have offered Sao Tome to switch ties as being “very imaginative”.

Defeated Nationalist forces fled to Taiwan at the end of a civil war in 1949 and Beijing has never renounced the use of force to bring Taiwan under its control.

In Africa, only Burkina Faso and Swaziland now maintain formal ties with Taiwan. President Tsai will visit Central American allies Honduras, Nicaragua, Guatemala and El Salvador next month.

“We now have 21 allies left. We must cherish them,” Lee said.

China and Taiwan had for years tried to poach each other’s allies, often dangling generous aid packages in front of developing nations.

But they began an unofficial diplomatic truce after signing a series of landmark trade and economic agreements in 2008 following the election of the China-friendly Ma Ying-jeou as Taiwan’s president.

Sao Tome and Principe’s tiny island economy is heavily dependent on cocoa exports but its position in the middle of the oil-rich Gulf of Guinea has raised interest in its potential as a possible oil and gas producer.

Diplomatic sources in Beijing have previously said Sao Tome was likely high on China’s list of countries to lure away from Taiwan.

In 2013, Sao Tome said China planned to open a trade mission to promote projects there, 16 years after it broke off relations over Sao Tome’s diplomatic recognition of Taiwan.

(Editing by Lincoln Feast, Robert Birsel)

China says situation at disputed Scarborough Shoal has not changed

A fisherman look at the fishing boats that just returned from disputed Scarborough Shoal, as they are docked at the coastal village of Cato in Infanta, Pangasinan in the Philippines,

BEIJING/MANILA (Reuters) – China said on Monday the situation at the disputed Scarborough Shoal in the South China Sea “has not changed and will not change”, after the Philippines said Chinese vessels that blocked the area for four years had stopped harassing its fishermen.

Philippine security officials on Sunday said China had scaled down its maritime presence at the shoal since President Rodrigo Duterte’s return from a visit to Beijing aimed at patching-up ties and courting investment.

The disputed territory is significant not only for fishing, but for the broader balance of power in the South China Sea, and the circumstances behind China’s apparent softening of its position are not clear.

Asked about Philippine fishermen entering the area unimpeded, China’s foreign ministry spokeswoman, Hua Chunying, said China always had “normal administration” over the Scarborough Shoal.

“The relevant situation has not changed and will not change,” she told a regular briefing.

Hua said Duterte’s visit to Beijing marked an overall improvement in relations.

“China will make proper arrangements on issues of President Duterte’s interest,” Hua said, without giving details.

China had repelled fishermen since seizing the Scarborough Shoal in 2012.

Philippine boats returned from the area at the weekend with tonnes of fish and said Chinese boats had left them alone.

China’s blockade of what is a prime fishing spot prompted the previous Philippine government to file a legal case in 2013 at the Permanent Court of Arbitration in The Hague, infuriating Beijing.

The tribunal’s July ruling in favor of the Philippines, which China refuses to acknowledge, declared no one country had sovereign rights over the shoal, and as a traditional fishing ground, Chinese, Philippine and Vietnamese were entitled to access it.

A frosty Philippine-China relationship changed dramatically after Duterte took office four months ago and started praising China while denouncing old ally the United States in a reversal of his predecessor’s foreign policy.

Duterte’s national security adviser, Hermogenes Esperon, confirmed there had been no agreement between the two countries about the Scarborough Shoal.

He said the dispute had not been resolved and the Philippines would reassert its rights when bilateral talks resume, although he noted “the climate has changed”.

“The president reiterated that we won in the court, the other leader also reiterated that it is historically their territory, so it was not resolved,” Esperon told reporters, referring to Duterte’s talks with Chinese leaders.

“They have coastguard ships there, there are no more navy ships and our fishermen are no longer accosted, they are not driven away.”

“In short, they are more friendly now.”

(Reporting by Paul Carsten in BEIJING and Manuel Mogato in MANILA; Editing by Robert Birsel)

Philippine police van drives at protesters to break up anti-U.S. demo

SWAT team prepares tear gas in Philippines

MANILA (Reuters) – Philippine police used tear gas to disperse about 1,000 anti-U.S. protesters outside the U.S. embassy in Manila on Wednesday, as television news footage showed a patrol van, which had come under attack, driving at demonstrators.

The rally came as President Rodrigo Duterte visits Beijing to strengthen relations with the world’s second-largest economy amid deteriorating ties with former colonial power the United States, sparked by his controversial war on illegal drugs.

Police made 29 arrests at the rally while at least 10 people were taken to hospital after being hit by the police van, Renato Reyes, secretary general of left-wing activist group Bayan (Nation), told reporters.

The protesters were calling for the removal of U.S. troops in the southern island of Mindanao.

“There was absolutely no justification (for the police violence),” Reyes said. “Even as the president avowed an independent foreign policy, Philippine police forces still act as running dogs of the U.S.”

In a series of conflicting statements, Duterte has insulted U.S. President Barack Obama and the U.S. ambassador in Manila for questioning his war on drugs, which has led to the deaths of 2,300 suspected users and pushers. He told Obama to “go to hell” and alluded to severing ties with Washington.

Then, after weeks of anti-American rhetoric, Duterte said the Philippines would maintain its existing defense treaties and its military alliances.

The comments have left Americans and U.S. businesses in the Philippines jittery about their future.

(Reporting by Ronn Bautista and Neil Jerome Morales; Editing by Nick Macfie)

Exclusive: Top Obama aide to take call for South China Sea calm to Beijing

By Matt Spetalnick and David Brunnstrom

WASHINGTON (Reuters) – U.S. National Security Adviser Susan Rice will urge Beijing next week to avoid escalation in the South China Sea when she makes the highest-level U.S. visit to China since an international court rejected its sweeping claims to the strategic waterway.

Even as Washington has sought to keep a lid on the situation, Rice – in an interview with Reuters – vowed that the U.S. military would continue to “sail and fly and operate” in the South China Sea, despite a Chinese warning that such patrols could end “in disaster.”

With less than six months remaining of President Barack Obama’s tenure, Rice’s broader mission in her July 24-27 trip is aimed at keeping overall ties between the world’s two largest economies, which she called “the most consequential relationship we have,” on track at a time of heightened tensions. “I’ll be there to advance our cooperation,” she said.

But the trip, due to be formally announced later on Friday, follows a July 12 ruling by the Permanent Court of Arbitration in The Hague that China has no historic title over the waters of the South China Sea. Beijing has angrily rejected the verdict and pledged to pursue claims that conflict with those of several smaller neighbors.

“I’ve been in communication with our Chinese counterparts over the last couple of weeks … We understand each other’s perspectives clearly,” Rice said when asked what message she would deliver to the Chinese. “We’ll urge restraint on all sides.”

Her trip, to include Beijing and Shanghai, will coincide with visits by U.S. Secretary of State John Kerry to Laos and the Philippines where he is expected to try to reassure Southeast Asian partners of Washington’s commitment.

The United States is also using quiet diplomacy to persuade claimants like the Philippines, Indonesia and Vietnam not to move aggressively to capitalize on The Hague ruling, U.S. officials have said.

TEST OF U.S. CREDIBILITY

How Washington handles the aftermath of the ruling is widely seen as a test of U.S. credibility in a region where it has been the dominant security presence since World War Two but is now struggling to contain an increasingly assertive China.

China has responded to the ruling with sharp rhetoric. But a senior official said, “So far there has not been precipitous action” and Washington was hoping confrontation could be avoided.

“We are not looking to do things that are escalatory,” another senior U.S. official said. “And at the same time we don’t expect that they (the Chinese) would deem it wise to do things that are escalatory.”

Despite that view, two Chinese civilian aircraft conducted test landings at two new military-length airstrips on reefs controlled by China in the Spratly Islands shortly after the arbitration ruling.

And signaling Beijing’s plans to further stake its claim to contested waters, a Chinese state-run newspaper said that up to eight Chinese ships will offer cruises to the South China Sea over the next five years.

China has blamed the United States for stirring up trouble in the South China Sea, a strategic waterway through which more than $5 trillion of trade moves annually.

Citing international rules, the United States has conducted freedom-of-navigation patrols close to Chinese-held islands where China has been bolstering its military presence.

Rice is expected to meet Chinese President Xi Jinping during her visit and her agenda will include North Korea, economic issues and human rights. She will also lay the groundwork for Obama’s talks with Xi at a G20 summit in China in September, U.S. officials said.

But with the South China Sea issue looming large, Rice, who has led U.S. policymaking on China, said the United States and China have “careful work to do to manage our differences.”

She also said the administration would not allow crises in other parts of the world, from Syria to Turkey to Ukraine, to distract from Obama’s signature policy of “rebalancing” toward Asia. “We don’t have the luxury as the world’s leading power to devote our attention to one region and ignore another,” she said.

(Reporting by Matt Spetalnick and David Brunnstrom; Additional reporting by Lesley Wroughton; Editing by Cynthia Osterman)

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