Tag Archives: China

Businesses growing in face of upcoming risks

waiter carries food at British restaurant

By Jonathan Cable

LONDON (Reuters) – Business started 2017 on a solid footing, surveys showed on Friday, thriving ahead of a myriad of political risks in the coming year.

Fears of a growing protectionist agenda in the United States, whether national elections across Europe upset the status quo and just how fractious Britain’s divorce proceedings from the European Union become, are all expected to weigh in the months ahead.

Yet so far those risks seem to have been mostly ignored with firms from Asia to Europe increasing or at least largely maintaining activity. Similar upbeat results are expected later from the United States..

Euro zone businesses started 2017 by increasing activity at the same multi-year record pace they set in December.

China’s factory activity grew for a seventh month and while India’s services business contracted for a third month as firms struggled to recover from a government crackdown on currency in circulation, the pace slowed.

“The outlook for this year is reasonably bright despite all the risks. The numbers for January have generally been quite positive,” said Andrew Kenningham, chief global economist at Capital Economics.

Growth in Britain’s services sector slowed for the first time in four months in January, dipping just below its long-run average, as businesses battled the sharpest rise in costs in more than five years.

But on Thursday the Bank of England sharply revised up its growth forecast for 2017 to 2.0 percent, a view held by only the most optimistic forecaster in a Reuters poll of 50 economists taken last month.

Britain’s economy unexpectedly outpaced all its major peers last year, wrongfooting those who expected an immediate hit from June’s Brexit vote.

The Markit/CIPS British services Purchasing Managers’ Index dropped to a three-month low of 54.5 last month from December’s 15-month high, at the bottom end of a range of forecasts in a Reuters poll of economists, but Markit said the PMIs still point to first quarter growth of 0.5 percent.

IHS Markit’s final composite PMI for the euro zone, seen as a good guide to growth, held at 54.4. It has not been higher since May 2011 and has remained above the 50 mark dividing growth from contraction since mid-2013.

That points to first quarter expansion of 0.4 percent, Markit said, matching the median prediction in a Reuters poll.

“Despite the slightly disappointing outcome this remains a very strong report,” said James Knightley, senior economist at ING.

China’s factory activity expanded for the seventh straight month in January, giving Beijing more room to tackle chronic imbalances in the economy. The Caixin/Markit Manufacturing PMI fell to 51.0.

The world’s second largest economy has seen a broad-based pickup in recent months, with fourth-quarter GDP beating expectations due largely to a strong housing market and higher government spending on infrastructure projects.

A recovery in the country’s “smokestack” industries has also been supported by government mandates to close down outdated production capacity in the coal and steel sectors, as well as a rebound in investment in the property sector that came amid a record flood of credit.

India’s Nikkei/IHS Markit Services PMI remained below 50 registering 48.7 in January as firms still reel from Prime Minister Narendra Modi’s decision in November to abolish high-value bank notes.

Modi’s policy removed 86 percent of the currency in circulation, hitting consumption and capital investments, and shattered traditional cash-reliant supply chains.

(Editing by Jeremy Gaunt)

Trump’s defense chief heads to Asia, eying China, North Korea threat

President Trump with Defense Secretary Mattis

By Phil Stewart and Nobuhiro Kubo

WASHINGTON/TOKYO (Reuters) – President Donald Trump’s defense secretary is expected to underscore U.S. security commitments to key allies South Korea and Japan on his debut trip to Asia this week as concerns mount over North Korea’s missile program and tensions with China.

The trip is the first for retired Marine General James Mattis since becoming Trump’s Pentagon chief and is also the first foreign trip by any of Trump’s cabinet secretaries.

Officials say the fact that Mattis is first heading to Asia – as opposed to perhaps visiting troops in Iraq or Afghanistan – is meant to reaffirm ties with two Asian allies hosting nearly 80,000 American troops and the importance of the region overall.

That U.S. reaffirmation could be critical after Trump appeared to question the cost of such U.S. alliances during the election campaign. He also jolted the region by pulling Washington out of an Asia-Pacific trade deal that Japan had championed.

“It’s a reassurance message,” said one Trump administration official, speaking on condition of anonymity.

“This is for all of the people who were concerned during the campaign that then-candidate, now-president, Trump was skeptical of our alliances and was somehow going to retreat from our traditional leadership role in the region.”

Trump himself has spoken with the leaders of both Japan and South Korea in recent days and will host Japanese Prime Minister Shinzo Abe in Washington on Feb. 10.

Mattis leaves the United States on Feb. 1, heading first to Seoul before continuing to Tokyo on Feb. 3.

DEFENSE SPENDING

Trump singled out both South Korea and Japan on the campaign trail, suggesting they were benefiting from the U.S. security umbrella without sharing enough of the costs.

In one 2016 television interview, Trump said of the 28,500 U.S. troops deployed to South Korea: “We get practically nothing compared to the cost of this. Why are we doing this?”

Mattis, in his confirmation hearing, appeared to play down those remarks, noting that there was a long history of U.S. presidents and even defense secretaries calling on allies to pay their fair share of defense costs.

But his visit to the region comes amid concerns North Korea may be readying to test a new ballistic missile, in what could be an early challenge for Trump’s administration.

Speaking with South Korean Defense Minister Han Min-koo ahead of his trip, Mattis reaffirmed a U.S. commitment to defend the country and “provide extended deterrence using the full range of U.S. capabilities.”

Analysts expect Mattis to seek an update on South Korea’s early moves to host a Terminal High Altitude Area Defense (THAAD) system, which, once in place sometime in 2017, would defend against North Korea’s nuclear and ballistic capabilities.

Still, a South Korean military official played down expectations of any big announcements during the trip, saying Mattis’ first visit would likely be “an ice-breaking session” for both countries.

In Tokyo, Mattis is to meet Defense Minister Tomomi Inada, who has repeatedly said Japan is bearing its fair share of the costs for U.S. troops stationed there and has stressed that the alliance is good for both nations.

Japan’s defense spending remains around 1 percent of GDP, far behind China, which is locked in a dispute with Japan over a group of East China Sea islets 220 km (140 miles) northeast of Taiwan known as the Senkakus in Tokyo and the Diaoyus in Beijing.

The trip also comes amid growing concern about China’s military moves in the South China Sea. Tension with Beijing escalated last week when Trump’s White House vowed to defend “international territories” there.

China responded by saying it had “irrefutable” sovereignty over disputed islands in the strategic waterway.

“What U.S. military people say is that considering the pace of China’s military build-up such as anti-ship missiles and fighters, there are worries about Japan’s capabilities,” said a senior Japanese defense ministry official, speaking on condition of anonymity.

(Reporting by Phil Stewart; Additional reporting by Linda Sieg in Tokyo, Matt Spetalnick and David Brunnstrom in Washington, and Ju-min Park in Seoul; Editing by Dan Grebler)

Momentum and risk: world economy enters 2017 with winds fore and aft

employee in factory

By Jonathan Cable and Nichola Saminather

LONDON/SINGAPORE (Reuters) – Factories across the world fired up – or at least kept up activity – in January with some registering multi-year output highs, just as a barrage of political risks threatens the global economy with potential harm.

Rising protectionism from the United States, concerns over how Britain’s negotiations on leaving the European Union will pan out, and national elections in Europe’s largest economies all lie ahead.

But entering 2017, economic growth gathered momentum, according to surveys released on Wednesday, following on from last year thanks to a bounce in consumption.

Euro zone factories registered the fastest activity rate for nearly six years, China’s activity expanded for the sixth month and Japanese manufacturing growth was the fastest in almost three years.

Even in Britain, where a slump in sterling since the June referendum stoked the sharpest rise in factory costs on record last month, growth remained robust.

There were also signs of growth in Brazil, where industrial output rose in December at its fastest monthly pace in 2-1/2 years after one of the worst years on record.

“So far momentum is pretty strong heading into 2017,” said Jacqui Douglas at TD Securities. “But political risks are definitely one of the biggest this year and given the surprises we had through 2016 it’s really hard to tell what’s in store.”

Among unexpected events last year was Britain’s vote to leave the EU and the election as U.S president of Donald Trump, both seen as the result of anti-establishment anger among voters who feel left out of the wealth of nations.

Signs of concern this may spread could be found on bond markets. The premium investors demand to hold France’s government debt rather than that of similar economies shot up on so-called Frexit fears – the possibility that the far-right National Front might win the presidential election and try to take the country out of the euro zone.

IHS Markit’s final manufacturing Purchasing Managers’ Index for the currency bloc rose to 55.2 in January from December’s 54.9, its highest since April 2011. A Markit/CIPS UK factory PMI edged down to 55.9 from December’s 2-1/2 year peak of 56.1, matching the consensus forecast in a Reuters poll.

Anything above 50 indicates growth.

A similar survey for the United States due later on Wednesday is expected to show factories in the world’s largest economy also increased activity.

TOKYO TEMPERING TRUMP

A stronger dollar helped major economies such as Japan, where export orders surged, Markit/Nikkei PMI numbers showed, a welcome sign for the economy along with recent data suggesting a more durable recovery may be underway.

However, those encouraging signals sit uncomfortably with the growing threat from Trump’s trade policies. Japan is moving to temper the risks with plans to show Trump its firms are ready to create U.S. jobs, according to a document whose contents were revealed to Reuters.

In export-reliant Asia, and other regions where global supply chains are closely interlinked, Trump’s election is a particular risk to both world trade and broad economic growth if the new president follows though on his “America First” policies.

“The uncertainty surrounding future market access to the U.S. is bound to weigh on investment activity as companies await regulatory certainty,” said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong.

“I suspect there’s going to be a lot of capital expenditure expansion projects that will be put on hold as long as the uncertainty surrounding the trade environment persists.”

In China, the world’s second-biggest economy, growth was led by an investment and construction boom that has helped spur global growth. Its official PMI stood at 51.3 in January, slowing marginally from 51.4 in December.

Analysts question whether Chinese growth will be sustainable once the impact of earlier stimulus begins to wear off and if the property market cools. They warn a slowdown in the Asian economic powerhouse could ripple across the region and beyond.

“Within China, we expect that real estate will slow down, because the government is quite keen to contain housing prices,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

Other regional economies like Indonesia showed positive momentum in manufacturing activity, while Indian factory activity returned to modest growth in January, bouncing from a contraction in December triggered by the government’s scrapping of high value banknotes.

Even in laggard South Korea where manufacturing contracted for the sixth straight month, exports rose at the fastest pace in nearly five years.

“We remain quite cautious how much of an acceleration in growth we can see in this pretty challenging climate,” Oxford Economics’ Kuijs said.

“Things like PMI are timely indicators of the hard data but sometimes they do run ahead, and the improvement in actual data doesn’t materialize.”

(Editing by Jeremy Gaunt)

As Trump stresses ‘America First’, China plays the world leader

Xi Jinping, China's President

By Ben Blanchard

BEIJING (Reuters) – China is calmly mapping out global leadership aspirations from trade to climate change, drawing distinctions between President Xi Jinping’s steady hand and new U.S. President Donald Trump, whose first days have been marked by media feuds and protests.

Just days ahead of Trump taking office, a self-assured Xi was in Switzerland as the keynote speaker at the World Economic Forum in Davos, offering a vigorous defense of globalization and signaling Beijing’s desire to play a bigger role on the world stage.

Even on the thorny issue of the South China Sea, Beijing did not rise to the bait of White House remarks this week about “defending international territories” in the disputed waterway. Instead, China stressed its desire for peace and issued a restrained call for Washington to watch what it says.

“You have your ‘America first’, we have our ‘community of common destiny for mankind’,” Retired Major-General Luo Yuan, a widely read Chinese military figure best known for his normally hawkish tone, wrote on his blog this week.

“You have a ‘closed country’, we have ‘one belt, one road’,” he added, referring to China’s multi-billion dollar new Silk Road trade and investment program.

And while China has repeatedly said it does not want the traditional U.S. role of world leadership, a senior Chinese diplomat accepted this week it could be forced upon China.

“If anyone were to say China is playing a leadership role in the world I would say it’s not China rushing to the front but rather the front runners have stepped back leaving the place to China,” said Zhang Jun, director general of the Chinese Foreign Ministry’s international economics department.

STEPPING UP

That message was reinforced this week when Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal, distancing America from its Asian allies. Several remaining TPP members said they would now look to include China in a revised pact, or pursue Beijing’s alternative free trade agreements.

“At many important multilateral forums, China’s leader has put forward Chinese proposals, adding positive impetus to world development,” Su Xiaohui a senior researcher at the Foreign Ministry-backed China Institute of International Studies, wrote of the U.S. TPP decision in the overseas edition of the People’s Daily.

“In the economic integration process of the Asia Pacific, compared to certain countries who constantly bear in mind their leadership role, what China pays even more attention to is ‘responsibility’ and ‘stepping up’,” Su said.

China’s hosting of an international conference on its “One Belt, One Road” initiative in May is one opportunity for Beijing to showcase its leadership of global infrastructure and investment.

A diplomatic source familiar with preparations said China was likely to hold it at the same glitzy convention center used to host the Asia Pacific Economic Cooperation summit in 2014, setting the stage for Xi’s most high profile diplomatic event of the year.

“China’s pretty much inviting everyone,” the diplomat said.

Another area where China is keen to be seen as leading the way is climate change. Trump has in the past dismissed climate change as a “hoax” and vowed during his presidential campaign to pull the United States out of the Paris Climate Agreement.

Li Junhua, head of the Chinese Foreign Ministry’s Department of International Organizations and Conferences, said world was worried about climate change and whether countries would honor their Paris commitments.

“As far as China is concerned, my president has made it extremely clear, crystal clear, China will do its part,” Li told reporters.

LEARNING PROCESS

It’s not always been this way. China has been through a long, tough learning process to become a more responsible power.

In 2013, China, angered with Manila over the long dispute on the South China Sea, only stumped up meager aid to the Philippines after it was hit by Super Typhoon Haiyan, prompting rare dissent in the influential Chinese state-run tabloid the Global Times that Beijing’s international image would be hit.

It also will not be plain sailing. On certain key core issues including the self-ruled island of Taiwan, China will not back down.

In its first official reaction to Trump taking office, China’s Foreign Minister urged his administration to fully understand the importance of the “one China” principle, which Trump has called into doubt and under which Washington acknowledges China’s position of sovereignty over Taiwan.

China also expects that under the Trump administration it will be left alone on one issue that has long dogged ties with Washington – human rights.

The WeChat account of the overseas edition of the ruling Communist Party’s official People’s Daily noted with approval on Saturday that Trump’s inaugural speech neither mentioned the words “democracy” nor “human rights”.

“Perhaps looking back, these things have been hyped up too much” by U.S. politicians, it added.

(Editing by Lincoln Feast)

China jails two over vaccine scandal

BEIJING (Reuters) – A court in China on Tuesday jailed two people for selling vaccines without a license, state media said, after a scandal last year that sparked public anger.

The case, involving possibly as much as $90 million of illegal trades of vaccines through a black market drugs ring, underscored regulatory weaknesses in the world’s second largest pharmaceuticals market.

The court in Jinan city sentenced Pang Hongwei to 15 years in prison for illegally purchasing vaccines, including rabies vaccines, which she stored in warehouses in Jinan and another city, before selling them around China, Xinhua news agency said.

Pang improperly stored the vaccines she bought, and earned nearly 75 million yuan ($10.93 million) from selling them, Xinhua added.

She was also given another six years for a previous accusation of illegally trading vaccines, and so will serve a total of 19 years, the news agency said.

Pang’s daughter, Sun Qi, was sentenced to six years in prison for assisting her mother, Xinhua added.

It was not possible to reach legal representatives of either of them for comment.

The vaccines, including ones against meningitis and other illnesses, are suspected of being sold in dozens of provinces around China since 2011.

The government has said it has not found any spike in abnormal reactions to inoculations and that the vaccines themselves were real, though traded illegally and improperly stored.

($1 = 6.8588 Chinese yuan renminbi)

(Reporting by Ben Blanchard; Editing by Robert Birsel)

China says will protect South China Sea sovereignty

Chinese ships in South China Sea

By Ben Blanchard and David Brunnstrom

BEIJING/WASHINGTON (Reuters) – China said on Tuesday it had “irrefutable” sovereignty over disputed islands in the South China Sea after the White House vowed to defend “international territories” in the strategic waterway.

White House spokesman Sean Spicer in his comments on Monday signaled a sharp departure from years of cautious U.S. handling of China’s assertive pursuit of territorial claims in Asia.

“The U.S. is going to make sure that we protect our interests there,” Spicer said when asked if Trump agreed with comments by his secretary of state nominee, Rex Tillerson. On Jan. 11, Tillerson said China should not be allowed access to islands it has built in the contested South China Sea.

“It’s a question of if those islands are in fact in international waters and not part of China proper, then yeah, we’re going to make sure that we defend international territories from being taken over by one country,” Spicer said.

Chinese Foreign Ministry spokeswoman Hua Chunying told a regular news briefing on Tuesday “the United States is not a party to the South China Sea dispute”.

China claims most of the South China Sea, while Taiwan, Malaysia, Vietnam, the Philippines and Brunei claims parts of the sea that commands strategic sealanes and has rich fishing grounds along with oil and gas deposits.

China’s sovereignty over the Spratly Islands in the South China Sea was “irrefutable” Hua said. But China was also dedicated to protecting freedom of navigation and wants talks with nations directly involved to find a peaceful solution.

“We urge the United States to respect the facts, speak and act cautiously to avoid harming the peace and stability of the South China Sea,” Hua said.

“Our actions in the South China Sea are reasonable and fair. No matter what changes happen in other countries, what they say or what they want to do, China’s resolve to protect its sovereignty and maritime rights in the South China Sea will not change,” she added.

BAR ACCESS TO ISLANDS

Tillerson’s remarks at his Senate confirmation hearing prompted Chinese state media to say at the time that the United States would need to “wage war” to bar China’s access to the islands, where it has built military-length air strips and installed weapons systems.

Tillerson was asked at the hearing whether he supported a more aggressive posture toward China and said: “We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.”

The former Exxon Mobil Corp <XOM.N> chairman and chief executive did not elaborate on what might be done to deny China access to the islands.

But analysts said his comments, like those of Spicer, suggested the possibility of U.S. military action, or even a naval blockade. Such action would risk an armed confrontation with China, an increasingly formidable nuclear-armed military power. It is also the world’s second-largest economy and the target of Trump accusations it is stealing American jobs.

Spicer declined to elaborate when asked how the United States could enforce such a move against China, except to say: “I think, as we develop further, we’ll have more information on it.”

Tillerson narrowly won approval from a Senate committee on Monday and is expected to win confirmation from the full Senate.

RISK OF DANGEROUS ESCALATION

Military experts said that while the U.S. Navy has extensive capabilities in Asia to stage blockading operations with ships, submarines and planes, any such move against China’s growing naval fleets would risk a dangerous escalation.

Aides have said that Trump plans a major naval build-up in East Asia to counter China’s rise.

China’s foreign ministry said earlier this month it could not guess what Tillerson meant by his remarks, which came after Trump questioned Washington’s longstanding and highly sensitive “one-China” policy over Taiwan.

Washington-based South China Sea expert Mira Rapp-Hooper at the Center for a New American Security called the threats to bar China’s access in the South China Sea “incredible” and said it had no basis in international law.

“A blockade – which is what would be required to actually bar access – is an act of war,” she added.

“The Trump administration has begun to draw red lines in Asia that they will almost certainly not be able to uphold, but they may nonetheless be very destabilizing to the relationship with China, invite crises, and convince the rest of the world that the United States is an unreliable partner.”

Bonnie Glaser at the Center for Strategic and International Studies think tank called Spicer’s remarks “worrisome” and said the new administration was “sending confusing and conflicting messages.”

Dean Cheng, a China expert at the conservative Heritage Foundation, said Spicer’s remarks showed the South China Sea was an important issue for the Trump administration.

He said it was significant that neither Spicer nor Tillerson had been specific as to what actions would be taken and this left open the possibility that economic measures – instead of military steps – could be used against China and firms that carry out island building.

(Clarifies paragraph 4 attribution)

(Additional reporting by Matt Spetalnick in Washington, and Christian Shepherd in Beijing; Editing by Andrew Hay and Bill Tarrant)

Trump pulls U.S. out of Pacific trade deal, loosening Asia ties

President Donald Trump holds up executive order

By Roberta Rampton and Steve Holland

(Reuters) – U.S. President Donald Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies as China’s influence in the region rises.

Fulfilling a campaign pledge to end American involvement in the 2015 pact, Trump signed an executive order in the Oval Office pulling the United States from the 12-nation TPP.

“Great thing for the American worker,” Trump said as he signed the order on his third full day in office. The Republican says the trade deal would have damaged U.S. manufacturing.

The accord, backed heavily by U.S. business, was negotiated by former President Barack Obama’s administration but never approved by Congress. It had been the main economic pillar of the Obama administration’s “pivot” to the Asia-Pacific region to counter China.

Trump has sparked worries in Japan and elsewhere in the Asia-Pacific with his opposition to the TPP and his campaign demands for U.S. allies to pay more for their security.

Harry Kazianis, Director of Defense Studies at the Center for the National Interest think tank in Washington, said Trump must now find an alternative way to reassure allies in Asia.

“This could include multiple bilateral trade agreements. Japan, Taiwan and Vietnam should be approached first as they are key to any new Asia strategy that President Trump will enact,” he said.

U.S. BUSINESS LEADERS

The new president also met with a dozen American manufacturers at the White House on Monday, pledging to slash regulations and cut corporate taxes, but warning them he would take action on trade deals he felt were unfair.

Trump, who took office on Friday, has promised to bring manufacturing plants back to the United States – an issue he said helped him win the Nov. 8 election. He has not hesitated to call out by name companies that he thinks should bring outsourced production back home.

He said those businesses that choose to move factories outside the country would pay a price. “We are going to be imposing a very major border tax on the product when it comes in,” Trump said.

Trump asked the group of chief executives from companies including Ford, Dell Technologies, Tesla and others to make recommendations in 30 days to stimulate manufacturing, Dow Chemical CEO Andrew Liveris told reporters.

Liveris said the CEOs discussed the border tax “quite a bit” with Trump, explaining “the sorts of industry that might be helped or hurt by that.”

“Look: I would take the president at his word here. He’s not going to do anything to harm competitiveness. He’s going to actually make us all more competitive,” Liveris said.

At a portion of the meeting observed by reporters, Trump provided no details on how the border tax would work. The U.S. dollar fell to a seven-week low against a basket of key world currencies on Monday and global stock markets declined amid investor concerns about Trump’s protectionist rhetoric.

“A company that wants to fire all of its people in the United States, and build some factory someplace else, and then thinks that that product is going to just flow across the border into the United States – that’s not going to happen,” he said.

CUT TAXES AND REGULATIONS

The president told the CEOs he would like to cut corporate taxes to the 15 percent to 20 percent range, down from current statutory levels of 35 percent – a pledge that will require cooperation from the Republican-led U.S. Congress.

But he said business leaders have told him that reducing regulations is even more important.

“We think we can cut regulations by 75 percent. Maybe more,” Trump told business leaders.

“When you want to expand your plant, or when Mark wants to come in and build a big massive plant, or when Dell wants to come in and do something monstrous and special – you’re going to have your approvals really fast,” Trump said, referring to Mark Fields, CEO of Ford, who sat around the boardroom-style table in the Roosevelt Room.

Fields said he was encouraged by the tone of the meeting.

“I know I come out with a lot of confidence that the president is very, very serious on making sure that the United States economy is going to be strong and have policies – tax, regulatory or trade – to drive that,” he said.

Trump told the executives that companies were welcome to negotiate with governors to move production between states, but Trump was scheduled to hold a meeting later on Monday with labor leaders and U.S. workers, the White House said.

Between winning the presidential election in November and taking office, Trump hosted a number of U.S. CEOs in meetings in New York, including business leaders from defense, technology and other sectors. He also met with leaders of several labor unions, including the AFL-CIO.

(Additional reporting by David Brunnstrom, Doina Chiacu, Susan Heavey, Ayesha Rascoe and David Shepardson)

North Korea nuclear threat means South must not delay anti-missile system

Kim Jong Un looking at rocket warhead

By Jack Kim and Christine Kim

SEOUL (Reuters) – Acting South Korean President Hwang Kyo-ahn said on Monday the deployment of a U.S. anti-missile defense system can not be delayed in the face of a growing North Korean nuclear missile threat and despite Chinese hostility to the move.

South Korea and the United States say the deployment of the Terminal High Altitude Area Defense (THAAD) system is designed to protect against North Korea’s nuclear and ballistic capabilities.

But China says THAAD’s powerful radar could penetrate its own territory, leading to calls from some South Korean opposition leaders to delay or cancel its deployment.

“(North Korea) has been expanding its nuclear capabilities and developing the technology to create nuclear weapons. They are also miniaturizing nuclear weapons,” Hwang told reporters.

“Right now is not the time to talk to try to resolve North Korea’s nuclear issues.”

North Korea has carried out a series of nuclear and missile tests in defiance of U.N sanctions. North and South are technically still at war because their 1950-53 conflict ended in a truce, not a peace treaty.

Asked about China’s response to THAAD, Hwang said there were “some concerns” and that more time was needed to address these.

“The relationship between South Korea and China was not made in a day. We have engaged in diverse cooperation since the beginning of our diplomatic ties,” Hwang said.

South Korea’s finance and trade ministers have said they suspect China is taking indirect, retaliatory action against THAAD, but have not addressed the issue outright.

Hwang was speaking in place of President Park Geun-hye, who has been impeached by parliament amid an influence-peddling scandal and stripped of her powers as she awaits a court decision on her fate.

(Additional reporting by Ju-min Park; Editing by Nick Macfie and Michael Perry)

China’s Xi says to build new relations with United States

Xi Jinping, China's president

By Tom Miles and Stephanie Nebehay

GENEVA (Reuters) – China will build a new model of relations with the United States as part of its creation of a “circle of friends” around the world, President Xi Jinping said in a speech at the United Nations in Geneva on Wednesday.

His speech, the finale of a Swiss trip that included a state visit and topping the bill at the World Economic Forum in Davos, was intended to highlight a Chinese interest in playing a cooperative role in international affairs.

“We always put people’s rights and interests above everything else and we have worked hard to develop and uphold human rights,” he said. “China will never seek expansion, hegemony or sphere of influence.”

Human rights groups and Western governments have accused China of widespread human rights abuses. Beijing has also been accused by smaller neighbors of expansionist ambitions in the South China Sea but denies such charges.

“Big countries should treat smaller countries as equals instead of acting as a hegemon imposing their will on others.

“We will strive to build new model of major country relations with the United States, a comprehensive strategic partnership of coordination with Russia, a partnership for peace, growth, reform and among different civilizations,” he said.

U.S. President-elect Donald Trump was particularly critical of China during his election campaign, accusing it of exploiting the United States economically. He also raised concern by taking a telephone call after his election from the president of Taiwan which Beijing regards as a renegade province.

Xi called for unity on climate change and the fight against terrorism, as well as nuclear disarmament.

“The Paris agreement is a milestone in the history of climate governance. We must ensure this endeavor is not derailed…China will continue to take steps to tackle climate change and fully honor its obligations,” Xi said.

China itself suffers serious air pollution but has pushed hard to develop “green” energy systems. President-elect Trump has cast doubt on accepted scientific wisdom that carbon emissions are driving a rise in global temperatures.

The deep sea, the polar regions, outer space and the Internet should be new frontiers for cooperation rather than a wrestling ground for competition, he said.

(Reporting by Tom Miles and Stephanie Nebehay; Editing by Ralph Boulton)

Underwater search for missing Malaysian flight ends without a trace

Handwritten notes on how a crew member should report the sighting of debris in the southern Indian Ocean is pictured on a window aboard a Royal New Zealand Air Force P-3K2 Orion aircraft searching for missing Malaysian Airlines flight MH370

By Tom Westbrook and Jonathan Barrett

SYDNEY (Reuters) – The deep-sea search for missing Malaysia Airlines flight MH370 ended on Tuesday without any trace being found of the plane that vanished in 2014 with 239 people on board, the three countries involved in the search said.

The location of Flight MH370 has become one of the world’s greatest aviation mysteries since the plane, a Boeing 777, disappeared en route to Beijing from the Malaysian capital of Kuala Lumpur.

“Despite every effort using the best science available … the search has not been able to locate the aircraft,” Malaysian, Australian and Chinese authorities said in a statement.

“The decision to suspend the underwater search has not been taken lightly nor without sadness.”

The last search vessel left the area on Tuesday, the three countries said, after scouring the 120,000-sq-km (46,000-sq-mile) area of the Indian Ocean sea floor that has been the focus of the almost-three-year search.

Malaysia, Australia and China agreed in July to suspend the $145 million search if the plane was not found, or if new evidence that might offer a clue as to its whereabouts was not uncovered, once that area had been checked.

Australia last month dismissed an investigators’ recommendation to shift the search further north, saying that no new evidence had emerged to support that.

Since the crash, there have been competing theories over whether one, both or no pilots were in control, whether it was hijacked – or whether all aboard perished and the plane was not controlled at all when it hit the water.

Adding to the mystery, investigators believe someone may have deliberately switched off the plane’s transponder before diverting it thousands of miles out over the Indian Ocean.

A next-of-kin support group called Voice 370 said in a statement investigators could not leave the matter unsolved.

“In our view, extending the search to the new area defined by the experts is an inescapable duty owed to the flying public in the interest of aviation safety,” Voice 370 said.

Most of the passengers were from China.

TRACES

A Chinese foreign ministry spokeswoman, asked about the end of the search, said China placed great importance on the search and had actively participated in it alongside Australia and Malaysia. The spokeswoman did not elaborate.

Malaysia Airlines (MAS) said the hunt had been “thorough and comprehensive” and it “stands guided by the decision of the three governments to suspend the search”.

“MAS remains hopeful that in the near future, new and significant information will come to light and the aircraft would eventually be located,” it said.

Boeing said it accepted the conclusion of the authorities leading the search.

Malaysia and Australia have contributed the bulk of search financing.

Malaysia holds ultimate responsibility given Malaysia Airlines is registered there. The aircraft is thought to have crashed west of Australia, placing it in its maritime zone of responsibility.

Grace Nathan, whose mother, Anne Daisy, was on the plane said the governments should consider the recommendation to search an additional 25,000 square kilometres.

“If money is a concern, prioritise within this area,” Nathan said.

In China, Jiang Hui, whose mother was also on board the flight, said he felt “disappointed, helpless and angry” because the search had been ended “purely due to a funding shortage”.

“The 370 incident is the most important thing in my life,” he said, referring to the flight number.

The only confirmed traces of the plane have been three pieces of debris found washed up on the island country Mauritius, the French island Reunion and an island off Tanzania.

As many as 30 other pieces of wreckage found there and on beaches in Mozambique, Tanzania and South Africa are suspected to have come from the plane.

The engineering group leading the search, Fugro has raised the prospect someone could have glided the aircraft outside of the defined search zone to explain why it has not been found.

A Fugro representative was not immediately available for comment.

Twelve of the 239 on board were crew. According to the flight manifest, 152 passengers were Chinese, 50 Malaysian, seven Indonesian, six Australian, five Indian, four French and three were American.

(Reporting by Tom Westbrook and Jonathan Barrett in SYDNEY. Additional reporting by Rozanna Latiff in KUALA LUMPUR and Christian Shepherd in BEIJING; Editing by Robert Birsel)