Tag Archives: China

Oil prices rise as Middle East producers confirm supply cuts

A motorist holds a fuel pump at a Gulf petrol station in London Apri

By Sabina Zawadzki

LONDON (Reuters) – Oil prices rose on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters.

But traders said the market was pressured by investors closing financial positions that profited from strong gains the day before.

International Brent crude and U.S. West Texas Intermediate  flirted with negative territory in early European trading. By 1420 GMT, Brent was up 40 cents at $56.09 a barrel, while WTI was up 34 cents $53.17.

Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week following a deal reached by the Organization of the Petroleum Exporting Countries and other exporters led by Russia to cut output by almost 1.8 million barrels per day (bpd).

But they added that oil markets were still broadly supported by the arrangement to crimp output.

“The market is putting a lot of importance on the commentaries coming out of OPEC and non-OPEC (and) the market is giving OPEC the benefit of the doubt that cuts will be implemented and achieved,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.

However, analysts warned prices would turn fast if the market believed compliance was lacking.

“The plan was designed on Nov. 30. The foundation was laid down on Dec. 10. The construction will start on Jan. 1. The following three to six months will provide us with an answer as to whether the foundation is strong enough to hold the building or will it collapse like a house of cards,” PVM analysts wrote.

In a sign that producers are acting on their plans to cut output, Abu Dhabi National Oil Co told customers it would reduce Murban and Upper Zakum crude supplies by 5 percent and Das crude exports by 3 percent.

Kuwait Petroleum Corp notified customers of a cut in contractual crude supplies for January, as did Qatar Petroleum.

Meanwhile, China’s November crude output fell 9 percent from a year earlier to 3.915 million bpd, data showed on Tuesday. Production recovered from October’s 3.78 million bpd, however, which was the lowest in more than seven years.

China’s refinery throughput hit a record in November of 11.14 million bpd, up 3.4 percent year-on-year.

“Declines in Chinese … crude oil output and expansion of its strategic crude reserves underpin our view for China’s crude oil imports to strengthen,” BMI Research said.

In India, fuel demand rose 12.1 percent year-on-year in November.

(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Dale Hudson and Louise Heavens)

Oil surges to one-and-a-half-year high, Fed rate increase looms

A gas station attendant pumps fuel into a customer's car at PetroChina's petrol station in Beijing, China,

By Marc Jones

LONDON (Reuters) – Oil prices surged to their highest since mid-2015 and U.S. Treasury yields hit a more than two-year peak on Monday after the world’s top crude producers agreed to the first joint output cut since 2001.

Coming at the start of a week when the United States is expected to raise interest rates for the only the second time since the global financial crisis, the weekend agreement between the Organization of Petroleum Exporting Countries and key non-OPEC states set the markets alive.

Brent oil futures soared 5 percent to top $57 a barrel for the first time since July 2015 and U.S. crude leapt above $54 a barrel to send global inflation gauges spiking as well.

There was particular surprise as Saudi Arabia, the world’s number one producer, said it may cut its output even more than it had first suggested at an OPEC meeting just over a week ago.

“The original OPEC deal pointed to a fairly lumpy 3 percent cut (in production), so this suggests there is a bit more upside for oil prices,” said Neil Williams, chief economist at fund manager Hermes.

On the rise in bond yields, which tend to set global borrowing costs, he added: “The Fed hike is mostly baked in so when we do get it, it will be more about the statement.”

European oil companies jumped more than 2 percent on the oil surge and helped the pan-regional STOXX 50 index add 0.1 percent, having just had its best week in exactly five years.

Bond markets in contrast were under heavy pressure. Euro zone government bond yields were sharply higher with German Bunds up 5 basis points at 0.40 percent as U.S. yields topped 2.5 percent for the first time since October 2014.

“We have seen OPEC and non-OPEC producers agreeing, which is boosting reflation expectations around the world,” said Chris Weston, an institutional dealer with IG Markets.

In another sign of the reflation trade, breakeven rates –the gap between yields of five-year U.S. debt and a matching tenor in inflation-protected securities — were at two-month highs.

Wall Street futures, meanwhile, pointed to the main U.S. indexes barely budging when they resume, having enjoyed an uninterrupted gain of nearly 4 percent over the past six sessions.

FED UP

Focus was also on the currency markets as the dollar rose to its highest since February against the Japanese yen, before what is almost certain to be the first rate hike of the year from the U.S. Federal Reserve on Wednesday.

Japan’s yen also tends to suffer when oil prices rise, since the country is a major importer.

The Norwegian crown, Canadian dollar and Russia rouble were the big gainers from the oil deal. The rouble rose almost 2 percent against both the dollar and euro as Russia shares, which have rocketed almost 90 percent since January, hit the latest in a string of record highs.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.5 percent after posting its biggest weekly rise in nearly three months last week.

China stocks suffered their biggest fall in six months as blue chips were knocked by fresh regulatory curbs to rein in insurers’ aggressive stock investments and rising bond yields prompted profit-taking in equities.

The blue-chip CSI300 index fell 2.4 percent, to 3,409.18 points, while the Shanghai Composite Index lost 2.5 percent to 3,152.97 points.

China’s insurance regulator, which recently warned it would curb “barbaric” acquisitions by insurers, said late on Friday it had suspended the insurance arm of China’s Evergrande Group from conducting stock market investment.

Concerns were also rumbling about U.S.-Sino relations after Donald Trump re-ignited controversy over Taiwan.

“I fully understand the ‘one China’ policy, but I don’t know why we have to be bound by a ‘one China’ policy unless we make a deal with China having to do with other things, including trade,” Trump said in an interview with Fox News.

Emerging markets are already bracing for a difficult run if U.S. rate hikes push up the dollar and global bond yields.

Turkey’s lira has borne the brunt of much of the pressure in recent weeks, and it took another 1 percent hit alongside a sharp fall in Turkish bonds after data showed the country’s economy suffering its first contraction since 2009.

Gold, meanwhile, which had a bumper first half of 2016, hit its lowest level since early February at $1,152 an ounce.

(Additional reporting by Saikat Chatterjee in Hong Kong, editing by Larry King)

EU upsets China with new steel price investigation

A worker verifies a product at a steel factory in Dalian, Liaoning province, China

By Philip Blenkinsop

BRUSSELS (Reuters) – The European Union has launched a new investigation into whether Chinese manufacturers are selling steel into Europe at unfairly low prices, angering China which says Europe’s steel problems are due to the region’s own economic weakness.

The European Commission has determined that a complaint brought by EU steel makers’ association Eurofer regarding certain corrosion resistant steel merits an investigation, the EU’s official journal said on Friday.

The Commission also said it would start another anti-dumping investigation into certain cast iron products from China and India as well as determining whether existing duties on Chinese steel seamless pipes and tubes should continue for another five years.

The EU has already imposed duties on a wide range of steel grades to counter what EU steel producers say is a flood of steel sold at a loss due to Chinese overcapacity and partly the cause of 5,000 British job losses.

A China Commerce Ministry official said Beijing attached a “high degree of attention and concern” to the case and that Europe’s steel problems were due to its own weak economic growth.

Wang Hejun, the head of the trade remedies investigation department, said in a statement on the ministry’s website that Europe should rationally analyze its steel industry’s problems.

“It should not adopt mistaken trade protectionist measures that limit fair market competition,” he said.

The EU investigation begins just days before the 15th anniversary of China’s accession to the World Trade Organization, when the country says new trade defense rules are supposed to kick in.

Until now, the EU has been able to compare Chinese prices with those of another country – in the current case Canadian prices. But, Beijing insists this should no longer be possible from Dec. 11.

If the United States, European Union, and other WTO members begin to take Chinese prices as fair market value, it will be much harder for them to challenge China’s cheap exports.

The European Commission proposed last month a new way of treating China, but its proposals still await approval from the EU’s 28 members and the European Parliament.

Aegis Europe, a group of European industry federations including Eurofer, said there was no legal requirement to change the way the EU treated China on Dec. 11 and that EU’s partners the United States and Japan would not be doing so.

G20 governments recognized in September that steel overcapacity was a serious problem. China, the source of 50 percent of the world’s steel and the largest steel consumer, has said the problem is a global one.

The EU currently has 40 anti-dumping and anti-subsidy measures in place, 18 of which are on products from China. Twenty more investigations related to steel are still ongoing, including three for which provisional duties are in place.

(Reporting By Philip Blenkinsop in Brussels, Yawen Chen and Nicholas Heath in Beijing,; Editing by Greg Mahlich and Jane Merriman)

U.S. Congress passes $618.7 billion annual defense bill

A U.S. Navy crewman directs an F/A-18E Super Hornet fighter jet on the flight deck of the aircraft carrier USS Harry S. Truman in the Mediterranean Sea in a photo released by the US Navy June 3, 2016. U U.S. Navy/Mass Communication Specialist 3rd Class

By Patricia Zengerle

WASHINGTON (Reuters) – The U.S. Senate overwhelmingly passed a compromise version of an annual defense policy bill on Thursday without controversial provisions such as requiring women to register for the draft or allowing contractors to make religion-based hiring decisions.

Ninety-two senators backed the $618.7 billion National Defense Authorization Act, or NDAA, and seven opposed it. Because it passed the House of Representatives by a similarly large margin last week, the bill now goes to the White House for President Barack Obama to veto or sign into law.

A White House spokesman told a briefing he did not yet have a position on the bill to report.

The 2016 bill, the last of Obama’s presidency, includes some Republican-backed initiatives with which he has disagreed in the past. It includes a $3.2 billion increase in military spending, when there has been no similar increase in non-defense funding.

The bill also bars closures of military bases, although top Pentagon officials say they have too much capacity, and it blocks planned reductions in active-duty troop numbers.

And it continues policies that bar transfers of prisoners to U.S. soil from the detention center at Guantanamo Bay, Cuba, which Obama had hoped to close. While his administration has shipped most inmates from the controversial prison, the Democrat is not expected to accomplish his goal of shuttering it before he leaves office Jan. 20.

Obama’s successor, Republican Donald Trump, wants to keep Guantanamo open, and expand it.

The NDAA passed both chambers in the Republican-led Congress with margins large enough to overcome a veto, and the compromise legislation features many provisions such as a military pay raise and an expansion of a landmark human rights bill, that are extremely popular in Congress. [L1N1E316A]

After months of negotiation, the Senate and House Armed Services committees unveiled a compromise version of the NDAA last month that left out the Russell Amendment, a “religious freedom” measure Democrats said would have let federal contractors discriminate against workers on the basis of gender or sexual orientation, overturning Obama’s executive order.

Some House Republicans said they hoped to revisit that provision after Trump takes office, when they do not have to worry about a veto threat from a Democratic White House.

The bill also excluded a provision that would have required women to register for the military draft, now that Pentagon leaders are moving to allow them into combat.

A provision recommending that the U.S. conducts yearly high-level military exchanges with Taiwan, which Beijing sees as a breakaway province, made it into the final bill.

China’s defense ministry said in a statement on its official microblog on Friday that it was “firmly opposed” to the move, which would “inevitably damage U.S. interests”.

(Reporting by Patricia Zengerle; Additional reporting by Timothy Gardner, and Christian Shepherd and Michael Martina in BEIJING; Editing by Richard Chang and Clarence Fernandez)

White House voices concerns about China cyber law

A lock icon, signifying an encrypted Internet connection, is seen on an Internet Explorer browser in a photo illustration in Paris

WASHINGTON (Reuters) – The White House said on Thursday that it raised concerns about China’s new cyber security law during a meeting with a Chinese official after the latest round of talks between the two countries on cyber crime.

U.S. National Security Adviser Susan Rice met with Chinese State Councilor Guo Shengkun to discuss the importance “of fully adhering” to an anti-hacking accord signed last year between the China and the United States, National Security Council spokesman Ned Price said.

The deal, brokered during Chinese President Xi Jinping’s state visit to Washington in 2015, included a pledge that neither country would knowingly carry out hacking for commercial advantages.

Rice told Guo that the United States was concerned “about the potential impacts” of a law that China adopted in November aimed at combating hacking and terrorism.

Critics of the law say it threatens to shut foreign technology companies out of various sectors deemed “critical,” and includes contentious requirements for security reviews and for data to be stored on servers in China.

Rights advocates also say the law will enhance restrictions on China’s Internet, already subject to the world’s most sophisticated online censorship mechanism, known outside China as the Great Firewall.

Rice met with Guo after the third round of high level talks on cyber security between China and the United States was held on Wednesday.

(Reporting by Ayesha Rascoe; Editing by Alistair Bell)

Exclusive: Risking Beijing’s ire, Vietnam begins dredging on South China Sea reef

Vietnam begins building in South China Sea

By Lincoln Feast and Greg Torode

SYDNEY/HONG KONG (Reuters) – Vietnam has begun dredging work on a disputed reef in the South China Sea, satellite imagery shows, the latest move by the Communist state to bolster its claims in the strategic waterway.

Activity visible on Ladd Reef in the Spratly Islands could anger Hanoi’s main South China Sea rival, Beijing, which claims sovereignty over the group and most of the resource-rich sea.

Ladd Reef, on the south-western fringe of the Spratlys, is completely submerged at high tide but has a lighthouse and an outpost housing a small contingent of Vietnamese soldiers. The reef is also claimed by Taiwan.

In an image taken on Nov. 30 and provided by U.S.-based satellite firm Planet Labs, several vessels can be seen in a newly dug channel between the lagoon and open sea.

While the purpose of the activity cannot be determined for certain, analysts say similar dredging work has been the precursor to more extensive construction on other reefs.

“We can see that, in this environment, Vietnam’s strategic mistrust is total … and they are rapidly improving their defences,” said Trevor Hollingsbee, a retired naval intelligence analyst with Britain’s defence ministry.

“They’re doing everything they can to fix any vulnerabilities – and that outpost at Ladd Reef does look a vulnerability.”

Reuters reported in August that Vietnam had fortified several islands with mobile rocket artillery launchers capable of striking China’s holdings across the vital trade route.

Vietnam’s foreign ministry did not respond to a request for comment.

The vessels at Ladd Reef cannot be identified in the images, but Vietnam would be extremely unlikely to allow another country to challenge its control of the reef.

Greg Poling, a South China Sea expert at Washington’s Center for Strategic and International Studies (CSIS), said it remained unclear how far the work on Ladd Reef would go. Rather than a reclamation and a base, it could be an attempt to simply boost access for supply ships and fishing boats.

Ladd could also theoretically play a role in helping to defend Vietnam’s nearby holding of Spratly Island, where a runway is being improved and new hangars built, he said.

“Vietnam’s knows it can’t compete with China but it does want to improve its ability to keep an eye on them,” Poling said.

Vietnam has long been fearful of renewed Chinese military action to drive it off its 21 holdings in the Spratlys – worries that have escalated amid Beijing’s build-up and its anger at the recent Philippines legal action challenging its claims.

China occupied its first Spratlys possessions after a sea battle against Vietnam’s then weak navy in 1988. Vietnam said 64 soldiers were killed as they tried to protect a flag on South Johnson reef – an incident still acutely felt in Hanoi.

BUILDING BURST

The United States has repeatedly called on claimants to avoid actions that increase tensions in the South China Sea, through which some $5 trillion in world trade is shipped every year.

Vietnam has emerged as China’s main rival in the South China Sea, actively asserting sovereignty over both the Paracel and the Spratly groupings in their entirety and undergoing its own naval modernisation. Taiwan also claims both, but its position is historically aligned with Beijing’s.

The Asia Maritime Transparency Initiative, run by the CSIS, says Vietnam has added about 120 acres (49 hectares) of land to its South China Sea holdings in recent years.

Regional military attaches say Vietnam’s key holdings are well fortified, some with tunnels and bunkers, appearing geared to deterring easy invasion.

Vietnam’s reclamation work remains modest by Chinese standards, however.

The United States, which has criticized China for militarizing the waterway, estimates Beijing has added more than 3,200 acres (1,300 hectares) of land on seven features in the South China Sea over the past three years, building runways, ports, aircraft hangars and communications equipment.

Beijing says it is entitled to “limited and necessary self-defensive facilities” on its territory and has reacted angrily to “freedom of navigation” operations by U.S. warships near Chinese-held islands.

CHINESE RECLAMATION WORK DAMAGED

In another image provided by Planet Labs, reclamation work in the Chinese-held Paracel Island chain appears to have been damaged by recent storms.

China began dredging and land filling earlier this year at North Island, about 12 km (7 miles) north of Woody Island, where it has a large military base and this year stationed surface-to-air missiles.

Satellite images in February and March showed dredging vessels working to build a 700 meter (2,300 ft) sand bridge connecting low-lying North Island with neighboring Middle Island.

But images taken after two powerful storms spun through the region in October show the narrow sand strip has been largely swept away.

The Paracels have been under Chinese control for more than 40 years after a battle towards the end of the Vietnam War, when Chinese forces removed the then-South Vietnamese navy. Analysts say they play a key part in protecting China’s nuclear armed submarine fleet on Hainan Island, to the north.

China has not commented publicly on the work at North Island and the foreign ministry did not respond to requests for comment.

(Additional reporting by Martin Petty and Ben Blanchard; Editing by Alex Richardson)

China, U.S. look past tensions with joint relief drill

Liu Xiaowu (C), army commander of the Chinese southern military region, and General Robert Brown (2nd L), commanding general of the U.S. Army Pacific, attend a session as the Chinese and U.S. armed forces hold joint humanitarian relief drills in Kunming, Yunnan province, China

By Ben Blanchard

KUNMING, China, Nov 18 (Reuters) – China and the United States wrapped up a three day humanitarian relief military drill on Friday, looking past simmering tensions over the disputed
South China Sea and the deployment of an advanced U.S. anti-missile system in South Korea.

The exercises, held in the southwestern Chinese city of Kunming, come a month after a U.S. navy destroyer sailed near islands claimed by China in the South China Sea, prompting fury in Beijing which called the moved illegal and provocative.

That patrol, the latest by Washington to challenge Chinese claims in the strategic waterway, capped a tense year for military-to-military ties between the world’s two largest economies, which are also at odds over the U.S. decision to base Terminal High Altitude Area Defense (THAAD) anti-missile system battery system in South Korea to defend against North Korea.

China, neighboring North Korea, worries the system’s radar will be able to track its own military capabilities.

New uncertainty looms with the shock election of Donald Trump as U.S. president earlier this month, a man who lambasted China on the campaign trail and has suggested Japan and South Korea be allowed to develop nuclear weapons.

But it was all smiles and friendship as Chinese and U.S. soldiers simulated digging out bodies from an earthquake-destroyed building and rescuing people from an overturned boat in a reservoir.

Liu Xiaowu, army commander of the Chinese southern military region, and General Robert Brown, commanding general of the U.S. Army Pacific, chatted amiably as they oversaw the last day of
exercises.

“Very smart, very good,” Brown said, as Chinese officers explained how they were using new technology, including drones, in the drill.

Jeremy Reynolds, a U.S. army captain based in Hawaii, told Reuters the exercise was a unique opportunity for the two to work together.

“The execution of the exchange went very well between the Chinese and the American forces. We were able to communicate very well through interpreters. There were no major issues. The
Chinese did a very good job planning their portions of the exercise and it led to very smooth operations in a very good overall product,” he said, standing on a pontoon bridge.

“These operations do help to create a mutual understanding between our two militaries.”

This is the fourth time China and the United States have conducted such drills since they began in 2013, as the two try to set aside mutual suspicion from the bottom up, rather than just relying on contacts at a more senior level.

The exercise involved 134 military personnel from China and 89 from the United States, using helicopters, pontoon bridges and engineering equipment.

They also conducted tabletop exercises focusing on sharing information and joint decision-making, field maneuvers focusing on evacuation of earthquake victims and search and rescue.

“We had very happy cooperation with the United States. I was really happy,” said Chinese army doctor Zhao Yao.

“This was the first time I’d met the U.S. military. The exchange with them has really helped my English.”

(Editing by Nick Macfie)

U.S. panel says China firms be banned from buying U.S. companies

U.S. (L) and Chinese national flags flutter on a light post at the Tiananmen Square ahead of a welcoming ceremony for U.S. President Barack Obama, in Beijing,

WASHINGTON/BEIJING (Reuters) – A U.S. congressional commission charged with monitoring security and trade links between the United States and China has recommended that CFIUS, the body that vets acquisitions from foreign firms, be required to block purchases from Chinese state-owned companies.

In its annual report to the U.S. Congress, the U.S.-China Economic and Security Review Commission said on Wednesday the Chinese Communist Party has used state-owned enterprises (SOEs) as the primary economic tool to advance and achieve its national security objectives.

“The Commission recommends Congress amend the statute authorizing the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of U.S. companies,” the report said.

The suggestion, one of 20 recommendations made to Congress, comes just a week after the election of Donald Trump, who has repeatedly blasted China’s trade policies while on the presidential campaign trail and proposed slapping a 45 percent import tariff on Chinese goods. Trump’s transition team is currently formulating policies and choosing personnel to fill key economic and security positions.

The U.S.-China Economic and Security Review Commission, created in 2000, is mandated to monitor, investigate and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and China.

The United States was the most targeted nation by Chinese acquirers this year, with mainland buyers launching a record $64.5 billion worth of deals, according to Thomson Reuters data.

The push into the United States is part of a global overseas buying spree by Chinese companies that this year has seen a record $200 billion worth of deals, nearly double last year’s tally.

The U.S.-China commission did not make any reference to CFIUS, the U.S Treasury-led Committee on Foreign Investment in the United States, in its 2015 report.

CFIUS has shown a higher degree of activism against Chinese acquirers this year, catching some Chinese by surprise. Prominent deals that fell victim to CFIUS include Tsinghua Holdings’ $3.8 billion investment in Western Digital.

Overall, data do not demonstrate CFIUS has been a significant obstacle for Chinese investment in the United States. In 2014, the latest year for which data is available, China topped the list of foreign countries in CFIUS review with 24 deals reviewed out of more than 100 scrutinized by CFIUS. Although the number of Chinese transactions reviewed rose in absolute terms, it fell as a share of overall Chinese acquisitions, the reported noted, and the vast majority of deals reviewed by CFIUS were cleared.

But the report added that both private and public Chinese entities present significant risks to U.S. economic and national security, as the degree of state ownership does not necessarily reflect a business’ strategic importance.

(Reporting by David Lawder and Tony Munroe; Editing by Chizu Nomiyama)

U.S. panel urges probe on whether China weakening U.S. militarily

A paramilitary policeman watches a flag-raising ceremony at Tiananmen Square ahead of the opening session of the National People's Congress (NPC) in Beijing, China,

By David Brunnstrom

WASHINGTON (Reuters) – A U.S. advisory commission warned on Wednesday that China’s growing military might may make it more likely to use force to pursue its interests and called for a government probe into how far outsourcing to China has weakened the U.S. defense industry.

The annual report of the U.S.-China Economic and Security Review Commission pointed to a growing threat to U.S. national security from Chinese spying, including infiltration of U.S. organizations, and called on Congress to bar Chinese state enterprises from acquiring control of U.S. firms.

The release of the report to Congress comes a week after Donald Trump won the U.S. presidential election. Trump, an outspoken Republican who has vowed to take a tougher line in trade and security dealings with China than President Barack Obama, will take office on Jan. 20.

The panel is a bipartisan body set up in 2000 to monitor the national security implications of the U.S. trade and economic relationship with China and to make recommendations to Congress for legislative and administrative action.

Its report also called on Congress to back more frequent U.S. Navy freedom-of-navigation operations in the South China Sea, one of the world’s busiest trade routes where China’s building of artificial islands with military facilities has raised concerns about future freedom of movement. Beijing and its neighbors have conflicting territorial claims there.

The commission said ongoing reforms of the People’s Liberation Army would strengthen Beijing’s hand and noted that China was close to completing its first domestically produced aircraft carrier.

“China’s pursuit of expeditionary capabilities, coupled with the aggressive trends that have been displayed in both the East and South China Seas, are compounding existing concerns about China’s rise among U.S. allies and partners in the greater Asia,” the report said.

“Given its enhanced strategic lift capability, strengthened employment of special operations forces, increasing capabilities of surface vessels and aircraft, and more frequent and sophisticated experience operating abroad, China may also be more inclined to use force to protect its interests,” it said.

The panel said that U.S. responses to the threat from Chinese intelligence gathering had suffered from a lack of a coordinated effort by U.S. intelligence agencies.

It said Congress should also direct the U.S. Government Accountability Office to prepare a report “examining the extent to which large-scale outsourcing of manufacturing activities to China is leading to the hollowing out of the U.S. defense industrial base.”

“This report should also detail the national security implications of a diminished domestic industrial base (including assessing any impact on U.S. military readiness), compromised U.S. military supply chains, and reduced capability to manufacture state-of-the-art military systems and equipment,” it said.

The commission’s report also recommended that Congress call on the U.S. State Department to produce educational materials to alert U.S. citizens overseas and students going to China to the dangers of recruitment efforts by Chinese agents.

(Reporting by David Brunnstrom; Editing by Cynthia Osterman)

U.S. to deploy THAAD anti missile battery in South Korea

A Terminal High Altitude Area Defense (THAAD) interceptor is launched during a successful intercept test, in this undated handout photo provided by the U.S. Department of Defense, Missile Defense Agency. U.S. Department of Defense,

SEOUL (Reuters) – The commander of U.S. forces in South Korea said on Friday a U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system battery would be deployed to South Korea within eight to 10 months, an official from the U.S. forces in South Korea said.

The official was commenting on a Yonhap news agency report on remarks made by Vincent Brooks, commander of United States Forces Korea, in which he laid out plans for the deployment.

Brooks said rotating strategic weaponry onto the Korean peninsula would have a deterrent effect against North Korean provocations, according to the agency. He also said the battery would be bigger than one deployed in Guam.

The official could not confirm Brook’s comment on rotation, but said the U.S. and South Korean governments are currently in discussions for such strategic weaponry deployment.

In September, two U.S. B-1 bombers flew over South Korea in a show of force and solidarity with its ally following North Korea’s fifth nuclear test.

Washington and Seoul have agreed to deploy the THAAD system in South Korea to protect against North Korean threats. China was angered by the decision as its worries that the system’s powerful radar can see into its territory.

China’s foreign ministry spokeswoman Hua Chunying urged South Korea and the United States to “immediately cease” the deployment process and reiterated that China would take “necessary steps to safeguard China’s security interests.”

“The U.S. deployment of THAAD on the Korean Peninsula seriously damages strategic balance in the region and seriously harms the strategic security interests of relevant regional countries, including China,” Hua told a regular news briefing.

South Korea has said it plans to have THAAD operational by the end of next year at the latest.

Tensions on the Korean peninsula have been high this year, with North Korea conducting two nuclear tests and an unprecedented number of ballistic missile tests.

Tensions on the Korean peninsula have been high this year, with North Korea conducting two nuclear tests and an unprecedented number of ballistic missile tests.

Many in South Korea have called for development of home-grown nuclear weapons or the return of U.S. nuclear weapons to deter North Korea, although South Korea says it has no plans to reintroduce them.

Former U.S. President George H.W. Bush decided in 1991 to remove U.S. nuclear weapons from South Korea.

Brooks, speaking at a breakfast event, also said that relocating tactical nuclear weapons to the peninsula would complicate the situation, the official cited him as saying.

(Reporting by Christine Kim and Ju-min Park; Additional reporting by Michael Martina in Beijing; Editing by Simon Cameron-Moore)