China passes new pollution law, sets sights on coal consumption cap

GNN - Legislators have approved amendments to China's 15-year-old air pollution law that grant the state new powers to punish offenders and create a legal framework to cap coal consumption, the Asian giant's biggest source of smog.

The draft amendments were passed by 154 votes to 4, with five abstentions, Zhong Xuequan, spokesman for the National People's Congress (NPC), China's parliament, told a media briefing on Saturday.

The ruling Communist Party has acknowledged the damage that decades of untrammeled economic growth have done to China's skies, rivers and soil. It is now trying to equip its environmental inspection offices with greater powers and more resources to tackle persistent polluters and the local governments that protect them.

The amendments are expected to make local governments directly responsible for meeting environmental targets. They also ban firms from temporarily switching off polluting equipment during inspections and outlaw other behavior designed to distort emission readings.

Tong Weidong, vice-director of the NPC's legal work committee, told the briefing the law would improve the way local authorities were assessed and allow them to draw up their own plans to meet environmental targets.

"Amendments to this air pollution law have strengthened pollution treatment from the source - from sources such as industrial policy, energy consumption and automobile pollution," Tong said.

However, researchers said the changes do not go far enough and that the third reading of the bill should have been postponed until all its shortcomings had been resolved.

Tong said such criticism was "very normal" and that it was impossible to include all proposals in the law.

Chang Jiwen, an environmental researcher with the Development and Research Council, a government think tank, has described the new law as "not very useful".

"It is filled with many slogan-like clauses and is more like a policy document than legislation," Chang told the state-backed newspaper China Business. He said many experts had said the bill should have been postponed.

Lawmakers had rejected proposals to include specific coal consumption targets in the law and also ruled out a clause allowing local authorities to set their own restrictions on car use, the official Xinhua news agency said earlier this week.

Wang Yi, head of the policy committee of the China Academy of Sciences and a member of the NPC's standing committee, has told Chinese media the law fails to set clear goals on emissions and air quality standards.

According to the Ministry of Environmental Protection, concentrations of hazardous breathable particles known as PM2.5 fell 17.1 percent in the first half of 2015 to 58 micrograms per cubic meter. China doesn't expect to meet the state standard of 35 micrograms until 2030.

(Reporting by David Stanway and Kathy Chen, Reuters; Editing by Himani Sarkar and Paul Tait)

Pakistan PM approves deal to buy eight Chinese submarines: official

(GNN) - Pakistani Prime Minister Nawaz Sharif has approved a deal "years in the making" to buy eight submarines from China, a Pakistani government official said on Thursday, in what could be one of China's largest overseas weapons sales once it is signed.

The official, who was present at Tuesday's meeting of the National Assembly Standing Committee on Defense which was briefed by the Navy, said the deal to buy the diesel-electric submarines would likely be signed by Chinese President Xi Jinping when he visits, "but that is still not final".

Xi was due to travel to Pakistan this month, the government in Islamabad has said. China has said Xi would visit this year, but given no timeframe.

China and Pakistan call each other "all-weather friends" and their close ties have been underpinned by long-standing wariness of their common neighbor and rival, India, and a desire to hedge against U.S. influence across the region.

"The prime minister has approved buying eight submarines from China and these would be used to bolster Pakistan's strength," the official, who asked not to be identified, told Reuters.

He added that "last-minute homework is pending".

"Some officials are traveling to China even today. Work is ongoing," he said. "This deal is years in the making."

He said Pakistan was looking at S20 and Yuan class diesel-electric vessels.

A former senior Pakistan navy officer with knowledge of the negotiations told the Financial Times the contract could be worth $4 billion to $5 billion.

Asked about the submarines, Chinese Foreign Ministry spokeswoman Hua Chunying said China and Pakistan were friendly neighbors and that the two sides had normal military exchanges.

"I can tell you, relevant cooperation does not violate international convention and accords with China's three principles on military exports," she told a daily news briefing.

China is Pakistan's top supplier of weapons, according to the Stockholm International Peace Research Institute (SIPRI), which tracks global arms sales, selling 51 percent of the weapons Islamabad imported in 2010-2014.

China has also surpassed Germany to become the world's third largest arms exporter, SIPRI said in a report last month. Little is known about China's arms exports because the country does not publish data on such sales.

The Pakistani official also said that Pakistan had been in talks with France to buy new submarines, but the proposal was declined by the French.

A top U.S. Navy admiral said in February that, though they were technologically inferior, China's submarine fleet now outnumbered that of the United States.

(Reuters)(Reporting by Mehreen Zahra-Malik in Islamabad and Ben Blanchard and Megha Rajagopalan in Beijing; Writing by Nick Macfie; Editing by Alex Richardson)

China angered after U.S. fighter jets land in Taiwan

(GNN) - China's Foreign Ministry expressed anger on Thursday after two U.S. fighter jets landed in Taiwan, in a rare official contact between the militaries of the United States and the self-ruled democratic island.

Taiwan's Central News Agency said the two F-18s landed at an air force base in southern Taiwan on Wednesday after experiencing mechanical problems. It said it was not clear where they were coming from or where they were going.

"While this landing was unplanned and occurred exclusively out of mechanical necessity, it reflects well on Taiwan that they permitted pilots in distress to land safely," said U.S. Pentagon spokeswoman Henrietta Levin.

China's Foreign Ministry spokeswoman, Hua Chunying, told a regular news briefing: "We have already made solemn representations to the U.S. side."

"China demands that the United States strictly abide by the 'one-China policy' ... and cautiously and appropriately handle this incident."

The United States is obligated to help Taiwan defend itself under the Taiwan Relations Act of 1979, when Washington severed formal ties with the island to recognize the People's Republic of China in Beijing.

U.S. weapons sales in recent years to Taiwan, or indeed any formal contact between the two armed forces, have provoked strong condemnation by China, but have not caused lasting damage to Beijing's relations with either Washington or Taipei.

China views Taiwan as a renegade province and has not ruled out the use of force to bring it under its control.

While Taiwan and China have signed a series of landmark trade and economic agreements since 2008, political and military suspicions still run deep, especially in democratic Taiwan, where many fear China's true intentions.

China's military modernization has also been accompanied by a more assertive posture in its regional territorial disputes.

(Reuters)(Reporting by Michael Martina, and J.R. Wu in Taipei; Writing by Ben Blanchard and Clarence Fernandez)

BMW, Mercedes grapple with unauthorized exports from U.S. to China

(GNN) - Mercedes-Benz and BMW are probing unauthorized exports of luxury cars from the United States to China, which have recently surged and threaten profit in the world's largest auto market, senior executives said.

So-called gray imports to China have jumped since the country allowed dealers registered in Shanghai's free trade zone to import cars without the consent of foreign carmakers, exacerbating price pressure for German manufacturers.

As a result, Daimler AG (DAIGn.DE), which owns premium auto brand Mercedes-Benz, said it intensified efforts to clamp down on exports of U.S. models to China about a year ago.

"We got concerned when it hit 4,000," said Steve Cannon, head of Mercedes-Benz USA, referring to the number of vehicles being shipped to China from the United States.

Mercedes can penalize U.S. dealers who knowingly sell vehicles to so-called gray-market exporters, who operate through unauthorized channels.

As a first step it has encouraged dealers to vet buyers of exclusive models such as the GL large SUV, using online resources such as Zillow to check addresses of would-be buyers, and has discouraged cash payment for cars, Cannon said.

"We nipped it in the bud," Cannon said, referring to the ability of unauthorized buyers to acquire vehicles in the United States for immediate export to China. "We took it down to almost nothing."

China has had a gray market in auto sales for some time, centered around the northern port city of Tianjin, where about half of China's total car import deals are done. Together, Audi (VOWG_p.DE), BMW and Mercedes have about 70 to 80 percent market share in the premium segment.

A BMW 650i xDrive Convertible that sells from $97,900 in the United States can cost close to 2 million yuan ($320,179) in China.

Ian Robertson, BMW AG's (BMWG.DE) board member responsible for global sales, said the company is concerned about the effect of new Chinese laws that clear a legal path for parallel imports. The automaker is cooperating with U.S. law enforcement authorities investigating the source and flow of the money used to acquire such vehicles.

BMW does not have a precise figure for how many vehicles are being shipped to China from the United States through unofficial channels. "It's not a single entrepreneur," Robertson said. "It's difficult to know."

But BMW is seeing vehicles turn up in China with navigation systems and engines that are specified for the United States, not China. One concern, he said, is that U.S. engines are designed to run on different fuel than is commonly available in China, and the result could be that gray-market BMWs perform poorly.

After years of growth that turned China into the world's biggest car market, cooling demand is exacerbating tensions between global automakers and local car dealers.

Earlier this year, BMW said it will pay 5.1 billion yuan ($823 million) to its established China dealers who are suffering from slowing sales as the economy cools and competition from unauthorized dealers increases.

(Reuters)(Additional reporting by Edward Taylor in Frankfurt; editing by Matthew Lewis)

China knocking on door of IMF's major league, U.S. wavers

(GNN) - China is closer to joining the major league of reserve currencies with a deal possible later this year to include the yuan in the International Monetary Fund's unit of account, international finance officials say.

However the United States, where China's growing economic and political muscle is a source of strategic concern in Congress, is reluctant to add the yuan so soon to the basket of currencies that make up the IMF's Special Drawing Rights.

U.S. Treasury Secretary Jack Lew said after a visit to Beijing this week the yuan was not yet ready to join the virtual currency that defines the value of the IMF's reserves, used for lending to countries in financial difficulty.

"While further liberalization and reform are needed for the (yuan) to meet this standard, we encourage the process of completing these necessary reforms," Lew said in a speech in San Francisco on Tuesday.

The yuan, also known as the renminbi or RMB, is already the world's fifth most-used trade currency. Beijing has made strides this year in introducing the infrastructure needed to float it freely on global capital markets.

European members of the Group of Seven major industrialized economies - Germany, Britain, France and Italy - favor adding the yuan this year to the basket that comprises the dollar, the euro, the yen and the pound sterling. Japan, like the United States, is more cautious, the officials said.

The IMF's board will hold an initial discussion in May on China's request and a full five-yearly review of the SDR's composition will be conducted later in the year ahead of a decision expected in November, IMF officials said.

"The German side supports China's goal to add the RMB to the SDR currency basket based on existing criteria," Joachim Nagel, a member of the executive board of the German central bank, said last weekend at a high-level forum in Boao, on the southern Chinese island of Hainan.

The upcoming review could be a good opportunity to introduce the yuan into the basket, he said, adding: "We appreciate China's recent development and progress towards liberalization."

Chinese Premier Li Keqiang asked IMF chief Christine Lagarde last month to include the yuan in its SDR basket, pledged to speed up its "basic convertibility" and said China hoped to play an active role in international efforts to maintain financial stability, state news agency Xinhua said.

PHASED ENTRY?

A euro zone central bank source said one route could see a phased entry into the SDR, linked to fulfilling the official criterion that the yuan must be "freely usable", which Western officials interpret as full convertibility.

It would be the first emerging market currency to join the SDR, marking another stage in China's rise as a global economic player and requiring the United States to accept a dilution of its unrivalled power in international finance.

While the Europeans are vying for commercial advantage in the world's second biggest economy, Washington sees Beijing also as an authoritarian strategic challenger that may not feel bound by rules written by the West.

The U.S. Congress has held up ratification of a 2010 reform of voting rights in the IMF intended to give China and other emerging economies more say.

Britain, keen to secure pole position for London as an offshore center for international trading in yuan, has taken the lead in pressing publicly for China's admission to the SDR.

David Ramsden, chief economic adviser at the UK Treasury, said much had changed since the makeup of the virtual currency was last reviewed in 2010, and including the yuan was now a "very live issue".

Germany has ambitions to lure yuan trading to Frankfurt, home of the European Central Bank, and was irked when Britain last month jumped ahead of its EU partners to become a founder member of the China-led Asian Infrastructure Investment Bank.

Washington suffered a diplomatic reverse after trying to dissuade its allies from joining the Chinese initiative, seen as a potential rival to the World Bank and Asian Development Bank, dominated by the United States and Japan.

Keen to avoid a second rift with Europe - even though the United States can block IMF decisions - Lew focused on the terms for admitting the yuan to the SDR rather than the timing.

"China will need to successfully complete difficult fundamental reforms, such as capital account liberalization, a more market-determined exchange rate, interest rate liberalization, as well as strengthening of financial regulation and supervision," he said.

While Washington believed Beijing has stopped intervening to weaken its currency, Lew said the true test would come when market pressure increased for the yuan to strengthen.

David Marsh, managing director of the central banking think-tank OMFIF, sees a "grand bargain" between China, the United States and the IMF taking shape under which Beijing would enter the heart of global finance in exchange for turning the yuan into a strong currency on world financial markets.

The Chinese central bank was using its $3.8 trillion in reserves to keep the yuan steady against the dollar. The Chinese currency has appreciated by 11 percent in trade-weighted terms in the past year.

"All of this is a potential challenge for the dollar and its pivotal position in world money," Marsh said in a briefing.

While there is no fixed set of indicators to measure the eligibility of a currency for the SDR basket, in 2011 IMF staff set out a number of indicators that could show whether a currency is "freely usable":

- currency composition of official reserve holdings;

- currency denomination of international banking liabilities; - currency denomination of international debt securities;

- volume of transactions in foreign exchange spot markets.

More than 60 central banks hold the yuan in their reserves, according to China-focused bankers in London. Offshore trading in the yuan CNH= soared some 350 percent on Thomson Reuters trading platforms last year and rival platform EBS said the yuan was one of its top five traded currencies.

A former high IMF official, speaking on condition of anonymity, said 2015 was too soon for the yuan to qualify, but the Chinese central bank could use the review to persuade Communist Party leaders to move further towards convertibility.

Zhu Min, the IMF's Chinese deputy managing director, noted the yuan was increasingly used in trade and was also growing in capital markets.

"Clearly the RMB is already qualified, in a sense, on trade activity," he told reporters at the Boao Forum. "But on the freely usable side ... there are still some obstructions."

(This story corrects paragraph 18, changing to Asian Development Bank)

(Reuters)(Additional reporting by Adam Jourdan in Boao, China, Rory Carroll in San Francisco, Randall Palmer in Ottawa and Patrick Graham in London; Writing by Paul Taylor. Editing by Mike Peacock.)

Two Chinese energy executives under investigation

(GNN) - Two senior energy executives are under investigation, authorities in China said on Thursday, as a corruption crackdown on state-owned enterprises continues to fell top officials.

The deputy general manager and board member of state-run China Southern Power Grid, Xiao Peng, is under criminal investigation for "work-related crimes," the procuratorate in Guangdong province said in a statement on its website.

And at state-owned China National Offshore Oil Corp (CNOOC), a former general manager named Wu Zhenfang is being probed for "serious disciplinary violations," the central government's corruption watchdog said on its website.

A call to Peng's office went unanswered. CNOOC could also not be reached for comment.

China's president, Xi Jinping, has warned that corruption threatens the survival of China's ruling Communist Party and his two-year anti-graft campaign has brought down scores of senior officials in the party, the government, the military and state-owned enterprises.

Peng is the second high-level executive at China Southern Power Grid, one of the country's two national power grid operators, to come under scrutiny this week.

On Monday, authorities said Qi Dacai, the company's vice president and director, was under investigation for "serious disciplinary violations."

On Tuesday, authorities announced an investigation into a top executive at state-owned Baosteel Group.

(Reuters)(Reporting By Adam Rose and Chen Aizhu; Editing by Tom Hogue)

Amid Yemen chaos, China keeps oil shipments flowing

(GNN) - China has managed to export a large shipment of crude oil from Yemen over the weekend, ship-tracking data showed on Monday, despite mounting chaos in the country after the launch of Saudi-led air strikes last week.

The 2 million barrel Very Large Crude Carrier (VLCC), Tai Hung San, left the Yemeni port of Ash Shihr on Sunday. Trading sources said the vessel was chartered by China's state-backed oil trader Unipec. Tanker data listed it as being run by Glasford, the shipping-arm of PetroChina.

The supertanker was sailing towards the Chinese port of Qingdao on Monday after exiting the Gulf of Aden.

The shipment shows some oil is still being exported from the country, which has become a growing supplier to China despite years of falling output and political instability.

Oil markets were roiled last week after Saudi Arabia and nine other Sunni Muslim states started air strikes against the Shi'ite Houthi militia, who control the capital and are backed by Iran, sparking fears of a wider sectarian confrontation.

Industry and local sources had said on Thursday that all major seaports were closed after the start of the strikes.

Warplanes hit the Yemeni capital of Sanaa overnight and after daybreak on Monday, residents said, marking the fifth day of the Saudi-led campaign.

Trading sources estimate Yemen's oil exports before the start of the air strikes at around 100,000 barrels per day, with production of approximately 140,000 bpd.

China's oil imports from Yemen in the first two months this year were 4.5 million barrels, up 315 percent from the same period a year ago, and the equivalent of three-quarters of the country's total crude exports.

Yemen's oil production has roughly halved since 2010, according to the U.S. Energy Information Administration.

A spokesperson for state-backed PetroChina was not immediately available to comment.

French oil major Total, which operates a liquefied natural gas (LNG) export facility in Yemen, said on Monday it had evacuated all expatriate staff.

Sources told Reuters on Sunday that LNG exports from the 6.7 million-tonnes-a-year Yemen LNG plant were running as normal.

Any disruption to Yemen's crude exports is not expected to have a huge impact on the global oil market, with prices down almost 50 percent on this time last year due to a supply glut.

Chinese traders have said they can increase imports of West African crude if necessary.

There are some concerns about the security of oil supplies through the Bab al-Mandab shipping lane, a vital energy gateway from the Gulf to Europe and North America, though Egypt and the United States have said they will keep it open.

(Reuters)(Additional reporting by Chen Aizhu and Adam Rose in Beijing; Editing by Crispian Balmer and David Evans)