Category Archives: Malaysia

China stakes claim to South China Sea by building islands in the Spratlys

South China SeaThe South China Sea, believed to hold large deposits of oil and natural gas, is contested by the governments of countries surrounding the Sea, as well as by China.

Vietnam, the Philippines, Taiwan, and Malaysia all control islands in the South China Sea. But China claims almost the entire South China Sea, rejecting rival claims from Vietnam, the Philippines, Taiwan, Malaysia and Brunei.

South China Sea - China's claimIn 2012, China declared the region a “core national interest,” and it has been increasingly aggressive in asserting control over it, deploying an aircraft carrier in 2013, and moving an enormous oil rig into the area earlier this year.

Now, China is building its own islands, including a suspected air base, by dredging millions of tons of rock and sand and piling it on top of submerged reefs in the Spratlys.

Below is a BBC news video on some of China’s construction sites projects on five different reefs, including one that appears to be a concrete runway long enough to accommodate fighter jets.

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~StMA

PLA officer says China must establish Air Defense Identification Zone in South China Sea

On Nov. 23, 2013, China announced that it had set up an East China Sea Air Defense Identification Zone (ADIZ) that includes the Japan-held Senkaku Islands, which Chinese call Diaoyutai and over which China also claims ownership.

China-Japan ADIZs

On Feb. 2, 2014, in a Foreign Ministry press release, Beijing dismissed Japanese media reports that said China was preparing to establish a South China Sea ADIZ, but seemed to leave open the possibility that China might do so in the future.

Beijing claims ownership of islands in the South China Sea, which is contested by a number of countries, including Vietnam, Philippines, Malaysia, Indonesia, Thailand, Brunei, and Taiwan.

South China Sea

However, 19 days later on Feb. 21, 2014, a senior researcher and officer in China’s People’s Liberation Army (PLA) said that establishing an ADIZ in the South China Sea is essential to China’s national interest.

Reuters reports that Senior Colonel Li Jie, a researcher at the PLA Navy’s Military Academy and frequent media commentator, said “The establishment of another ADIZ over the South China Sea is necessary for China’s long-term national interest.”

Li’s remark came in the context of a discussion about remarks made by U.S. Captain James Fanell, director of intelligence and information operations at the US Pacific Fleet. As The Diplomat reported, at a recent U.S. Naval Institute conference Capt. Fanell said that the PLA had held a drill to practice defeating Japan’s Maritime Self Defense Forces in the East China Sea as a prelude to seizing the disputed Diaoyu/Senkaku Islands. Fanell also predicted that China would establish an ADIZ in the South China Sea by 2015 at the latest.

See “Dir. of US Navy Intelligence: Chinese Navy in drills to take Senkaku and invade Okinawa.”

Col. Li characterized Fanell’s remark as America’s attempt to deter China from establishing a South China Sea ADIZ.

The Pentagon quickly distanced itself from Fanell’s remarks, with Pentagon spokesperson Rear Admiral John Kirby saying that “those were his views to express. What I can tell you about what Secretary Hagel believes is that we all continue to believe that the peaceful prosperous rise of China is a good thing for the region, for the world.  We continue to want to improve our bilateral military relations with China.” Blah. Blah. Blah.

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~StMA

Lost Malaysia flight 370 reveals limits of China’s power in Asia

MA flight 370 Louise Watt reports for the AP (via ABC News), March 16, 2014:

The search for a missing jetliner with Chinese travelers aboard has revealed the limits of Beijing’s influence in its own backyard and left communist leaders facing outrage from their public.

Beijing has demanded Malaysia do more to find the missing Malaysia Airlines jetliner. But despite sending nine ships to help in the search, China appears to have little leverage over its far smaller Southeast Asian neighbor.

The situation is especially uncomfortable for Chinese leaders because part of the ruling Communist Party’s claim to a monopoly on power is that it is best qualified to look after the public’s interests. The rise of social media and the increased willingness of China’s public to assert its rights adds to the pressure to find the 154 Chinese among the 227 missing passengers.

There is “very likely a lot more pressure from the domestic community in China on Beijing to make sure that Chinese nationals are being protected,” said Marc Lanteigne, research director at the New Zealand Contemporary China Research Centre at Victoria University of Wellington.

Malaysia 370

Anxious relatives have thronged a temporary Malaysia Airlines office set up in a Beijing hotel and accuse Malaysian officials and the carrier of withholding information. “Some of the information released by the Malaysian government and airline turns out to be true, some turns out to be false,” said Nan Jinyan, a woman from Shanghai whose brother-in-law was aboard the flight. “I believe they are still deciding which information to release and which isn’t convenient to release right now.”

China has the world’s second-largest military budget, at $114 billion last year, and has spent heavily on expanding the ability of its navy to project power farther from its shores. But the search that began in the Gulf of Thailand on the edge of the South China Sea, which China claims as its territorial waters, has relied heavily on expertise from the United States and Britain on the other side of the globe.

China is the biggest trading partner for most of its Asian neighbors, buying tens of billions of dollars’ worth of raw materials and components from them annually. Yet despite such incentives for cooperation, countries from Vietnam to Australia are uneasy about China’s ambitions, which has hampered its efforts to acquire influence.

Beijing has resorted to taking the unusual step of publicly haranguing Malaysia’s government, a sign that whatever pressure it is applying in private is failing to produce results. After Malaysian Prime Minister Najib Razak said Saturday that the Boeing 777 might have flown beyond the current search area, Beijing reacted with fury, a sign that the announcement took it by surprise. A deputy Chinese foreign minister demanded “more thorough and accurate information” about the new search area.

A stinging commentary by China’s official Xinhua News Agency accused Malaysia and the United States of dragging their feet. “Given today’s technology, the delay smacks of either dereliction of duty or reluctance to share information in a full and timely manner,” Xinhua said. It said Malaysia “bears inescapable responsibility.” Xinhua said the plane’s manufacturer, Boeing Co., and the maker of its engines, Britain’s Rolls Royce plc, as well as “intelligence superpower the United States,” with access to valuable information, “should also have done a better job.”

H/t China Daily Mail

~StMA

500% increase in China’s purchase of US commercial real estate

Please note that although the Reuters news report below does not say it, there is good reason to believe that at least some of the Chinese companies purchasing U.S. residential and now, also commercial, real estate are state-owned entities, including those owned by the People’s Liberation Army.

Chinese investment in US by sectorSource

Reuters reports, Dec. 23, 2013:

Chinese investors, the second-biggest overseas buyers of U.S. residential real estate, are building up portfolios of U.S. commercial property as they look for new avenues of diversification.

Chinese entities announced more than $5.89 billion in projects in January-October, nearly six times the $996 million for all of 2011 and 2012 combined, showed data from New York-based consultancy Rhodium Group.

“There is a lot of upside,” said Thilo Hanemann, Rhodium’s research director. “We are at the beginning of a structural increase of Chinese investment in U.S. commercial real estate.

This week, Greenland Holding Group Co. completed a deal that will give the Shanghai-based developer a 70 percent stake in Forest City Enterprises Inc’s Atlantic Yards, a 22-acre commercial and residential project in Brooklyn, New York. The deal, which is expected to require $4.8 billion worth of investment over 8 years, is the largest property transaction by a Chinese company in the United States.

China’s push into U.S. property is underpinned by declining investment returns at home, a growing desire by wealthy individuals and developers to diversify their holdings overseas, and property companies looking to capitalize on offshore migration.

“Some investors want to diversify their assets, and some are looking for different growth opportunities,” said Julien Zhang, international director in Beijing for property consultancy Jones Lang Lasalle, which is advising three Chinese conglomerates on property deals. “Others want to learn how to enter mature and developed markets.”

A rebound in U.S. real estate pricing, tight inventory in major cities, and continued low interest rates also are attracting Chinese buyers, said Gary Locke, the U.S. ambassador to China.

Locke was speaking this week at a forum in Beijing sponsored by the U.S. Embassy to promote Chinese investment in U.S. property. Chinese investment in the United States has surged to $18.5 billion over the last two years, more than the combined total of the previous 11 years, Locke said.

Chinese nationals bought more than $8.1 billion worth of real estate in the year ended March 31, representing 12 percent of the estimated $68.2 billion of domestic property purchased by overseas nationals and second only to Canadians, according to a survey by the National Association of Realtors.

Real estate is finally becoming a global industry and you will see capital flows on a cross-border basis, just like every other investment class,” said Rob Speyer, the co-chief executive of Tishman Speyer Properties LP, which partnered in February with China Vanke Co Ltd to build a $620 million apartment project in San Francisco.

Speyer, whose company is also developing commercial, residential and retail projects in the Chinese cities of Shanghai, Chengdu and Tianjin, said he courted Vanke’s Chairman Wang Shi for more than two years, and inked their deal only 45 days after first introducing the project to him.

Not everyone is convinced that Chinese investment in the U.S. property market will continue uninterrupted. Other options for expansion include Europe, Australia and Singapore, which account for about two-thirds of offshore Chinese real estate investment, according to Jones Lang Lasalle.

Zhang Xin, the chief executive of SOHO China Ltd, who paid $700 million through her family trust to buy a stake in the General Motors Building in Manhattan, said that while the U.S. regulatory and legal environment remained attractive, valuations were getting expensive. “I would not feel as comfortable today putting in money as I did a few years ago,” Zhang said.

Asian investment in USSee also:

Malaysia to build naval base near James Shoal, also claimed by China

South China SeaMalaysia is joining other countries to resist China’s irredentist claims over the South China Sea.

EastAsiaIntel.com reports that “normally reticent Malaysia” is joining its neighbors in pushing back against Beijing’s expansive territorial claims in the South China Sea. The Malaysian government has recently sped up its measures against China by announcing the establishment of a Marine force and a naval base near a site claimed by China. The dispute centers on James Shoal, merely 80 miles off the coast of Malaysia, yet more than 1,100 miles away from China.

Rowan Callick reports for The Australian, Oct. 23, 2013, that the new Malaysian naval base will be about 100km from James Shoal, which is also claimed by China.

In March, China’s navy conducted a substantial exercise at the shoal, off the coast of the Malaysian state of Sarawak on northern Borneo, described by analyst Gary Li as “not just a few ships here and there, but a crack amphibious landing ship carrying marines and hovercraft and backed by some of the best escort ships in the PLAN fleet. We’ve never seen anything like this that far south in terms of quantity or quality.”

Malaysian Defense Minister Hishammudin Tun Hussein said the Royal Malaysian Navy would set up a base at Bintulu in Sarawak to protect the region, and national oil and gas reserves. He also said Malaysia would establish its first marine battalion, to be drawn from army, navy and air force elements, but with the core to come from parachutists.

Malaysia is setting up this marine battalion in part to counter future incursions from militant supporters of the ancient Sultanate of Sulu, who have attempted to re-establish an independent state on an archipelago between Mindanao in the southern Philippines, and the Malaysian state of Sabah.

The Malaysian government has discussed with the US support for the establishment of its new marine force, chiefly involving training including personnel exchanges, as well as the sale of some equipment that is becoming surplus as Afghanistan operations wind down.

According to IHS Jane’s newsletter, Malaysia is also holding talks with France and South Korea for the purchase of an attack helicopter for marine use, as well as a replacement for its only amphibious ship, which was destroyed by fire four years ago.

Only six weeks ago, Mr Hishammudin said he was not concerned about how often Chinese ships patrolled the areas it claims in the South China Sea. “If their intention is not to go to war, it is not of much concern,” he said. “I think we have enough level of trust that we will not be moved by day-to-day politics or emotions.”