China-U.S. rivalry casts shadow over APEC meeting in PNG

PORT MORESBY (Reuters) – Wide differences between China and the United States dominated an Asia-Pacific Economic Cooperation (APEC) summit in Papua New Guinea on Sunday, with little evidence of consensus as officials struggled to frame a closing statement acceptable to all.

Competition between the United States and China over the Pacific was also thrown into focus with Western allies launching a coordinated response to China’s Belt and Road program, promising to jointly fund a $1.7 billion electrification and internet project in Papua New Guinea (PNG).

Tonga, on the other hand, signed up to the Belt and Road and won deferment on a Chinese loan, a Tongan official said.

U.S. Vice President Mike Pence, as he left the PNG capital of Port Moresby, listed U.S. differences with China, a day after he directly criticized its Belt and Road program.

“They begin with trade practices, with tariffs and quotas, forced technology transfers, the theft of intellectual property. It goes beyond that to freedom of navigation in the seas, concerns about human rights,” Pence told reporters traveling with him.

Differences over trade were making it difficult to draft a summit communique that members would sign, with Chinese officials rebuffed in an attempt to meet PNG Foreign Minister Rimbink Pato on the issue.

Pato confirmed to Reuters that Chinese officials had wanted to see him, adding they had not made “necessary arrangements” for a meeting.

He said the multilateral trade system was the sticking point in drafting the communique.

“If there are last minute issues then, like what we’re doing now, we will talk through them and try and reach a compromise,” he said.

At a Pacific Islands Forum in September, there was a similar dispute when China’s envoy demanded to be allowed to address the forum before the prime minister of Tuvalu.

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  • China says no developing country will fall into debt trap by cooperating with China

PNG ELECTRICITY PROJECT

APEC host PNG is home to 8 million people, four-fifths of whom live outside urban areas and with poor infrastructure.

The United States, Japan, Australia and New Zealand unveiled a $1.7 billion plan to provide electricity and internet to much of PNG, the first step of a plan that will counter China’s Belt and Road spending and political influence in the region.

The Western allies’ plan would see 70 percent of PNG’s population getting electricity by 2030, from 13 percent now, and was showcased as a demonstration of commitment to the strategically important Pacific region.

China had its success, with Tonga signing up to the Belt and Road and getting a five-year deferral on a concessional loan just before it was due to commence principal repayments.

Chinese President Xi Jinping, who arrived in Port Moresby on Thursday, has been feted by PNG officials and stoked Western concern on Friday when he held a meeting with Pacific island leaders in which he pitched the Belt and Road initiative.

China has poured investment into development projects in the region, including plans to build a large hydropower generation plant in PNG.

The Western plan for PNG comes as diplomatic sources told Reuters that Australia and the United States were concerned about the debt burden that the Chinese plant could have on it.

Belt and Road was first proposed in 2013 to expand land and sea links between Asia, Africa and Europe, with billions of dollars in infrastructure investment from China.

Australia, a staunch U.S. ally, has for decades enjoyed largely unrivalled influence among Pacific island nations. China has only recently turned its attention to the region with a raft of bilateral financing agreements to often distressed economies.

On Saturday, Pence took direct aim at Belt and Road, saying countries should not accept debt that compromised their sovereignty.

China’s foreign ministry responded by saying no developing country would fall into a debt trap simply because of its cooperation with Beijing.

“On the contrary, cooperating with China helps these countries raise independent development capabilities and levels, and improves the lives of the local people,” ministry spokeswoman Hua Chunying said in a statement.

In Port Moresby, Foreign Minister Pato said his country did not need to pick sides.

“For us, we welcome Chinese investment, we welcome U.S. investment. Our foreign policy is to be friends of all, enemies of none.”

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China defers Tonga's loan payments as Pacific nation signs up to Belt and Road

PORT MORESBY (Reuters) – Tonga has signed up to China’s Belt and Road initiative and has received a reprieve from Beijing on the timing of debt payments shortly before an onerous schedule to repay loans was due to start.

Lopeti Senituli, political advisor to Tongan Prime Minister ‘Akilisi Pōhiva, told Reuters by email on Sunday that Tonga had signed a Belt and Road memorandum of understanding, and that the concessional loan had been deferred for five years.

Tonga is one of eight island nations in the South Pacific that owe significant debt to China. The deferment came just as Tonga was set to commence principal repayments on the debt, which is expected to put severe strain on its finances.

China’s ministry of foreign affairs did not immediately respond to request for comment on Sunday.

Tonga’s financial reliance on China dates back just over a decade after deadly riots in the capital of Tonga, Nuku’alofa, destroyed much of the small Pacific nation’s central business and government districts.

The government rebuilt the city with Chinese financing, and the roughly $65 million in China’s initial loans to the island now exceeds $115 million, due to interest and additional borrowings. This represents almost one-third of Tonga’s annual gross domestic product, budget papers show

The issue of Chinese-issued debt has been at the forefront of the Asia Pacific Economic Co-operation summit, held in Papua New Guinea (PNG). On Saturday, U.S. Vice President Mike Pence criticized President Xi Jinping’s flagship programme, saying countries should not accept debt that compromised their sovereignty.

While most Pacific island nations are not APEC members, their representatives were invited to attend events, and have been engaged in talks with larger regional neighbors such as China and Australia.

China’s official Belt and Road website reported last week that Fiji had made a commitment to Belt and Road, joining the likes of Samoa and PNG.

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U.S. allies counter China with alternative electricity plan for PNG

PORT MORESBY (Reuters) – The United States and three of its Pacific allies said on Sunday they would work with Papua New Guinea to ensure most of the country had access to electricity by 2030, as Western powers seek to contain China’s economic influence in the region.

Leaders of the United States, Japan, Australia and New Zealand met in PNG’s capital, Port Moresby, at the Asia Pacific Economic Co-operation (APEC) summit to unveil the plan, which seeks to boost the power grid’s reach to 70 percent of the population from 13 percent currently.

PNG is home to 8 million people, four-fifths of whom live outside urban areas and with poor infrastructure. The developing nation has emerged as a flashpoint in Washington’s and Beijing’s competing strategic efforts to lock-in alliances in the region.

“This initiative will also be open to other partners that support principles and values which help maintain and promote a free, open, prosperous and rules based region,” a White House statement said.

The four nations did not specify what kind of power-generation would be used, or the cost of the plan. However, an Australian government spokeswoman told Reuters it would contribute A$25 million ($18.3 million) in the first year of the initiative.

China has poured investment into development projects in the region, including plans to build a large hydropower generation plant in PNG under President Xi Jinping’s flagship Belt and Road initiative.

Belt and Road was first proposed in 2013 to expand land and sea links between Asia, Africa and Europe, with billions of dollars in infrastructure investment from Beijing.

On Saturday, U.S. Vice President Mike Pence took direct aim at Belt and Road at an APEC address, saying countries should not accept debt that compromised their sovereignty.

Australia, a staunch U.S. ally, has for decades enjoyed largely unrivalled influence among Pacific island nations. China has only recently turned its attention to the region with a raft of bilateral financing agreements to often distressed economies.

($1 = 1.3633 Australian dollars)

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Clashes break out after Greeks march to mark 1973 student revolt

ATHENS (Reuters) – Greek police clashed with young protestors in central Athens on Saturday after thousands marched to mark the anniversary of a violently quashed student uprising in 1973 that helped topple the military junta.

More than 10,000 demonstrators marched peacefully through the center of Athens, which was heavily guarded by police.

They held banners reading “Resistance” and chanted slogans related to Greece’s eight-year debt crisis that led to three international bailouts in exchange for deep austerity cuts.

The procession ended at the embassy of the United States, which many Greeks accuse of having supported the 1967-1974 seven-year military dictatorship.

After the march ended, clashes broke out between police and protesters hurling stones and petrol bombs at them in the district of Exarchia, home to Athens Polytechnic, where dozens died in 1973.

Greek TV station Alpha showed images of police firing tear gas at demonstrators locked in the Polytechnic. Other protesters built street barricades with chairs or threw petrol bombs from rooftops. Police deployed a water cannon to disperse the crowd.

Earlier, many people laid wreaths and carnations at the Athens Polytechnic to honor those killed in the 1973 revolt.

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Investors eye holiday sales for market salve

NEW YORK (Reuters) – Investors will get a glimpse of consumer health next week as the holiday shopping season gets under way with Black Friday sales, and a solid start could help equities steady after several tumultuous weeks.

The day after Thanksgiving has been regarded as the traditional start of the holiday buying season, although deals and bargains are being unveiled earlier this year.

Wall Street has been struggling with uncertainty over U.S. congressional midterm elections, the path of interest rate hikes by the Federal Reserve, tariffs, the trade war and the possibility corporate earnings have already peaked. But a strong start to the gift buying season could help ease some concerns.

After an October that saw the S&P 500 .SPX slump nearly 7 percent, Wall Street has struggled to find its footing, rising 0.7 percent so far in November. That puts the index on pace for its biggest quarterly loss since the third quarter of 2015 and its worst fourth quarter performance in a decade.

About 38 percent of American consumers plan to shop on Black Friday this year, and six in 10 of those shoppers anticipate making at least half of their holiday purchases on that day, a Reuters/Ipsos poll showed on Thursday.

“Of all the other factors, the consumer has been hanging in there – they drove third quarter growth, we are seeing wage growth over 3 percent, financing rates are still reasonable,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.

“If we see any kind of disappointment in Black Friday sales, that is going to cause some real concern.”

Same store sales for the fourth quarter are expected to come in at a healthy 3 percent, according to Refinitiv data. Still, that number is trending downward from the previous two quarters and is slightly below the year-ago result of 3.1 percent.

Refinitiv same store sales index – tmsnrt.rs/2QFVypg

A strong start to holiday sales might not translate to strong earnings, however, reinforcing concerns about the best of corporate profits being in the rear-view mirror as retailers have to grapple with deal-conscious consumers.

“Even a healthy consumer doesn’t necessarily mean that retail sales and profitability and performance will be off the charts,” said Shawn Kravetz, president of Esplanade Capital in Boston, who spoke at the Reuters Global Investment 2019 Outlook Summit in New York this week.

Muddying the picture was data on Thursday that showed U.S. retail sales rebounded sharply in October, boosted by purchases of motor vehicles and building materials, but the prior two months were revised lower and the trend indicated slower consumer spending, which accounts for more than two-thirds of economic activity in the country.

Big name retailers such as Target (TGT.N), Lowe’s Companies (LOW.N) and Gap Inc (GPS.N) are expected to report quarterly results next week and investors will watch for any guidance for the holiday season.

Still, a strong start to the holiday shopping season will only partially alleviate investor concerns, with a G20 meeting at the end of November and the final Fed policy announcement of the year in December likely to cause some market volatility.

The market will need to digest these events for it to have a chance for what is known as a Santa Claus rally. Since 1950, the S&P has rallied in December three-fourths of the time, according to the Stock Traders Almanac. The benchmark index has gained an average of 1.6 percent for December, the best month of the year.

“These are all important things but if the mosaic is either constructive or negative then that is going to provide a wealth of information to either drive the market higher or drive the market lower.” said Phil Orlando, chief equity market strategist, at Federated Investors, in New York.

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Over 40 killed in attack on refugee base in Central African Republic

BANGUI (Reuters) – More than 40 people were killed and dozens wounded in Central African Republic in an attack on a Catholic mission sheltering 20,000 refugees, a regional lawmaker said.

The attack happened on Thursday in Alindao, a town 300 km (200 miles) east of the capital Bangui. Thousands of people were forced to flee when the mission was set on fire, the United Nations said.

“We have counted 42 bodies so far, but we are still searching for others. The camp has been burnt to the ground and people fled into the bush and to other IDP (internally displaced person) camps in the city,” Alindao lawmaker Etienne Godenaha told Reuters.

A humanitarian source confirmed that more than 40 people were killed.

U.N. humanitarian coordinator in Central African Republic Najat Rochdi said in a statement: “This vicious cycle of repeated attacks against civilians is unacceptable.”

Thousands have died and a fifth of Central African Republic’s 4.5 million population have fled their homes in a conflict that broke out after mainly Muslim Seleka rebels ousted President Francois Bozize in 2013, provoking a backlash from Christian anti-balaka militias.

Depite electing a new leader in 2016, the country has continued to face political instability and tit-for-tat inter-communal violence.

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Saudi media ignore US reports on Khashoggi

Saudi mainstream media have completely ignored reports that the CIA has concluded that Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, ordered the killing of prominent journalist Jamal Khashoggi.

Khashoggi was murdered in Saudi Arabia’s Istanbul consulate early last month.

The reports about the CIA conclusions emerged in US media in the late hours of 16 November.

Saudi Arabia insists the crown prince knew nothing about the killing.

In its morning news bulletins and coverage on 17 November, the state-run, news-oriented Saudi Al-Ikhbariya TV led with news that Saudi King Salman bin Abdulaziz and his son Crown Prince Mohammed bin Salman sent cables of congratulations to King Mohammed VI of Morocco on the occasion of his country’s independence.

Although the TV station then reported that the Russian foreign ministry had rejected the politicising of the Khashoggi case, it failed to make any reference to the Khashoggi-related CIA conclusions. The channel’s coverage was mostly focused on developments in Yemen.

Saudi denial emphasised

Likewise, the Dubai-based, Saudi-funded Al-Arabiya TV has ignored the CIA story in its morning coverage and news bulletins.

Although it reported the denial by the Saudi ambassador to the US, Prince Khalid bin Salman, that he encouraged Khashoggi to go to Istanbul, the pan-Arab broadcaster also failed to make any reference to the widely-reported CIA conclusions.

The channel’s coverage was focused on developments in Yemen, Syria, Israel and Iraq.

The London-based, Saudi-funded pan-Arab daily Asharq al-Awsat also completely ignored the news. But it featured Prince Khalid’s denial prominently on its website under the headline: “Khalid bin Salman underlines the falsehood of The Washington Post’s allegations.”

Al-Hayat daily, another Saudi-funded paper based in London, also turned a blind eye to the CIA reports, and instead highlighted Moscow’s comments about Khashoggi.

“Russia rejects politicisation, and questioning Saudi Arabia’s ability to investigate,” read the top headline on the paper’s website.

The top two headlines of Okaz, a Saudi-based pro-government daily, read: “Khalid bin Salman denies the allegations of The Washington Post about his contact with Khashoggi” and “The kingdom of justice…the rights of its citizens are never wasted.”

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Rouhani sees Iran, Iraq expanding trade despite U.S. sanctions

DUBAI (Reuters) – Iran and Iraq could raise their annual bilateral trade to $20 billion from the current level of $12 billion, President Hassan Rouhani said on Saturday, amid concerns in Tehran over the economic impact of renewed U.S. sanctions.

Rouhani’s remarks, made after a meeting with visiting Iraqi President Barham Salih, came about two weeks after the United States restored sanctions targeting Iran’s key oil industry as well as its banking and transportation sectors.

“… through bilateral efforts, we can raise this figure (for bilateral trade) to $20 billion in the near future,” Rouhani said in comments broadcast live on Iranian state television.

“We held talks on trade in electricity, gas, petroleum products and activities … in the field of oil exploration and extraction,” Rouhani said.

Iraqi officials told Reuters last week that Iraq had agreed to trade Iraqi food items in return for Iranian gas and energy supplies.

Baghdad is seeking U.S. approval to allow it to import Iranian gas for its power stations. Iraqi officials say they needs more time to find an alternative source than a 45-day waiver granted to it by the United States.

“It will be important to create free trade zones at our shared border and to connect the two countries’ railways,” Salih said.

“We will not forget your support for the Iraqi people in the fight against (Iraqi dictator) Saddam (Hussein). Neither do we forget Iran’s stand in the recent fight against terrorism,” added Salih, an Iraqi Kurd.

Iran wields wide influence in Iraq, its smaller Arab neighbor, where its Revolutionary Guards played a key role in training and arming the mainly Shi’ite militias that helped defeat Islamic State.

Iraq imports a wide range of goods from Iran, including food, agricultural products, home appliances, air conditioners and spare car parts. The goods element of Iranian imports to Iraq was worth about $6 billion in the 12 months ending March 2018, or about 15 percent of Iraq’s total imports for 2017.

Energy contracts also contribute to the total volume of bilateral trade.

Iraqi central bank officials said in August that their country’s economy was closely linked to non-Arab Iran, which is engaged in several proxy wars with Saudi Arabia in the region.

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Pence vows no end to tariffs until China bows

PORT MORESBY (Reuters) – The United States will not back down from its trade dispute with China, and might even double its tariffs, unless Beijing bows to U.S. demands, Vice President Mike Pence said on Saturday.

In a bluntly worded speech at an Asia Pacific Economic Co-operation (APEC) summit in Papua New Guinea, Pence threw down the gauntlet to China on trade and security in the region.

“We have taken decisive action to address our imbalance with China,” Pence declared. “We put tariffs on $250 billion in Chinese goods, and we could more than double that number.”

“The United States, though, will not change course until China changes its ways.”

The stark warning will likely be unwelcome news to financial markets which had hoped for a thaw in the Sino-U.S. dispute and perhaps even some sort of deal at a G20 meeting later this month in Argentina.

U.S. President Donald Trump, who is not attending the APEC meeting, is due to meet Chinese President Xi Jinping in Argentina.

Pence’s warning on Saturday contrasted with remarks made by Trump on Friday, when he said he may not impose more tariffs after China sent the United States a list of measures it was willing to take to resolve trade tensions.

Trump has imposed tariffs on $250 billion worth of Chinese imports to force concessions on a list of demands that would change the terms of trade between the two countries. China has responded with import tariffs on U.S. goods.

Washington is demanding Beijing improve market access and intellectual property protections for U.S. companies, cut industrial subsidies and slash a $375 billion trade gap.

There was no hint of compromise from Pence.

“China has taken advantage of the United States for many years. Those days are over,” he told delegates gathered on a cruise liner docked in Port Moresby’s Fairfax Harbour.

He also took aim at China’s territorial ambitions in the Pacific and, particularly, Xi’s Belt and Road Initiative to expand land and sea links between Asia, Africa and Europe with billions of dollars in infrastructure investment.

“We don’t offer constricting belts or a one-way road,” said Pence.

While not referring directly to Chinese claims over various disputed waters in the region, Pence said the United States would work to help protect maritime rights.

“We will continue to fly and sail where ever international law allows and our interests demand. Harassment will only strengthen our resolve.”

Just minutes earlier, Xi had spoken at length about his initiative and the need for free trade across the region.

“It is not an exclusive club closed to non-members, nor is it a trap as some people have labeled it,” Xi said of his brainchild project.

He also called protectionism a “shortsighted approach” that was “doomed to fail”.

“History has shown that confrontation, whether in the form of a Cold War, hot war, or trade war will produce no winners,” said Xi.

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Top Kentucky court upholds state's 'right-to-work' law

(Reuters) – The Kentucky Supreme Court has upheld the state’s so-called “right-to-work” law, which makes it illegal to require workers to join unions and bars the collection of fees from private-sector workers who choose not to become union members.

Rejecting a challenge by the Kentucky AFL-CIO and other unions, the court in a 4-3 decision on Thursday said the promotion of economic development and job growth formed the “rational basis” that the state needed to justify passing the law. The law, which took effect last year, allows workers who do not join unions to receive union-negotiated benefits without paying dues.

Nearly 30 U.S. states have passed “right to work” laws, and none have been struck down by courts. Voters in Missouri in August decided to reject a proposed right-to-work law, marking the first time such a measure was defeated at the polls.

Kentucky state officials did not immediately respond to requests for comment. Neither did the unions that challenged the law.

The unions claimed the law violated the state’s constitution by discriminating against unions. They also said the state legislature had no reason to designate the measure as “emergency legislation,” which allowed it to be signed into law within days of its passage.

But the Kentucky Supreme Court said it had little authority to question what constitutes an “emergency.” It was reasonable for the state to pass a law that only applied to unions because of their significant economic impact, the court said.

“The legislature clearly established a rational basis for the act: to promote economic development, to promote job growth, and to remove Kentucky’s economic disadvantages in competing with neighboring states,” Judge Laurance Vanmeter wrote for the court.

Republicans in Kentucky had been trying to pass the right-to -work law for nearly two decades. The legislation was passed in January 2017, two months after Republicans won control of the state’s General Assembly for the first time since 1921.

Supporters of the law say it will spur economic growth and attract new businesses to the state. Opponents see it as an assault on organized labor and blue-collar workers that will limit union revenues and erode wages, benefits and workplace safety.

The judges who dissented on Thursday said that because Kentucky’s law treats union employers and workers differently than non-union businesses and employees, it violates a provision of the state constitution guaranteeing equal protection under the law.

The case is Zuckerman v. Bevin, Kentucky Supreme Court, No. 2018-SC-000097-TG.

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