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1 Talking Point 7 Week in 60 Seconds 8 China Consumer Week in China 9 Economy 11 M&A 12 Energy and Resources 13 Media 14 Society and Culture 6 June 2014 19 And Finally Issue 240 20 The Back Page www.weekinchina.com Letting off steam? m o c . n i e t s p e a t i n e b . w w w Angry words at regional security summit, as the row over the South China Sea worsens Brought to you by Week in China Talking Point 6 June 2014 Dangerous currents War of words at Singapore forum as South China Sea crisis continues Grin and bear it: American Defence Secretary Chuck Hagel and the PLA’s Lieutenant General Wang Guanzhong “ he China seas north and south came up for discussion at a regional that Washington “will not look the Tare narrow seas. They are seas security summit in Singapore. And other way when fundamental prin - full of everyday, eloquent facts, rather than the threat from the ciples of the international order are such as islands, sand banks, reefs, weather, today’s dangers are instead being challenged”. swift and changeable currents – decidedly of the man-made variety, “China has undertaken destabil - tangled facts that nevertheless as a hundred vessels from China ising, unilateral actions asserting its speak to a seaman in clear and def - and Vietnam circle a disputed oil claims in the South China Sea,” he inite language.” rig, and fighter jets from both coun - rebuked. “We take no position on Such is the description in Ty - tries fly overhead. competing territorial claims, but we phoon – Joseph Conrad’s 1902 novel oppose any nation’s use of intimi - – as Captain McWhirr steers his So there were angry words in Sin - dation, coercion or the threat of steamship into the fury of a tropical gapore? force to assert these claims.” P h o t o storm. Most of the headlines at the Then Hagel listed some of the S o u r But the language was shrill Shangri-La Dialogue went to US Sec - Chinese activities causing concern: c e : R e rather than clear and definite last retary of Defence Chuck Hagel, who “It has restricted access to the Scar - u t e r s weekend, when the South China Sea made a forceful speech promising borough Reef; put pressure on the 1 In the future, finance will help new growth flourish. There are grounds for cautious optimism in the real economy — but creating sustainable growth always needs careful encouragement. New income streams should be built on opportunities that have longevity and new solutions prepared for technology that will continue to evolve. In this era of transparency, HSBC is working with clients to help create conditions in which businesses can flourish. By connecting the developed and the developing world, we can help you protect and cultivate real growth — and so create that success that lasts. 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Once the meeting actually began the Chinese soon felt targeted. “I feel they are echoing each other and sang a duet,” the PLA’s Wang com - plained. “We can see from the Shangri-La Dialogue this year, it’s Japan and the US who stirred up conflict.” He showed up too: Japan’s leader Abe Xinhua opted to heap its scorn on Abe, insisting that “such rhetoric long-standing Philippine presence common ground in their shared is fundamentally flawed when it at the Second Thomas Shoal; begun military backgrounds. comes from the nationalist leader land reclamation activities at mul - “I do think it’s much a better way who has been trying to conjure up tiple locations; and moved an oil for soldiers to talk with peer sol - the militarist past of Japan in a drive rig into disputed waters near the diers and we are all very candid,” he to rearm his country.” Paracel Islands.” ventured in what appeared to be a But Major General Zhu Chenghu, Then followed a terse exchange diplomatic riposte. dean of the National Defence Uni - with Major General Yao Yunzhu of But the following morning Wang versity, chose instead to aim his de - the People’s Liberation Army (PLA). turned more confrontational, dra - risive tones at the Americans, Ignoring attempts from the moder - matically dispensing with his pre - telling Phoenix TV that their mili - ator to bring her questioning to a pared remarks to fire back at the tary power was shrinking. Washing - halt, Yao challenged Hagel about American position. ton’s limited response to events in whether Japan had fractured the “Secretary Hagel’s speech is full the Ukraine was further proof of its status quo two years ago when it na - of American hegemony,” he re - “erectile dysfunction,” he scoffed. tionalised the Senkaku Islands in proached. “Secondly, it’s full of Zhu had calmed down by the the East China Sea, which China also threats and intimidation; thirdly, time he gave another interview to claims and calls the Diaoyu Islands it’s full of instigation and incite - the Wall Street Journal, although (see WiC78 for our first article on ment, aimed at provoking restless he was still keen to blame Wash - this longstanding dispute). elements in the Asian-Pacific region ington for making “very, very im - Was Washington’s inclusion of to stir up trouble.” portant strategic mistakes” in the the islands in its defence treaty with region. After alleging hypocrisy – the Japanese not the same coercive Tokyo was caught in the crossfire “whatever the Chinese do is ille - and intimidating behaviour that it too? gal, and whatever the Americans warns others against, Yao de - The day before Hagel’s criticism of do is right” – Zhu finished with a manded? the Chinese, Japanese Prime Minis - more ominous twist. “If you take “I thought I made America’s po - ter Abe Shinzo also warned against China as an enemy, China will ab - sition clear in my remarks about the efforts to “consolidate changes to solutely become the enemy of the position we take on disputed terri - the status quo by aggregating one US,” he warned. tories,” Hagel retorted. “In fact, I fait accompli after another”. think I repeated our position a This contravened the spirit of the What is China’s claim to the South number of times.” rule of law, Abe told the summit au - China Sea? Later Hagel met Lieutenant Gen - dience, although he was careful not Primarily it’s historical: principally eral Wang Guanzhong, the PLA’s to refer to China by name. that the Chinese discovered the is - P h o t o deputy chief of the general staff. That counted for little with a Chi - lands as early as the second century S o u r Wang said he was surprised at the nese delegation whose seniority BC; that its naval missions have c e : R e bluntness of the American’s com - and size had been beefed up, Xin - made references to the Spratlys and u t e r s ments but that he would try to find hua commented, so that Abe could the Paracels throughout Chinese 3 Week in China Talking Point 6 June 2014 history; that official accounts from the Song and Yuan dynasties demonstrate that the seas were un - der the Middle Kingdom’s writ for hundreds of years; and that maps from the later Ming and Qing dy - nasties prove the point beyond challenge. China’s rivals don’t accept the historical argument. Then again, they don’t always present a united front when seeking to refute China’s claims. For example, they don’t Getting busier by the day: Chinese surveillance ships even agree on what to call the dis - puted waters. The Vietnamese refer Owners of smaller rocks or reefs are namese coast (see WiC237). Hanoi to the East Sea, for instance, while granted smaller expanses of territo - says it is located within its exclusive it’s the West Philippine Sea for the rial water, but they don’t get exclu - zone, while Beijing insists that the Filipinos. sive economic rights beyond. rig is drilling in its own waters. There is also disagreement over Vietnam and Malaysia made One interpretation is that Bei - China’s use of historical arguments submissions to the UN body seek - jing is testing the resolve of its in its row with Japan over islands in ing confirmation of their own strongest adversary in Southeast the East China Sea, says Eric Posner, rights under the same rules five Asia. “If China can break off Viet - a professor at the University of years ago. Beijing’s response was nam they’ve won the South China Chicago Law School. Again, the Chi - swift, reiterating its historical case Sea,” an unnamed American offi - nese claim is based on references to and filing claims of its own within cial told Robert Kaplan in Asia’s events that took place centuries ago.

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