China Reform Monitor: No. 1116

July 16:

From April to June, China’s Central Military Commission sent inspection teams to investigate leading Party officials in Guangzhou and Chengdu military commands, but “the campaign is now expected to be widened” to cover “personnel selection and promotion, construction projects, real estate and equipment procurement,” the officialPLA Daily reports. At a meeting where anti-corruption inspection results were reviewed and future plans were set, Xu Qiliang, vice chairman of the Commission, called for more inspections of high-ranking military officials. “Be adept at spotting problems and make real efforts to punish, save, educate and mold people into shape,” Xu told disciplinary inspection officials.

July 17:

At risk of becoming the first borrower to default in China’s largest bond market, Huatong Road and Bridge Group blamed a continuing official investigation into its chief executive for its financial problems. Huatong’s chief executive, Wang Guorui, was dismissed from the Shanxi provincial Chinese People’s Political Consultative Conference on July 10. The company was uncertain whether it would be able to pay interest or principal on a one-year bond worth 400 million RMB, or about $64 million. This is the first time China’s interbank bond market – the primary platform for China’s institutional fixed-income investors, with 94 percent of the mainland’s bond issues – is threatened with a public default, and the first time a Chinese company has defaulted on both interest and principal for a bond, the New York Times reports.

July 21:

North Korea has indirectly criticized China’s new zero-tolerance policy against Pyongyang's possession of nuclear weapons. The North's powerful National Defense Commission said, “some backbone-lacking countries are blindly following the stinky bottom of the U.S., and struggling to embrace (South Korean President) Park Geun-hye.” The statement, which was carried by the official North Korean Central News Agency, came after President Xi Jinping held a summit meeting with Park this month in Seoul, where they agreed on the denuclearization of the Korean Peninsula. China also joined the United Nations Security Council in denouncing the North’s recent ballistic missile tests and suspended crude oil exports to North Korea in the first five months of this year. For its part, this year Pyongyang did not publish a celebratory message on the July 11 anniversary of the signing of the 1961 Sino-North Korean Mutual Aid and Cooperation Friendship Treaty, Yonhap reports.

July 22:

While in Venezuela on the first stop of his South American tour, which also includes Brazil, Argentina and Cuba, China’s president Xi Jinping and Venezuela’s president Nicolas Maduro signed 38 agreements worth $18 billion, including a $4 billion loan and $14 billion in financing for projects. Agreements include financing for producing oil, exploring mining reserves, expanding public transport, launching a Venezuelan satellite, and building cement, fertilizer, and other factories. Chinese loans are repaid with oil shipments that now amount to 524,000 bpd, the Venezuelanalysis reports. Opposition leader Henrique Capriles criticized the oil-for-cash agreements, arguing that they only benefit “those with connections.” “If we’re the country with the greatest oil reserves in the world, why do we have to indebt ourselves to China? Our debt with China is equivalent to twice our reserves.” Capriles argued that corrupt officials siphon off the cash from China’s loan deals so it is not invested as promised.

[Editor’s Note: Since 2001 Venezuela and China have signed 480 cooperation agreements and participated in 143 joint projects. From 2005 - 2012 China lent Venezuela $47 billion, accounting for 55 percent of Chinese credit to South American nations over that period. Last month Venezuela’s Vice President for the Economy, Rafael Ramirez, said only $17 billion remained outstanding. China is Venezuela's largest trading partner after the U.S., while Venezuela is China's fourth largest trading partner in the region, after Brazil, Mexico and Chile.]

July 23:

A political battle has erupted in the Sri Lankan parliament about the proposed construction of an aircraft maintenance facility in Trincomalee “to carry out maintenance work on Chinese built aircraft used by the Sri Lanka Air Force,” Sri Lanka’s the Islandreports. Opposition Leader Ranil Wickremesinghe told Parliament that the Chinese-built aircraft maintenance center “would be detrimental to India’s security interests.” In response, a Sri Lankan Military Spokesman said the facility would be built with Beijing’s assistance, but Sri Lankan Air Force personnel would handle repairs after they are trained by Chinese technicians. Currently Chinese aircraft operated in Sri Lanka are repaired in Pakistan.