Thrill-Seeking Chinese Tourists Rush To Visit North Korea "Before The Regime Collapses"

While nearly two-thirds of Americans view North Korea as a “serious threat” and most would rather vacation literally anywhere else following the death of college student Otto Warmbier, Chinese adventure-seekers are visiting the North in ever-greater numbers, according to Reuters. The wave of tourism has been inspired by the fear that the latest escalation between Pyongyang and Washington might lead to the toppling of the Kim regime, which has successfully kept the forces of modernization at bay for decades, offering tourists a rare opportunity to catch a glimpse into the past that some say reminds them of a "young" China.

North Korea has become a favorite destination among wealthier, more adventurous Chinese travelers. Another tour operator who targets the affluent said he’s been fielding more questions about whether it’s safe to visit the North, Reuters reported.

"But those that inquire often already have their heart set on going," the operator, who declined to be named, told Reuters. "The idea of a bit of danger adds to the thrill and mystery of North Korea."

While the looming threat of nuclear annihilation is keeping some tourists at bay, more daring travelers say they are trying to visit the North before regime change brings the country into the 21st century, according to one tour guide.

"There have been quite a few tourists in my groups who say they want to see North Korea in its reclusive state while they can," he said.

"It won"t be the same if the regime collapses."

China stopped publishing national data about tourism to North Korea in 2012. But regional data show that more than 580,000 Chinese from the province of Dandong crossed the border into North Korea during the second half of 2016, more than the double the 237,000 Chinese who visited the country during 2012.

“China"s tourism authority has not published a breakdown of the total number of Chinese visitors to North Korea since 2012, when it said 237,000 made the trip.

But the number traveling just from Dandong spiked to 580,000 in the second half of 2016 alone, according to the state-run China News Service. The report said 85 percent of Chinese tourist visits to North Korea originated from Dandong.

That"s still only a fraction of the 8 million Chinese who visited South Korea in 2016.”

According to Reuters, tourists can take ferries or charter speedboats down the Yalu River – the border between the North and China – to catch a glimpse of North Korea villages and the heavily armed guards who patrol the border.

Other fun activities include paying respects to a statue of Kim il-Sung.

“A flyer for the one-day tour to Sinijiu tout a trip to the city’s central plaza, where you can pay respects to a bronze statue of North Korea"s founding president Kim il-Sung, as well as visits to a cosmetics factory, a revolutionary history museum, art history museum and a cultural park.

"You can feast on the North Korean specialty food by warm and hospitable North Koreans," it says.

As we reported last month, trade between China and North Korea expanded by 10% during the first half of the year, as have the number of border crossings. Meanwhile, traffic, especially on lower-end group tours, has grown steadily to one of the world"s most isolated states over the past few years, despite North Korea"s persistent nuclear and missile tests, which have elicited increasingly tight U.N. sanctions.

Few of the Chinese who spoke to Reuters were concerned about the North’s missile tests, or the economic sanctions imposed by the UN. Most said they saw the opportunity to visit a “piece of history” as too attractive to pass up.

“Undeterred by escalating tensions between Pyongyang and Washington rattling nerves globally, a steady stream of tourists from China each morning passes through the immigration checkpoint at the border trading hub of Dandong.

Greeting them on the North Korean side are dozens of tour buses, collecting them for itineraries ranging from a day in neighboring Sinijiu to a week visiting North Korea"s main cities, including the capital Pyongyang.

 "We"re curious. We want to see how they live," Xu Juan said on Thursday before crossing the Yalu River, which marks the border between the two countries. Xu was traveling with friends and family from Hangzhou, in eastern China.

"I just want the sense of nostalgia, to see a country that is poor, like (China was) when I was young," said a man in his early 50s, from Jilin province, declining to give his name.”

If the Chinese government has its druthers, the North’s status as a living wax museum likely won’t change any time soon: According to an article in the Global Post, the Communist Party has vowed to step in if the US or South Korea tries to topple the Kim regime.

Though no official US records are available, it’s believed that hundreds of adventure-seeking US tourists would visit North Korea every year. Typically, they would arrange tours through Switzerland, or sign on with a Chinese tour company based near the border. However, relations between the two countries have deteriorated to such a degree that any US tourist crazy enough to visit the North should get it over with soon: The State Department has banned US passport holders from traveling to the North after Sept. 1.

For any American hoping to visit a foreign country ruled by a hostile government, we hear Eritrea is beautiful in the fall.
 

"Time Is Running Out" - China Is Planning For A Crisis Along North Korean Border

Despite Chinese officials reassurance that "military means shouldn’t be an option," WSJ reports that China has been bolstering defenses along its 880-mile frontier with North Korea and realigning forces in surrounding regions to prepare for a potential crisis across their border, including the possibility of a U.S. military strike.

While all eyes in America are once again distracted by "Russia"-related narratives and the dismal GOP efforts to replace, repeal, re-who-knows-what Obamacare, the threat of North Korea has not gone away... and neither has China"s preparations. As President Trump stepped up the rhetoric, pressuring China to do more to "solve" the North Korean problem, and threatening military action to halt Kim"s nuclear weapons program ambitions, it is clear that China has used this crisis to not just prepare for potential problems with North Korea but to reinforce military forces elsewhere.

The Journal writes that a review of official military and government websites and interviews with experts who have studied the preparations show that Beijing has implemented many of the changes in recent months after initiating them last year.

Recent measures include establishing a new border defense brigade, 24-hour video surveillance of the mountainous frontier backed by aerial drones, and bunkers to protect against nuclear and chemical blasts, according to the websites.

China’s military has also merged, moved and modernized other units in border regions and released details of recent drills there with special forces, airborne troops and other units that experts say could be sent into North Korea in a crisis.

They include a live-fire drill in June by helicopter gunships and one in July by an armored infantry unit recently transferred from eastern China and equipped with new weaponry.

China’s Defense Ministry didn’t respond directly when asked if the recent changes were connected to North Korea, saying only in a written statement that its forces “maintain a normal state of combat readiness and training” on the border.

While Chinese authorities have been preparing for North Korean contingencies - including economic collapse, nuclear contamination, or military conflict - according to U.S. and Chinese experts who have studied Beijing’s planning, perhaps more intriguing, as Mark Cozad, a former senior U.S. defense intelligence official for East Asia, now at the Rand Corp, explains..

China’s contingency preparations “go well beyond just seizing a buffer zone in the North and border security."

In other words, China is not letting a good crisis go to waste. Coad goes to note:

“Once you start talking about efforts from outside powers, in particular the United States and South Korea, to stabilize the North, to seize nuclear weapons or WMD, in those cases then I think you’re starting to look at a much more robust Chinese response."

“If you’re going to make me place bets on where I think the U.S. and China would first get into a conflict, it’s not Taiwan, the South China Sea or the East China Sea: I think it’s the Korean Peninsula.”

As The Journal further notes, Beijing also appears to be enhancing its capability to seize North Korean nuclear sites and occupy a swath of the country’s northern territory if U.S. or South Korean forces start to advance toward the Chinese border, according to those people. That, they say, would require a much larger Chinese operation than just sealing border, with special forces and airborne troops likely entering first to secure nuclear sites, followed by armored ground forces with air cover, pushing deep into North Korea. It could also bring Chinese and U.S. forces face to face on the peninsula for the first time since the war there ended in 1953 with an armistice - an added complication for the Trump administration as it weighs options for dealing with North Korea.

China has long worried that economic collapse in North Korea could cause a refugee crisis, bring U.S. forces to its borders, and create a united, democratic and pro-American Korea. But as WSJ"s Ben Kesling  reports, China’s fears of a U.S. military intervention have risen since January as Pyongyang has test-fired several missiles, including one capable of reaching Alaska. In a notably outspoken article written in May, retired Maj. Gen. Wang Haiyun, a former military attaché to Moscow now attached to several Chinese think tanks, made his view clear (while carefully noting he did not speak for the PLA)...

China should “draw a red line” for the U.S.: If it attacked North Korea without Chinese approval, Beijing would have to intervene militarily.

“Time is running out,... We can’t let the flames of war burn into China.”

China should demand that any U.S. military attack result in no nuclear contamination, no U.S. occupation of areas north of the current “demarcation line” between North and South, and no regime hostile to China established in the North, his article said.

“If war breaks out, China should without hesitation occupy northern parts of North Korea, take control of North Korean nuclear facilities, and demarcate safe areas to stop a wave of refugees and disbanded soldiers entering China’s northeast,” it said.

Beijing’s interests “now clearly extend beyond the refugee issue” to encompass nuclear safety and the peninsula’s long-term future, said Oriana Skylar Mastro, an assistant professor at Georgetown University who has studied China’s planning for a North Korean crisis.

“China’s leaders need to make sure that whatever happens with (North Korea), the result supports China’s regional power aspirations and does not help the United States extend or prolong its influence,” Ms. Mastro said.

In other words, China may appear to be preparing for a North Korean crisis... but is really building its capabilities should President Trump decide the time is right for more international distractions.

One Belt, One Road, And One Debt Hangover

Autohred by Jim Rickards via The Daily Reckoning,

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors.

China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run.

Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes.

CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe.

While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

The second and third initiatives are the New Development Bank, NDB, created by the BRICS in 2014, and the Asia Infrastructure Investment Bank, AIIB, created by China in 2016. These have participation from 35 countries in the Asia/Australia region, and 18 other countries from outside that region, mostly in Europe. The United States refused to join.

Although NDB and AIIB are both multilateral institutions, China was the principal sponsor and a major source of funding. It provided about $10 billion to NDB and $30 billion to AIIB.

These banks will expand their lending capacity by issuing notes and will fund infrastructure projects in competition with the World Bank and its regional development banks — without interference from the U.S. on priorities.

China, One Belt, One Road

By far, the most ambitious outbound investment effort by China is the “One Belt, One Road” initiative. The “belt” refers to overland routes from central China to Europe. The “road” refers to maritime routes from eastern China to Southeast Asia, Africa, and Europe.

It is a recreation of the original Silk Road caravan route of the thirteenth century, and China’s glory days as a naval power led by Admiral Zheng He in the Ming Dynasty in the early fifteenth century.

The scope of the One Belt, One Road initiative is immense. It will include port facilities, railroads, highways, telecommunications channels, airports, transshipment facilities, renewable energy sources, and more strung out from Xian to Rotterdam, and from Guangzhou to Venice.

The graphic on the previous page shows the main corridors of the belt and road, but there are many ranches and capillaries not shown in detail. Of these offshoots, one of the most critical is a transportation link from Kashgar in western China to the port of Gwadar on the Arabian Sea in Pakistan. This route passes through disputed territory in Kashmir that could lead to a war with China and Pakistan on one side, and India on the other.

Another critical belt link runs from Kunming in southern China through Myanmar, Thailand, and Malaysia before terminating in Singapore.

Main routes in China’s “One Belt, One Road” Initiative are shown above. The overland belt is in green and the maritime road is in blue.

At a global leaders’ summit in Beijing on May 14–15, 2017, President Xi Jinping of China laid out his vision for the One Belt, One Road and committed $55 billion of lending capacity.

Vladimir Putin, president of Russia, was one of many foreign leaders present. The U.S. sent a low level delegation, probably including CIA assets, attempting to get a read on Putin, Xi and the North Korean delegation.

The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current.

As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure.

In the end, China is attempting to create a geopolitical sphere of influence of even greater scope than the Japanese Empire prior to World War II, called by Japan “The Greater East Asian Co-Prosperity Sphere.”

As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong.

China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

Viral Video Shows Chinese Warehouse Where Humans Were Replaced By Robots

Even as talk about robots taking over low-(and not so low) skilled jobs has been all the rage in recent months, few Americans have been faced with the imminent threat of being displaced by Johnny 5. Not so in China, where a viral clip released by the local TV broadcaster shows an army of little orange robots sorting out packages in a warehouse in eastern China, the latest example of how machines are increasingly taking over menial factory work in the world"s most populous nation.

The People’s Daily shared the behind-the-scenes footage of the self-charging robot army in a sorting centre of Chinese delivery powerhouse Shentong (STO) Express. The video, also released by the SCMP, shows hundreds of round Hikvision robots,  each roughly the size of a seat cushion,  swivelling across the floor of the large warehouse in Hangzhou. A worker is seen feeding each robot with a package before the machines carry the parcels away to different areas around the sorting centre, then flipping their lids to deposit them into chutes beneath the floor.

The robots identified the destination of each package by scanning a code on the parcel, thus minimising sorting mistakes, according to the video.

The army of robots can sort up to 200,000 packages per day and are self-charging, so they can work 24/7, although they are presently used only for about six or seven hours each time from 6pm according to a STO Express spokesman.

An STO Express spokesman told the South China Morning Post on Monday that the robots had helped the company save half the costs it typically required to use human workers. They also improved efficiency by around 30% and maximised sorting accuracy, he said.

“We use these robots in two of our centres in Hangzhou right now,” the spokesman said. “We want to start using these across the country, especially in our bigger centres.”

Manufacturers across China have been increasingly replacing human workers with machines, for one simple reason: Chinese wage growth is soaring with average wages in China"s manufacturing sector rising above those in countries such as Brazil and Mexico.

Meanwhile, the output of industrial robots in the country grew 30.4% last year. In the country’s latest five-year plan, the central government set a target aiming for annual production of these robots to reach 100,000 by 2020.

Elsewhere, Apple’s supplier Foxconn last year replaced 60,000 factory workers with robots. The Taiwanese smartphone maker has several factories across China, with the bulk of the hundreds of thousands of employees set to be rep[laced by robots.

Chinese Gold Miner Claims Discovery Of Largest Ever Gold Mine

Shandong Gold Group, China’s second biggest gold producer by output, announced on Tuesday that it has discovered deposits in eastern China containing an estimated 380 tons of gold reserves, which would represent the nation’s largest ever gold deposit.

According to a Tuesday statement that cited the company on sdchina.com, the Xiling mine in Shandong province told local authorities it had found 382.58 tons of gold reserves and that the volume could reach more than 550 tons once exploration is completed in two years. According to local media reports, the Xiling gold seam in eastern China is more than 2,000 meters long and 67 meters wide; operating at full capacity, the mine would have a life of 40 years, according to the statement.

The mine is located in the Laizhou-Zhaoyuan region of northwest Jiaodong Peninsula in eastern China"s Shandong; the region has the largest gold deposits in the country. The mine is estimated to have the equivalent of 20% of the country’s 1,843 tons of gold reserves.

China had the fifth largest gold reserves in the world after the United States, Germany, Italy, and France. In July 2015, China ended six years of mystery over how much gold it has, revealing a 57% jump in reserves since 2009 when it last updated the figures. In November that year, China said it discovered another vast deposit of gold beneath the seabed of the East China Sea. At the time, the Chinese media claimed the deposit situated at a depth of 2,000 meters held 470.47 tons of gold.

As Bloomberg adds, Shandong Gold Mining saw its shares rise as much as 2.8% in Shanghai. The listed unit said Monday that net profit doubled to 1.29 billion yuan ($187 million) last year from a year ago as gold prices rebounded.

Chinese gold companies have been stepping up their search for domestic deposits and eyeing acquisitions as the nation seeks to increase reserves by 3,000 tons to as much as 14,000 tons by 2020, the Ministry of Industry and Information Technology said last month. That amount of holdings would propel China into first place globally for official gold reserves.

Chinese Home Prices "Unexpectedly" Rebound; Government Loses Interest In "Curbs"

On Friday, we summarized research reports from Deutsche Bank and Bank of America, which came to the same conclusion: the fate of the global economic rebound may be in the hands of the Chinese housing bubble, which through price appreciation has unleashed wealth effect equivalent to twice the annual disposable income of China.

 

We concluded by saying that those who are looking for key inflection points to determine the future trajectory of the global economy, in addition to the global (read Chinese) credit impulse, we suggest keeping a close eye on what happens with Chinese housing, which has become a - if not the - top variable for the fate of the both the great inflation-deflation debate, as well as the overall fate of the world economy

The key variable is "how Beijing manages to deflate the existing bubble: if it fails to be aggressive enough, home prices will once again spike, leading to an even more precarious bubble. If it is too aggressive, a hard landing is in store, coupled with what a crash in the country"s financial system, where the bulk of the banks" $35 trillion in assets is collateralized by housing values. While such a crash may not necessarily lead to a catastrophe for China, where the government ultimately backstops all the banks, the deflationary wave spread around the globe from a housing crash would be dire."

One answer was revealed just hours later, when on Saturday China"s NBS revealed that following two months of broad but shallow declines, in February there was an unexpected rebound in Chinese home prices, which last month rose in more cities despite increased "restrictions" on property transactions by local authorities. As Bloomberg reported, new home prices, excluding subsidized housing, gained in February in 56 out of 70 cities tracked by the government, compared with 45 in January, the National Bureau of Statistics said Saturday. Furthermore, prices climbed in 67 out of 70 cities from a year earlier, compared with 66 in January. 

As Goldman calculates, prices in the primary market increased 0.4% month-over-month after seasonal adjustment (weighted by population) in February, the same as the growth rate in January.

And while on a year-over-year, population-weighted basis, housing prices in the 70 cities were up 12.0%, slightly lower than 12.4% yoy in January, the nuance was once again among the various city ties. On month-over-month basis, house price growth diverged among different city tiers. Home price inflation decelerated in tier-1 cities, but home price inflation in tier 2/3/4 cities was steady or accelerated, which goes back to the core issue discussed last Friday: for all the talk about moderating home prices, China is first and foremost focused on preserving the wealth effect, which a sharp drop in home prices would crush.

February average price growth was 0.2% month-over-month after seasonal adjustment in tier-1 cities, vs. 0.3% in January. Average property price inflation in tier 2/3/4 cities was 0.6%/0.4%/0.5% month-over-month sa in February, vs 0.5%/0.4%/0.3% in January.  Indeed, as Bloomberg Intellgience wrote earlier in March, braking measures to counteract soaring home prices in eastern China’s largest cities appear to be diverting demand to smaller ones. Saturday"s data confirms this.

* * *

The unexpected pick up in prices takes place as various Tier 1 cities are taking further measures to cool the market: among them, Beijing on Friday raised down-payment requirements for second homes 10 percentage points to between 60 percent and 80 percent. The rule also applied to buyers who don’t currently own a home but previously had a mortgage with the same down-payment threshold, making it harder for someone to sell their house to upgrade to a bigger or more expensive property.

Other cities taking additional measures were the southern export hub of Guangzhou, coastal Qingdao and Nanjing in the southeast have also tightened measures. Changsha, the capital of inland Hunan province, joined the ranks on Saturday after the home price data release.

“The government intends to pause the surging home prices, and let them walk steadily up later,” said Xia Dan, a Shanghai-based analyst at Bank of Communications Co., adding that if curbs on demand are lifted, prices will rise further. “The government doesn’t want the prices to run all the time and ferment bubbles.”

As Bloomberg notes, China’s biggest cities have seen a round of home price surges in the past year. In Beijing, new home prices rose 24 percent in February from a year earlier, while Shanghai saw a 25 percent gain. Shenzhen prices increased 14 percent in the same period.

“Beijing’s tightening will have a short-term effect to stabilize the market, but the power of policy has become increasingly weaker,” Zhang Hongwei, a research director at Shanghai-based Tospur Real Estate Consulting Co., said Friday, adding more local tightening may follow.

Or maybe not, because one may ask: is the rebound really unexpected. Perhaps not: as the WSJ reported on Sunday, "this year it seemed China was finally going to make headway on an idea familiar to U.S. homeowners: a property tax.

For many Chinese families, owning a home is one of few options to build wealth, driving buying frenzies as people rush to purchase before prices soar. Imposing costs on homeowners through a property tax is seen as a way to tame such speculation, while also helping fund local governments.

Lu Kehua, China’s vice housing minister, last month said the government needed to “speed up” a property-tax law. Economists and academics have long recommended the move.

Yet the annual National People’s Congress came and went this month with no discussion of the topic. An NPC spokeswoman said a property tax wouldn’t be on the legislative agenda for the rest of the year.

In short, China evaluted the risk of a potential housing bubble burst, and deciding that - at least for the time being - it is not worth the threat of losing a third of Chinese GDP in "wealth effect", got cold feet. Expect the recent dip in home prices to promptly stabilize, with gains in the short-term more likely that not.

US Begins Deployment Of Controversial THAAD Anti-Missile System To South Korea

Well that escalated quickly. Just a day after North Korea"s test firing of 4 missiles towards US bases in Japan, and hours after North Korea warned the world was "on the brink of nuclear war" due to US-South Korea "maneuvers," CNN reports the first pieces of the controversial US-built missile defense system (designed to mitigate the threat of North Korean missiles) arrived at the Osan Air Base in South Korea Monday night, according to the US military.

The decision in January to deploy the Terminal High Altitude Area Defense (THAAD) missile system, had angered both Russian and Chinese officials:

"We think the US-South Korean decision to deploy the THAAD missile defense system has seriously threatened China"s security interest. For the region, it will also break the strategic balance. So it"s completely understandable to see countries in the region firmly oppose this decision," Chinese Foreign Ministry spokesman Lu Kang said. "China and other countries have to address our own legitimate security concerns and take necessary measures to safeguard our security interest."

"Deployment of US missile defense systems in South Korea clearly goes beyond the tasks of deterring "the North Korean threat,"" Russian Deputy Defense Minister Anatoly Antonov said in October, according to Russian state-run Tass news agency.

And now - dramatically faster than expected - the deployment has begun.

Some equipments including 2 launch pads for U.S. missile defense system known as Thaad arrived in South Korea on Monday and will continue to be brought in, Yonhap News says, citing unidentified South Korean military official.

"Continued provocative actions by North Korea, to include yesterday"s launch of multiple missiles, only confirm the prudence of our alliance decision last year to deploy THAAD to South Korea," Adm. Harry Harris, commander, US Pacific Command, said in a news release.

US Secretary of Defense James Mattis and South Korean Defense Secretary Han Min-koo spoke over the phone last week and agreed that THAAD should be deployed "ASAP."

White House Press Secretary Sean Spicer signaled the deployment Monday when he told reporters that the United States is "taking steps to enhance our ability to defend against North Korea"s ballistic missiles, such as through the deployment of a THAAD battery to South Korea." U.S. defense officials confirmed to NBC News on Monday night that that meant delivery was already under way — not that the United States was simply restating its previous promises to send the system to South Korea sometime in the future.

The US and its allies in the region, notably South Korea and Japan, tend to focus on THAAD"s defensive nature. They tout its value as a system to prevent a missile from hitting a target and killing people.

"This is purely a defensive measure that the alliance must take in light of the serious threat posed by North Korean missiles," Chris Bush, a spokesman for the US Forces in Korea said.

But Beijing and Moscow don"t see it that way.

"We do not have any doubts that US, with support of their allies, will continue to build up the potential of the Asia Pacific segment of their global missile system, which will inevitably lead to disruption of established strategic balances both in the Asia Pacific and beyond."

Interestingly, it"s not just Russian and Chinese officials that are against the US deployment of THAAD; South Korean presidential candidate Lee Jae-myung and mayor of Seongnam City commented:

"We have to realize clearly that THAAD cannot stop the nuclear missiles coming from the DPRK. How can the 48 missiles of THAAD stop the over 1,000 missiles from the DPRK? The north of Chungcheongbuk-do and the capital area jointly account for more than half of our population and most of our territory. THAAD cannot even cover these areas, but merely increases the regional military tensions. To be honest, deploying THAAD will hurt both us and China. No one will gain anything from it. The starting point of THAAD is wrong, so we have to reconsider it completely. Otherwise, our future will be gloomy, chaotic and insecure."

Clearly the rush to get THAAD deployed counters any pre-emptive rejection by Lee. We are sure China"s response will be swift at this apparent "retaliation" by the US.

As Strategic Culture"s Nan Li previously noted, China is opposed to THAAD deployment for several reasons.

First, Chinese analysts believe that THAAD in South Korea is intended to intercept missiles launched, not from North Korea, but from China and Russia. THAAD has an operational range of 200 kilometers (km) and is designed to intercept missiles at altitudes between 40 and 180 km. Such altitudes, according to analysts from the People’s Liberation Army (PLA), match the “terminal phase” of the intermediate, long-range and even intercontinental ballistic missiles (ICBM), or those with ranges exceeding 3,500 km. PLA analysts also claim that they match the “mid-course phase” of medium-range missiles, or those with ranges between 1,000 and 3,500 km, including China’s DF-21 and DF-26 missiles. Because the direct threats to South Korea — including the Seoul area, where 40 percent of the South Korean population resides — are North Korea’s long-range artilleries and short-range ballistic missiles, THAAD, they believe, is clearly a mismatch against such threats.

Chinese analysts are particularly concerned about THAAD’s X-band radar. Even though it would be configured as a fire-control radar with a detection range of 600 km, it perhaps could be reconfigured as an early-warning radar, which allows a detection range exceeding 2,000 km. Such a range suggests that China’s missile activities on land and at sea in northern and eastern China may be mostly exposed. The radar allegedly can see the critical processes where warheads and decoys are released during China’s strategic missile tests. In times of war, it can undermine the reliability of China’s strategic deterrent because in comparison with Alaska-based radars, it is believed to be capable of acquiring more than ten minutes of early warning time against China’s strategic ballistic missiles. It can also differentiate real warheads from decoys. If integrated into the U.S. national missile defense network, this radar allegedly can increase the odds of success in intercepting Chinese missiles even at their “boost phase,” reducing further the reliability of China’s already small strategic deterrent and tilting the strategic balance in favor of the United States.

Moreover, Chinese analysts believe that the Korean Peninsula has historically been a nearby sphere critical to China’s security. They worry that by deploying THAAD, South Korea could share data with the United States and Japan on air traffic control, air defense, and early warning. This may help to integrate South Korea-based systems with U.S. and Japanese sensors and sea-based Aegis systems, with the goal of forming a trilateral strategic alliance to contain China at China’s door steps. Chinese analysts believe that North Korean nuclear tests were only an excuse used by the United States to deploy THAAD, the real U.S. intention being to drive a wedge between South Korea and China at a time when China-South Korea relations were improving substantially, as reflected in the countries’ booming bilateral trade and Park Geun-hye’s attendance at the Victory Day Parade in Beijing in September 2015. THAAD deployment would bring the United States and South Korea closer at the expense of China’s security. This could help the United States to stabilize U.S.-South Korea relations and prevent the possible loss of the U.S. military foothold on the Korean Peninsula.

Chinese analysts have proposed a wide range of countermeasures to retaliate against the THAAD deployment. They argue that to restore regional “strategic balance,” China should cooperate with Russia in developing strategic offensive weapons, particularly in developing “penetration” technologies that can defeat missile defense. Other proposed countermeasures include concealment and redeployment of China’s strategic capabilities to reduce their exposure to the THAAD radar, and accelerated development of China’s own missile defense systems. Other analysts argue for economic sanctions.

THAAD Is Coming To China's Doorstep (But Beijing Has A Plan To Push Back)

Submitted by Nan Li via Strategic-Culture.org,

After months of negotiation, the United States and South Korea announced on July 8 their decision to deploy the Terminal High-Altitude Area Defense (THAAD) missile defense system in South Korea. During a press briefing, China’s Defense Ministry spokesman Yang Yujun said that Beijing is “firmly opposed to the proposed THAAD deployment… and will take necessary measures to maintain national strategic security as well as regional equilibrium”.

Why Is China Opposed to THAAD Deployment?

Chinese analysts are particularly concerned about THAAD’s X-band radar. Even though it would be configured as a fire-control radar with a detection range of 600 km, it perhaps could be reconfigured as an early-warning radar, which allows a detection range exceeding 2,000 km. Such a range suggests that China’s missile activities on land and at sea in northern and eastern China may be mostly exposed. The radar allegedly can see the critical processes where warheads and decoys are released during China’s strategic missile tests. In times of war, it can undermine the reliability of China’s strategic deterrent because in comparison with Alaska-based radars, it is believed to be capable of acquiring more than ten minutes of early warning time against China’s strategic ballistic missiles. It can also differentiate real warheads from decoys. If integrated into the U.S. national missile defense network, this radar allegedly can increase the odds of success in intercepting Chinese missiles even at their “boost phase,” reducing further the reliability of China’s already small strategic deterrent and tilting the strategic balance in favor of the United States.

Moreover, Chinese analysts believe that the Korean Peninsula has historically been a nearby sphere critical to China’s security. They worry that by deploying THAAD, South Korea could share data with the United States and Japan on air traffic control, air defense, and early warning. This may help to integrate South Korea-based systems with U.S. and Japanese sensors and sea-based Aegis systems, with the goal of forming a trilateral strategic alliance to contain China at China’s door steps. Chinese analysts believe that North Korean nuclear tests were only an excuse used by the United States to deploy THAAD, the real U.S. intention being to drive a wedge between South Korea and China at a time when China-South Korea relations were improving substantially, as reflected in the countries’ booming bilateral trade and Park Geun-hye’s attendance at the Victory Day Parade in Beijing in September 2015. THAAD deployment would bring the United States and South Korea closer at the expense of China’s security. This could help the United States to stabilize U.S.-South Korea relations and prevent the possible loss of the U.S. military foothold on the Korean Peninsula.

What Countermeasures Might China Take?

Chinese analysts have proposed a wide range of countermeasures to retaliate against the THAAD deployment. They argue that it is time to integrate technologies into Chinese medium-range ballistic missiles that can reinforce their penetration capabilities (????), such as those that can enhance mid-course or terminal maneuverability of warheads to dodge intercepting missiles. These technologies and measures also include integrating decoys to mislead the intercepting missiles, hardening warheads, and building more missiles. They also propose electronic countermeasures to jam THAAD radar. Some believe that China’s flight-tested DF-ZF supersonic missile delivery vehicle, which allegedly can reach the speed of Mach 10, can “turn all missile defense systems obsolete in one night.” Some also argue that in times of war, China should “at the first moment” launch strikes to destroy THAAD. To elude South Korea-based THAAD, Chinese analysts propose to deploy China’s strategic nuclear submarines to the Pacific Ocean for routine patrol. Being highly mobile and more concealed than China’s land-based nuclear deterrent, these submarines can enhance the survivability of China’s sea-based nuclear force, thus enhancing the credibility of China’s second strike nuclear capabilities.

Chinese analysts argue that to restore regional “strategic balance,” China should cooperate with Russia in developing strategic offensive weapons, particularly in developing “penetration” technologies that can defeat missile defense. Other proposed countermeasures include concealment and redeployment of China’s strategic capabilities to reduce their exposure to the THAAD radar, and accelerated development of China’s own missile defense systems.

A Moderate View?

While a majority calls for sanctions, there also exists a minority view based on a more nuanced and moderate interpretation of the THAAD deployment. On the effectiveness of THAAD to intercept short-range missiles, this view agrees that a launched North Korean Scud missile targeting Seoul may fly lower than 40 km because of the short range. This missile cannot be intercepted by THAAD because such low altitudes do not match the interception altitudes of THAAD, even though it can be intercepted by South Korea’s Patriot PAC-2/3 interceptors. But if a Scud missile is fired to hit a South Korean target 300 km away, it would reach the maximum height of 80 km and then descend to 40 km in slightly more than a minute, which matches the interception altitudes of THAAD. For this school of thought, a major challenge for South Korea is how to acquire sufficient defenses against North Korean missiles, while at the same time not undermining China’s strategic security. The best option, according to these analysts, is for South Korea to replace the current AN/TPY-2 radar with the Israeli Green Pine radar, which has an effective search range of 500 km. Such a range can provide South Korea sufficient protection against North Korean missiles, while posing no threat to China’s strategic missiles.

A Critique

China’s security analysts have offered great insights into why China is opposed to THAAD deployment in South Korea, and what countermeasures China might take to “maintain national strategic security as well as regional equilibrium.” However, a few important issues may require closer scrutiny in order to gain a balanced understanding of THAAD deployment in South Korea.

As pointed out by Chinese analysts, it is probably true that the interception altitudes of THAAD match the “terminal phase” of longer-range Chinese ballistic missiles, or those with ranges exceeding 3,500 km, including China’s ICBMs. Of note, however, is that these Chinese missiles are not intended for targets in East Asia. If launched, they are unlikely to have their “descending” or “terminal phase” in this region. So they are less likely to be intercepted by South Korea-based THAAD.

South Korea-based THAAD is more likely intended to intercept China’s medium-range ballistic missiles, or those with ranges between 1,000 and 3,500 km, including China’s DF-21 and DF-26 missiles. This is because these missiles may aim at military targets in the Asia-Pacific region, including U.S. military bases in Japan and on Guam, and its aircraft carrier strike groups deployed in this region. But because North Korea is also developing and deploying medium-range ballistic missiles, it is reasonable to assume that THAAD is intended to intercept both North Korean and Chinese medium-range ballistic missiles.

As mentioned earlier by some Chinese analysts, THAAD can be effective in intercepting a North Korean short-range ballistic missile attempting to hit a South Korean target 300 km away, because its “terminal phase” matches the interception altitudes of THAAD. It is also known that the North Korean ballistic missile arsenal consists mainly of hundreds of modified Scud missiles with ranges between 300 and 700 km. Because these missiles can hit any South Korean target beyond the Seoul area (which is protected by Patriot PAC2/3 interceptors), the primary objective for deploying THAAD in South Korea is in all likelihood for defending against short-range ballistic missiles from North Korea.

Chinese analysts believe that the X-band radar can gain more than ten minutes of early warning time compared to Alaska-based radars against Chinese strategic missiles flying toward the United States, which undermines the reliability of China’s already small strategic deterrent. Assuming this radar can easily be converted to an early-warning radar, however, whatever extra time it can contribute to early warning against Chinese missiles may become less significant for two reasons. One is that the two Japan-based X-band radars can also see the flight paths of Chinese missiles early and provide somewhat similar extra early warning time. The other is that the U.S. ballistic missile early-warning systems based on constellations of satellites, either deployed or under development such as the Space-Based Infrared System, may also be capable of provide early warning time sufficient to marginalize the contribution of the South Korea-based X-band radar.