• China Warns Australia Not to Interfere in Rio ‘Spy’ Case BEIJING: China warned Australia Thursday not to interfere in the case of a Rio Tinto executive held on spy claims, after Australian Prime Minister Kevin Rudd took a tough line against Beijing.“We are firmly against anyone stirring up the case and interfering with the independent judicial authority of China. This is not in the interest of Australia,” foreign ministry spokesman Qin Gang told reporters.

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  • China Security Alert in Algeria After Al Qaeda Threa
    BEIJING: China issued a heightened security alert to its citizens in Algeria after al Qaeda reportedly vowed to avenge the deaths of Muslims killed in ethnic unrest in northwestern .
    “The Chinese Embassy in Algeria is specially calling on Chinese-funded organisations and personnel to raise their security awareness and strengthen security measures,” the embassy said in a statement on its website Tuesday.
    Such measures should be taken “in view of the situation following the violent criminal incident in Urumqi on July 5,” the statement said, without elaborating.
    Chinese citizens should immediately report to embassy personnel any “emergency matter” that may arise in Algeria, it said.
    According to a report by the London-based risk analysis firm Stirling Assynt, an Algerian al Qaeda affiliate has vowed to avenge the deaths of Muslims killed in Xinjiang by targeting Chinese workers in northwest Africa.
    Hundreds of thousands of Chinese work in the Middle East and North Africa, including 50,000 in Algeria, the report said.
    Chinese authorities have said unrest and riots in Xinjiang’s capital Urumqi on July 5 left 184 people dead — most of whom were Han, China’s dominant ethnic group — and more than 1,600 injured.
    Ethnic Muslim Uighurs, many of whom have chafed under China’s 60-year rule in Xinjiang, have accused Chinese forces of opening fire on peaceful protests, and say the number of people killed is far higher than the official tally.
    On Tuesday, the foreign ministry said it would take all necessary measures to protect its overseas interests following the report.
    “We will keep a close eye on developments and make joint efforts with relevant countries to take all necessary measures to ensure the safety of overseas Chinese institutions and people,” foreign ministry spokesman Qin Gang told reporters.

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  • China’s Police Chief Urges Stout efforts Against Ethnic Separatists
    URUMQI: China’s top police officer urged here Monday people from all ethnic groups and officials at all levels in to stand stoutly against ethnic separatists and put more efforts in ensuring the stability of the region.Meng Jianzhu, state councilor and public security minister, made the remarks in Urumqi, capital of northwest, where a riot on July 5 caused at least 184 deaths and injured 1,680 others.
    Meng expressed his appreciations for the hard work of all the police teams that were dispatched here from other parts of the country during a meeting with police representatives.
    “You must have a clear notion for the current complicated situation in Urumqi… Now everything is going better, but those ethnic separatists won’t give up easily and may continue their sabotage,” said Meng to the police officers.
    Meng urged local police teams to “stay on high alert” and do their utmost to prevent further conflicts while at the same time protecting themselves.

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  • Mosques Bans in China’s Urumqi BEIJING: The normally bustling mosques of China’s Urumqi city were ordered shut on the main Muslim day of prayer on Friday with police out in force to prevent new outbreaks of deadly ethnic unrest.Uighur Muslims said they had been directed to pray at home, as armed forces saturated the streets of the northwest Xinjiang region’s capital five days after clashes that authorities said left 156 people dead.
    “The government said there would be no Friday prayers,” said a Uighur man named Tursun outside the Hantagri mosque, one of the oldest in the capital, as about 100 policemen carrying machine guns and batons stood guard nearby.
    Eight million Uighurs have long complained about religious, political and economic repression under Chinese rule, and this deep-set anger spilled out on Sunday in protests that quickly turned violent.
    The Chinese government said 156 people were killed and more than 1,000 others were injured, as Uighur Muslims attacked people from China’s dominant Han ethnic group.

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  • Chinese president confronts violence in Xinjiang China's president has gone home from Italy’s G8 summit to try to sort out ethnic tensions in Xinjiang province. A Foreign Ministry statement said President Hu Jintao had cut short his trip to Italy to immediately go back to Beijing. It is not known if he will also travel to Urumqi, which about four hours by air from Beijing. Hundreds of Muslim Uighurs wielding makeshift weapons have once again engaged with police in Urumqi. The Uighurs, armed with sticks and meat cleavers, have been protesting in an area that stood between them and a Han Chinese populated area. On Sunday, running battles took place in the streets involving Han Chinese and minority Muslim Uighurs. The massive riot saw the deaths of 156 people. A heavy police and paramilitary presence has since been present with helicopters flying overhead. While authorities have blamed Uighurs for Sunday's unrest, many Han Chinese have also taken to the streets with shovels, meat cleavers and other makeshift weapons.

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  • China holds Rio exec as spy; iron ore deal said done
    BEIJING/PERTH (Reuters) – Rio Tinto Ltd's top iron ore negotiator is being held by Chinese authorities on suspicion of espionage and stealing state secrets, Australia's foreign minister said on Wednesday.
    The details about the detention of Stern Hu, as well as three other Rio employees, emerged just as a Shanghai paper reported Chinese steel mills have finally given in on annual iron ore prices, agreeing the same 33 percent cut other Asian steelmakers set earlier, but for six months instead of a year.
    It was unclear whether there was any relationship between the two events, but the detention follows a period of increasingly tense relations between the two vast trading partners, with iron ore price negotiations going down to the wire and Rio snubbing a planned $19.5 billion investment by Chinalco last month.
    Australian Foreign Minister Stephen Smith said Hu had been detained on suspicion of espionage and stealing state secrets, adding there was no evidence for drawing any link between his detention and any commercial matters concerning Rio such as the collapsed Rio/Chinalco deal.
    Smith also said he was very surprised by the detention and reasons for it.
    IRON ORE DEAL SAID
    Separately, the China Business News reported on Wednesday that Chinese mills had agreed to new iron ore prices for six months instead of the usual one-year deal, and had already begun negotiating on the next six-month phase.
    The deal, which could not be immediately confirmed, would conclude some nine months of tense negotiations that threatened to scupper the decades-old annual pricing ritual and would frustrate China's efforts to wield more clout on global commodity markets, even where it is the dominant buyer, such as iron ore.
    Several Chinese steel officials Reuters contacted on Wednesday said they were unaware of any settlement, though two sources not directly involved in the discussions said they had heard of a possible agreement, but could not confirm it.
    "All news should be subject to the statement from CISA and Baosteel. I have nothing to say about the news," Chen Xianwen, head of the market research department at the China Iron and Steel Association industry body, told Reuters.
    The Shanghai-based newspaper, backed by a local government agency, said China had agreed to pay $0.97 per dry metric tonne unit for Pilbara blend fines and $1.12 per dmtu for Pilbara Blend lump, but only for April through October. It said negotiations were already underway for the following period.
    But the newspaper said its sources could not say which of the big iron ore suppliers had signed the deal.
    A 33 percent cut would be in line with what analysts have been expecting as Rio Tinto showed no inclination to relax its "take it or leave it" stance on the initial deal, and an economic recovery lifted spot market prices above new contract levels, leaving China with little leverage.
    "It's a report but it is certainly the deal that we expect to be done. It always seemed likely that the outcome would be no change from Japanese settlement," said Mark Pervan, a senior commodities analyst at ANZ.
    "The mills have started to pre-empt this move; Baosteel kept its (steel) prices on hold for its main products so they were obviously preparing for this outcome."
    (Reporting by Tom Miles, Alfred Cang, David Stanway, Nick Trevethan, Rob Taylor, Denny Thomas and Mark Bendeich; Writing by Miyoung Kim; Editing by Clarence Fernandez and Jerry Norton)

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  • Key issues: Financial regulation


    The UK government is set to announce its plans to reform the financial system to prevent future crises.
    New powers will be proposed to curb bank lending and prevent asset bubbles, such as the housing boom undermining the real economy.
    The aim, according to Chancellor Alistair Darling, is a "significant toughening up of the regulatory system" in order to "learn the lesson of what went wrong... and make sure we reduce those risks".
    But critics say many of the proposals are still too vague, and the plans lack teeth. The government says it will need to consult the City and international regulators before moving forward on some proposals - therefore delaying their implementation until after the next election.


    KEY PROPOSALS: WHO WILL BE REGULATED

    There will be broad power to regulate any financial institution that poses a "systemic" threat to the financial system.
    "If an activity looks like a bank and sounds like a bank, we regulate it like a bank," said Lord Turner, the head of the Financial Services Authority.
    So investment houses as well as commercial banks will be regulated.
    And the Treasury is suggesting that banks which pose a bigger risk to the financial system as a whole, because of their size or inter-connections with other banks, will be regulated more heavily.
    Other off-balance sheet activities which banks used to hide their risky lending, such as structured investment vehicles, will be brought under regulation.
    The government will also assert its right to examine the books of hedge funds and private equity funds if they pose big risks to the system.
    But it is resisting EU proposals for even tighter hedge fund regulation that it says would be anti-competitive.
    The government says that regulation will have to be agreed at a global level, to avoid firms migrating to "softer" jurisdictions.
    KEY PROPOSALS: WHO WILL BE THE REGULATORS
    The White Paper is likely to endorse the current system of "tripartite regulation" where responsibility in a financial crisis is shared between the Bank of England, the Financial Services Authority, and the Treasury.
    However, the Bank, which has been given the legal mandate for maintaining financial stability, argues that it needs more powers beyond raising interest rates to carry out its mandate.
    Bank Governor Mervyn King has said that without such powers, his role is merely to "preach sermons".
    The FSA, which currently has the power to declare individual banks insolvent and trigger a government takeover, says it is more important to resolve how banks are regulated than by whom.
    One possibility might be to set up a special committee, including both the Bank and the FSA, to look at issues of systemic risk and regulation.
    However, if the Conservatives win the next election, they have pledged to give the Bank of England a lead role in financial regulation.
    KEY PROPOSALS: WHAT NEW POWERS THEY WILL HAVE
    The key issue in the White Paper will be how to implement the new objective of "macro-prudential" regulation, which aims to ensure that the regulators look at the whole financial system, not just the state of individual banks.
    The government will tell the FSA to put in place tougher standards for big banks - so that they have to put aside more of their funds for a rainy day - and also hold more in cash equivalents, to prevent a bank run.
    There will be discussion of other ways of regulating credit creation, from the restriction on the size of consumer mortgage loans (or a loan-to-value limit) or a higher tax on incremental bank lending when there was a risk of overheating, but these would be unlikely to be implemented before the next General Election.
    The idea is to find a way to identify and limit "asset bubbles" such as the housing boom, without causing too much damage to the wider economy.
    The Bank of England has urged caution in deciding too quickly what are the right instruments.
    Mervyn King has said that "we are a long way from identifying precise regulatory instruments that would improve the functioning of markets".
    Many of the new regulatory powers would also need to be discussed among international regulators.
    KEY PROPOSALS: RESTRICTING THE SIZE OF BANKS
    One key issue is whether banks should be allowed to grow so big that they pose a risk to the global financial system.
    Bank of England governor Mervyn King has said: "If a bank is too big to fail, it is too big."
    But although the crisis has produced a wave of consolidations within banking, it could prove legally and economically difficult to unravel bank mergers.
    One possibility would be to tax big banks more heavily, perhaps with some form of windfall tax to cut their profits, in good times.
    Another idea would be a return to the US-style separation of investment banking and retail banking (as in the Glass-Steagall Act, which was repealed in 1999).
    KEY PROPOSALS: LIMITING EXECUTIVE PAY
    The Chancellor is keen that the banks get the message that excessive risk-taking should be a thing of the past.
    The concern has been that the system of high rewards for short-term profits encouraged bank bosses to lend too much.
    So the White Paper is likely to give powers to the FSA to impose higher capital requirements on banks whose pay structures it believes encourages too much risk-taking.
    Such higher requirements would reduce profits and presumably encourage shareholders to revolt.
    There will also be talk of strengthening the role of the shareholders and independent board directors in determining pay.
    A new code of conduct for boards is likely to be the centrepiece of proposals next week from Sir David Walker in his review of banking management.

    KEY PROPOSALS: MORE CONSUMER PROTECTION

    The Treasury will sketch out its plan for new rights for consumers in order to rebuild confidence in the financial system.
    These could include "risk alerts" for financial products such as mortgages and pensions, similar to the health warnings on food and tobacco.
    The government will also be pressing the private sector to provide more financial education and advice for consumers as they take more responsibility for their own financial affairs.
    And it may call for tougher controls on overdraft charges levied on small businesses.

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  • China riots force Hu to abandon G-8 summit Government floods Xinjiang with security forces after ethnic clashes kill 156
    URUMQI, China - China's president cut short a G-8 summit trip to rush home Wednesday after ethnic tensions soared in Xinjiang territory, and the government flooded the area with security forces in a bid to quell emotions in the wake of a massive riot that left 156 dead.
    Two helicopters dropped leaflets appealing for calm among the Xinjiang capital's 2.3 million residents a day after running battles in the streets involving Han Chinese and minority Muslim Uighurs waving bricks, steel pipes and cleavers.
    A Foreign Ministry statement said "given the current situation in Xinjiang," President Hu Jintao cut short a trip to Italy for a Group of Eight meeting later Wednesday to return home. It was not known if he would travel to Urumqi, about four hours by air west of Beijing.

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