Death toll from floods in China’s Henan province rises to 302

BEIJING (Reuters) -The death toll from last month’s floods in the central Chinese province of Henan rose to 302 as of Monday, officials said, triple the figure of 99 that was reported last week, with most of the fatalities reported in the provincial capital Zhengzhou.

In Zhengzhou, a city of 12 million that lies along the Yellow River, the death toll was 292, including 14 who perished when a subway line was flooded. In total, 39 people died in underground areas in Zhengzhou including garages and tunnels.

Over three days last month, 617.1 mm (24.3 inches) of rain fell in Zhengzhou, nearly equivalent to its annual average of 640.8 mm, causing widespread damage and disruption in a city that is a major transport and industrial hub.

Of the 50 people still missing in Henan province, 47 were from Zhengzhou, local officials told a briefing on Monday.

Direct economic losses in Henan reached 114.27 billion yuan ($18 billion), with more than 580,000 hectares of farmland affected.

China’s State Council said it will set up a team to investigate the disaster in Zhengzhou and will hold officials accountable if found to have derelicted their duty, the official Xinhua news agency reported.

($1 = 6.4592 Chinese yuan renminbi)

(Reporting by Beijing Newsroom and Tony MunroeEditing by Mark Heinrich and David Holmes)

China says Taliban expected to play ‘important’ Afghan peace role

KABUL (Reuters) -China told a visiting Taliban delegation on Wednesday it expected the insurgent group to play an important role in ending Afghanistan’s war and rebuilding the country, the Chinese foreign ministry said.

Nine Taliban representatives met Foreign Minister Wang Yi in the northern Chinese city of Tianjin on a two-day visit during which the peace process and security issues were discussed, a Taliban spokesperson said.

Wang said the Taliban is expected to “play an important role in the process of peaceful reconciliation and reconstruction in Afghanistan,” according to an account of the meeting from the foreign ministry.

He also said that he hoped the Taliban would crack down on the East Turkestan Islamic Movement as it was a “direct threat to China’s national security,” referring to a group China says is active in the Xinjiang region in China’s far west.

The visit was likely to further cement the insurgent group’s recognition on the international stage at a sensitive time even as violence increases in Afghanistan. The militants have a political office in Qatar where peace talks are taking place and this month sent representatives to Iran where they had meetings with an Afghan government delegation.

“Politics, economy and issues related to the security of both countries and the current situation of Afghanistan and the peace process were discussed in the meetings,” Taliban spokesperson Mohammed Naeem tweeted about the China visit.

Naeem added that the group, led by Taliban negotiator and deputy leader Mullah Baradar Akhund, was also meeting China’s special envoy for Afghanistan and that the trip took place after an invitation from Chinese authorities.

Asked about the Taliban visit, U.S. Secretary of State Antony Blinken said in New Delhi that it was a “positive thing” if Beijing was promoting a peaceful resolution to the war and “some kind of (Afghan) government … that’s truly representative and inclusive.”

“No one has an interest in a military takeover by the Taliban, the restoration of an Islamic emirate,” he said in an interview with CNN-News18 television.

Security in Afghanistan, with which China shares a border, has been deteriorating fast as the United States withdraws its troops by September. The Taliban has launched a flurry of offensives, taking districts and border crossings around the country while peace talks in Qatar’s capital have not made substantive progress.

“(The) delegation assured China that they will not allow anyone to use Afghan soil against China,” Naeem said. “China also reiterated its commitment of continuation of their assistance with Afghans and said they will not interfere in Afghanistan’s issues but will help to solve the problems and restoration of peace in the country.”

(Reporting by Kabul bureau; Additional reporting by Beijing bureau; Editing by Kevin Liffey, William Maclean and Grant McCool)

In ‘frank’ talks, China accuses U.S. of creating ‘imaginary enemy’

By Yew Lun Tian and Tony Munroe

BEIJING (Reuters) -A top Chinese diplomat took a confrontational tone on Monday in rare high-level talks with the United States, accusing it of creating an “imaginary enemy” to divert attention from domestic problems and suppress China.

Amid worsening relations between the world’s two largest economies, Deputy Secretary of State Wendy Sherman, the second-ranking U.S. diplomat, arrived on Sunday for face-to-face meetings in the northern city of Tianjin that the U.S. State Department described as “frank and open.”

No specific outcomes were agreed and the prospect of a meeting between U.S. President Joe Biden and Chinese President Xi Jinping was not discussed, senior U.S. administration officials said following talks that lasted about four hours.

China seized the early narrative, with state media reporting on confrontational remarks by Vice Foreign Minister Xie Feng soon after the session began, in echoes of a similarly combative opening by senior Chinese officials during high-level talks in March in Alaska.

Foreign media were kept at a distance from the site of the talks, held outside of Beijing due to COVID-19 protocols, but Chinese media were permitted on the premises.

“The United States wants to reignite the sense of national purpose by establishing China as an ‘imaginary enemy’,” Xie was quoted as saying while the talks were underway.

The United States had mobilized its government and society to suppress China, he added.

“As if once China’s development is suppressed, U.S. domestic and external problems will be resolved, and America will be great again, and America’s hegemony can be continued.”

Sherman laid out U.S. concerns over China’s actions on issues ranging from Hong Kong and Xinjiang to Tibet and cyber attacks, senior administration officials said, adding that China should not approach areas of global concern, such as climate and Afghanistan, on a transactional basis.

Sherman, who also met with State Councilor and Foreign Minister Wang Yi, raised concerns including over what Washington sees as China’s unwillingness to cooperate with the World Health Organization on a second phase investigation of the origins of COVID-19, and foreign media access in China.

“The Deputy Secretary raised concerns in private – as we have in public – about a range of PRC actions that run counter to our values and interests and those of our allies and partners, and that undermine the international rules-based order,” the State Department said in a statement.

“It is important for the United States and China to discuss areas where we disagree so that we understand one another’s position, and so that we are clear about where each side is coming from,” a senior administration official said.

“Reaching agreement or specific outcomes was not the purpose of today’s conversations,” a senior U.S. official said.

PROTOCOL WRANGLE

Sherman’s China visit was added late to an Asian itinerary that included stops in Japan, South Korea and Mongolia amid wrangling over protocol between Beijing and Washington.

On Saturday, Wang had warned that China would not accept the United States taking a “superior” position in the relationship, a day after China unveiled sanctions on former U.S. Commerce Secretary Wilbur Ross and others.

Relations between Beijing and Washington deteriorated sharply under former U.S. President Donald Trump, and the Biden administration has maintained pressure on China in a stance that enjoys bipartisan support but threatens to deepen mistrust.

“When both countries see each other as an enemy, the danger is that it becomes a self-fulfilling prophecy,” said Cheng Xiaohe, a professor of international relations at Renmin University in Beijing.

Monday’s talks came amid frayed relations between Beijing and Washington that have worsened in the months since an initial diplomatic meeting in March in Anchorage, the first under the Biden administration.

At the Alaska meeting, Chinese officials, including Wang, railed against the state of U.S. democracy, while U.S. officials accused the Chinese side of grandstanding.

(Reporting by Yew Lun Tian, Cate Cadell and Tony Munroe; Editing by Lincoln Feast, Clarence Fernandez and Giles Elgood)

China bars for-profit tutoring in core school subjects -document

SHANGHAI (Reuters) – China is barring tutoring for profit in core school subjects to ease financial pressures on families that have contributed to low birth rates, news that sent shockwaves through its vast private education sector and share prices plunging.

The policy change, which also restricts foreign investment in a sector that had become essential to success in Chinese school exams, was contained in a government document widely circulated on Friday and verified by sources.

The move threatens to decimate China’s $120 billion private tutoring industry and triggered a heavy selloff in shares of tutoring firms traded in Hong Kong and New York including New Oriental Education & Technology Group and Koolearn Technology Holding Ltd.

All institutions offering tutoring on the school curriculum will be registered as non-profit organizations, and no new licenses will be granted, according to the document, which says it was distributed by China’s State Council, or cabinet, to local governments and is dated July 19.

More than 75% of students aged from around 6 to 18 in China attended after-school tutoring classes in 2016, according to the most recent figures from the Chinese Society of Education, and anecdotal evidence suggests that percentage has risen.

China International Capital Corp said the rules are “tougher than market expectations, and we expect material impact on future business and capital market activities.”

The pressure for children to succeed in an increasingly competitive society has given rise to the term Jiwa, or “chicken baby”, which refers to children pumped with extracurricular classes and energy-boosting “chicken blood” by anxious parents.

Existing online tutoring firms will be subject to extra scrutiny and after-school tutoring prohibited during weekends, public holidays and school vacations, the document said. China’s State Council did not immediately respond to a request for comment.

Curriculum-based tutoring institutions would be barred from raising money through listings or other capital-related activities, while listed companies would be banned from investing in such institutions, according to the document.

China’s for-profit education sector has been under scrutiny as part of Beijing’s push to ease pressure on school children and reduce a cost burden on parents that has contributed to a drop in birth rates. In May, China said it would allow couples to have up to three children, from two previously.

The policy aims to reduce burdens on students and family finances “effectively” within one year and “significantly” within three, the document said.

Three sources told Reuters last month that the crackdown is being driven from the top. In June the official Xinhua news agency quoted President Xi Jinping as saying schools, rather than tutoring firms, should be responsible for student learning.

FOREIGN INVESTMENT RESTRICTIONS

The new policy would also bar foreign investors from investing in China’s curriculum-based tutoring businesses through mergers and acquisitions, franchises, or variable interest entity (VIEs) arrangements, according to the document. VIEs are a commonly used structure to circumvent rules restricting foreign investment in certain industries.

Those which have already violated the rules must make corrective measures, it added.

“The worst case in our scenario analysis could imply 70%+ K12 revenue plunge for leaders,” Citi wrote, referring to kindergarten to grade 12.

New Oriental’s Hong Kong-traded shares slumped as much as 50.4% to their lowest since its listing late last year. Scholar Education Group and Koolearn Technology Holding Ltd both tumbled nearly 30% in Hong Kong.

“The regulations have not been published, and the Company has not received official notification of the regulations,” New Oriental, whose U.S.-listed shares slumped about 60%, said in a statement late on Friday.

TAL Education and Gaotu Techedu, whose U.S. listed shares also tumbled roughly 60% in response to the news, made similar statements about waiting for details.

Shares of other U.S.-listed Chinese education companies, including China Online Education Group, Zhangmen Education Inc and 17 Education & Technology Group Inc also plunged.

Education stocks also saw a sell-off in mainland China, with an index tracking the sector dropping nearly 5%.

The rules threaten the listing ambitions of numerous venture capital-backed education firms, including Alibaba-backed Zuoyebang, and online education platforms Yuanfudao and Classin, both backed by Tencent.

A broad crackdown on China’s massive internet sector has already rattled investors and saw Beijing launch a data-related cybersecurity investigation into ride-hailing giant Didi Global Inc just two days after it raised $4.4 billion in a New York initial public offering.

(Reporting by Samuel Shen in Shanghai, Tony Munroe in Beijing, Julie Zhu in Hong Kong and Tom Westbrook in Singapore; Editing by William Maclean, Andrea Ricci and Philippa Fletcher)

China rejects WHO plan for study of COVID-19 origin

By Gabriel Crossley

BEIJING (Reuters) -China rejected on Thursday a World Health Organization (WHO) plan for a second phase of an investigation into the origin of the coronavirus, which includes the hypothesis it could have escaped from a Chinese laboratory, a top health official said.

The WHO this month proposed a second phase of studies into the origins of the coronavirus in China, including audits of laboratories and markets in the city of Wuhan, calling for transparency from authorities.

“We will not accept such an origins-tracing plan as it, in some aspects, disregards common sense and defies science,” Zeng Yixin, vice minister of the National Health Commission (NHC), told reporters.

Zeng said he was taken aback when he first read the WHO plan because it lists the hypothesis that a Chinese violation of laboratory protocols had caused the virus to leak during research.

The head of the WHO said earlier in July that investigations into the origins of the COVID-19 pandemic in China were being hampered by the lack of raw data on the first days of spread there.

Zeng reiterated China’s position that some data could not be completely shared due to privacy concerns.

“We hope the WHO would seriously review the considerations and suggestions made by Chinese experts and truly treat the origin tracing of the COVID-19 virus as a scientific matter, and get rid of political interference,” Zeng said.

China opposed politicizing the study, he said.

The origin of the virus remains contested among experts.

The first known cases emerged in the central Chinese city of Wuhan in December 2019. The virus was believed to have jumped to humans from animals being sold for food at a city market.

In May, U.S. President Joe Biden ordered aides to find answers to questions over the origin, saying that U.S. intelligence agencies were pursuing rival theories potentially including the possibility of a laboratory accident in China.

White House press secretary Jen Psaki said on Thursday that the Biden administration is “deeply disappointed” in China’s decision and told reporters that “their position is irresponsible and, frankly, dangerous.”

Zeng, along with other officials and Chinese experts at the news conference, urged the WHO to expand origin-tracing efforts beyond China to other countries.

“We believe a lab leak is extremely unlikely and it is not necessary to invest more energy and efforts in this regard,” said Liang Wannian, the Chinese team leader on the WHO joint expert team. More animal studies should be conducted, in particular in countries with bat populations, he said.

However, Liang said the lab leak hypothesis could not be entirely discounted but suggested that if evidence warranted, other countries could look into the possibility it leaked from their labs.

One key part of the lab leak theory has centered on the Wuhan Institute of Virology’s (WIV) decision to take offline its gene sequence and sample databases in 2019.

When asked about this decision, Yuan Zhiming, professor at WIV and the director of its National Biosafety Laboratory, told reporters that at present the databases were only shared internally due to cyber attack concerns.

(Reporting by Gabriel Crossley and Stella Qiu; Additional reporting by Jeff Mason and Trevor Hunnicutt in Washington; Editing by Shri Navaratnam, Robert Birsel, Ana Nicolaci da Costa and Steve Orlofsky)

At least 25 dead in Chinese province’s heaviest rains in 1,000 years

By Ryan Woo and Stella Qiu

BEIJING (Reuters) – At least 25 people have died in China’s flood-stricken central province of Henan, a dozen of them in a subway line in its capital that was drenched by what weather officials called the heaviest rains for 1,000 years.

About 100,000 people have been evacuated in Zhengzhou, the capital, where rail and road transport have been disrupted, while dams and reservoirs have swelled to warning levels while thousands of troops launched a rescue effort in the province.

City authorities said more than 500 people were pulled to safety from the flooded subway, as social media images showed train commuters immersed in chest-deep waters in the dark and one station reduced to a large brown pool.

“The water reached my chest,” a survivor wrote on social media. “I was really scared, but the most terrifying thing was not the water, but the diminishing air supply in the carriage.”

The rain halted bus services in the city of 12 million people about 650 km (400 miles) southwest of Beijing, said a resident surnamed Guo, who had to spend the night at his office.

“That’s why many people took the subway, and the tragedy happened,” Guo told Reuters.

At least 25 people have died in the torrential rains that have lashed the province since last weekend, with seven missing, officials told a news conference on Wednesday.

Media said the dead included four residents of the city of Gongyi, located on the banks of the Yellow River like Zhengzhou, following the widespread collapse of homes and structures because of the rains.

More rain is forecast across Henan for the next three days, and the People’s Liberation Army has sent more than 5,700 soldiers and personnel to help with search and rescue.

From Saturday to Tuesday, 617.1 mm (24.3 inches) of rain fell in Zhengzhou, almost the equivalent of its annual average of 640.8 mm (25.2 inches).

The three days of rain matched a level seen only “once in a thousand years”, meteorologists said.

“Such extreme weather events will likely become more frequent in the future,” said Johnny Chan, a professor of atmospheric science at City University of Hong Kong.

“What is needed is for governments to develop strategies to adapt to such changes,” he added, referring to authorities at city, province and national levels.

‘FLOOD PREVENTION DIFFICULT’

Many train services have been suspended across Henan, a major logistics hub with a population of about 100 million. Highways have also been closed and flights delayed or cancelled.

By Wednesday, media said food and water supplies had run out for hundreds of passengers stranded on a train that had stopped just beyond the city limits of Zhengzhou two days earlier.

Roads were severely flooded in a dozen cities of the province.

“Flood prevention efforts have become very difficult,” President Xi Jinping said in a statement broadcast by state television.

Dozens of reservoirs and dams breached danger levels.

Local authorities said the rainfall had caused a 20-metre breach in the Yihetan dam in the city of Luoyang west of Zhengzhou, and that the dam “could collapse at any time”.

In Zhengzhou itself, where about 100,000 people have been evacuated, the Guojiazui reservoir had been breached but there was no dam failure yet.

A raft of Chinese companies, insurers and a state-backed bank said they had offered donations and emergency aid to local governments in Henan amounting to 1.935 billion yuan ($299 million).

SCHOOLS, HOSPITALS CUT OFF

Taiwan’s Foxconn, which operates a plant in Zhengzhou assembling iPhones for Apple, said there was no direct impact on the facility.

China’s largest automaker, SAIC Motor, warned of short-term impact on logistics at its plant in the city, while Japan’s Nissan said production at its factory had been suspended.

Schools and hospitals were marooned, and people caught in the floods flocked to shelter in libraries, cinemas and even museums.

“We’ve up to 200 people of all ages seeking temporary shelter,” said a staffer surnamed Wang at the Zhengzhou Science and Technology Museum.

“We’ve provided them with instant noodles and hot water. They spent the night in a huge meeting room.”

After the First Affiliated Hospital of Zhengzhou, the city’s largest with more than 7,000 beds, lost all power, officials raced to find transport for about 600 critically ill patients.

The neighboring province of Hebei issued a storm alert for some cities, including Shijiazhuang, its capital, warning of moderate to heavy rain from Wednesday.

(Reporting by Sameer Manekar in Bengaluru, Josh Horwitz and Jing Wang in Shanghai, and Stella Qiu, Roxanne Liu, Cheng Leng, Yilei Sun, Judy Hua and Ryan Woo in Beijing; Additional reporting by Ben Blanchard in Taipei, Beijing Newsroom and Kanupriya Kapoor in Singapore; Editing by Kenneth Maxwell and Clarence Fernandez)

China frictions steer electric automakers away from rare earth magnets

By Eric Onstad

LONDON (Reuters) – As tensions mount between China and the United States, automakers in the West are trying to reduce their reliance on a key driver of the electric vehicle revolution – permanent magnets, sometimes smaller than a pack of cards, that power electric engines.

Most are made of rare earth metals from China.

The metals in the magnets are actually abundant, but can be dirty and difficult to produce. China has grown to dominate production, and with demand for the magnets on the rise for all forms of renewable energy, analysts say a genuine shortage may lie ahead.

Some auto firms have been looking to replace rare earths for years. Now manufacturers amounting to nearly half global sales say they are limiting their use, a Reuters analysis found.

Automakers in the West say they are concerned not just about securing supply, but also by huge price swings, and environmental damage in the supply chain.

This means managing the risk that scrapping the metals could shorten the distance a vehicle can travel between charges. Without a solution to that, the range anxiety that has long hampered the industry would increase, so access to the metals may become a competitive edge.

Rare earth magnets, mostly made of neodymium, are widely seen as the most efficient way to power electric vehicles (EVs). China controls 90% of their supply.

Prices of neodymium oxide more than doubled during a nine-month rally last year and are still up 90%; the U.S. Department of Commerce said in June it is considering an investigation into the national security impact of neodymium magnet imports.

Companies trying to cut their use include Japan’s third-largest carmaker Nissan Motor Co, which told Reuters it is scrapping rare earths from the engine of its new Ariya model.

Germany’s BMW AG did the same for its iX3 electric SUV this year, and the world’s two biggest automakers Toyota Motor Corp of Japan and Volkswagen AG of Germany have told Reuters they are also cutting back on the minerals.

Rare earths are critical for the electronics, defense and renewable energy industries. Because some can generate a constant magnetic force, the magnets they make are known as permanent magnets.

Electric cars with these require less battery power than those with ordinary magnets, so vehicles can go longer distances before recharging. They were the no-brainer choice for EV motors until about 2010 when China threatened to cut rare earth supply during a dispute with Japan. Prices boomed.

Now, supply concerns are opening a divide between Chinese EV producers and their Western rivals.

While automakers in the West are cutting down, the Chinese are still churning out vehicles using the permanent magnets. A Chinese rare earths industry official told Reuters that if geopolitical risks are set aside, China’s capacity can “fully meet the needs of the world’s automotive industry.”

Altogether, based on sales data from JATO Dynamics, manufacturers accounting for 46% of total light vehicle sales in 2020 have said they have scrapped, plan to eliminate, or are scaling down rare earths in electric vehicles.

And new ventures are springing up to develop electric motors without the metals, or to boost recycling of the magnets used in existing vehicles.

“Companies that spend tens or hundreds of millions developing a family of products… they don’t want to put all their eggs in one basket – that’s the Chinese basket,” said Murray Edington, who runs the Electrified Powertrain department at British consultancy Drive System Design. “They want to develop alternatives.”

BMW says it has redesigned its EV technology to make up for a lack of rare earths; Renault SA has slotted its rare-earth-free Zoe model into a growing niche of small urban cars that do not need extended driving ranges.

Tesla Inc, the U.S. EV giant whose $621 billion market value is just below that of the top five automakers combined – is opting for both types of motors.

“You’re pulling your hair deciding whether you think supplies will be viable in the future and at what price,” said Ryan Castilloux of Canada-based consultancy Adamas Intelligence.

His consultancy expects global consumption of rare earths for magnets to climb to $15.7 billion by 2030, nearly four times this year’s value.

EVS AND WIND TURBINES

Neodymium is a mighty metal. The neodymium magnets in a typical EV weigh up to 3kg (6 lb), but even at 1/12th of that weight, a neodymium magnet can support steel as heavy as prizefighter Tyson Fury, and will have about 18 times more magnetic energy than the standard variety, British magnet company Bunting told Reuters.

Even though the pandemic has dented auto sales, demand for these magnets in electric vehicles shot up by 35% last year alone to 6,600 tonnes, Adamas Intelligence says.

The permanent magnets in hybrid and EV motors cost more than $300 per vehicle or up to half the cost of the motor, analysts say.

Analysts at investment bank UBS expect electric models to make up half of global new car sales by 2030, up from only 4% last year. The magnets are also in demand for wind turbines, global installations of which jumped 53% last year, according to the industry trade group.

Over the past two decades, Western countries largely withdrew from producing rare earth metals, which involves complex processing and often noxious byproducts. Today, China’s dominance runs through the entire production chain.

“The upstream rare earth supply chain, including mining and processing, is definitely a big concern, but when it comes to actual RE magnet production, China has an even tighter grip,” said David Merriman at Roskill, a critical materials consultancy in London.

NOT ENOUGH

For many EV drivers, range anxiety may not be an issue.

“Most people are driving less than 100 miles a day, so for that you can have a less efficient motor,” said researcher Jürgen Gassmann at Fraunhofer IWKS in Germany.

Even so, automakers in the West have adopted a range of strategies. Some, like Toyota, still use permanent magnets but have trimmed use of rare earths, developing a magnet that needs 20%-50% less neodymium.

Others, like BMW, have undertaken major redesigns: The German carmaker told Reuters it overhauled its drive unit to combine motor, electronics and transmission in a single housing, cutting down on space and weight.

“Our goal for the future is to avoid rare earths as much as possible and to become independent of possible cost, availability and – of course – sustainability risks,” said Patrick Hudde, BMW’s vice president of raw material management.

Tesla started in 2019 to combine engine types. Its S and X models have two motors: one with rare earth magnets, one without. The induction motor provides more power, while the one with permanent magnets is more efficient, Tesla said: Including a rare earth motor boosted the models’ driving range by 10%. Volkswagen also uses both types of motors on its new ID.4 crossover SUV, it said.

The use of non-rare-earth electric motors is set to jump nearly eightfold by 2030, according to Claudio Vittori, senior analyst of e-mobility at data analytics company IHS Markit. But he said permanent magnet motors will still dominate, mainly because of their power and efficiency.

If the forecasts are correct, it’s not certain that even these tweaks can cool the market.

“I think we need these innovations to help balance the really strong demand growth that we’re looking at,” Castilloux says. “There’s almost no scenario where supply will be enough.”

(Additional reporting by Eimi Yamamitsu in Tokyo, Jan Schwartz in Hamburg, Christoph Steitz in Frankfurt, Yilei Sun in Beijing and Tom Daly; edited by Veronica Brown and Sara Ledwith)

U.S. and allies accuse China of global hacking spree

By Steve Holland and Doina Chiacu

WASHINGTON (Reuters) – The United States and its allies accused China on Monday of a global cyberespionage campaign, mustering an unusually broad coalition of countries to publicly call out Beijing for hacking.

The United States was joined by NATO, the European Union, Britain, Australia, Japan, New Zealand and Canada in condemning the spying, which U.S. Secretary of State Antony Blinken said posed “a major threat to our economic and national security.”

Simultaneously, the U.S. Department of Justice charged four Chinese nationals – three security officials and one contract hacker – with targeting dozens of companies, universities and government agencies in the United States and abroad.

The Chinese Embassy in Washington did not immediately respond to a request for comment. Chinese officials have previously said China is also a victim of hacking and opposes all forms of cyberattacks.

While a flurry of statements from Western powers represent a broad alliance, cyber experts said the lack of consequences for China beyond the U.S. indictment was conspicuous. Just a month ago, summit statements by G7 and NATO warned China and said it posed threats to the international order.

Adam Segal, a cybersecurity expert at the Council on Foreign Relations in New York, called Monday’s announcement a “successful effort to get friends and allies to attribute the action to Beijing, but not very useful without any concrete follow-up.”

Some of Monday’s statements even seemed to pull their punches. While Washington and its close allies such as the United Kingdom and Canada held the Chinese state directly responsible for the hacking, others were more circumspect.

NATO merely said that its members “acknowledge” the allegations being leveled against Beijing by the U.S., Canada, and the UK. The European Union said it was urging Chinese officials to rein in “malicious cyber activities undertaken from its territory” – a statement that left open the possibility that the Chinese government was itself innocent of directing the espionage.

The United States was much more specific, formally attributing intrusions such as the one that affected servers running Microsoft Exchange earlier this year to hackers affiliated with China’s Ministry of State Security. Microsoft had already blamed China.

U.S. officials said the scope and scale of hacking attributed to China has surprised them, along with China’s use of “criminal contract hackers.”

“The PRC’s Ministry of State Security (MSS) has fostered an ecosystem of criminal contract hackers who carry out both state-sponsored activities and cybercrime for their own financial gain,” Blinken said.

U.S. security and intelligence agencies outlined more than 50 techniques and procedures that “China state-sponsored actors” use against U.S. networks, a senior administration official said.

Washington in recent months has focused heavy attention on Russia in accusing Russian hackers of a string of ransomware attacks in the United States.

The senior administration official said U.S. concerns about Chinese cyber activities have been raised with senior Chinese officials. “We’re not ruling out further action to hold the PRC accountable,” the official said.

The United States and China have already been at loggerheads over trade, China’s military buildup, disputes about the South China Sea, a crackdown on democracy activists in Hong Kong and treatment of the Uyghurs in the Xinjiang region.

Blinken cited the Justice Department indictments as an example of how the United States will impose consequences.

The defendants and officials in the Hainan State Security Department, a regional state security office, tried to hide the Chinese government’s role in the information theft by using a front company, according to the indictment.

The campaign targeted trade secrets in industries including aviation, defense, education, government, health care, biopharmaceutical and maritime industries, the Justice Department said.

Victims were in Austria, Cambodia, Canada, Germany, Indonesia, Malaysia, Norway, Saudi Arabia, South Africa, Switzerland, the United Kingdom and the United States.

“These criminal charges once again highlight that China continues to use cyber-enabled attacks to steal what other countries make, in flagrant disregard of its bilateral and multilateral commitments,” Deputy U.S. Attorney General Lisa Monaco said in the statement.

(Reporting by Steve Holland, David Shepardson, Doina Chiacu and Lisa Lambert; Editing by Chizu Nomiyama and Grant McCool)

Merkel, Biden face tough talks on Russian gas pipeline, China

By Andreas Rinke and Joseph Nasr

BERLIN (Reuters) – Chancellor Angela Merkel and President Joe Biden hold talks at the White House on Thursday that experts say are unlikely to yield major breakthroughs on divisive issues like a Russian gas pipeline to Germany and a U.S. push to counterbalance China.

Both sides have said they want to reset ties strained during the presidency of Donald Trump. Yet their positions on the most divisive issues remain far apart.

Merkel has rejected opposition from the United States and eastern European neighbors to the almost completed Nord Stream 2 pipeline which they fear Russia could use to cut out Ukraine as a gas transit route, depriving Kyiv of lucrative income and undermining its struggle with Moscow-backed eastern separatists.

And during her 16 years in power, she has worked hard for closer German and European economic ties with China, which the Biden administration sees as a global threat that it wants to counter with a joint front of democratic countries.

“The problem for the U.S. is that Merkel has the upper hand, because she has decided that the status quo in the trans-Atlantic relationship is good enough for Germany,” said Ulrich Speck, an independent foreign policy analyst. “Biden by contrast needs to win over Germany for his new China strategy.”

Officials from both sides are engaged in intense discussions to resolve the issue and stave off the reimposition of sanctions that Biden waived in May. Biden has opposed the project, but he is also facing increasing pressure from U.S. lawmakers to reimpose sanctions.

“Nord Stream 2 is the area where you most realistically can expect progress,” said Thorsten Benner of the Global Public Policy Institute (GPPi). “Merkel may hope to get away with providing guarantees for Ukraine’s continued role as a gas transit country and a vague snapback mechanism that would kick in if Russia seeks to cut transit through Ukraine.”

A senior U.S. administration official, speaking on condition of anonymity, said Biden would underscore his opposition when he meets with Merkel, but the waiver had given diplomatic space for both sides to “address the negative impacts of the pipeline”.

“Our teams are continuing to discuss how we can credibly and concretely ensure that Russia cannot use energy as a coercive tool to disrupt Ukraine, eastern flank allies or other states,” the official said.

Merkel, who will step down after an election in September, vowed during a news conference on Monday with visiting Ukrainian President Volodymyr Zelenskiy that Germany and the European Union will guarantee Ukraine’s status as a transit country.

“We promised Ukraine and will keep our promise,” said Merkel. “It is my custom to keep my word and I believe this applies to every future chancellor.”

The issue of China is more complicated.

Merkel was an advocate of an investment pact between the European Union and China struck late last year on the eve of Biden taking office, and she has been criticized for not facing up to Beijing on human rights violations in Hong Kong and against a Muslim minority in Xinjiang, which the United States has labelled a genocide.

“There will likely be a joint call by Biden and Merkel for China to step up its efforts on carbon reduction and global health, maybe a reference to the need to further open the Chinese market,” Benner said. “But don’t expect anything from Merkel that will remotely look like there is a joint trans-Atlantic front on China.”

The two countries also remain at odds over a proposed temporary waiver of intellectual property rights to help increase production of COVID-19 vaccines, a measure backed by Washington, and the United States’ refusal to ease travel restrictions on visitors from Europe.

(Additional reporting by Andrea Shalal in Washington; Writing by Joseph Nasr; editing by David Evans)

China, U.S. can coexist in peace but challenge is enormous – White House

By David Brunnstrom and Humeyra Pamuk

WASHINGTON (Reuters) – White House Indo-Pacific coordinator Kurt Campbell said on Tuesday that it was possible for China and United States to coexist in peace but the challenge was enormous and Beijing had become increasingly assertive.

At an event hosted by the Asia Society think tank, Campbell said President Joe Biden will host a summit later this year with the leaders of Australia, India and Japan – the so-called “Quad” grouping that Washington see as a means of standing up to China.

Asked when he expected a first meeting between Biden and Chinese leader Xi Jinping and whether this could come at the G20 summit in October, he replied: “My expectation will be that we’ll have some sort of engagement before too long.”

Campbell said the challenge for the United States would be to come up with a strategy that presented China with opportunities, but also a response if it takes steps “antithetical to the maintenance of peace and stability”.

There were likely to be “periods of uncertainty, perhaps even periods of occasional raised tensions,” he said.

“Do I think it’s possible that the United States and China can coexist and live in peace? Yes I do. But I do think the challenge is enormously difficult for this generation and the next,” he said.

He said Beijing had been increasingly assertive in recent times, taking on many countries simultaneously, a strategy that contrasted with how it operated in the 1990’s.

​ He criticized China’s approach to U.S. ally Australia.

“I’m not sure they have the strategic thinking to go back to a different kind of diplomacy towards Australia right now. I see a harshness in their approach that appears unyielding”

On Taiwan, the self-ruled U.S.-backed island China sees as part of its territory and wants to reclaim, Campbell maintained a cautious approach.

He said the United States supports having a strong unofficial relationship with Taiwan but does not support its independence.

“We fully recognize, understand the sensitivities involved here,” he said. “We do believe that Taiwan has a right to live in peace. We want to see its international role, particularly in areas like vaccines, and issues associated with the pandemic, they should have a role to play here, they should not be shunned in international community.”

(Reporting by David Brunnstrom and Humeyra Pamuk; Editing by Angus MacSwan)