Biden’s CIA director creates high-level unit focusing on China

By Mark Hosenball

WASHINGTON (Reuters) – The career diplomat U.S. President Joe Biden named to lead the Central Intelligence Agency is creating a high-level unit aimed at sharpening the agency’s focus on China, at a time of tense relations between the world’s two largest economies.

CIA Director William Burns said on Thursday that the China Mission Center he was setting up “cuts across all of the agency’s mission areas,” while noting that the CIA’s concern is that “the threat is from the Chinese government, not its people.”

A senior CIA official compared Burns’ creation of the China unit to the agency’s tight focus on Russia during the Cold War and to its concentration on counter-terrorism following the Sept. 11, 2001 attacks on New York and Washington. No such high-level unit focusing explicitly on China had previously been set up by the agency, even in the wake of harsh attacks on China by former President Donald Trump and his aides.

The new China unit was one of several re-shuffles resulting from a broad review the agency launched last spring, the senior official said, speaking on condition of anonymity.

In the Biden administration’s first months, relations with Beijing soured over deep differences on many issues including human rights, Hong Kong and the South China Sea. But top officials from both countries met this week to improve communication and set the stage for a virtual meeting of presidents by the end of the year.

Other agency moves include merging an Iran Mission Center set up by the Trump administration into a broader Middle East unit and merging a unit focusing on Korea with a broader East Asia-Pacific unit, the official said.

Burns said the CIA also was creating a position for a Chief Technology Officer as well as a new office called the Transnational and Technology Mission Center. This unit, the senior official said, would enable the agency to focus more tightly on issues such as global health, climate change, humanitarian disasters and disruption caused by new technologies.

The agency will also create a program under which it would encourage qualified employees to serve as “technology fellows” for a year or two in private industry.

The senior official said the agency had also set up an “incident cell” to oversee responses to the mysterious illness known as “Havana Syndrome” which has affected numerous diplomats and CIA employees, some of whom have been “diagnosed with real harm.”

(Reporting By Mark Hosenball; editing by Mary Milliken and Richard Pullin)

Taiwan plans $9 billion boost in arms spending, warns of ‘severe threat’

By Ben Blanchard and Yimou Lee

TAIPEI (Reuters) -Taiwan proposed on Thursday extra defense spending of T$240 billion ($8.69 billion) over the next five years, including on new missiles, as it warned of an urgent need to upgrade weapons in the face of a “severe threat” from giant neighbor China.

Taiwan President Tsai Ing-wen has made modernizing the armed forces – well-armed but dwarfed by China’s – and increasing defense spending a priority, especially as Beijing ramps up military and diplomatic pressure against the island it claims as “sacred” Chinese territory.

The new money, which comes on top of planned military spending of T$471.7 billion for 2022, will need to be approved by parliament where Tsai’s ruling party has a large majority, meaning its passage should be smooth.

Taiwan’s Defense Ministry said China’s military strength had grown rapidly and it had continued to invest heavily in defense.

“In the face of severe threats from the enemy, the nation’s military is actively engaged in military building and preparation work, and it is urgent to obtain mature and rapid mass production weapons and equipment in a short period of time,” it said in a statement.

Deputy Defense Minister Wang Shin-lung told reporters the new arms would all be made domestically, as Taiwan boosts its own production prowess, though the United States will probably remain an important provider of parts and technology.

Taiwan has been keen to demonstrate that it can defend itself, especially amid questions about whether the United States would come to its aid if China attacked.

“Only if we ensure our security and show determination will the international community think well of us,” said Cabinet spokesman Lo Ping-cheng. “Others will only help us if we help ourselves.”

The additional cash will likely be well received in Washington, which has been pushing Taiwan to modernize its military to make it more mobile so it can become a “porcupine,” hard for China to attack.

Ingrid Larson, one of Washington’s unofficial representatives for Taiwan, stressed there was “a real and urgent need” for Taiwan to pursue defense reforms.

“As allies and partners in the region and around the globe increasingly push back on China’s aggressive action, it is important that Taiwan remain committed to the changes that only it can make for itself,” she told the Center for a New American Security think tank.

“Taiwan must build as strong a deterrent as possible and as quickly as possible. Taiwan needs truly asymmetric capability, and a strong reserve force. Asymmetry means systems which are mobile, survivable and lethal.”

Larson is managing director of the Washington office of the American Institute in Taiwan, which handles U.S. relations with Taiwan in the absence of formal diplomatic links.

The weapons Taiwan aims to buy with the money include cruise missiles and warships, the defense ministry said.

Taiwan has been testing new, long-range missiles off its southern and eastern coasts, and while it has not given details, diplomats and experts have said they are likely to be able to hit targets far into China.

Taiwan has already put into service a new class of stealth warship, which it calls an “aircraft carrier killer” due to its missile complement, and is developing its own submarines.

The announcement comes as Taiwan is in the middle of its annual Han Kuang military drills.

On Thursday, its army simulated fending off an invasion, firing artillery out to sea from a beach on its southern coast.

($1 = 27.6330 Taiwan dollars)

(Reporting by Ben Blanchard and Yimou Lee; Additional reporting by Roger Tung and Jeanny Kao and David Brunnstrom in Washington; Editing by Muralikumar Anantharaman, Sam Holmes and Jonathan Oatis)

U.S. manufacturing activity rises; shortages linger

By Lucia Mutikani

WASHINGTON(Reuters) – U.S. manufacturing activity unexpectedly picked up in August amid strong order growth, but a measure of factory employment dropped to a nine-month low, likely as workers remained scarce.

The survey from the Institute for Supply Management (ISM) on Wednesday continued to highlight persistent problems securing enough raw materials, a situation worsened by disruptions caused by the latest wave of COVID-19 infections, primarily in Southeast Asia, as well as ports congestion in China.

“A surprising turn of events for manufacturing activity in the U.S., but it doesn’t change the story of supply disruptions and shortages holding back stronger growth,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index falling to 58.6.

Manufacturing is holding up even as spending is rotating back to services from goods because of vaccinations against COVID-19. All of the six largest manufacturing industries, including computer and electronic products, chemical products and transportation equipment reported moderate to strong growth.

Manufacturers of computer and electronic products said while a global semiconductor shortage was impacting supply lines, they had so far “been able to manage it without impacting clients.”

Chemical goods producers said they continued to “see extended lead times due to port delays and sea container tightness.” Transportation equipment makers reported that “strong sales continue, but production is limited due to supply issues with chips.”

The ISM survey’s forward-looking new orders sub-index rebounded to a reading of 66.7 last month after two straight monthly declines. Fourteen out of 18 manufacturing industries, furniture and related products, machinery and electrical equipment, appliances and components reported growth in new orders. Only nonmetallic mineral products reported a drop.

Demand is being driven by businesses desperate to replenish stocks after inventories were drawn down sharply in the first half of the year. Inventory accumulation, which is expected to be the main driver of economic growth for the rest of this year and into 2022, has been frustrated by the supply constraints.

Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.

INFLATION ABATING

Scarce inputs have boosted prices for both manufacturers and consumers. But there appears to be light at the end of the tunnel. The ISM measure of delivery performance of suppliers to manufacturing organizations eased further in August, indicating some improvement in the pace of deliveries.

The survey’s measure of prices paid by manufacturers fell to an eight-month low of 79.4 from a reading of 85.7 in July. This measure has dropped from a record 92.1 in June.

It was the latest indication that inflation has probably peaked. Data last week showed the Federal Reserve’s preferred inflation measure recorded its smallest monthly gain in five months in July.

But worker shortages persist, with ISM chair Timothy Fiore highlighting “a clear cycle of labor turnover as workers opt for more attractive job conditions.”

A measure of factory employment contracted last month and fell to its lowest level since November.

Together with the ADP National Employment Report, which showed on Wednesday that private payrolls increased by 374,000 jobs last month after rising 326,000 in July, the ISM factory index poses a downside risk to job growth in August. Economists had forecast the ADP report would show private payrolls increased by 613,000 jobs.

The ADP report is jointly developed with Moody’s Analytics and was published ahead of the Labor Department’s more comprehensive and closely watched employment report for August on Friday. But it has a dismal record predicting the private payrolls count in the department’s Bureau of Labor Statistics (BLS) employment report because of methodology differences.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 728,000 jobs last month after rising 943,000 in July.

“ADP is far from consistent in predicting changes in the BLS payrolls data,” said Rubeela Farooqi, chief U.S. economist at High Frequency economics in White Plains, New York. “Overall, job growth has strengthened in recent months, even as companies continue to report labor supply shortages.”

The pandemic has upended the labor market dynamics, creating worker shortages even as 8.7 million people are officially unemployed. The were a record 10.1 million job openings at the end of June. Lack of affordable child care, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.

The labor shortage is expected to ease starting in September. The government-funded unemployment benefits lapse on Sept. 6 and schools are reopening for in-person learning.

But the resurgence in new COVID-19 cases, driven by the Delta variant of the coronavirus, could cause reluctance among some people to return to the labor force.

The labor shortages led to a building up of the backlog of uncompleted work at factories in August.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

China will soon surpass Russia as a nuclear threat –senior U.S. military official

By Michael Martina

WASHINGTON (Reuters) – China, in the midst of a rapid nuclear weapons buildup, will soon surpass Russia as the United States’ top nuclear threat, a senior U.S. military official said on Friday, warning that the two countries have no mechanisms to avert miscommunication.

U.S. Air Force Lieutenant General Thomas Bussiere, the deputy commander of the U.S. Strategic Command, which oversees the country’s nuclear arsenal, said China’s development of nuclear capabilities “can no longer be aligned” with its public claim that it wants to maintain a minimum nuclear deterrent.

“There’s going to be a point, a crossover point, where the number of threats presented by China will exceed the number of threats that currently Russia presents,” Bussiere told an online forum.

He said the determination would not be based solely on the number of Beijing’s stockpiled nuclear warheads, but also on how they are “operationally fielded.”

“There will be a crossover point, we believe, in the next few years,” Bussiere said.

Unlike with Russia, the United States did not have any treaties or dialogue mechanism with China on the issue to “alleviate any misperceptions or confusion,” he added.

Bussiere’s comments come as the United States is attempting to realign its foreign policy to put greater emphasis in the Indo-Pacific region to counter China’s growing economic and military might.

U.S. Secretary of State Antony Blinken expressed deep concern about China’s growing nuclear arsenal during a meeting with foreign ministers of Asian countries and partner nations in early August.

Think-tank reports based on satellite imagery say China appears to be constructing hundreds of new silos for nuclear missiles, and Washington has accused Beijing of resisting nuclear arms talks.

China says its arsenal is dwarfed by those of the United States and Russia, and that it is ready for dialogue, but only if Washington reduces its nuclear stockpile to China’s level.

In a 2020 report to Congress, the Pentagon estimated China’s operational nuclear warhead stockpile to be in “the low 200s,” and said it was projected to at least double in size as Beijing expands and modernizes its forces.

According to a State Department fact sheet, the United States had 1,357 nuclear warheads deployed as of March 1.

China’s advances in missile technology to deliver those warheads are also a concern for the United States, and Bussiere said China last year tested more ballistic missile capabilities than the rest of the world combined.

(Reporting by Michael Martina in Washington; Editing by Matthew Lewis)

China criticizes U.S. ‘scapegoating’ as COVID origin report to be released

BEIJING (Reuters) -China criticized on Wednesday the U.S. “politicization” of efforts to trace the origin of the coronavirus, demanding a U.S. military laboratory be investigated, shortly before the release of a U.S. intelligence community report on the virus.

The U.S. report is intended to resolve disputes among intelligence agencies considering different theories about how the coronavirus emerged, including a once-dismissed theory about a Chinese laboratory accident.

“Scapegoating China cannot whitewash the U.S.,” Fu Cong, director-general of the Ministry of Foreign Affairs’ arms control department, told a briefing.

A White House official said on Wednesday that President Joe Biden had been briefed on the classified report. “We look forward to having an unclassified summary of key judgments to share soon,” the official said.

U.S. officials say they did not expect the review to lead to firm conclusions after China stymied earlier international efforts to gather key information on the ground.

China has said a laboratory leak was highly unlikely, and it has ridiculed a theory that coronavirus escaped from a lab in Wuhan, the city where COVID-19 infections emerged in late 2019, setting off the pandemic.

China has instead suggested that the virus slipped out of a lab at the Army’s Fort Detrick base in Maryland in 2019.

“It is only fair that if the U.S. insists that this is a valid hypothesis, they should do their turn and invite the investigation into their labs,” said Fu.

On Tuesday, China’s envoy to the United Nations asked the head of the World Health Organization for an investigation into U.S. labs.

A joint WHO-Chinese team visited the Wuhan Institute of Virology but the United States said it had concerns about the access granted to the investigation.

When asked if China would stop talking about the Fort Detrick laboratory if the U.S. report concluded the virus did not leak from a Chinese lab, Fu said: “That is a hypothetical question, you need to ask the U.S.”

Fu said China was not engaged in a disinformation campaign.

(Reporting by Gabriel Crossley; additional reporting by Steve Holland in Washington; editing by Jonathan Oatis)

China holds assault drills near Taiwan after ‘provocations’

By Yew Lun Tian and Yimou Lee

BEIJING/TAIPEI (Reuters) -China carried out assault drills near Taiwan on Tuesday, with warships and fighter jets exercising off the southwest and southeast of the island in what the country’s armed forces said was a response to “external interference” and “provocations”.

Taiwan, which Beijing claims as Chinese territory, has complained of repeated People’s Liberation Army (PLA) drills in its vicinity in the past two years or so, part of a pressure campaign to force the island to accept China’s sovereignty.

In a brief statement, the PLA’s Eastern Theatre Command said warships, anti-submarine aircraft and fighter jets had been dispatched close to Taiwan to carry out “joint fire assault and other drills using actual troops”.

It did not give details.

A senior official familiar with Taiwan’s security planning told Reuters that China’s air force had carried out a “capturing air supremacy” drill, using their advanced J-16 fighters.

“In addition to seeking air supremacy over Taiwan, they have also been conducting frequent electronic reconnaissance and electronic interference operations,” the person said.

Taiwan believes China is trying to gather electronic signals from U.S. and Japanese aircraft so that they can “paralyze reinforcing aircraft including F-35s in a war,” the source said, referring to the U.S.-operated stealth fighter.

Taiwan’s Defense Ministry said 11 Chinese aircraft entered its air defense zone, including two nuclear-capable H-6K bombers and six J-16 fighters, and that it had scrambled jets to warn China’s planes away.

While the Chinese statement gave no exact location for the drills, Taiwan’s Defense Ministry said the aircraft flew in an area between mainland Taiwan and the Taiwan-controlled Pratas Islands at the top part of the South China Sea.

Some of the aircraft also briefly entered the strategic Bashi Channel off southern Taiwan that leads to the Pacific, according to a map provided by the ministry.

“The nation’s military has a full grasp and has made a full assessment of the situation in the Taiwan Strait region, as well as related developments at sea and in the air, and is prepared for various responses,” it added.

The PLA statement noted that recently, the United States and Taiwan have “repeatedly colluded in provocation and sent serious wrong signals, severely infringing upon China’s sovereignty, and severely undermining peace and stability in the Taiwan Strait”.

“This exercise is a necessary action based on the current security situation across the Taiwan Strait and the need to safeguard national sovereignty. It is a solemn response to external interference and provocations by Taiwan independence forces.”

It was not immediately clear what set off the flurry of Chinese military activity, though earlier this month, the United States approved a new arms sale package to Taiwan, an artillery system valued at up to $750 million.

China believes Taiwan President Tsai Ing-wen is a separatist bent on a formal declaration of independence, a red line for Beijing. Tsai said Taiwan is already an independent country called the Republic of China, its formal name.

Washington has expressed its concern about China’s pattern of intimidation in the region, including towards Taiwan, reiterating that U.S. commitment to Taiwan is “rock solid.”

China has never renounced the use of force to bring Taiwan under its control.

(Reporting by Yew Lun Tian and Yimou Lee; Writing and additional reporting by Ben Blanchard in Taipei; Editing by Jacqueline Wong, Simon Cameron-Moore and Bernadette Baum)

WHO seeks to take political heat out of virus origins debate

By Emma Farge

GENEVA (Reuters) – The World Health Organization said on Friday it was setting up a new group to trace the origins of the coronavirus, seeking to end what it called “political point scoring” that had hampered investigations.

The inability of the WHO to say where and how the virus began spreading has fueled tensions among its members, particularly between China, where COVID-19 cases were first identified in Wuhan in late 2019, and the United States.

The WHO called for all governments to cooperate to accelerate studies into the origins of the COVID-19 pandemic and “to depoliticize the situation.”

It specified that a new advisory group called the International Scientific Advisory Group for Origins of Novel Pathogens would support “the rapid undertaking” of further studies.

“We should work all together. You, me, everyone wants to know the origin of worst pandemic in a century,” WHO spokesperson Fadela Chaib said at a U.N. briefing on Friday.

Washington on Friday welcomed the WHO plan, noting the “emphasis on scientific-based studies and data driven efforts to find the origins of this pandemic so that we can better detect, prevent and respond to future disease outbreaks.”

President Joe Biden in late May ordered aides to find answers on COVID-19 origins and report back in 90 days.

In its final report, written jointly with Chinese scientists, a WHO-led team that spent four weeks in and around the city of Wuhan in January and February said that the virus had probably been transmitted from bats to humans through another animal. It said that a leak from a laboratory was “extremely unlikely” as a cause.

However, in a documentary broadcast in his native Denmark on Thursday, the WHO mission leader Peter Ben Embarek said that the lab hypothesis merited further study. Ben Embarek could not be reached by Reuters for further comment on Friday.

A WHO official said that its statement on advancing the virus origins study bore no relation to those remarks, noting that the Ben Embarek interview was filmed months ago.

China said it has never rejected cooperation on tracing COVID-19 origins, state media quoted the country’s vice foreign minister as saying.

(Reporting by Emma Farge, Jacon Gronholt-Pedersen and Gabriel Crossley; Editing by Keith Weir and Jon Boyle)

Blinken expresses U.S. concern about China’s growing nuclear arsenal

WASHINGTON (Reuters) -U.S. Secretary of State Antony Blinken expressed deep concern about China’s growing nuclear arsenal during a meeting with foreign ministers of Asian countries and partner nations, the State Department said on Friday.

Addressing a virtual meeting of the ASEAN Regional Forum (ARF), which groups more than two dozen countries, Blinken also called on China to cease “provocative” behavior in the South China Sea and “raised serious concerns about ongoing human rights abuses in Tibet, Hong Kong, and Xinjiang,” the department said in a statement.

“The Secretary also noted deep concern with the rapid growth of the PRC’s nuclear arsenal which highlights how Beijing has sharply deviated from its decades-old nuclear strategy based on minimum deterrence,” it added, using the acronym for China’s official name, the People’s Republic of China.

In his address, Blinken urged all ARF member states to press Myanmar’s military government to end violence and support the people of the country as they work to return to democratic governance, the statement said.

Both the Pentagon and State Department have aired concerns recently about China’s buildup of its nuclear forces following think-tank reports based on satellite imagery saying that China appears to be constructing hundreds of new silos for nuclear missiles.

Washington has repeatedly called on China to join it and Russia in a new arms control treaty and last month the State Department urged Beijing to engage with it “on practical measures to reduce the risks of destabilizing arms races.”

A 2020 Pentagon report estimated China’s nuclear warhead stockpile in “the low 200s” and said it was projected to at least double in size as Beijing expands and modernizes its forces.

Analysts say the United States has around 3,800 warheads, and according to a State Department factsheet, 1,357 of those were deployed as of March 1.

Beijing says its arsenal is dwarfed by those of the United States and Russia and it is ready to conduct bilateral dialogues on strategic security “on the basis of equality and mutual respect.”

Blinken has taken part in a series of regional meetings this week at which he has sought to reinforce the U.S. message that it is serious about engaging with Asian countries to push back against Beijing.

(Reporting by David Brunnstrom and Lisa Lambert in Washington; Editing by Jonathan Oatis, Matthew Lewis and Dan Grebler)

Britain says China’s BGI must register prenatal tests by Sept 1

By Reuters Staff

LONDON (Reuters) – China’s largest gene company BGI Group must register its prenatal test with local regulators by Sept. 1 if it wants to keep offering products in Britain, a minister said on Thursday.

A Reuters report found BGI Group developed the tests in collaboration with China’s military and uses them to collect genetic data from millions of women round the world.

However, BGI says it alone produced the NIFTY test, has never shared data for national security or defense purposes, and complies with European privacy laws. Reuters found no evidence BGI violated privacy agreements or regulations.

British junior health minister James Bethell said the British Medicines and Healthcare products Regulatory Agency (MHRA) expected BGI’s devices to need oversight before being placed on the local market.

“The MHRA understand BGI genetic screening tests are currently available for sale in the UK. These devices do not appear to have been registered with the MHRA at this time,” Bethell said in a written response to a question on BGI’s tests from a member of Britain’s upper chamber of parliament.

“However, due to their risk classification, registration will be required from 1 September 2021 in order to continue placing the products on the market.”

Bethell said there had been no specific assessment of BGI’s tests, but that neither the state-run National Health Service (NHS) nor the Public Health England (PHE) agency used its technology.

The tests have been available in some private clinics in England since at least 2014, however.

“There are no grounds to prevent BGI Groups operating in the UK provided they comply with UK legislation and regulatory requirements,” Bethell added.

In an emailed statement, BGI said it “strictly complies with local laws, guidelines, and protocols, while adhering to internationally recognized ethical and legal standards.”

Oil prices fall as Delta variant spread weighs

By Ahmad Ghaddar

LONDON (Reuters) -Oil prices fell sharply to a two-week low on Wednesday as the spread of the coronavirus Delta variant in top consuming countries outweighed the impact of Mideast geopolitical tensions and a fall in U.S. inventories.

Brent crude oil futures were down $1.80, or 2.5%, to $70.61 a barrel by 1349 GMT. U.S. West Texas Intermediate (WTI) crude fell $2.15, or 3.1%, to $68.41 a barrel. Both contracts were trading at their lowest since July 21.

“Worries continue to grow over the spread of the Delta variant in China, which has weighed heavily on oil prices in recent days,” analysts at bank ING said.

The United States and China, the world’s two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts anticipate will limit fuel demand at a time when it traditionally rises in both countries.

In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control.

An expected fall in U.S. oil inventories failed to arrest losses.

U.S. crude inventories fell by 879,000 barrels for the week ended July 30, according to two market sources, citing figures from industry group American Petroleum Institute (API).

Gasoline inventories fell by 5.8 million barrels and distillate stocks fell by 717,000 barrels, the data showed, according to the sources, who spoke on condition of anonymity.

Official Energy Information Administration numbers are due later on Wednesday.

Tensions in the Mideast Gulf also supported prices.

On Tuesday, three maritime security sources claimed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates, though Iran denied the reports.

This is the second attack on a tanker since Friday in the region, which includes the Strait of Hormuz. The United Kingdom and the United States are also blaming Iran for the earlier incident, in which drones crashed into the vessel and killed two sailors. Iran denies the reports.

(Additional reporting by Naveen Thukral in Singapore; editing by Jason Neely and Barbara Lewis)