2 Mar 2013

China Central Bank Says It Is "Fully Prepared For Looming Currency War" + Here Come…China’s Drones

Just in case Lagarde (and everyone else except for the Germans, who have a very unpleasant habit of telling the truth), was lying about that whole "no currency war" thing, China is already one step ahead and is fully prepared to roll out its own FX army. According to China Times, "China is fully prepared for a looming currency war should it, though "avoidable," really happen, said China's central bank deputy governor Yi Gang late Friday." We look forward to the female head of the IMF (International Mother Fuckers) explaining how China is obviously confused and that it is not currency war when one crushes their currency to promote "economic goals." Of course, that same organization may want to read "Zero Sum for Absolute Idiots" because in this globalized economy any attempt to promote demand (by an end consumer who has no incremental income and stagnant cash flow) through currency debasement has no impact when everyone does it. But then again, this is the IMF - the same organization that declared Europe fixed in 2009, 2010, 2011, 2012, 2013 and so on.
More on China's FX troop deployments:

Yi, vice governor of the People's Bank of China, made the comment amid widespread concerns that the world's major economies would drive down their units to gain a trade advantage through monetary easing policies. 

A currency war could be avoided, Yi said, if policymakers in major countries observed the consensus, reached at the recent G20 meeting, that monetary policy should primarily serve as a tool for domestic economy.


G20 members promised that they would not wage a currency war, but none have shown signs of scaling back monetary easing that has injected a flood of cash into global markets. They worry that removing the stimulus will plunge their economies into another recession.

"China is fully prepared," Yi said. "In terms of both monetary policies and other mechanism arrangement, China will take into full account the quantitative easing policies implemented by central banks of foreign countries."
What probably requires clarification is whether the PBOC will tie up its currency, already pegged to the USD, to the Yen, or the Pound, or whatever is the worst performing currency du jour, and adjust the CNY trading band on a daily basis.
What certainly demands clarity is just how will crushing the Chinese currency prevent the kind of soaring energy and food inflation that led to an explosion in civil unrest and disobedience in 2011, and when it took an abrupt end to the devaluation of all central banks to prevent an inflationary conflagration first in China, and then across the world.
We hope to get the answer to both soon, because once you pop (the first FX war shot), you don't stop, until someone's currency hits rock bottom. 

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Here Come…China’s Drones
Trefor MossBy Trefor Moss: Unmanned systems have become the legal and ethical problem child of the global defense industry and the governments they supply, rewriting the rules of military engagement in ways that many find disturbing. And this sense of unease about where we’re headed is hardly unfamiliar. Much like the emergence of drone technology, the rise of China and its reshaping of the geopolitical landscape has stirred up a sometimes understandable, sometimes irrational, fear of the unknown.
It’s safe to say, then, that Chinese drones conjure up a particularly intense sense of alarm that the media has begun to embrace as a license to panic. China is indeed developing a range of unmanned aerial vehicles/systems (UAVs/UASs) at a time when relations with Japan are tense, and when those with the U.S. are delicate. But that hardly justifies claims that “drones have taken center stage in an escalating arms race between China and Japan,” or that the “China drone threat highlights [a] new global arms race,” as some observers would have it. This hyperbole was perhaps fed by a 2012 U.S. Department of Defense report which described China’s development of UAVs as "alarming."
That’s quite unreasonable. All of the world’s advanced militaries are adopting drones, not just the PLA. That isn’t an arms race, or a reason to fear China, it’s just the direction in which defense technology is naturally progressing. Secondly, while China may be demonstrating impressive advances, Israel and the U.S. retain a substantial lead in the UAV field, with China—alongside Europe, India and Russia— still in the second tier. And thirdly, China is modernizing in all areas of military technology – unmanned systems being no exception.
New unmanned missions
Nonetheless, China has started to show its hand in terms of the roles that it expects its growing fleet of UAVs to fulfill. In a clear indication that the People’s Liberation Army (PLA) has an operational armed UAV capability in which it feels relatively confident, last week reports of a plan to send a UAV into Myanmar to assassinate a drug trafficker who had murdered 13 Chinese nationals came to light. The Chinese government ultimately rejected this tactic, but it is evidently tempted to follow Washington’s lead in reserving the right to use UAVs to target enemies of the state, even on foreign soil.
Territorial disputes in the East China Sea and the South China Sea have also persuaded Beijing to accelerate its deployment of UAVs, which are ideally suited to maritime surveillance missions. UAVs are already used routinely to monitor the disputed Diaoyu/Senkaku islands, a PLA general recently claimed. “[Both China and Japan] seem intent on establishing more presence in these disputed zones,” comments Peter Singer, Director of the Center for 21st Century Security and Intelligence at the Brookings Institution,“both to establish their own claims … and to watch what the other is doing. UAS are helpful in those aims, especially with their longer duration versus traditional manned platforms.” The PLA Air Force has also converted its obsolete J-6 fighters into UAVs; based in Fujian, the J-6s are apparently being used for Diaoyu surveillance, as well as being expendable strike assets in the event of an armed engagement.
Nor is China’s deployment of UAVs limited to the military realm. The government of Liaoning Province is reportedly using UAVs to monitor the North Korean border, and is also said to be establishing two coastal UAV bases from which it will oversee its areas of jurisdiction in the Yellow Sea and the Bohai Gulf. Meanwhile, the State Oceanic Administration (SOA) – one of China’s main maritime agencies – announced in August that it is setting up 11 UAV bases, one in each of China’s coastal provinces. It expects to have these bases up and running by 2015 (images of some of the SOA’s current UAVs can be seen here). It’s also worth recalling that all of China’s UAV advances have been enabled by the Beidou satellite constellation, which now includes 16 active satellites providing coverage across China and the Asia-Pacific.
If provincial governments and civilian law enforcement agencies plan to induct UAVs in tandem with the PLA, then that’s a large fleet of unmanned aircraft able to perform a variety of different functions that China will need to bring online over the next few years. But, there is no shortage of technology programs competing to make the cut.
China’s UAV programs
Dozens of Chinese UAV concepts have appeared over the years, most of which will never leave the laboratory, let alone the runway. However, the Chinese aerospace sector has clearly devoted a great deal of energy to producing a range of designs from which the PLA has been able to cherry-pick. Chinese engineers have also been able to draw on Israeli technology, having acquired Harpy UAVs from Israel Aerospace Industries in the 1990s. “They've gone in the last few years from having none in development to at least 25 different models displayed at arms shows,” says Singer.“So, it’s a very ambitious program. But again, it parallels their growth in capabilities and ambitions in many others beyond UAS, from jet fighters to missiles.” He warns against overhyping China’s UAV effort, noting that for now “we’re talking very small numbers [of Chinese UAVs] … and not yet near U.S. capabilities.”
If the example of the U.S military is anything to go by, the PLA should only have operational requirements for around six to ten UAVs. It appears closer to filling some of these operational niches than others.
The China National Aero-Technology Import & Export Corporation (CATIC) has developed a number of ASN series UAVs, at least two of which appear to be in operational use. First is the ASN-15, a small intelligence, surveillance, target acquisition and reconnaissance (ISTAR) UAV similar to the U.S. RQ-11 Raven, a small, man-portable system able to perform basic battlefield ISTAR duties. Second is the ASN-209 medium altitude and medium endurance UAV comparable to the U.S. ScanEagle, a larger ISR asset than the Raven with up to 20 hours of flight time for longer-range battlefield and maritime surveillance. The ASN-209 is probably the same aircraft as the “Silver Eagle” which was widely reported to have taken part in naval exercises over the South China Sea in 2011.
Vertical takeoff UAVs (VTUAV), which are especially useful for naval ISTAR and fire control, are also beginning to enter service (though the U.S. Navy’s comparable MQ-8 Fire Scout is itself yet to receive operational clearance). A PLA Navy frigate was pictured in 2012 operating what was probably one of the 18 Camcopter S-100s China acquired from Austrian company Schiebel, supposedly intended for civilian use. Another VTUAV, the SVU-200, made its first flight late last year, while a third unmanned helicopter, the V750, recently entered civilian service. The PLA Navy is known to be exploring the possible applications of VTUAVs, including their use in anti-submarine warfare, and to be interested in the use of UAVs more broadly on its new and future aircraft carriers, not least because UAVs can significantly augment China’s anti-access/area denial (A2/AD) capabilities. “A2/AD places a premium on extending your range of monitoring and tracking targets from afar,” Singer says.“UAS are very helpful in that.”
Bigger, more advanced UAVs are also now breaking cover. Two in particular appear to be similar to the U.S.’s MQ-1 Predator and MQ-9 Reaper drones, medium altitude, long endurance (MALE) UAVs best known for conducting lethal operations in Pakistan and elsewhere. These are the Yilong/Wing Loong “Pterodactyl”, built by the Chengdu Aircraft Design and Research Institute (CADI), and the China Aerospace Science and Technology Corporation’s (CASC’s) CH-4. According to a recent Global Times report, the Yilong is primarily regarded as a Reaper-style strike aircraft, while the CH-4 is more of a multi-role aircraft that will be deployed by civilian agencies, as well as by the military, for surveillance purposes, though it can also be weaponized. These two UAVs appear to be in the same class as the CH-91, built by Aerospace Long March International (ALIT), an ISTAR system which is reported to have already entered production, and the more advanced CH-92, which is due to enter production in 2014. A similar class of UAV, the WJ-600, has been showcased by the China Aerospace Science and Industry Corporation (CASIC), though this system – which is jet-powered, unlike the propeller-driven Yilong and the CH-4 – was not seen at the most recent China Air Show.
Finally, the Chengdu Aircraft Industry Corporation is working on the Soaring Eagle, an analogue of the RQ-4 Global Hawk, Washington’s high-altitude, long-endurance (HALE) UAV. Recent pictures of a Soaring Eagle on the runway suggest that its development is moving forward effectively. There are also hints that China is working on a stealthy UAV called the Wing Blade, which is reminiscent of the U.S.’s black-budget RQ-170 Sentinel, while a stealthy Unmanned Combat Air Vehicle (UCAV) called the Dark Sword – perhaps along the lines of the U.S. Navy’s experimental X-74B – may also be in development. Chinese technicians are also undoubtedly experimenting with a new generation of nano-UAVs, like the Black Hornet micro-helicopter now in action with the British Army.
China’s drone boom
The aerospace sector must now supply huge demand from both the PLA and civilian authorities. So it is not hard to envisage several of these seemingly competing UAVs, rather than just one winner, being produced in large numbers in order to help the defense industry meet its growing demand. In fact, last November a senior CASIC executive forecast that Chinese UAV sales would double in 2013.
Chinese firms also have high hopes for export sales. The Predator-style CH-4 in particular is being pushed for export, and was displayed at the recent IDEX defense expo in Abu Dhabi. The system is part of CASC’s CH “Rainbow” family of drones, and is understood to be an upgraded version of the CH-3 UAV, which China has already sold to Pakistan. The Yilong has also “already successfully entered the international market”, according to Chinese sources quoted by RIA Novosti at the recent China Air Show.
China has rightly identified a gap in the market, with relatively few countries having inducted UAVs so far, and few capable of building drones themselves, the low cost of Chinese systems will certainly be an advantage. A U.S. Predator costs around $4.5 million, while a Reaper is closer to $10 million for countries that manage to obtain clearance to buy them. Chinese sources have claimed that their equivalent UAVs cost less than $1 million, making them a highly affordable capability for a host of international customers, especially those unable or unwilling to source U.S. and Israeli technology.
So if there is an alarm bell worth ringing about the emergence of Chinese UAVs, it is probably not the threat they will pose to the U.S. or Japan in the Asia-Pacific – it is the proliferation to the developing world of armed, unmanned systems that China’s low prices, and even lower export barriers, may soon begin to drive

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