Taiwan’s Diplomatic Warning Over Prolonged China-Japan Tensions

Taipei's Role and Soft Diplomacy

Call for Responsible Regional Behavior

Source: Reuters

Japanese and Chinese vessels engaged in a fresh standoff around disputed islands on Tuesday, the two countries' coast guards said.

Relations have been strained since Japan's new Prime Minister Sanae Takaichi suggested last month that her country could intervene militarily in any Chinese attack on Taiwan.

Japan's coast guard said two Chinese coast guard patrol ships entered Japan's territorial waters around the Senkaku Islands in the East China Sea in the early hours of Tuesday, and left a few hours later.

The Japanese-administered Senkaku Islands, known as the Diaoyu in China, have been a regular flashpoint between the two nations over the decades.

After the patrol ships sailed toward a Japanese fishing boat, a Japanese coast guard vessel issued a demand that they leave the waters, the Japanese coast guard statement said.

"The activities of Chinese coast guard vessels navigating within Japan's territorial waters around the Senkaku Islands while asserting their own claims fundamentally violate international law," it said.

The statement added that the two Chinese vessels, and others, were still in the area.

China Coast Guard spokesman Liu Dejun said that a Japanese fishing vessel "illegally entered China's territorial waters."

"China Coast Guard vessels took necessary control measures and made warnings to drive it away," Liu said on the China Coast Guard's official WeChat account.

"The China Coast Guard will continue to conduct rights protection and law enforcement activities in the waters around the Diaoyu Islands, resolutely safeguarding national territorial sovereignty and maritime rights," he added.

It followed a similar incident around the islands on November 16, around a week after Takaichi's comments, Kyodo News reported.

China claims self-ruled Taiwan as part of its territory and has not ruled out using force to take the democratic island.

Beijing has urged its citizens to avoid travel to Japan and a number of cultural events have been hit — including the halt of a performance by a Japanese singer in Shanghai on Friday.

Aside from reportedly renewing a ban on Japanese seafood imports, China has however so far stopped short of imposing more serious economic measures such as curbing exports of rare earth metals.

Source: Koreatimes

As Europe embarks on a historic rearming effort, its defense companies are scrambling for a vital component in high-tech weapons: rare earth minerals, which more nimble US rivals are scooping up.

Despite a one-year rare earths trade war truce between the US and China, Beijing maintains tight controls on supplies and prohibits sales to companies that produce weapons.

That has made stockpiles already outside China even more precious — European rare earths supplies may begin running dry in months by some estimates — and incentivized defense companies to be quick and ruthless in securing them.

So far, US companies have been much better at navigating that landscape than their European counterparts.

"If we look at how long it takes us on average to sell, say, a ton of terbium to a European partner, we're talking about three to four weeks; with the Americans it's more like three to four days," said Tim Borgschulte, chief financial officer at Berlin-based critical raw materials trader Noble Elements.

Rare earths are necessary for defense components such as advanced sensors and precision motors, used in everything from frigates to fighter jets to military drones. Component makers are already feeling the squeeze.

Dwindling stockpiles in Europe may leave just months before production is affected, according to a person familiar with the matter at a European defense company.

Jan Giese, senior manager for rare earth elements at Frankfurt-based metals trading company Tradium GmbH, said US defense companies are using their heft and financial firepower to secure supplies and funnel them as far upstream as they can to component suppliers.

This can mean less scrutiny of the transaction and obscures a portion of the supply chain — a hedge against harsher restrictions from China. It also ensures component suppliers have what they need.

By contrast, European defense companies are trying to buy rare earths directly, without coordinating with suppliers, and with little government support. Borgschulte said his defense customers often don't know the quantity and quality of rare earths they need and when they need them, creating last-second purchases that fall short of requirements.

US companies are more creative with how they use supply chain knowledge, Giese said.

"The Americans have a sense of urgency, a financial might and people with both mandates and expertise making decisions, all of which are things that Europe is sorely lacking," he said.

A person familiar with the matter at a German defense company said their US counterparts were much more aggressive in the European market. The Americans' speed at tracking down and buying rare earths has left the company with just small amounts available at high prices, the person said.

Chinese rare earths sold before April 2025, when defense export restrictions went into force, are snapped up quickly. It is difficult to quantify the amount of rare earth elements in circulation because of high turnover rates.

There are no EU restrictions on where rare earths in Europe can be sold or shipped, opening the door to outflow to other continents.

The US has prioritized becoming more independent from Chinese supplies and taken a government stake in MP Materials Corp., which operates the only US rare earths mine, in California. The US Department of Defense will pay guaranteed minimum prices for MP Materials' supplies for a decade, protecting the company from sudden market swings.

For its part, the EU adopted the Critical Raw Materials Act in 2024 and this week is set to anniunce the details of its new RESourceEU initiative. Both are meant to decrease resource dependence on China by developing domestic supply chains and critical minerals partnerships with other countries outside the bloc. German development bank KfW set up a €1 billion raw materials fund a year ago.

Armin Papperger, chief executive officer of Germany's biggest arms maker, Rheinmetall AG, said on an earnings call in early November that the company was conducting weekly raw material stress tests. He noted that its automotive business faced greater difficulties than its larger defense branch because it needed more rare earths.

"We have billions in our stock at the moment," Papperger said on the call in reference to critical materials and components.

Smaller companies can't often afford such measures, and rare earths stockpiling creates the risk of getting stuck with costly excess.

Hans Christoph Atzpodien, chairman of the Federation of German Security and Defence Industries, disputed that European companies were unprepared for China's rare earths restrictions. He noted that processing — not mining the minerals themselves — was the main hurdle for creating domestic supplies.

"Rare earths are also found in Europe and even in Germany. However, in the past, we have been happy to outsource processing to China, which is no longer feasible," Atzpodien said in a statement from the association.

Rare earths processing produces hazardous byproducts, which makes it difficult to get regulatory approval, and many European countries lack refining technology. In France, Borgschulte said, some rare earths companies have lured workers out of retirement so they can rebuild institutional knowledge.

Germany is negotiating a potential submarine deal with Canada that could include Berlin's investing in mining and processing there. Canada has some of the world's largest rare earth reserves, estimated by the government at over 15.2 million tonnes.

European allies should work together on making rare earth supply chains less reliant on China, said Thorsten Benner, co-founder and director of the Global Public Policy Institute in Berlin.

"It has to be: 'Whatever it takes' — just like in the Euro crisis," he said.

Source: Bloomberg Europe

China's yuan slipped on Tuesday, retreating from a 14-month peak against the dollar hit in the previous session, as the central bank again used its official guidance rate to signal caution over a recent spike in the Chinese currency.

Market participants closely watch the People's Bank of China's (PBOC) daily midpointfixing for any subtle signals about the official stance on the foreign exchange market.

The central bank has been generally setting the midpoint firmer than market expectations since last November. However, the official fix came in weaker than market projections for the fourth straight session on Tuesday, the longest such streak since last September, a move traders interpreted as an effort to slow the pace of yuan rises.

Prior to market opening, the PBOC set the midpoint rateat 7.0794 per dollar, its weakest since November 26, and 48 pips weaker than a Reuters estimateof 7.0746. The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.

"It appears aimed at arresting the recent rapid declines in the dollar/yuan pair," said a trader at a foreign bank.

The onshore yuantraded at 7.0745 per dollar as of 0412 GMT, down from a 14-month high of 7.0650 hit a day earlier. Its offshore counterpartstood at 7.0709.

Apart from the broad dollar weakness, recent strength in the yuan also comes as companies have higher seasonal demand for yuan towards the year-end, when many exporters settle their foreign exchange receipts for various administrative requirements and for their employees.

"Exports have shown overall strength this year ... leading to a concentrated demand for foreign exchange settlement among enterprises," analysts at GF Securities said in a note.

"Some companies might have anticipated potential dollar volatility if the Federal Reserve lowers rates in December. Consequently, they are inclined to settle foreign exchange promptly during the current favorable period to lock in their income in yuan."

The yuan has gained about 3.2% versus the dollar year-to-date and looked set for the biggest annual rise since 2020.

Rapid one-way moves on either side of the currency are never ideal for policymakers as they could trigger a herd effect and lead to a market stampede, currency traders said.

Guan Tao, global chief economist at BOC International and a former senior official with the country's foreign exchange regulator, also warned "against betting on one-sided FX market movements."

Source: TradingView

Flowers are seen next to the buildings of the Wang Fuk Court housing complex after the deadly fire in Tai Po, Hong Kong, China, Dec. 2. Reuters-Yonhap

Hong Kong will set up an independent commission of inquiry headed by a judge to determine the cause of a deadly apartment block fire that shocked the city and make recommendations to prevent a similar tragedy from happening again, its leader said Tuesday.

John Lee, the chief executive of the Chinese region, pledged to overcome vested interests and pursue accountability for a fire that killed at least 151 people.

"We must uncover the truth, ensure that justice is served, let the deceased rest in peace and provide comfort to the living," he told the media at a 30-minute weekly appearance completely dominated by last week's blaze.

The fire started in scaffolding that had been set up around the Wang Fuk Court complex for maintenance work and spread to seven of the eight towers. They were home to more than 4,600 people and many have been left homeless .

The initial investigation has focused on why the fire expanded so rapidly, overwhelming firefighting efforts.

Authorities have cited both high winds and substandard materials used for the maintenance work — both highly flammable foam panels that had been used to block the windows and the green netting — which is required to be flame-retardant — hung around the scaffolding.

Lee said that those responsible had mixed substandard netting with qualified netting "so as to cheat the inspection."

Police and the city's anti-corruption authorities have already detained 14 people, including the directors and an engineering consultant of a construction company. Thirteen of them have been arrested on suspicion of manslaughter.

Source: Koreatimes

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Source: CNBC