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China signs Venezuela oil deal

Chinese President Xi Jinping has signed a series of oil and mineral deals with Venezuela.

They include a $4bn credit line in return for Venezuelan crude and other products.

The agreements came on the latest stop of a four-country visit to Latin America.

Mr Xi has already signed key deals in Argentina and Brazil. He has now departed from Venezuela and will visit Cuba next.

In Argentina the Chinese leader agreed to an $11bn currency swap providing much needed money for the government of President Cristina Fernandez de Kirchner.

Argentina has been locked out of the international capital markets since a default in 2001.

Mr Xi also helped launch a new development bank alongside the other emerging powers of the Brics group - Brazil, Russia, India and South Africa - at the summit in Brazil.

The new bank is intended to create an alternative to the Western-dominated World Bank.

Chinese trade with Latin America has grown rapidly. It is now the second-largest trading partner in Argentina and Cuba, and has been Brazil's largest since 2009.

China is the second-largest market for Venezuelan oil after the United States.

Analysts say the underlying purpose of the visit has been to secure more natural resources from Latin American countries to fuel China's long term economic expansion.

The Chinese president is now on his way to Cuba where he will meet President Raul Castro.

The Communist-led island and China are long-term close political allies and China has given Cuba generous trade credits in the past.

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Sorry, typo: 'resources'

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Forbes Media sold to Hong Kong's Integrated Whale

After 97 years of family ownership, Forbes Media has announced it has sold a majority stake in the company to a Hong Kong-based group of international investors, Whale Media Investments for an undisclosed sum.

Steve Forbes will remain as chairman and editor-in-chief.

Forbes - which says it reaches 75 million people worldwide every month through its print, digital, TV, conferences and research ventures - began looking for a buyer last November.

Forbes will continue to be headquartered in the US, but announced plans for an international expansion.

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Malaysia Air disaster: The financial fallout for Russia, E.U.

The downing of a Malaysian airliner over Ukraine Thursday is likely to ramp up hostilities between Russia and the West, ultimately leading to tougher economic sanctions for Moscow and increased fighting in eastern Ukraine. Russian President Vladimir Putin will come under intense domestic pressure to increase support for Ukrainian separatists in the wake of the tragedy, putting the Kremlin in a difficult position vis-à-vis the West. The situation could quickly spin out of control, leading to dire economic consequences for Russia as well as for the dozens of U.S. and European companies that do business there.

While the investigation into the crash of Malaysia Airlines flight 17 is just getting underway, the evidence so far suggests that the Boeing 777 aircraft, with nearly 300 people on board, was brought down by a missile launched by Russian-backed Ukrainian separatists. One of the leaders of the separatist movement, Igor Stelkov, boasted on his Twitter feed yesterday morning that his men had just shot down a Ukrainian cargo plane at the same time and place the Malaysian airliner fell from the sky. Coincidence? Doubtful. Those Tweets have since been removed.

While it is becoming increasingly clear who shot the plane down, the motive behind the crash remains a mystery. How could anyone confuse a massive Boeing 777 aircraft with an old Soviet-era cargo plane half its size? How could a rag-tag group of rebels even get ahold of a weapon powerful enough to blow a commercial airliner out of the sky traveling at an altitude of 33,000 feet? And what was a commercial Asian airline doing flying over the conflict zone in the first place?

Well, mistakes happen in war and it could very well be the case that an itchy trigger finger is to blame here. The separatists had downed two Ukrainian military aircraft in the area earlier in the week, a cargo plane and a fighter jet, so we know that planes were being targeted. Protocol may have been ignored in the haste to get another kill. Fear of being bombarded by the Ukrainian Air Force may have also clouded the judgment of the fighters on the ground.

As for how the separatists could have even shot down a plane traveling at such high altitude, well, Russian media reported a few weeks back that the separatists had taken possession of a long-range mobile missile system during a raid on a Ukrainian military supply depot in the east of the country. The cargo plane the separatists shot down earlier in the week was traveling at an altitude well above the range of a hand-held rocket launcher, meaning that they were indeed in possession of a powerful surface-to-air missile system, one that could easily shoot down a plane traveling at 33,000 feet.

The Malaysia Airlines jet wasn’t being reckless in flying over Ukraine, it was just one of hundreds of planes flying on one of the established air superhighways, the L980, which connects Europe and Southeast Asia and goes through Ukraine. The jet, which took off from Amsterdam on its way to Kuala Lumpur, wasn’t the only airliner using the L980 that day. Indeed, at the time the aircraft lost contact with the ground, both a Singapore Airlines Boeing 777 and a brand new Air India Boeing 787 were both no more than 15 miles away in either direction.

So, what happens next?

While Russia supports the separatists with intelligence, training, and possibly cash and small arms, they aren’t providing significant military assistance. If the Russian military were conducting operations in the country, then Kiev would be smoldering. The truth is that the separatists are getting pounded badly by Ukraine and Russia has done very little to stop it. In the battle for Donetsk in June, for example, Russia stood on the sidelines as Ukrainian troops killed scores of separatists and retook control of the airport. The Ukrainian Air Force is now in full control of the air space above the combat zone and has conducted bombardments against civilian and military targets with little resistance, save for the surface to air missiles. But even then, the separatists are terribly outgunned and outmanned.

The Russian media, even the state-controlled media, have been critical of President Putin’s restraint in the matter. His popularity rating has taken a nosedive since Ukraine began its offensive against the separatists last month. While Putin isn’t interested in a full-scale invasion of the Ukraine or in annexing Ukraine’s eastern territories, he may no longer have any choice in the matter. At the very least, Putin will be compelled to institute some sort of “no-fly zone” over eastern Ukraine. While that falls short of an invasion, it does eliminate the Ukrainian air advantage over the separatists, making it much harder to fight them.

President Obama first heard of the Malaysian crash Thursday morning while on a conference call with President Putin. The two were discussing the latest round of U.S. sanctions against Russia announced on Wednesday. These sanctions were similar to others the West had levied against Russia over the Ukrainian affair—pretty weak. The latest sanctions would primarily limit U.S. investors and banks from engaging in long-term financing agreements with Rosneft, Russia’s state-controlled oil company. This will hurt the company’s ability to refinance its debt, but the firm could easily seek alternative financing from Asian and Middle Eastern sources. In any case, Rosneft’s interest coverage, which measures a company’s ability to cover its debts, is around 13, meaning it is more than capable of making its debt payments.

The E.U. didn’t match the U.S. sanctions on Wednesday; rather, it “urged” the European Investment Bank to refrain from signing new financing agreements with Russia. It also suspended operations financed in Russia by the European Bank for Reconstruction and Development.

But with the majority of those killed in the crash being E.U. citizens—mostly Dutch headed to Asia and Australia on holiday—the E.U. might rethink their position and end up matching the U.S. sanctions.

Granted, it is much easier for the U.S. to ratchet up its sanctions against Russia as it is far less dependent on the country economically compared to the E.U. Sure, the Russians can kick ExxonMobil out, but that would do more harm to Russia than to the U.S. as the Russians need Exxon’s expertise to help them tap their oil reserves. The most exposed U.S. companies are some of the nation’s largest multi-nationals like Boeing, General Motors, and Cargill. But the Russian market isn’t so significant to any of those companies; losing access to Russia would not in any way sink them.

By contrast, E.U. companies have significant investments in Russia—around 50% of all imports entering Russia come from the E.U., making it a very important consumer of E.U. goods and services. Germany has probably the most to lose here, as its companies have forged very close relationships with Russia over the years. German chemical maker BASF, for example, derives around a quarter of all of its sales from Russia, while German clothing maker Adidas counts on Russia for 16% of its total sales.

Energy is the real biggie here, though, accounting for around 75% of the total trade between Russia and the E.U. Russia supplies around a third of the E.U.’s natural gas. Tougher sanctions could end up hurting Europe as hard, if not harder, than it would Russia.

But economics tend to take a back seat to safety. If E,U, citizens feel threatened by an increasingly aggressive Russia, then the E.U. will have no choice but to impose stronger sanctions, no matter the cost. Such dire economic consequences may be the key to finally force both Putin and Ukraine to the bargaining table.

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Despite memories of decades of Cold War frostiness, Beijing is now quite chummy with Moscow.

On July 18, shortly after Malaysia Airlines Flight 17 crashed over eastern Ukraine, extinguishing 298 lives, China’s Xinhua state news agency cautioned against making snap judgments. The U.S. and other Western nations had begun to finger pro-Russian rebels in Ukraine for shooting down the Boeing 777 passenger plane, but Xinhua dismissed such accusations as “rash” and took the opportunity to swipe at Western democracies for their condemnation of Russia’s earlier military intervention in Ukraine:

“The one-sided accusation is not surprising in light of their long-time stance on the crisis in eastern Ukraine, and their attitude towards Russia’s absorption of Crimea in March. But without convincing evidence, jumping to a conclusion will only heighten regional tension and is not conducive to finding out the truth.

Russian President Vladimir Putin late Thursday said it is Ukraine that bears the responsibility as the tragedy occurred over its territory. The tragedy, Putin said, could have been avoided should Ukraine’s eastern regions be in peace.

On July 21, the People’s Daily, the Chinese Communist Party’s mouthpiece, ran a piece still cautioning that “no proof has been found so far to clarify the cause or identify the perpetrator.” Nowhere did the story mention the likelihood that pro-Russian rebels had trained a missile on MH17 as it flew from Amsterdam to Kuala Lumpur.

The same day, the Global Times, a Chinese Communist Party–linked daily that can be counted on for nationalist commentary, did at least mention such a possibility — if only to decry Western governments’ speculation that Russia may have aided and abetted the rebels’ cause:

“The Western rush to judge Russia is not based on evidence or logic. Russia had no motive to bring down MH17; doing so would only narrow its political and moral space to operate in the Ukrainian crisis. The tragedy has no political benefit for Ukrainian rebel forces, either. Russia has been back-footed, forced into a passive stance by Western reaction. It is yet another example of the power of Western opinion as a political tool.

The crisis in Ukraine had already put China in a difficult position. Despite memories of decades of Cold War frostiness, Beijing has boosted its ties with Moscow. The two neighbors share an antipathy toward Western democratic values and a mutual interest in natural resources. The first foreign trip Xi Jinping made as President was to Russia in March 2013.

Yet China also proclaims that one of its foreign-policy bedrocks is staying out of other nation’s internal affairs. Russia’s invasion of Crimea — which Xinhua delicately termed an “absorption” — cannot be considered as anything but a gross interference in Ukraine’s internal affairs. Beijing is struggling with separatist sentiment at home, most notably among Tibetan and Uighur populations in China’s far west. How can Chinese foreign-policy makers support an ethnic rebel movement over a national government, even if those separatists do have Russia’s tacit blessing?

China may soon have to reconcile this foreign-policy quandary. “It will bring about a severe challenge to China’s general strategy and diplomacy if America and Europe propose sanctions against Russia and demand China should join with them,” wrote Chinese security analyst Gao Feng in a widely disseminated blog post. “For China, the issue is which side it should choose. Without doubt, an ambiguous stance [by Beijing] will face criticism and moral pressure.”

There were no mainland Chinese nationals on MH17. By contrast, Malaysia Airlines Flight 370, which vanished in March en route from Kuala Lumpur to Beijing, was filled with Chinese passengers. As the Malaysian investigation into that plane’s disappearance foundered, Chinese authorities allowed MH370 families to stage protests in Beijing — a rarity in a nation allergic to public displays of dissent.

This time around, official Chinese sentiment has steered clear of blaming Malaysia for the Ukraine tragedy. Instead, West-bashing has predominated. “The West has successfully put itself in a position to dictate ‘political correctness’ in international discourse,” said the Global Times editorial on MH17 on Monday. “Those unwilling to work with Western interests will often find themselves in a tough position.” Criticism of the West even extended beyond the tragedy of MH17. On July 21, Xinhua publicized a new campaign of “intense ideological education for officials to strengthen their faith in communism and curb corruption.” First on cadres’ to-do lists? Keeping a “firm belief in Marxism to avoid being lost in the clamor for western democracy.”

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Asia Pacific became Volkswagen group’s biggest market

For the first 9 months of year 2013, Volkswagen Group has registered sales growth of 4.8% worldwide year-on-year. Traditionally Western Europe was their largest market, but for the first time Asia Pacific became the most productive market for VW group. Audi and Porsche have been major contributors to the outcome. The market recovery of China as per forecast had played a big role in making VW succeed in the region.

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The scenario stays imminent if they manage to pull out positives from the remaining three BRIC markets; soon enough VW will be the number one automotive manufacturer in the world.

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In Hong Kong, Tens of Thousands March for Democracy

When typhoons begin to lash along Asia’s coastlines each midsummer, Hong Kong usually manages to escape serious damage, since storms in the South China Sea tend to lose their muster over the Philippines and Taiwan by the time they make landfall. Some locals will cheekily boast that the city, constructed across an archipelago and on a peninsula extending south of the Chinese mainland, is protected by an invisible dome that blocks out these tempests.

But weathering political storms may be a different story for the former British colony, now a semiautonomous territory under the controversial domain of the Beijing government. On one hand, inside this proverbial dome a vibrant society enjoying free press and rule of law has flourished alongside — or rather, within — the last superpower on earth to describe itself as a communist state. On the other, some conflicting visions of this duality have spurred a more existential political unhappiness in Hong Kong, one that some believe is approaching boiling point.

On Tuesday, up to 500,000 people are slated to march on the city’s central financial district, in what in years past has encompassed myriad domestic grievances while commemorating the official end of British rule 17 years ago. This year’s protest, however, forms the loudest testament yet to mounting opposition to just one thing: China.

The call of the day — and, for some political dissenters, of the past five years — is for “universal suffrage.” Beijing has agreed to enact electoral reforms, most importantly the direct election of Hong Kong’s Chief Executive — the territory’s highest office — by 2017, but only from a list of preapproved candidates who must be “patriotic.” Nearly 800,000 Hong Kongers voted in an unofficial plebiscite that ended on Sunday and instead called for open nominations. Beijing deemed that referendum illegal.

At present, there are 3.5 million registered voters in this Special Administrative Region, but virtually none of them have ever cast their ballot in the quinquennial elections for the Chief Executive. The position is instead appointed by a 1,200-seat election committee, whose decision ostensibly reflects both the wishes and interests of the people of Hong Kong.

Critics of the system — and there are increasingly many — scoff at this presumption. Under the Basic Law, Hong Kong’s hundred-plus-page de facto constitution, the majority of seats on the election committee are occupied by individuals hailing from Big Business and various professional sectors, with only a small fraction reserved for legislators directly represented by the people. Some point to this as a plainly and conspiratorially pro-China endeavor.

Within Hong Kong’s ideologically popular but politically fragmented pro-democracy camp, Lau and her party represent the moderate minority that believes some tapered form of “universal suffrage” is compatible with the current electoral system structured by the Basic Law. In other words, the existence of the election committee needn’t necessarily inhibit popular choice; what, Lau wondered aloud, if the latter had a role in determining the makeup of the former?

Given Beijing’s trademark stubbornness when it comes to amending Hong Kong’s constitution, Lau’s moderate stance may encourage the most pragmatic course of action. Say what you will about the Chinese government in Hong Kong, but it’s there to stay: Lau made a point to gesture outside her window to the 28-story headquarters of the People’s Liberation Army, just across the road from her office in the Legislative Council Complex.

But pragmatism doesn’t always prevail, and reactionism tends to be radical. The past five years have seen the rise of pro-democracy student groups that view a complete upheaval of the current election system as the only option, and any who oppose such a solution as traitorous to the cause of building a democratic Hong Kong.

For many of these activists, any gesture of political compromise with the Chinese government is a further sacrifice of Hong Kong’s autonomy. A civil-disobedience movement called Occupy Central threatens to paralyze the city’s main business district later this month, naturally incurring Beijing’s wrath. (Immediately after the July 1 march, a prominent students’ group is planning a rehearsal sit-in.)

“More and more young people are aware of the disappointments and failures of the Chinese central government,” says 22-year-old Johnson Yeung, convener of the Civil Human Rights Front, which organizes the July 1 protests. “We believe that civil disobedience is the best means of fighting for democracy.”

This sentiment of extremism has all but hijacked the pro-democracy stage in Hong Kong, with mixed results. While the “civil disobedience” endorsed by Yeung and the thousands marching through downtown Hong Kong on Tuesday has given an unprecedented voice to the city’s discontent with Chinese rule, it also threatens to intensify the political hostility coming from Beijing that prompted the discontent in the first place.

Last month, China released a white paper condemning the intensified push for democracy in Hong Kong, calling the understanding of the “one country, two systems” policy here “confused or lopsided,” as by definition it only operates at the behest of Beijing. On Tuesday morning, a pro-democracy group burned a copy of this document in protest.

The radical [pro-democracy] choice is loud, and potentially destabilizing. China feels its sovereignty has been infringed upon. But it has all the authority it wants — there’s nothing to stop it. It’s their territory, and they know that.

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China gets tough

China is in the midst of a serious economic and political transition and both are having global impact. Over the past decade or so the growth rate in China, with strong government control, has been amongst the fastest in the world. This has let to a marked shift in the attitude of many governments across Asia, Africa and Latin America, which have grabbed the opportunity to have a role model justifying a government-led approach.

In many ways this is a slight misreading of the Chinese model, as much of the country's economic dynamism stems from areas where the government has let go. What China does not tolerate are political challenges. China's hard line against Tibetans and Uighurs has led to a stiffening of separatist sentiment. A recent change of tone in official attitudes towards Hong Kong - bizarrely supported by the big four accounting firms - is also strengthening the hand of the territory's democrats, and risks provoking a backlash that could ultimately undermine the Communist Party. The Party has shown itself to be adept at managing the needs of business, but it is proving a much less skilful operator when it comes to the more nuanced task of building genuine rapport with all the diverse interests that make up its empire.

Does the increasingly vocal democracy movement make you think Hong Kong is a more or less attractive business destination?