Clinton heads to China and into dissident drama - Reuters

1 of 4. Paramilitary police officers guard the entrance to the U.S. embassy in Beijing April 30, 2012. The United States faces a tense week in China as high-level talks on trade and global hot spots like Iran and North Korea open in the shadow of a blind Chinese activist's bold escape from house arrest to seek U.S. protection in Beijing.

Credit: Reuters/Petar Kujundzic

By Arshad Mohammed and Chris Baltimore

WASHINGTON/MIDLAND, Texas | Mon Apr 30, 2012 11:54pm EDT

WASHINGTON/MIDLAND, Texas (Reuters) - President Barack Obama nudged China on Monday to improve its human rights record and his top diplomat said she will raise the issue in Beijing this week, but both stayed mum about a Chinese dissident said to be under U.S. protection.

At a news conference, Obama appeared to be walking a fine line between not saying anything that would make it harder to resolve Chen Guangcheng's case while conveying U.S. concern for human rights and appreciation for wider cooperation with China.

Chen's case arose as the U.S. secretaries of state and treasury prepared to travel to China for talks on Thursday and Friday with senior Chinese officials, an annual meeting likely to be overshadowed by the fate of the blind dissident.

Chen, who has opposed forced abortions in China, escaped house arrest in rural China and is under U.S. protection in Beijing, according to a U.S.-based rights group, creating a diplomatic dilemma for the world's top economic powers.

Analysts said the dissident appears to have two options: going into exile, which he has told associates he does not want to do, or getting the Chinese authorities to allow him to live in freedom within China, a challenge at best.

Bob Fu, whose religious and political rights advocacy group ChinaAid is the chief source of information on Chen, suggested the most plausible solution would be for him to leave China for the United States with his family, ostensibly for medical care.

"Another option that is more realistic is for him and his family to come to the U.S., face-savingly for the Chinese government, to receive medical treatment," Fu told Reuters in an interview in Midland, Texas, where his group is based.

CLINTON TO RAISE 'EVERY' ISSUE IN BEIJING

Neither Obama nor Secretary of State Hillary Clinton said a word in public about Chen, whose shadow will loom large at this week's U.S.-China Strategic and Economic Dialogue in Beijing even if he himself remains invisible.

Asked about Chen's case, Obama told a news conference: "Obviously I am aware of the press reports on the situation in China but I am not going to make a statement on the issue."

Obama said the issue of human rights comes up every time there are senior U.S.-Chinese talks, saying the United States does so both on principle and because "we actually believe China will be stronger as it opens up and liberalizes its own system."

"We want China to be strong, we want it to be prosperous and we are very pleased with all the areas of cooperation that we have been able to engage in," he said at a news conference with Japanese Prime Minister Yoshihiko Noda.

"But we also believe that that relationship will be that much stronger and China will be that much more prosperous and strong as you see improvements on human rights issues in that country," he said.

Clinton also ducked a question about Chen, but she hinted that she would not be shy about the matter in Beijing.

"A constructive relationship includes talking very frankly about those areas where we do not agree, including human rights," she told a news conference with the Philippine foreign and defense ministers.

"That is the spirit that is guiding me as I take off for Beijing tonight and I can certainly guarantee that we will be discussing every matter including human rights that is pending between us," Clinton added.

CHEN ADAMANT ABOUT STAYING IN CHINA

A senior U.S. diplomat, Kurt Campbell, U.S. assistant secretary of state for East Asian and Pacific affairs, flew to Beijing to work on a solution to the Chen case ahead of this week's U.S.-China Strategic and Economic Dialogue in Beijing, a source briefed on the matter said on Monday.

The U.S. State Department said nothing about Campbell's whereabouts over the weekend but on Monday confirmed he was in Beijing. A State Department spokesman described his trip as part of the preparations for Clinton's talks this week.

Associates of Chen said he is firmly against leaving China.

"He was adamant that he would not apply for political asylum with any country," said Guo Yushan, a Beijing-based researcher and rights advocate who has campaigned for Chen and helped bring him to Beijing after his escape.

Yang Jianli, who runs the U.S.-based pro-democracy group Initiatives for China, said he believed that both the United States and China would prefer that Chen go into exile but that he did not think the dissident would.

"He is not the (kind of) person who will give in," Yang said. "He is so determined to stay in China."

But Fu, who said he has spoken with senior U.S. diplomats in China about Chen's case, suggested the dissident ultimately may have little choice.

"At the end of the day that is the only option that is left, if he wants safety and freedom for himself and his family," he said.

The source briefed on the Chen case said Campbell, the senior U.S. diplomat who traveled to Beijing over the weekend, had an enormous challenge.

"I think Kurt is there to negotiate one of the two more favorable outcomes, either his asylum or his exoneration by senior Chinese officials so that he can return home to Shandong and live unmolested," said the source, saying this was an inference on his part.

"I don't think either of those outcomes is going to be easy to negotiate."

On Sunday a top Obama administration official, White House counterterrorism adviser John Brennan, declined to comment on the Chen case or whether the United States was protecting the dissident, but he neatly summarized the dilemma for Obama.

"I think in all instances the president tries to balance our commitment to human rights, making sure that the people throughout the world have the ability to express themselves freely and openly, but also that we can continue to carry out our relationships with key countries overseas," Brennan said on the "Fox News Sunday" television program.

(Additional reporting by Laura MacInnis, Paul Eckert and Andrew Quinn; Editing by Eric Walsh)

• Link this
• Share this
• Digg this
• Email
• Reprints

Brent holds above $119 as China offsets Europe, US gloom - Reuters

Mon Apr 30, 2012 10:59pm EDT

* China's April PMI at 53.3 vs 53.1 in March

* Spain in recession, U.S. economic growth slows

* U.S. crude stocks to post 6th weekly rise - poll

By Florence Tan

SINGAPORE, May 1 (Reuters) - Brent crude held steady above $119 a barrel on Tuesday as China's manufacturing activities grew, providing a bright spark amid a gloomier economic outlook in the euro zone and the United States that could depress fuel demand.

China's vast factory sector expanded at a slightly higher rate in April from the previous month, a sign that its economy may have bottomed out in the first quarter. The world's second-largest oil consumer is expected to account for nearly half of global incremental oil demand this year, according to the International Energy Agency.

Brent crude for June fell 17 cents to $119.30 a barrel by 0214 GMT. The front-month contract was down nearly 3 percent in April, its first loss in four months.

U.S. crude for June edged down 8 cents to $104.79 a barrel, after posting its first fall in seven sessions on Monday.

"China is still in an expansionary phase and we saw a slight tick-up on the month," said Ben Le Brun, a Sydney-based market analyst at OptionXpress. "That will offset that negativity we saw filtered through from Europe last night."

"We may see a bit of a delayed reaction as prices are not moving much in the Asian session."

On the negative side, debt woes in the euro zone continued to drag down its economies while growth in the United States, the world's largest economy, sputtered.

Spain, the fourth-largest economy in the euro zone, sank into a recession in the first quarter, its second in just over two years. Economists said spending cuts aimed at meeting strict EU deficit limits, together with a reeling bank sector, would delay any return to growth until late this year or beyond.

The U.S. economy appeared to down shift as it entered the second quarter, with consumers increasing their spending only modestly last month and a gauge of business activity in the Midwest falling sharply in April.

"We are forecasting a slowing in momentum in the U.S. manufacturing sector, but we believe this will be a consolidation rather than a sharp loss in momentum as was seen in 2011," ANZ analysts led by Mark Pervan said in a note.

MORE SUPPLY

Yet analysts' expectations for a sixth weekly rise in U.S. crude inventories and higher OPEC output in April could also weigh on prices.

OPEC's April output is at its highest since 2008 as extra crude from Iraq and Saudi Arabia has helped cover for tighter sanctions on Iran, whose own oil output has hit its lowest in two decades, a Reuters survey found.

"Unless OPEC curtails production - which we see as unlikely in today's elevated price environment - inventories should build above-normal through third quarter," Morgan Stanley analysts led by Hussein Allidina said in a note.

"A diplomatic solution to Iran's nuclear ambitions or a coordinated SPR (strategic petroleum reserves) release, both of which are increasingly possible, may also present additional downside."

In the United States, crude inventories likely rose for the sixth time in a row last week, due in part to rising domestic production, a preliminary Reuters poll of analysts showed.

U.S. gasoline prices are also under pressure as concerns about a supply shortfall eased after Delta Air Lines Inc announced that it will buy a Pennsylvania oil refinery from ConocoPhillips for $150 million. (Editing by Ed Davies)

• Link this
• Share this
• Digg this
• Email
• Reprints

Leaders in Beijing Feared Arab Spring Could Infect China - Bloomberg

Enlarge image

China Leaders Revealed Concern of Uprisings From Arab Rebellion

Bo Xilai attends the closing ceremony of China's National People's Congress at the Great Hall of the People in Beijing, on March 14, 2012.

Bo Xilai attends the closing ceremony of China's National People's Congress at the Great Hall of the People in Beijing, on March 14, 2012. Photographer: Nelson Ching/Bloomberg

Shortly after a Tunisian fruit vendor set himself on fire in 2010, some senior Chinese leaders began asking if the rebellions that followed throughout the Arab world could ignite similar uprisings in China, according to U.S. diplomatic and intelligence reports.

Some members of China’s ruling Politburo, the reports reveal, began musing about whether bribery and other abuses of power were undermining the Communist Party’s authority at least 16 months before the corruption scandal surrounding deposed party leader Bo Xilai shined an international spotlight on the issue. The reports were described by five U.S. officials familiar with the contents who spoke on the condition of anonymity because the intelligence is classified.

As the Arab Spring revolts spread from Tunisia to Egypt and Libya after vendor Mohamed Bouazizi’s self-immolation on Dec. 17, 2010, the reports said, some Politburo members questioned whether protests might follow against Chinese provincial politicians demanding bribes; local party officials confiscating land; and products and government services rendered shoddy by influence peddling, the U.S. officials said.

Now, U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy F. Geithner, who will arrive in Beijing this week to discuss such matters as North Korea and China’s currency, will find the country’s leaders preoccupied by the corruption scandal, a fugitive human rights activist, a leadership transition and slowing economic growth.

Insecure Leaders

“The leadership is quite insecure now,” said Michael Green, an associate professor of international affairs at Georgetown University and a former senior director for Asia at the National Security Council under President George W. Bush.

The fifth generation of leaders since Mao Zedong led China’s 1949 revolution will be appointed to take the helm of the Communist Party later this year. That historic shift already has been clouded by the Bo scandal and the case of activist Chen Guangcheng, who human rights advocates say is under U.S. protection in Beijing.

Both cases touch a sensitive nerve in China: the concern that foreign pressure could rouse some Chinese people against their leaders and upset the country’s stability, as they have at other times in the nation’s history.

The Chinese are watching a “soap opera” of murder and corruption surrounding Bo and his family, and they’re asking, “How could the system let someone like that emerge?” said Cheng Li, a senior fellow at the Washington-based Brookings Institution and a scholar of China’s leadership. “As people find corruption is out of control, the very legitimacy of China’s Communist Party is in jeopardy.”

Personal Gain

The state-run Xinhua News Agency said on April 14, four days after reporting that Bo had been suspended from the Politburo, “The spouses and children of some cadres have taken advantage of their power to seek personal gains, disregarding the law, thus stirring public outcry.”

Three days later, Xinhua said the Communist Party is “being confronted with the danger of a slackened spirit, incompetence, divorced relations from the people, inactivity and corruption.”

The U.S. officials said the Chinese leaders’ concern about popular protests prompted by the Arab Spring and now the Bo incident have been compounded by the knowledge that China’s “Great Firewall” on the Internet no longer can block reports of the Middle Eastern uprisings and domestic political scandals on social media, blogs, websites, and from Chinese students and business people in the U.S. and elsewhere.

Beijing Protest

The leadership’s concern wasn’t unfounded, as protesters gathered weeks after the Tunisian incident outside a McDonald’s restaurant in Beijing. While a government crackdown quickly ended the Feb. 20, 2011 rally, the “Jasmine Revolution” remained on social media, using computers and mobile phones mostly made in China, said one of the U.S. officials.

Kenneth Lieberthal, another scholar at Brookings, and other former and current U.S. officials who travel regularly to China said they’ve never seen so much open discussion of a political scandal in Chinese social media and among people they meet.

There’s been much to talk about. The wealth of just three relatives of Chongqing party chief Bo and wife, Gu Kailai, is at least $136 million, according to regulatory and corporate filings tracked by Bloomberg and reported on April 23. Bloomberg has also reported that the richest 70 members of the National People’s Congress have amassed assets of some $90 billion in a nation where the World Bank calculates that the average income last year was $4,428.

Bo Violations

Bo, 62, has been accused of serious violations of party discipline, and Gu is under arrest on suspicion of involvement in murdering a British businessman after an alleged scheme to launder and transfer funds overseas.

The unfolding account of murder and double-crossing is a drama worthy of Shakespeare, said Douglas Paal, who worked on China policy at the White House, the State Department and the Central Intelligence Agency under several administrations. “Imagine a centipede with 100 shoes and only three have dropped.”

The U.S. officials said they’re watching to see if the Chinese leadership responds to the Bo scandal by continuing to paint his as an isolated case, beginning a more aggressive crackdown on official corruption in the provinces, or urging party leaders at every level to curb bribe-taking and public extravagance by themselves and their offspring.

‘Bad Apple’

China’s leadership doesn’t want the investigation to go too far and will present Bo as “one bad apple, and we found him out,” Lieberthal, who served as a special assistant to President Bill Clinton on China, said in an interview. “They’re trying to make this out as a good news story, to persuade people that at the highest national level, officials are honest. The question is: Will people buy it?”

James Sasser, a former Democratic senator from Tennessee and U.S. ambassador to Beijing, described Bo in an interview as “an outlier, almost a deviant from the stereotype” of a circumspect Chinese communist leader.

Sasser said he met Bo several times when Bo was mayor of Dalian and minister of commerce, and recalled him as “a sharp dresser, very flamboyant in his personality, very handsome, aggressive and antagonistic.” Sasser said when then-President Jiang Zemin visited Dalian, he supposedly commented that the town square Bo had built was larger than Tiananmen in Beijing.

Publicity Campaign

“Bo Xilai was playing games that are not normal in China: promoting his brand name, his own legitimacy, running his own public-relations campaign, right up to the end when he gave his own press briefing at the National People’s Conference” in March, giving himself a spotlight at the annual event, said Paal, now vice president of studies at the Carnegie Endowment for International Peace in Washington.

Paal said Chinese official media, which already have received directives to denounce Bo and Gu, may pile on by revealing “mi-shi,” or secret histories of Bo’s family and associates, so that he can’t be rehabilitated.

“They’re going to limit this as much as possible -- identify the main tumor, excise it and move on,” said Orville Schell, director of the Center on U.S.-China Relations at the Asia Society in New York. “They’re not going to go into a mass purge if they can avoid it, because everyone at the top leadership has a complex web of connections.”

Web of Influence

Bo wasn’t unique with his links between political power and family wealth, said China analysts and U.S. officials. A full investigation would mean exposing his close ties to the military, state-owned enterprises and banks, and provincial officials that helped him land $159 billion in financing for projects in Chongqing, China’s largest municipality with 29 million residents.

Nor were Bo’s family connections unique. He’s the son of a founder of Communist China; Gu is a daughter of a well-known Chinese revolutionary general. Both were members of the elite cadre of “princelings,” privileged offspring of high-ranking party leaders who hold senior positions in China’s intertwined government and businesses.

Vice President Xi Jinping, the man expected to be tapped as China’s next president during the 18th Party Congress later this year, is also the son of a revolutionary hero, though he keeps a lower profile than Bo did.

Clean-Up Man

Xi’s daughter studies at Harvard University under an assumed name, and a joke in China is that his singer wife Peng Liyuan is more famous than Xi is. Xi is known for cleaning up corruption in Fujian Province, and he was named Shanghai party chief after his predecessor was brought down for graft. No evidence has emerged of corruption connected to Xi.

Still, even if Xi, President Hu Jintao, and other members of the Politburo Standing Committee have rooted out Bo’s alleged abuses, “every tongue in China is wagging about this,” and citizens are disappointed that their leaders would allow a man whose power and ambition were no secret to rise, Paal said.

The Bo scandal has brought public cynicism to a new high, said Andrew Nathan, a China scholar at Columbia University in New York. “That doesn’t mean the public in China is going to rise up in rebellion, but it’s definitely a big hole to climb out of.”

To contact the reporter on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

China's official PMI rises to 13-month high in April - Reuters

An employee is reflected on a rear view mirror at an assembly line of car components in Jiaxing, Zhejiang province February 2, 2012.

Credit: Reuters/Stringer

By Lucy Hornby

BEIJING | Tue May 1, 2012 12:55am EDT

BEIJING (Reuters) - China's official purchasing managers' index (PMI) rose to a 13-month high in April, signaling the economy has found a footing and may be recovering from a first-quarter trough, but smaller factories are still struggling.

The pick-up in the PMI to 53.3 from 53.1 in March indicated a further expansion in the vast factory sector, although it was slightly below market expectations of 53.6. Readings above 50 signal expansion while those below 50 point to contraction.

The manufacturing output sub-index rose to 57.2 from 55.2 in March. However, the National Bureau of Statistics noted many important industries remained weak with index readings below 50, among them chemicals, equipment, autos and oil refining.

The improvement in manufacturing likely reflected restocking after a slow winter, said Ting Lu, an economist at Bank of America-Merrill Lynch.

He said infrastructure investment was recovering as the dust settled from a corruption scandal in the Ministry of Railroads and from bureaucratic reshuffling at the local government level.

Although new export orders edged up to 52.2 from 51.9 in March, the sub-index for all new orders slipped to 54.5 from 55.1, implying that domestic new orders remained weak.

SMALL FIRMS SQUEEZED

The PMI boosted Australian shares, but did little to move other markets where investors are concerned about a sluggish U.S. economy and the bubbling euro area debt crisis. Indeed, many markets, including those in China, are closed on Monday to mark public holidays.

Australian shares .AXJO extended gains on the day to 0.5 percent after the PMI. The market had been up 0.2 percent before the figures were released.

Tight credit, especially for real estate developers and private firms, had helped push the Chinese economy to its weakest footing since the fall of 2008. But there are signs that the availability of loans is improving.

New loans in April may have reached 900 billion yuan ($140 billion), the Caijing Magazine said this weekend, citing a recent report by China International Capital Corp, or CICC. More attractive interest rates led to an acceleration in new mortgages, it added.

"Policymakers continue to grapple with the challenge of loosening enough to prevent a sharp slowdown, but not loosening too much and sparking an inflationary spiral," said Alastair Thornton, analyst at IHS Global Insight.

China's annual growth slowed to 8.1 percent in the first quarter of 2012 from 8.9 percent in the previous three months -- the fifth consecutive quarter of slowdown in the world's second-largest economy.

While large-scale manufacturers continue to report growth, small firms remain in contraction, the statistics bureau said. The tight credit conditions have disproportionately hit smaller and private companies, as reflected in a survey of smaller factories by HSBC.

The HSBC Flash PMI, the earliest indicator of China's industrial activity, showed a stabilizing economy last week. That index's reading of 49.1 for April came in below 50 for the sixth month in a row, reflecting a contraction in the factory sector, however the rate of deterioration slowed in a sign the economy may have bottomed out in the first quarter.

HSBC is due to release its final reading for April on Wednesday.

"Economic activity has started to recover but at a relatively slow pace," Capital Economics' analyst Qinwei Wang said in a note before the official data, citing an index of data the firm tracks.

(Editing by John Mair)

• Link this
• Share this
• Digg this
• Email
• Reprints

US's Clinton heads to China and into dissident drama - Reuters

Tue May 1, 2012 3:12am EDT

* Obama: China stronger if improves record on rights

* Blind dissident said to want to stay in China

* Clinton to raise human rights in Beijing

* China, US governments keep silence on Chen issue

By Arshad Mohammed and Chris Buckley

WASHINGTON/BEIJING, May 1 (Reuters) - U.S. Secretary of State Hillary Clinton left on Monday on a high-stakes trip to Beijing, where a blind dissident is reportedly holed up in the U.S. embassy in a drama threatening to overshadow top-level meetings between the two governments.

Dissident Chen Guangcheng, according to one of his helpers, will demand to stay in China and press on with his campaign for reform, adding to tension between Beijing and Washington that poses risks for both governments as well as to relations between the world's two biggest economies.

Both governments have scrupulously avoided official comment on the Chen case and neither has confirmed that he is under U.S. protection in Beijing.

Chen's audacious escape from house arrest, under the watch of the world's largest domestic security apparatus, was a "miracle" of planning and endurance, said Guo Yushan, a Beijing-based researcher and rights advocate who has campaigned for Chen and helped bring him to the Chinese capital after his escape.

But he said the 40-year-old, self-taught lawyer wants to stay in China and campaign for reform.

"He was adamant that he would not apply for political asylum with any country. He certainly wants to stay in China, and demand redress for the years of illegal persecution in Shandong and continue his efforts for Chinese society," said Guo on Monday, speaking in his first long interview since he was released from days of police questioning.

Chen, who campaigned against forced abortions as part of family planning, was confined to his village home in the eastern province of Shandong since September 2010, after release from jail on charges he rejected as spurious.

U.S. President Barack Obama nudged China to improve its human rights record, saying the two countries' relationship "will be that much stronger and China will be that much more prosperous and strong as you see improvements on human rights issues in that country".

POLITICAL AMMUNITION

But at a news conference, he walked a fine line between not saying anything that would make it harder to resolve Chen's case while conveying U.S. concern for human rights and appreciation for wider cooperation with China.

It is a politically fragile period for both countries.

Obama, in this presidential election year, wants to avoid giving any political ammunition to his Republican foes who already accuse him of being too soft on China and have demanded he ensure Chen and his family are protected from persecution.

In Beijing, the ruling Communist Party is gearing up for leadership changes later in the year but the carefully choreographed planning has already been jolted out of step by the downfall of top official Bo Xilai, in a case linked to the apparent murder of a British businessmen.

Before leaving, Clinton promised to press China's leaders on human rights, an issue that has dropped down the agenda between the two countries in the more than two decades since the 1989 Tiananmen Square crackdown.

Clinton ducked a question about Chen, but hinted that she would not be shy about the matter in Beijing.

"A constructive relationship includes talking very frankly about those areas where we do not agree, including human rights," she told a news conference.

The Chen case has already distracted attention from this week's two-day talks, which U.S. Treasury Secretary Timothy Geithner will also attend amid some progress in long-standing disputes over currency, trade and market access.

The talks also give Washington a chance to win more Chinese co-operation on international issues including pressuring Iran and North Korea over their nuclear programmes, halting Syria's continued crackdown on unarmed protesters and reducing tensions over competing territorial claims in the South China Sea.

Analysts said Chen appears to have two options: going into exile or getting the Chinese authorities to allow him to live in freedom within China, a challenge at best.

Yang Jianli, who runs the U.S.-based pro-democracy group Initiatives for China, said he believed that both the United States and China would prefer that Chen go into exile but that he did not think the dissident would.

"He is not the (kind of) person who will give in," Yang said. "He is so determined to stay in China."

Bob Fu, whose religious and political rights advocacy group ChinaAid has been a source of information about Chen, suggested the most plausible solution would be for him to leave China for the United States with his family, ostensibly for medical care.

Fu, who said he has spoken with senior U.S. diplomats in China about Chen's case, suggested the dissident ultimately may have little choice.

"At the end of the day, that is the only option that is left, if he wants safety and freedom for himself and his family."

• Link this
• Share this
• Digg this
• Email
• Reprints

Brent crude holds above $119 as China offsets Europe, US - Reuters

Tue May 1, 2012 1:15am EDT

* China's April PMI at 53.3 vs 53.1 in March

* Spain in recession, US economic growth appears to slow

* U.S. crude stocks to post 6th weekly rise - poll (Adds J.P. Morgan Brent-WTI forecasts, updates prices)

By Florence Tan

SINGAPORE, May 1 (Reuters) - Brent crude held steady above $119 a barrel on Tuesday, with an an expansion in China manufacturing helping to counter gloomier economic outlooks from the euro zone and the United States that could depress fuel demand.

China's vast factory sector grew at a slightly higher rate in April from the previous month, a sign that its economy may have bottomed out in the first quarter. The world's second-largest oil consumer is expected to account for nearly half of global incremental oil demand this year, according to the International Energy Agency.

"China is still in an expansionary phase and we saw a slight tick-up on the month," said Ben Le Brun, a Sydney-based market analyst at OptionXpress. "That will offset that negativity we saw filtered through from Europe last night."

"We may see a bit of a delayed reaction as prices are not moving much in the Asian session."

Brent crude for June edged 18 cents lower to $119.29 a barrel by 0430 GMT. The front-month contract fell nearly 3 percent in April, its first loss in four months.

U.S. crude for June was down 10 cents at $104.77 a barrel after posting its first fall in seven sessions on Monday.

But debt woes in the euro zone continued to cast a pall over the region's economies, with Spain, the fourth-largest economy in the euro zone, sinking into recession in the first quarter.

Economists said spending cuts aimed at meeting strict EU deficit limits, together with a reeling bank sector, would delay any return to growth until late this year or beyond.

The U.S. economy appeared to down shift as it entered the second quarter, with consumers increasing their spending only modestly last month and a gauge of business activity in the Midwest falling sharply in April.

"We are forecasting a slowing in momentum in the U.S. manufacturing sector, but we believe this will be a consolidation rather than a sharp loss in momentum as was seen in 2011," ANZ analysts led by Mark Pervan said in a note.

MORE SUPPLY

Higher OPEC output in April as well as analysts' expectations for a sixth weekly rise in U.S. crude inventories due in part to rising domestic production could also weigh on prices.

OPEC's April output was at its highest since 2008 as extra crude from Iraq and Saudi Arabia has helped cover for tighter sanctions on Iran, whose own oil output has hit its lowest in two decades, a Reuters survey found.

"Unless OPEC curtails production - which we see as unlikely in today's elevated price environment - inventories should build above-normal through third quarter," Morgan Stanley analysts led by Hussein Allidina said in a note.

"A diplomatic solution to Iran's nuclear ambitions or a coordinated SPR (strategic petroleum reserves) release, both of which are increasingly possible, may also present additional downside."

J.P. Morgan revised down its 2012 forecast for West Texas Intermediate (WTI) crude prices by $3 to $108 a barrel as it expects the spread between Brent and WTI to widen sharply at the end of the year on refinery maintenance.

"We expect the spread to be very volatile, pushing above $15 a barrel at the end of the year as the three-month-long maintenance at the BP Whiting refinery kicks in just ahead of the expansion of the Seaway pipeline," analysts led by Lawrence Eagles said.

They added that a Seaway pipeline oil flow reversal in mid-May will first narrow the spread to $6 a barrel or less.

The spread between Brent and WTI CL-LCO1=R was at $14.52 a barrel on Tuesday after settling at $14.60.

U.S. gasoline prices are also under pressure as concerns about a supply shortfall eased after Delta Air Lines Inc announced that it will buy a Pennsylvania oil refinery from ConocoPhillips for $150 million. (Editing by Ed Davies and Edwina Gibbs)

• Link this
• Share this
• Digg this
• Email
• Reprints

Dissident Chen Guangcheng's case complicates US-China ties - Los Angeles Times

WASHINGTON â€" Even before a blind human rights lawyer slipped away from house arrest in rural China last week, Washington and Beijing were each trying to navigate a turbulent time in their internal politics and their relationship. Now they are trying to avoid their worst diplomatic spat in years.

Although U.S. officials are mum, Chen Guangcheng's supporters are believed to have outwitted his guards and then spirited Chen several hundred miles from his village to seek refuge with U.S. diplomats in Beijing.

As Secretary of State Hillary Rodham Clinton and other top U.S. officials left Washington on Monday for previously scheduled annual talks in Beijing, diplomats from both countries scrambled to find a way to solve Chen's case without undermining efforts to improve economic and security ties.

A senior U.S. diplomat, Assistant Secretary of State Kurt Campbell, flew to Beijing on Sunday to discuss the case with Chinese officials. Activists and former U.S. officials say the most likely outcomes are Chen's departure for the U.S., an agreement by China to end harassment of him, or his traveling to a third country.

Former Chinese and U.S. officials say they believe leaders on both sides want to work out a deal. There are a range of international issues before them: North Korea, Iran, Syria and the weak global economy. China is still nervous about President Obama's announcement late last year of a pivot in U.S. diplomatic and military policy to focus on the Asia-Pacific region. But for both governments, domestic politics may limit their room to maneuver.

In a sign of the sensitivity of the case, President Obama pointedly declined to respond to questions at a White House news conference Monday as to whether Chen was under U.S. protection, if secret talks were underway to resolve the crisis, or whether the United States would grant Chen political asylum if he asked for it.

Obama said only that he was "aware of the press reports on the situation in China."

"What I would like to emphasize is that every time we meet with China the issue of human rights comes up," Obama said, familiar diplomatic language that is unlikely to limit the administration's maneuvering room.

However, Obama's China policy faces tough scrutiny from Republicans in an election year. He was criticized for U.S. actions in a scandal that is already rocking China's political establishment. A Chinese police official entered a U.S. Consulate in February seeking protection because of his accusations against his boss, Politburo member Bo Xilai, who was later sacked. The official, Wang Lijun, left the consulate and was reportedly taken into custody.

Mitt Romney, the presumptive Republican presidential nominee, over the weekend called for unflinching support of human rights in China.

Chen has long complained of China's harsh enforcement of its policy that limits each family to only one child, and he angered authorities in rural China by exposing forced abortions.

A Chen confidant, Texas-based activist Bob Fu of the China Aid Assn. human rights group, said Monday that talks between U.S. and Chinese officials were well underway and that it was likely Chen would be brought to the United States despite his reluctance to permanently leave his home country.

Some analysts say the case could become as serious as the dispute over the collision of a Navy spy plane and a Chinese warplane over the South China Sea in April 2001, which caused the Chinese jet to crash and the U.S. aircraft to make a forced landing in China.

There is precedent for U.S. diplomats protecting Chinese dissidents. Diplomats refused to turn over Fang Lizhi and his wife, who were wanted by Chinese authorities after the Tiananmen massacre in 1989. China allowed the couple to leave the country the next year.

Chen's surprise escape came at an extremely sensitive time for the Chinese leadership. Already faced with a once-in-a-decade transfer of power, it has been buffeted by the sensational case of Bo, whose wife has been accused of murder in connection with the death of a British businessman.

Analysts say Chen's case gives the outgoing leadership a chance to back up its contention that the rule of law is paramount in China. But hard-liners in the security establishment could undermine a deal by arguing that the government should firmly resist any American meddling in China's affairs.

"Some will say, 'We can't let the U.S. do this,' and then we may have a very big problem," said Kenneth Lieberthal, who was top Asia advisor to President Clinton and is now with the Brookings Institution think tank.

Chen made a video appeal to Premier Wen Jiabao to protect his wife and daughter, whom he left behind in his village in the eastern province of Shandong.

"This puts China in a dilemma, as the government has spent the better part of the last month telling people China is a law-governed society and law-based government," said Victor Shih, an associate professor of political science at Northwestern University. "The Chinese government should then, according to law, protect Chen Guangcheng, who has not broken any laws."

Though state media have tried in the past to cast the abuse of Chen and his family as an isolated local issue, Phelim Kine, a senior researcher for Human Rights Watch, says the case is emblematic of a nationwide breakdown that starts at the top.