The prosperous eastern province of Zhejiang intends to order developers to park pre-sale proceeds from their real estate projects in escrow bank accounts, according to a document obtained by Reuters on Wednesday.

Major cities, including Shanghai, Wuhan and Qingdao, are drawing up similar plans, according to state media.

The requirement will put a strain on developers’ cash flow as pre-sale proceeds account for about 40 percent of their funding.

“Some developers will have to cut prices in the short term to facilitate sales,” said Cheng Dong, a property analyst with BOC International in Shanghai.

China launched a slew of measures in April to cool the red-hot real estate market, in part to ease popular complaints that many people are unable to afford record home prices.

Sales have shown signs of recovering in recent weeks, as have some prices, and a number of industry analysts warn that Beijing could tighten further if developers raise prices during the traditional busy selling season in September and October.

Concern about further property tightening was one reason behind a drop in Chinese shares on Thursday. Shanghai’s main index (.SSEC) was down 1.33 percent in early afternoon.

The People’s Daily, the mouthpiece of the Communist Party, said China must maintain curbs on speculative housing demand as the benefits of the crackdown will outweigh the drawbacks.

The paper said the steps — including higher down payments and mortgage rates and curbs on sales to non-residents — would make prices more affordable for Chinese eager to get a foot on the property ladder, overriding the hit to economic growth.

“This round of property tightening is an important step to improve people’s lives and promote a harmonious and stable society. We must firmly stick to it,” the paper commented.

The newspaper’s views are usually taken as representing official policy.

If China could increase affordable housing construction, the impact of the tightening on the country’s investment growth as well as on related industries would be short-lived, it added.

The comments were echoed by Xia Bin, a cabinet adviser, who was quoted by the official China Securities Journal as saying that Beijing would continue with its property tightening drive.

He said there was no need to panic about a moderation in economic growth over the rest of the year. Such a trend was expected after Beijing acted to cool the housing market, tighten loans to local government financing vehicles and close down obsolete, energy-intensive plants.

Gross domestic product growth slowed to 10.3 percent in the second quarter from 11.9 percent in the first three months. — Reuters

China has twice summoned Japan’s ambassador to demand the release of the skipper, who was arrested early Wednesday following the collisions and a chase in the East China Sea near an island chain claimed by both nations.

The Japan Coast Guard, which arrested 41-year-old Zhan Qixiong and took him to the southern Japanese island of Ishigaki, on Thursday transferred him to prosecutors there who were questioning him before deciding whether to indict him.

Zhan was arrested on suspicion of obstructing officers on duty, a charge that carries a maximum sentence of three years’ imprisonment.

A Coast Guard spokeswoman also said “investigators today started inspecting the trawler and will soon start questioning the 14 fishermen on the boat”, which is docked off Ishigaki island in Okinawa prefecture.

Tokyo suspects the captain deliberately rammed the two Japanese Coast Guard vessels in a tense confrontation near uninhabited islands which are controlled by Japan but also claimed by China and Taiwan.

The incident started Tuesday morning when Japan’s 1,300-ton patrol ship Yonakuni ordered the fishing trawler to cease operations near the rocky islands known as Senkaku in Japan and Diaoyu in China

In the ensuing confrontation the Chinese boat’s bow hit the Yonakuni’s stern before it sailed off. About 40 minutes later it collided with another Japanese patrol boat, the Mizuki. No one was injured in the collisions.

Four Japanese patrol ships pursued the Chinese vessel, and Coast Guard personnel later boarded it to question the captain over the incident and on suspicion of violating Japan’s fisheries law.

The incident came as the number of Chinese vessels fishing near the disputed islands has risen since last month, reported the Asahi Shimbun newspaper.

The daily said some 160 Chinese vessels were fishing near the islands on Tuesday and 30 of them were inside what Japan says are its territorial waters.

The newspaper quoted a local Japanese fisherman as saying: “The Chinese may be coming down south to seek richer fishing grounds.” — AFP

“The chances are certainly on the rise, I think for two reasons,” Jeremie Waterman, senior director for China at the U.S. Chamber of Commerce, told Reuters.

The first is the testy political atmosphere ahead of November congressional elections that has many Democrats in fear of losing their seats, and the other is the “very limited progress” Beijing has made revaluing its yuan since a high-profile announcement in June, Waterman said.

China said in June that it would permit market forces greater sway in setting the yuan’s value, yet it has only appreciated about 0.6 percent since then.

Pressure is building in both the House of Representatives and Senate over the issue, creating some nervousness among analysts about the risk that legislative proposals may stir more trade tensions.

A bipartisan group of senators led by New York Democrat Charles Schumer and Republican Lindsey Graham have insisted throughout the year that have more than enough votes to win approval of a China currency bill.

The House Ways and Means Committee already has a hearing set for September 15 when members of Congress who support action on China’s currency would appear, as well as a panel of outside experts.

With a weak recovery constraining job creation and fanning voter anger, sources said they expected the Senate Banking Committee to also hold a hearing on September 16, with U.S. Treasury Secretary Timothy Geithner in the hot seat.

The hearings would occur when frustration at persistently high U.S. unemployment at nearly 10 percent is a growing threat to Democrats’ chances at retaining control of Congress in November and is a goad to lawmakers seeking a target for soaring U.S. deficits.

“There is no real question that China’s deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the United States jobs and economic growth, particularly in the manufacturing sector,” Ways and Means Committee Chairman Sander Levin said in a statement on Wednesday.

UNFAIR PRICE ADVANTAGE

U.S. lawmakers and some business groups insist the yuan, also called the renminbi, is undervalued so low it gives Chinese manufacturers an unfair price advantage in U.S. markets and has cost millions of lost American jobs.

To date, the Obama administration has declined to name China a currency manipulator in semi-annual reports issued by the U.S. Treasury. Such a declaration would initiate a process requiring discussion with Beijing about its currency policy and potentially clear the way for trade sanctions against its products.

The Nelson Report, a newsletter focused on U.S. relations with Asia, reported the potential back-to-back U.S. Senate and House hearings in its Tuesday edition and raised expectations that Geithner could testify at both.

However, the Senate Banking Committee still has not officially announced a hearing and the U.S. Treasury Department has declined comment on whether Geithner would testify. Ways and Means also has not released a witness list.

Some analysts monitoring the situation in Congress with some alarm for fear it aggravates global trade tensions.

Dan Griswold, director of trade policy at the Cato Institute, said he saw “a real danger” that either the House or Senate could pass China currency legislation, but hoped President Barack Obama would exert enough pressure to keep a bill from reaching his desk.

With Democrats in fear of losing control of Congress, “perhaps they’re desperate to respond to populist worries about the economy and energize their union base,” Griswold said.

Lawmakers have threatened to take legislative action against China in the past but backed down in hope that negotiation would eventually succeed in persuading Beijing that it was in its interests and those of the global trade satem to let its currency’s value be set by market forces.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said the House was the more likely of the two chambers to take action on a China currency bill.

“My guess is that the administration’s position would be not to blast it frontally, but to try to slow it down in the House in a quiet way,” Hufbauer said. — Reuters

Tokyo has arrested the boat’s captain. A Chinese Foreign Ministry statement said Japanese Ambassador Uichiro Niwa was summoned Wednesday to see Assistant Foreign Minister Hu Zhengyue, who demanded that the Chinese vessel be released immediately. The crew, who do not have passports, are waiting on the boat. Niwa also was summoned Tuesday evening.

But Japanese officials repeated their territorial claims over the islands, adding that they had no immediate plans to release the captain or the boat. Japan has also lodged a protest over the incident to the Chinese side.

The collisions happened in Japanese territorial waters off the northwestern coast of Japan’s Kuba island, just north of uninhabited, disputed islands known as Senkaku in Japanese and Diaoyu in Chinese. The islands, about 120 miles (190 kilometers) east of Taiwan, are controlled by Japan but are also claimed by China and Taiwan.

Japan Coast Guard officials said Wednesday that the Chinese captain of the fishing boat had been arrested for allegedly obstructing public duties in connection with Tuesday’s collision near the chain of islands in the East China Sea.

Coast Guard spokesman Daisuke Takahashi said officials are interrogating the captain. They were also to question the ship’s remaining 14 crew members, who are free to return to China, if the Chinese send a vessel to pick them up.

Japanese Foreign Press Secretary Satoru Sato told reporters Wednesday that Japan’s territorial ownership of the Senkaku is “the undeniable fact” and that the collision case should be investigated properly under Japan’s criminal law.

In Beijing, there was a small, organized protest Wednesday in front of the Japanese Embassy. About 30 people gathered to shout slogans and wave flags. Such events usually happen only with the approval of local police or officials. The group also submitted a letter of protest to the embassy.

Territorial disputes have been a disruptive undercurrent in Japan-China relations, which remain fraught despite attempts to improve them. As the robust Chinese economy’s demand for resources grows, China’s commercial ships are venturing farther from shore and its more powerful navy is enforcing claims in disputed waters.

Last month, a Chinese survey ship allegedly entered Japan’s disputed exclusive economic zone without prior notification, breaking a previous agreement between the two countries. In April, a Chinese helicopter came within 300 feet (90 meters) of a Japanese military monitoring vessel in the vicinity of a Chinese naval exercise.

The collisions occurred after the Japanese patrol vessels ordered the Chinese ship to stop for an inspection for allegedly violating international fishing laws after repeatedly ignoring earlier warnings to leave the area, another Coast Guard spokesman Yosuke Oi said.

No injuries were reported in the two separate collisions that occurred within 40 minutes, Oi said. The two Japanese patrol vessels sustained minor damage. It was unclear whether the Chinese ship was damaged.

Jiang Yu, a spokeswoman for China’s Foreign Ministry, told a regular news conference Tuesday that Beijing has reiterated its claim to the Diaoyu Islands and its adjacent islets and urged Japanese patrol boats in the area not to patrol there. — AP

The No. 3 drilling platform in the Shengli oil field, operated by Sinopec, Asia’s largest refiner by capacity, started tilting over Tuesday, causing four workers to fall into the water and trapping 32 of them on the platform, the Transport Ministry said in a statement on its website.

Rescue helicopters were dispatched to the site from the coastal city of Dalian at around 6 a.m. local time, the ministry said.

The platform was tilting at a 45 degree angle to the sea, around five nautical miles (nine kilometers) from the coast, where the water is 23 feet (seven meters) deep, the official Xinhua News Agency said.

A typhoon caused the platform to tilt, said a man surnamed Sun from the Shengli Oil Management Bureau of Sinopec, also known as China Petroleum & Chemical Corp., in Dongying in Shandong province.

Sun said winds were blowing at up to 55 miles per hour (24.4 meters per second), causing 13-foot (four-meter) waves. — AP

In another indication ties may be strengthening, the North asked the South for aid.

North Korea seized the South Korean fishing boat with a crew of seven — four South Koreans and three Chinese — off the east coast on Aug. 8.

The North accused the crew of fishing illegally in its exclusive economic zone but on Monday announced it would free the crew as a “humanitarian” gesture.

North Korean authorities handed the crew and their boat over to South Korean officials Tuesday at the eastern maritime border, a Coast Guard official said. He asked not to be identified because of the issue’s sensitivity.

“I am sorry to the public for causing concern, but I am grateful for the public support that secured our quick return,” the boat’s captain Kim Chil-i said in a brief comment after arriving in the port, according to the Coast Guard.

Kim and six other crew were immediately whisked away by officials for a debriefing, a Coast Guard official said. He asked not to be identified because he was not authorized to speak to the media.

Tensions have been high on the peninsula recently after an international team of investigators blamed North Korea for torpedoing the Cheonan and killing 46 sailors in March. Pyongyang flatly denies responsibility and has warned any punishment would trigger war.

The North’s rare conciliatory overture Tuesday came days after flood-stricken North Korea requested a shipment of rice, cement and heavy equipment from South Korea to recover from recent flooding. Last week, South Korea’s Red Cross proposed sending medicine, daily necessities and emergency food worth 10 billion won ($8.5 million).

The North’s Red Cross replied Saturday that it would prefer rice, cement and heavy equipment to help with flood-recovery efforts.

Waters overran riverbanks last month, swamping farms, houses and public buildings in the northwestern city of Sinuiju and adjacent areas. State media reported the region was “severely affected” by the flooding. North Korea observers fear the flooding has worsened the country’s chronic food shortages.

“The Red Cross is preparing to offer humanitarian aid, and that is a step forward” in inter-Korean ties, President Lee Myung-bak told ruling party leaders, according to his office.

The North may have decided to release the fishermen in return for South Korea’s offer of help, one analyst said.

“I believe this is the result of informal contacts between the two Koreas,” said Yang Moo-jin, a professor at the Seoul-based University of North Korean Studies. The latest development may foster a “positive atmosphere” for the resumption of formal talks, he said.

The Unification Ministry, however, said there were no negotiations with North Korea over the fishermen. Spokeswoman Lee Jong-joo said the aid offer and the fishermen’s release were “separate matters.”

North Korea has relied on foreign food aid since natural disasters and mismanagement devastated its economy in the mid-1990s and led to a famine estimated to have killed as many as 2 million people.

The two Koreas remain in a state of war because their 1950-53 conflict ended with an armistice, not a peace treaty. — AP

Reporters have followed a motorcade — apparently used by the reclusive Kim — around several cities in northeast China. The 35-vehicle convoy accompanied by police cars with flashing lights was seen headed to the train station in Changchun.

Kim rarely leaves North Korea and when he does he travels by special train. South Korea’s Yonhap news agency reported the train left the station, although it did not give a destination.

North Korea does not announce Kim’s trips until he returns home, and China has refused to say if he is in the country, even though a Japanese television station had a grainy picture of him.

Kim was reportedly accompanied by his son, Kim Jong Un, believed to be in his 20s. Many North Korea watchers predict the son will be appointed to a key party position at a ruling Workers’ Party meeting early next month — the first such gathering in decades.

To pull off the event with sufficient fanfare, North Korea will need Chinese aid, particularly following the devastating floods that battered the country’s northwest this month, analysts said.

“The convention needs to be festive with the party giving out food or normalizing day-to-day life for its people, but with the recent flood damages they are not able to,” said Cheong Seong-chang, a senior fellow at the Sejong Institute think tank outside Seoul.

“The most important thing on Kim’s agenda is scoring Chinese aid, which will ensure that the meeting will be well received by the people.”

Asked whether Kim was visiting China, a duty officer with the press office of the Chinese Foreign Ministry said: “China and North Korea consistently maintain high-level contacts. We will release the relevant information in good time.”

South Korea’s Chosun Ilbo newspaper and Yonhap both reported that Kim was believed to have met Chinese President Hu Jintao in Changchun on Friday.

The Dong-a Ilbo newspaper carried a similar report, saying the two are believed to have discussed the North’s succession, the resumption of six-nation talks on North Korea’s nuclear program, and ways to strengthen bilateral economic cooperation.

China, as North Korea’s biggest diplomatic ally and a major source of food aid and oil, would expect to be kept in the loop about major political transitions in the North, but the Beijing leadership is not likely to be enthusiastic about the prospect of another dynastic succession next door, said Zhu Feng, director of Peking University’s Center for International and Strategic Studies.

Kim also badly needs Chinese aid because of flooding earlier this month that damaged or destroyed more than 7,000 homes, and inundated 17,800 acres (7,200 hectares) of farmland close to the border with China, the North’s official Korean Central News Agency reported this week.

KCNA said China has already agreed to deliver some aid to help North Korea cope with the disaster but didn’t give specifics.

The North faces chronic food shortages and has relied on outside aid to feed much of its 24 million people since a famine that is believed to have killed as many as 2 million people in the 1990s.

In an attempt to improve its meager economy, it has experimented with limited market reforms and sought foreign investment, mostly from China and South Korea. But tensions with the South have caused trade and joint economic projects with the South to wither and raised the importance of Pyongyang’s ties to Beijing. — AP

BEIJING/SEOUL (Reuters) – China is lobbying neighbors to sign up to a road map for renewed nuclear disarmament talks with North Korea, whose leader Kim Jong-il is visiting China amid conciliatory words and threats of “holy war.”

The details of Beijing’s plan for restarting stalled six-party nuclear talks came from a South Korean diplomatic source, who spoke on Saturday after discussion in Seoul with Wu Dawei, China’s top envoy in the talks.

But the source, as well as a Japanese official speaking in Beijing, stressed that big obstacles remained, even if the secretive Kim’s trip to China yields another vow of North Korea’s willingness to sit down and discuss a dormant deal to scrap its nuclear weapons in return for aid.

“We don’t want to restart six-party talks for the sake of talks,” the South Korean diplomatic source said. “North Korea should change its attitude and show seriousness in denuclearizing.”

China’s regional lobbying, and courting of the reclusive Kim, highlight the pressures that North Korea — isolated, poor and with a brace of primitive nuclear bombs — has brought to bear on northeast Asia, home to the world’s second and third biggest economies and a big U.S. military presence.

Kim, 68, and his son and heir apparent, Kim Jong-un, were in China to visit the school of senior Kim’s father and founder of North Korea, Kim Il-sung, a source with knowledge of the secretive trip told Reuters.

“Trust me, it’s 100 percent both are here,” the source said, declining to give details when asked.

Kim Il-sung attended the Yu Wen High School in the northeastern Chinese city of Jilin in the 1920s. The school houses a memorial hall to Kim which is not open to the public.

The museum was renovated recently ahead of a visit by a group of North Korean dignitaries, a second source said.

Classes were suspended on Thursday amid tight security and a school choir performed for the dignitaries, the second source added, but did not know if the Kims were among the guests.

“They sang ‘The song of General Kim Il-sung’ in Chinese and Korean. It’s the school song,” the second source said.

There had been no conclusive sightings in China of Kim, who has appeared frail and gaunt since reportedly suffering a stroke in 2008.

Neither source wanted to be identified because of the political sensitivity of the trip. The two neighbors do not disclose much information about Kim’s travels, and then only after he has left for home.

DIPLOMAT’S WARNING

On Friday, a North Korean diplomat brandished the possibility of nuclear war with South Korea and the United States.

“If Washington and Seoul try to create conflict on the Korean peninsula we respond with a holy war on the basis of our nuclear deterrent forces,” North Korea’s ambassador to Cuba, Kwon Sung-chol, said in Havana, according to a report from there by China’s official Xinhua news agency.

North Korea staged nuclear test blasts in 2006 and 2009, drawing international condemnations and U.N. sanctions backed by China, the biggest economic and diplomatic backer of Pyongyang.

China’s envoy, Wu, proposed a three-stage process to restart the multilateral talks aimed at coaxing Pyongyang to give up its nuclear weapons in return for aid and other assurances, the South Korean diplomatic source told Reuters.

Former U.S. President Jimmy Carter returned home from Pyongyang on Friday with an American who had been sentenced to eight years of hard labor for illegally entering North Korea. The North’s state media said number two leader, Kim Yong-nam, had told Carter that Pyongyang wanted the nuclear talks resumed.

China has sought to defuse confrontation by hosting six-party nuclear disarmament talks since August 2003. But last April, North Korea quit the talks and reversed “disablement” steps intended to cripple its chief reactor complex, unhappy with implementation of an initial disarmament agreement reached in 2007.

North Korea has been retreating from its earlier public renunciation of the talks. South Korea and Washington say resuming the talks will be impossible until Pyongyang also faces up to their conclusion that it was behind the sinking of a South Korean navy ship, the Cheonan, in March.

South Korea lost 46 sailors when the Cheonan sank. Seoul said an inquiry found there was no doubt North Korea torpedoed the ship, but Pyongyang denied it was responsible. — Reuters

The traffic jam came four days after the break-up of an even bigger one — stretching to 60 miles (100 kilometers) at one point.

State media said the latest jam on the Beijing-Tibet highway was caused by an accident and road maintenance.

The worst of the jam started in Zhangjiakou, a city about 90 miles (150 kilometers) northwest of Beijing, and stretched into Inner Mongolia in northern China, with traffic creeping along in fits and starts.

A woman who answered the phone at the Beijing traffic management office said drivers should not take the highway. “The traffic flow is very slow,” said the woman, who refused to give her name.

Traffic jams are part of daily life in China’s major cities, with vehicles moving at a crawl in parts of Beijing for most of the day.

In the last traffic jam on the Beijing-Tibet highway, which started Aug. 14 and lasted about 10 days, state media said some drivers were stuck for five days with drivers on the worst-hit stretches passing the time sitting in the shade of their immobilized trucks, playing cards, sleeping on the asphalt or bargaining with price-gouging food vendors.

A bottle of water was selling for 10 yuan ($1.50), 10 times the normal price, Chinese media reports said.

The main reason traffic has increased on the partially four-lane highway is the opening of coal mines in the northwest, vital for the booming economy, which this month surpassed Japan’s in size and is now second only to America’s.

Officials eased the first jam by directing truckers to take a 180-mile-long (300-kilometer-long) detour, the China Daily said.

It quoted one truck driver, Lu Yong, who was stuck in both jams, as saying he should have prepared some food this time. “Who knows when the traffic will move again?” said the 37-year-old, who was stranded for two nights in the last jam at almost the same location.

A woman at the Inner Mongolian traffic management office said it may take several days to ease the latest jam. “Please do not drive on this expressway,” said the official, who also would not give her name. — AP