Wall Street Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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Syrians Face a Bread Shortage in Aleppo and Elsewhere

Tyler Hicks/The New York Times

A bakery in Aleppo. The price has shot up from 15 Syrian pounds, about 21 cents, for a bag of about eight flat, pitalike loaves to more than 200 pounds, nearly $3.

GAZIANTEP, Turkey — Jalal al-Khanji, the closest thing the Syrian city of Aleppo has to a mayor, hopes to organize elections there within two weeks, but he fears that residents with empty stomachs are in no mood for an experiment in democracy.

Since late November, bread has been scarce, with a lack of fuel and flour shutting most bakeries in Aleppo.

“We cannot hold elections while people are hungry; we have to solve that problem first,” he said in an interview in this southern Turkish city, where many leaders of Aleppo’s civil society have sought refuge. “People are angry, frustrated and depressed. They can understand how countries like France and Britain and the United States might hold back on the issue of weapons, but not on the issue of bread and diesel.”

The revolution that erupted across Syria in March 2011 only slowly engulfed Aleppo, Syria’s commercial capital. Long after major cities were convulsed by demonstrations, Aleppo’s residents still showed up in Gaziantep by the busload every weekend to scour the malls.

The armed struggle for the city began in earnest last July.

In August, the prominent doctors, engineers, pharmacists and businessmen sheltering here established the Aleppo Transitional Revolutionary Council, a kind of city government in exile for the liberated portions of the city. Mr. Khanji, 67, a civil engineer with a long history of opposing the Syrian government, serves as its president.

Dividing their time between Gaziantep and Aleppo, council members found the chaos convulsing their city worrisome. What if all the competing militias on the ground, even if nominally part of the loosely allied Free Syrian Army, continued to fight for the spoils even after the government’s forces were driven from the city?

They decided the remedy was an elected council of about 250 members who would run both the city and the province of Aleppo, roughly one representative for every 20,000 people in the liberated areas. The council would choose a smaller group to actually govern the city.

The idea is for the council to serve as a liaison between the military and the civilian populations. “If civilian life is not organized, if we cannot do anything, then the chaos will continue,” said a 29-year-old businessman who is also on the transitional council. Several members of the council declined to give their names because they still travel to government-controlled areas.

About 65 percent of the villages have already chosen their representatives, he said, but the humanitarian crisis in Aleppo forced a postponement of the choice of about 150 representatives from the city itself.

The transitional council is in the process of establishing a 500-member police force and runs a few courts, but members view the bread crisis as their first big test. “We represent a civil government to some extent, so if we cannot solve this problem there will be a lack of trust in such rule in the future,” said the businessman.

There is also competition. While about 70 percent to 80 percent of the Free Syrian Army commanders in the province have agreed to support the elected council, election organizers said, opponents include jihadi groups hostile to the very idea of democratic elections.

One such prominent group, Jibhat al-Nusra, which the United States sought to ostracize last week by labeling it a terrorist organization, has been distributing bread in and around Aleppo.

“The so-called terrorists are the ones who have been giving us bread and distributing it fairly,” said Tamam Hazem, a spokesman in Aleppo’s news media center, reached via Skype. “Free Syrian Army battalions have been trying to help, but they just don’t have the same kind of experience.”

Council members pleaded for outside help to counter the jihadists’ efforts. “They are offering bread to people to obtain their sympathy and respect,” said Mr. Khanji, the council’s president. “Prolonging the Syrian crisis will allow the extremist cells in Syria to grow and become more difficult to remove in the future.”

Hania Mourtada contributed reporting from Beirut, Lebanon, and Sebnem Arsu from Kilis, Turkey.

This article has been revised to reflect the following correction:

Correction: December 16, 2012

A picture caption with an earlier version of this article misstated the prewar price of an eight-loaf bag of bread in Syria. It was 15 Syrian pounds, not 25. The article also misstated the United States dollar equivalent for that amount. It is 21 cents, not 35.

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U.S. gun website sued for alleged ties to slayings

CHICAGO (Reuters) – A prominent U.S. gun control group on Wednesday sued a gun auction website it says is linked to a mass shooting at a Wisconsin spa in October and the stalker slaying of a woman near Chicago in 2011.

The Brady Center to Prevent Gun Violence alleges that the design of armslist.com facilitates illegal online sales to unlawful gun buyers with no background checks, and enables users to evade laws that permit private sellers to sell guns only to residents of their own state.

“We as a nation are better than an anonymous Internet gun market where killers and criminals can easily get guns,” said Jonathan Lowy, the Brady Center’s Legal Action Project Director, in a statement.

The wrongful death lawsuit was filed in Cook County Circuit Court on behalf of the family of Jitka Vesel, 36, an immigrant from the Czech Republic who was shot and killed last year by Demetry Smirnov, a stalker.

The suit, which the Brady Center says is the first of its kind, alleges that Smirnov illegally bought the gun from a private seller he located through armslist.com.

Vesel was killed in the parking lot of the Chicago-area Czechoslovak Heritage Museum, where she was a volunteer preparing for a celebration in memory of Czech-American Chicago Mayor Anton Cermak.

Cermak was slain with a handgun during an attempted assassination of President Franklin D. Roosevelt in 1933.

A representative for website owner Armslist, LLC was not immediately available for comment. The company is based in Noble, Oklahoma, according to public records.

The website includes a “terms of use” page on which users must promise they are age 18 or older and will not use the site for illegal purposes.

The Brady Center said that the case does not infringe on the Second Amendment right to bear arms, noting that 74 percent of National Rifle Association members believe that no guns should be sold without a criminal background check.

A representative for the NRA was not immediately available for comment.

Radcliffe Haughton, who killed his estranged wife and two other women and wounded four others before killing himself in a shooting in a Milwaukee suburb on October 21, also got his weapon through armslist.com, according to Wisconsin officials.

Haughton, who was under a restraining order for domestic violence, avoided a background check through a “lethal loophole” by buying a gun through the website, according to a letter to Armslist sent by Milwaukee Mayor Tom Barrett and Wisconsin U.S. Representative Gwen Moore on October 26.

Sales conducted over the Internet also have been linked to mass killings at Virginia Tech and Northern Illinois University. In 1999 eBay announced it was prohibiting online gun sales, according to the Brady Center lawsuit.

Craigslist did the same in 2007. Amazon.com and Google AdWords also prohibits the listing of firearms for sale, the suit says.

An undercover investigation of online gun sales by New York City last year found that 62 percent of private gun sellers agreed to sell a firearm to a buyer who said he probably could not pass a background check.

(Reporting By Mary Wisniewski; Editing by Greg McCune and Xavier Briand)

Internet News Headlines – Yahoo! News

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Donald Faison Marries Cacee Cobb

By Lesley Messer

12/15/2012 at 08:25 PM EST

Cacee Cobb and Donald Faison

Dr. Billy Ingram/WireImage

It's official!

After six years together, Donald Faison and Cacee Cobb were married Saturday night at the Los Angeles home of his Scrubs costar Zach Braff.

Cobb's friend Jessica Simpson was a bridesmaid. Sister Ashlee Simpson also attended.

"What a happy day," Tweeted groomsman Joshua Radin, a singer, who posted a photo of himself with Faison and Braff in their tuxedos.

The couple got engaged in August 2011. At the time, Faison Tweeted, "If you like it then you better put a Ring on it," and Cobb replied, "If she likes it then she better say YES!!"

Since then, the couple had been hard at work planning their wedding. On Nov. 12, Faison, who currently stars on The Exes, Tweeted that they were tasting cocktails to be served on the big day.

"Alcohol tasting for the wedding!" he wrote, adding a photo of the drinks. "The [sic] Ain't Say It Was Going To Be Like This!!!"

This is the first marriage for Cobb. Faison was previously married to Lisa Askey, with whom he has three children. (He also has a son from a previous relationship.)

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Wall Street Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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IHT Rendezvous: IHT Quick Read: Dec. 15

NEWS A 20-year-old man wearing combat gear and armed with pistols and a rifle killed 26 people — 20 of them children — in an attack in an elementary school in Newtown, Connecticut, before committing suicide on Friday. It was America’s second-deadliest school shooting, exceeded only by the 2007 Virginia Tech massacre. James Barron reports.

European Union leaders pledged on Friday to take further steps to set up common banking rules for the bloc, but they delayed plans for a shared budget for the euro zone nations as pressure appeared to be easing on the single currency. James Kanter reports from Brussels.

The lesson of Japan’s last major election, which ousted the long-dominant Liberal Democrats, was that a growing hunger for change had seemed to reach a threshold. But voters look ready to return that party to power Sunday, determined to punish the governing Democratic Party for failing to rein in bureaucracies and mishandling the 2011 nuclear crisis. Martin Fackler reports from Kanazawa, Japan.

At the global treaty conference on telecommunications in Dubai, the United States got most of what it wanted. But then it refused to sign the document and left in a huff. What was that all about, and what does it say about the future of the Internet? Eric Pfanner reports from Dubai.

The U.S. defense secretary, Leon E. Panetta, signed a deployment order on Friday to send 400 American military personnel and two Patriot air defense batteries to Turkey as its tensions intensify with neighboring Syria. Germany and the Netherlands will also send Patriot batteries. Thom Shanker and Michael R. Gordon report.

Xi Jinping, the new Communist Party chief and civilian commander of the Chinese military, is moving quickly to make strengthening the country’s armed forces a centerpiece of what he calls the “Chinese dream” of national rejuvenation. Edward Wong reports from Guangzhou.

Nearly a decade after the German government embarrassingly failed in an attempt to ban the country’s leading extreme-right political party, the upper house of Parliament on Friday voted to launch a new effort to have the National Democratic Party deemed unconstitutional. Melissa Eddy reports from Berlin.

SPORTS It’s tough to find a place where this Olympic year didn’t leave a trace, from hermetic Saudi Arabia to tiny Grenada. But for Britain, 2012 was a true annus mirabilis, and the London Games were not the only force behind it. Christopher Clarey looks back.

ARTS Increasing scarcity of Old Masters continues to drive up prices, even in hard economic times, but some bargains of rare beauty can still be had. Souren Melikian writes from London.

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Gunman's Father and Brother Are 'in Shock,' Says a Source

By Diane Herbst

12/14/2012 at 08:50 PM EST

State police personnel lead children to safety away from the Sandy Hook Elementary School

Shannon Hicks/Newtown Bee/Reuters/Landov

The father and older brother of the gunman who was blamed for the Connecticut school shooting are being questioned by authorities but are not suspects, a law enforcement source tells PEOPLE.

The Associated Press reports that the gunman has been identified as 20-year-old Adam Lanza.

His unidentified father, who lives in New York City, and his older brother, Ryan, 24, of Hoboken, N.J., are "in shock," the law enforcement source tells PEOPLE.

They were being questioned by the FBI in the Hoboken police station but "are not suspects, they have no involvement," the source says.

"Imagine the 24 year old – he's lost his mother. Imagine the father, his son killed 20 kids," the source says."   

As for Adam, "It looks like there's mental history there," the law enforcement source says.

Adam Lanza died at the scene of the shooting that killed 20 children and six adults at the Sandy Hook Elementary School in Newtown, Conn.

His mother, Nancy Lanza, was found dead at her home, according to CNN.

The source describes the weapons used by Lanza as "legitimate." According to CNN, Lanza used two hand guns that were registered to his mother and a rifle.

Adam's parents were no longer together, the source says.   

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Fewer health care options for illegal immigrants

ALAMO, Texas (AP) — For years, Sonia Limas would drag her daughters to the emergency room whenever they fell sick. As an illegal immigrant, she had no health insurance, and the only place she knew to seek treatment was the hospital — the most expensive setting for those covering the cost.

The family's options improved somewhat a decade ago with the expansion of community health clinics, which offered free or low-cost care with help from the federal government. But President Barack Obama's health care overhaul threatens to roll back some of those services if clinics and hospitals are overwhelmed with newly insured patients and can't afford to care for as many poor families.

To be clear, Obama's law was never intended to help Limas and an estimated 11 million illegal immigrants like her. Instead, it envisions that 32 million uninsured Americans will get access to coverage by 2019. Because that should mean fewer uninsured patients showing up at hospitals, the Obama program slashed the federal reimbursement for uncompensated care.

But in states with large illegal immigrant populations, the math may not work, especially if lawmakers don't expand Medicaid, the joint state-federal health program for the poor and disabled.

When the reform has been fully implemented, illegal immigrants will make up the nation's second-largest population of uninsured, or about 25 percent. The only larger group will be people who qualify for insurance but fail to enroll, according to a 2012 study by the Washington-based Urban Institute.

And since about two-thirds of illegal immigrants live in just eight states, those areas will have a disproportionate share of the uninsured to care for.

In communities "where the number of undocumented immigrants is greatest, the strain has reached the breaking point," Rich Umbdenstock, president of the American Hospital Association, wrote last year in a letter to Obama, asking him to keep in mind the uncompensated care hospitals gave to that group. "In response, many hospitals have had to curtail services, delay implementing services, or close beds."

The federal government has offered to expand Medicaid, but states must decide whether to take the deal. And in some of those eight states — including Texas, Florida and New Jersey — hospitals are scrambling to determine whether they will still have enough money to treat the remaining uninsured.

Without a Medicaid expansion, the influx of new patients and the looming cuts in federal funding could inflict "a double whammy" in Texas, said David Lopez, CEO of the Harris Health System in Houston, which spends 10 to 15 percent of its $1.2 billion annual budget to care for illegal immigrants.

Realistically, taxpayers are already paying for some of the treatment provided to illegal immigrants because hospitals are required by law to stabilize and treat any patients that arrive in an emergency room, regardless of their ability to pay. The money to cover the costs typically comes from federal, state and local taxes.

A solid accounting of money spent treating illegal immigrants is elusive because most hospitals do not ask for immigration status. But some states have tried.

California, which is home to the nation's largest population of illegal immigrants, spent an estimated $1.2 billion last year through Medicaid to care for 822,500 illegal immigrants.

The New Jersey Hospital Association in 2010 estimated that it cost between $600 million and $650 million annually to treat 550,000 illegal immigrants.

And in Texas, a 2010 analysis by the Health and Human Services Commission found that the agency had provided $96 million in benefits to illegal immigrants, up from $81 million two years earlier. The state's public hospital districts spent an additional $717 million in uncompensated care to treat that population.

If large states such as Florida and Texas make good on their intention to forgo federal money to expand Medicaid, the decision "basically eviscerates" the effects of the health care overhaul in those areas because of "who lives there and what they're eligible for," said Lisa Clemans-Cope, a senior researcher at the Urban Institute.

Seeking to curb expenses, hospitals might change what qualifies as an emergency or cap the number of uninsured patients they treat. And although it's believed states with the most illegal immigrants will face a smaller cut, they will still lose money.

The potential impacts of reform are a hot topic at MD Anderson Cancer Center in Houston. In addition to offering its own charity care, some MD Anderson oncologists volunteer at a county-funded clinic at Lyndon B. Johnson General Hospital that largely treats the uninsured.

"In a sense we've been in the worst-case scenario in Texas for a long time," said Lewis Foxhall, MD Anderson's vice president of health policy in Houston. "The large number of uninsured and the large low-income population creates a very difficult problem for us."

Community clinics are a key part of the reform plan and were supposed to take up some of the slack for hospitals. Clinics received $11 billion in new funding over five years so they could expand to help care for a swell of newly insured who might otherwise overwhelm doctors' offices. But in the first year, $600 million was cut from the centers' usual allocation, leaving many to use the money to fill gaps rather than expand.

There is concern that clinics could themselves be inundated with newly insured patients, forcing many illegal immigrants back to emergency rooms.

Limas, 44, moved to the border town of Alamo 13 years ago with her husband and three daughters. Now single, she supports the family by teaching a citizenship class in Spanish at the local community center and selling cookies and cakes she whips up in her trailer. Soon, she hopes to seek a work permit of her own.

For now, the clinic helps with basic health care needs. If necessary, Limas will return to the emergency room, where the attendants help her fill out paperwork to ensure the government covers the bills she cannot afford.

"They always attended to me," she said, "even though it's slow."

___

Sherman can be followed on Twitter at https://twitter.com/chrisshermanAP .

Plushnick-Masti can be followed on Twitter at https://twitter.com/RamitMastiAP .

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Wall St Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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News Analysis: China Stays Beside North Korea, a Buffer Against the U.S.

BEIJING — Even though North Korea ignored China’s appeal not to test its new longer-range missile, the new leadership here appears intent on remaining a steadfast supporter of its wayward neighbor because it considers the North a necessary buffer against the United States and its allies.

Analysts said that China’s overriding fear was of a collapse of the hard-line Communist government in Pyongyang, which could lead to the reunification of the Korean Peninsula under a government in Seoul allied with the United States. China, they said, would consider an American presence on its doorstep untenable.

But China’s unyielding support of Kim Jong-un has a serious downside, they added, because it may lead to a result nearly as unpalatable: efforts by the United States and its regional allies Japan and South Korea to contain China.

“It stirs up regional security,” said Zhu Feng, a professor of international relations at Peking University who favors reducing support for North Korea. Without naming the United States, he added that the missile launching “facilitates China-bashers to work on hard-line policies to contain China, or just balance China.”

Obama administration officials were clearly exasperated this week with China’s inability to rein in Mr. Kim, saying that they were considering a stronger military presence in the Asia-Pacific region.

Beneath the official tolerance of North Korea, a debate about the wisdom of remaining loyal to such a world outlier and its defiant young leader simmers among analysts who strive to influence China’s foreign policy.

China runs the risk, Dr. Zhu said, of being bunched together with North Korea as one of “the two bad guys.”

“I feel very frustrated,” Dr. Zhu added. “At least we should distance ourselves from North Korea. The reality is, as long as North Korea can’t change their behavior, then peace and stability on the peninsula will be increasingly vulnerable.”

China has twice asked Mr. Kim, who inherited the leadership of North Korea after the death of his father at the end of last year, not to proceed with missile tests, and twice he has rebuffed the entreaties. Shortly after he came to power, a Chinese vice minister of foreign affairs, Fu Ying, visited Pyongyang to warn him not to conduct a test. In April, Mr. Kim went ahead anyway with a rocket launching, which fizzled. Last month, Li Jianguo, a member of the Politburo, visited North Korea to again urge restraint.

Despite their displeasure, China’s leaders see little choice but to put up with such indignities.

The slight pique expressed by the Foreign Ministry on Wednesday was not a signal that China would alter its course, the analysts said, or back tougher sanctions at the United Nations.

The official reaction was “very hesitant,” said Jin Canrong, a professor of international relations at Renmin University in Beijing.

After the missile test, Washington immediately started pushing for deeper sanctions at the United Nations and for a tightening of existing sanctions that China agreed to after earlier rocket launchings.

“China will not support a resolution; it will favor a president’s statement,” said Cai Jian, the deputy director of the Center for Korean Studies at Fudan University in Shanghai. A president’s statement at the United Nations is considered a much weaker form of condemnation than sanctions.

A major reason for not backing new sanctions is the fear that they would provoke North Korea to test another nuclear weapon, a far worse prospect than the launching of an unarmed rocket like the one on Wednesday, said Jonathan D. Pollack, a North Korea expert at the Brookings Institution in Washington.

“The North Koreans demurred from a third nuclear test in April, very likely under major Chinese pressure,” Dr. Pollack said.

In 2006 and 2009, North Korea tested a nuclear weapon soon after launching missiles. Dr. Pollack said a repeat of that action would pose a major test to the Obama administration, as well as to the new Chinese leader, Xi Jinping.

“Pyongyang may have decided now is the time to put down a major marker as Obama’s second term approaches and as South Korea elects a new president,” he said.

Beyond the hard strategic questions for the new Chinese leadership, the concerns among ordinary Chinese about why China bankrolls such a ruthless government should be considered, several Chinese analysts said.

“Internally in China, many voices are questioning all this spending on rocket launches instead of on improving people’s livelihoods,” said Jia Qingguo, an expert at Peking University.

The South Korean government recently estimated that North Korea had spent $2.8 billion to $3.2 billion since 1998 on its missile program, said Stephan M. Haggard, a professor of Korea-Pacific studies at the University of California, San Diego. That amount of money would have bought enough corn to feed the country for about three years, Dr. Haggard said.

The debate within China about its relationship with North Korea stems from the unusual nature of the alliance. Fundamentally, the two governments do not like each other and harbor deep mutual suspicions, said Stephanie T. Kleine-Ahlbrandt, the China and Northeast Asia project director of the International Crisis Group in Beijing. When North Korean officials visited Singapore this year to get new ideas for Mr. Kim’s government, leaders in Beijing — who have sent teams of their own to Singapore to study its softer form of one-party leadership — became very nervous, she said.

The larger fear is that any fundamental change in North Korea could send waves of refugees into China, who would be considerably more difficult to absorb than people of other nationalities on China’s borders.

“For the Chinese,” Ms. Kleine-Ahlbrandt said, “there are fewer problems keeping North Korea the way it is than having a collapse.”

Bree Feng contributed research.

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