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After two weeks of continuous heavy rains, a farmer surnamed Chen in China's Henan province surveys bent stalks of saturated wheat in sodden fields that will take days to dry out before harvesting can start.

The rains are also causing the kernels on his wheat crop to begin sprouting early, which, more crucially, means the grain will produce lower quality flour unsuitable for noodles or bread. That could mean a large chunk of the crop will end up being sold as less valuable animal feed, or even abandoned.

"Look, all this wheat has sprouted," Chen told Reuters, pouring kernels into his hand while standing in his fields about 40 km (25 miles) north of the town of Zhumadian. Chen plants about 2 acres (0.8 hectares) of wheat every year.

About one-third of China's wheat is grown in Henan province, earning it the nickname the granary of China. With roughly 30 million metric tons expected to be affected nationally by the rains, out of a forecast bumper crop for all of China of 137 million metric tons, the losses may mean rising grain imports into the world's biggest wheat consumer.

About a third of the wheat across southern Henan has sprouted, said a harvester driver operating on a nearby farm who has worked his way north from Anhui province over the last week. He declined to give his name.

The rains have also impacted neighbouring provinces like Anhui, Shanxi and Shandong, though it's too early to say how extensive the damage is, but it could increase the need for more overseas grain.

"Imports of wheat into China are already going up. If there is damage to the crop ... then it's likely that China will need to increase its imports next year. So obviously that would have an impact on global prices and an impact on global markets," said Darin Friedrichs, co-founder of Shanghai-based Sitonia Consulting.

However, China's large grain stocks should protect against any impact on food prices, he said.

Any higher imports would also come just as the El Nino weather pattern is set to sharply reduce output in major wheat producer Australia and as the ongoing war in Ukraine continues to curtail its grain exports.

A DISASTER

For farmers like Chen, incomes will take a hit.

China's Agriculture Minister Tang Renjian visited Zhumadian and other impacted areas this week and urged "extraordinary measures" to harvest the wheat, according to a ministry statement on Monday.

The Henan government is urging insurance providers to cover early sprouting damage and quickly settle claims, the ministry said.

It has also ordered state grain buyers to purchase lower quality wheat at above-market prices.

A Xiping-based grain dealer surnamed Wang is paying growers 2,100 yuan ($295) per metric ton of germinated wheat, about 75% of the market price for food-grade wheat.

The wheat kernels she has bought have all more or less sprouted, Wang said. "These (sprouted) wheat have a bad taste as they are sticky and doesn't mix well to make dough."

But for damp wheat still unharvested, the price could be even lower, unless it dries up soon.

Only three-quarters of Henan's crop had been harvested as of Tuesday, compared with 90% this time last year, according to state media.

Farmers are digging trenches or using pumps to drain water off their fields so harvesting can start.

"I think that we will have to wait four or five days before harvesting," said Chen.

"This is really a disaster." (Reuters)

A North Korean youth group has donated rocket launchers to the military in a show of "fervent patriotism", state media KCNA reported on Wednesday, as the isolated state confronts what it sees as growing foreign threats.

The donation of military equipment took place at a ceremony on Tuesday as the Korean Children's Union (KCU), a political youth group, celebrated its 77th anniversary.

The KCU, whose members are known for their red scarfs, was set up to promote the North's political ideology including "Juche", or self reliance.

In recent months, North Korea has stepped up propaganda efforts and public messaging, including the staging of rallies at which effigies of South Korean and American leaders have been burned, as its missile and nuclear programmes raise growing alarm abroad.

North Korea has defied U.N. Security Council resolutions by test firing various missiles, including its biggest intercontinental ballistic missile this year.

Last week, it drew international condemnation by attempting to launch its first spy satellite, although the rocket and the payload plunged into the sea.

Tuesday's ceremony was attended by senior ruling party officials, KCNA reported. It did not say how the funds were raised for the military equipment.

The donated rocket launchers were dubbed "Sonyeon", which means boy in Korean, although the youth group's members include boys and girls. (Reuters)

The Organisation for Economic Cooperation and Development told Vietnam last week that handouts to big firms to offset higher levies under a global overhaul of tax rules would be problematic, a person familiar with the discussions said.

Reuters exclusively reported last week that Vietnam was planning subsidies worth hundreds of millions of dollars to partly compensate multinationals with big investments in the country, including Samsung Electronics (005930.KS) and Intel (INTC.O), for the higher taxes they will face from next year.

Under the new rules shepherded by the OECD, companies paying less than 15% in a low-tax jurisdiction will from January face a top-up levy either in that jurisdiction or in their home country.

Vietnam's plan is the first reported attempt worldwide to find a partial workaround to the new global rules, but other countries are considering similar moves, the person familiar with the talks said, noting the OECD warned of risks these arrangements may pose, potentially "compromising the ultimate purpose" of the reform.

The rules were mainly devised to tackle tax planning practices which have allowed multinationals to pay very low or no tax at all. Usually this is done by basing their headquarters in tax havens, such as Caribbean islands or small European states, where often they had no production activities.

Vietnam is a major manufacturing hub heavily reliant on foreign investment which it has been able to attract over the decades partly thanks to tax sweeteners, but also because of low labour costs, proximity to China, free trade deals and stable government.

Hanoi wants to introduce a top-up tax, but fears that without some sort of compensation, the higher levy could make it less attractive to large multinationals, which have been asking for compensation in private talks. In 2019, Samsung paid as little as 5.1% in tax in one province.

OECD WARNING

In meetings in Hanoi last week, OECD officials told Vietnamese government officials that if subsidies to multinationals were found to be direct compensation for the higher levy, "the domestic top-up tax would be disqualified," the person said, declining to be named because the information was not public.

The person said the OECD made it clear that large companies would therefore have to pay the top-up levy in their home country, for instance South Korea in the case of Samsung.

OECD senior tax official John Peterson declined to comment about the outcome of the meeting, citing confidentiality rules.

However, he said if one country compensates a multinational with "targeted benefits, for example in the form of grants or tax credits" it would no longer be able to raise revenues from a top-up tax.

In that case, the company "will simply be subject to additional top-up tax, equal to the same amount, in another jurisdiction."

Vietnam's government did not reply to Reuters requests for comment.

Asked about the planned measures at a press conference on Monday, Nguyen Thanh Lam, deputy information minister said: "It's a broad and complicated matter. Many government agencies are involved and studying it."

Vietnam's planned subsidies would be in the form of after-tax cash handouts or refundable tax credits, according to initial plans subject to changes, Reuters has reported.

That would benefit companies facing higher levies due to the global tax reform, but also firms which are not impacted by the overhaul, another source familiar with the separate talks between companies and the Vietnamese government told Reuters.

Decisions on compensation would be taken case by case and no direct link would be established between handouts and the top-up tax, the source added.

Asked whether the planned rules could be considered a direct subsidy to offset multinationals' higher taxes, the OECD declined to comment as Vietnam's plans had not been finalised.

Under the new rules, countries can introduce tax incentives for companies, but their laws must be reviewed and supported by tens of nations worldwide which have agreed to the global reform. (Reuters)

Vanuatu Prime Minister Ishmael Kalsakau said his government "must remove the stigma" from a security agreement with Australia and work toward having it ratified by parliament, local media reported on Wednesday.

The Pacific Islands nation signed a security treaty covering disaster relief, defence, policing and cyber security with Australia in December, but during a visit by Australia Defence Minister Richard Marles on Tuesday, Vanuatu officials said the document was still being examined.

Some Vanuatu politicians who favour ties with China, a major infrastructure lender, have expressed concern over the deal.

"We must remove the stigma that the agreement is one-sided and does not reflect Vanuatu’s sovereignty," Kalsakau said in a speech, the Vanuatu Daily Post reported on Wednesday.

"Thinking that some troops from Australia will enter the country without visas and access our sovereign data will not happen unless we agree and give our informed consent," he said, referring to misinformation on social media.

Australia is already providing assistance in many security areas, including helping Vanuatu recover from a cyber attack that crippled communications in November, and cyclone recovery in March, he said, according to a government statement.

China's navy sent a ship with humanitarian supplies to Vanuatu in April after two cyclones hit in March. The vessel arrived a week after 600 Australian Defence Force personnel and the HMAS Canberra helicopter carrier had departed after a seven-week humanitarian mission.

Washington and its allies are concerned about Beijing's naval ambitions in a region occupying vital sea lanes.

Concern at becoming embroiled in strategic competition between the United States and China has prompted some domestic political backlash in neighbouring Papua New Guinea, which signed a defence agreement with the United States in May, and where a security treaty with Australia is also being delayed. (Reuters)