North Korea could reach U.S. with nuclear arms: Pentagon

By David Alexander

WASHINGTON (Reuters) - North Korea's continuing development of nuclear technology and long-range ballistic missiles will move it closer to its stated goal of being able to hit the United States with an atomic weapon, a new Pentagon report to Congress said on Thursday.

The report, the first version of an annual Pentagon assessment required by law, said Pyongyang's Taepodong-2 missile, with continued development, might ultimately be able to reach parts of the United States carrying a nuclear payload if configured as an intercontinental ballistic missile.

North Korea launched a multi-stage rocket that delivered a satellite into orbit in December, an advance that "contributes heavily" to the country's development of a long-range ballistic missile capability, the report said.

It is also continuing to refine its atomic weapons capability, including with a nuclear detonation in February, and is capable of conducting "additional nuclear tests at any time," the report said.

"These advances in ballistic-missile delivery systems, coupled with developments in nuclear technology ... are in line with North Korea's stated objective of being able to strike the U.S. homeland," the report said.

"North Korea will move closer to this goal, as well as increase the threat it poses to U.S. forces and allies in the region, if it continues testing and devoting scarce regime resources to these programs," it said.

The document characterized North Korea as one of the biggest U.S. security challenges in the region because of its effort to develop nuclear arms and missiles, its record of selling weapons technology to other countries and its willingness to "undertake provocative and destabilizing behavior."

The report comes at a sensitive time in the region, with friction between Washington and Pyongyang only now beginning to ease following two months of increasingly shrill rhetoric that seemed to edge the Korean peninsula close to war.

Tensions between the two countries rose sharply after North Korea put the satellite into space in late December and conducted the nuclear test in February. The test triggered new U.N. sanctions, which led to a barrage of threats from Pyongyang.

North Korea went so far as to warn of nuclear strikes on the United States and South Korea, as its new leader, Kim Jong-un, marked his first year in office following the death of his father.

The U.S. and South Korean militaries went ahead with a long-scheduled military exercise despite the threats and Washington sending stealth bombers and other planes to the region in a show of force.

North Korea signed a deal to get rid of its nuclear program in exchange for aid in 2005 but later backed out of the pact and now says it will not give up its atomic weapons program.

The United States has firmly rejected North Korean demands that it be recognized as a nuclear-armed state. Washington has stepped up its diplomacy with China over the issue.

(Reporting By David Alexander; Editing by David Brunnstrom)

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New U.S., Chinese officials reach out ahead of talks later this year

By Anna Yukhananov and Sui-Lee Wee

BEIJING/WASHINGTON (Reuters) - A fresh roster of U.S. and Chinese economic and diplomatic officials on Wednesday pledged to strengthen relations between the world's two largest economies, even as concerns persist over currency rates, cybersecurity and the Korean peninsula.

U.S. Treasury Secretary Jack Lew, in his first international trip since taking office last month, wrapped up a two-day visit to Beijing with a meeting with Chinese Premier Li Keqiang, having reopened dialogue on economic reforms but saying more action is needed on China's exchange rate.

"It was clear from the discussions that China has made a serious commitment to their reform agenda. The challenge will be to drive forward toward material progress," Lew told reporters shortly before heading back to Washington.

On economic reforms, Lew said the dominant theme "was what can be done to generate more domestic demand and more growth."

Li told Lew that Sino-U.S. relations should establish "a new form of thinking" and that both sides should use a "strategic, global and long-term vision to view each other," according to a Chinese government website.

Separately, Chinese Foreign Minister Wang Yi told U.S. Secretary of State John Kerry in a phone call on Wednesday that Sino-U.S. relations are "now at a new historical point, we have to forge ahead on the foundations set by the previous people," the Chinese government said.

A senior U.S. official said Kerry, congratulating Wang on his new post, spoke with him about the secretary of state's planned trip to China next month, as well as bilateral and regional issues, North Korea, and cybersecurity.

Like Kerry and Lew, Wang and Li are both newly appointed to their positions.

The exchanges this week offer a preview of deeper talks scheduled for later this year when both Kerry and Lew will host their Chinese counterparts in Washington for the U.S-China Strategic and Economic Dialogue, an annual high-level forum.

COMPETITION AND COOPERATION

Underscoring the continued economic friction between Washington and Beijing, a bipartisan group of U.S. lawmakers on Wednesday reintroduced legislation to pressure China to allow its currency to rise further against the dollar. Similar proposals in recent years have failed to make it into law.

Many lawmakers assert that China's yuan is undervalued, harming U.S. exporters.

The yuan has appreciated 16 percent in real terms against the dollar since June 2010. The currency hit an all-time high against the dollar on Wednesday, but Lew said China needs to make more progress reforming its foreign exchange regime.

"China's exchange rate should be market-determined. That's in our interest and China's interest. They recognize the need to do it for internal reasons as well," Lew told reporters.

Lew's visit with China's new leaders and senior economic officials as well as with U.S. business leaders in Beijing was aimed at improving economic cooperation and boosting growth.

The two sides also discussed growing tensions on the Korean peninsula, European debt, Internet security and climate change.

Li, who was chosen as premier on Friday, told Lew that China "is ready to work with the United States to promote Sino-U.S. relations and develop it in a cooperative, inclusive, healthy and stable way amid competition," the government said.

Lew also met with Chinese President Xi Jinping, Finance Minister Lou Jiwei and People's Bank of China Governor Zhou Xiaochuan.

During his talks, Lew raised the issue of computer hacking. U.S. President Barack Obama last week convened a meeting with CEOs at the White House on such digital attacks and later called Xi over the issue.

The concerns follow a recent assessment by U.S. intelligence leaders that for the first time said cyber attacks and cyber espionage had supplanted terrorism as the nation's top threat.

"It has to be recognized, as the president indicated, this is a very serious threat to our economic interests. There was no mistaking how seriously we take this issue," Lew told reporters.

On North Korea, which has made a series of provocative threats, Lew said the United States and China "will continue to pursue methods available to change the policy perspective in Pyongyang. We share a common objective of a denuclearized Korean peninsula and we will continue to discuss it."

(Corrects family name for Chinese premier to Li from Keqiang, paragraph 5)

(Reporting by Anna Yukhanov and Sui-Lee Wee in Beijing and Doug Palmer and Arshad Mohammed in Washington; Writing by Susan Heavey; Editing by Warren Strobel and Paul Simao)

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Jurors reach verdict in Mich. grandma's trial

PONTIAC, Mich. (AP) — Jurors in suburban Detroit have reached a verdict in the trial of a 75-year-old woman who shot and killed her teenage grandson.

The jury must decide whether to convict Sandra Layne of first-degree murder or a lesser charge, or to acquit her on the basis of self-defense.

Attorneys were notified of a verdict Tuesday afternoon. The Oakland County jury began deliberating the case Monday afternoon.

Prosecutor Paul Walton says there was nothing defensive about Layne's treatment of 17-year-old Jonathan Hoffman. He was shot six times last spring at their home in West Bloomfield Township, even while pleading for help during a 911 call.

Layne's attorney says she feared her grandson and felt overwhelmed by his drug use and choice of friends.

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