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CNN NEWSROOM

North Korea Launches Ballistic Missile; Trump Has Warned North Korea That U.S. "Patience Is Over"; Syrian Forces Advance In Raqqa, Breach Key Wall; Vietnam's Beer Business; Syria And Ukraine To Top Trump-Putin Agenda; Tesla to Deliver Model 3 This Month; Iconic Hong Kong Fishing Village Going Solar. Aired 1-2a ET

Aired July 4, 2017 - 01:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[01:00:00] ANNOUNCER: This is CNN breaking news.

MICHAEL HOLMES, CNN ANCHOR: Hello, everyone! I'm Michael Holmes. You're watching CNN NEWSROOM live from Los Angeles. And we are following breaking news this hour. North Korea launching a missile that may have landed in Japan's exclusive economic zone. South Korean Military Officials say it landed in the sea east of the Korean Peninsula. Japanese officials say it flew for about 40 minutes.

The U.S. President Donald Trump had this reaction on Twitter: "North Korea has just launched another missile. Does this guy have anything better to do with his life? Hard to believe that South Korea and Japan will put up with this much longer, perhaps China will put a heavy move on North Korea end this nonsense once and for all."

Of course, CNN following this developing story with our correspondents throughout the region: Paula Hancocks is in Seoul, South Korea; Journalist, Kaori Enjoji, joins us from Tokyo; And Andrew Stevens is in Hong Kong. Paula, let's start with you. Around a dozen missile tests were conducted by North Korea this year alone, bring us the latest on this one, what do we know?

PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: Well, Michael, we're getting some new information now from the Blue House; there was a National Security Council meeting earlier this morning. And in a statement, the Blue House has said that President Moon Jae-in strongly condemns the irresponsible provocation and also says that the military is considering the possibility that this was an ICBM, an Intercontinental Ballistic Missile. Now, this is what North Korea has said that it's working towards a missile that eventually could hit mainland United States.

Now, we did hear from a U.S. official earlier on this morning that they believed it was one level lower, so an intermediate range missile. But we're now hearing it floated from the Blue House itself that there is a possibility that this could have been an ICBM. Now, if that is the case that will certainly raise alarm in Washington. This is one of the concerns they that have had for some time that Kim Jong-un, the North Korean leader himself has said he wants an ICBM that can be with a nuclear tip on it that can hit mainland United States. Now, we have some facts and figures for you, the JCS, Joint Chiefs of

Staff here, said it flew about 930 kilometers. U.S. Pacific Command believed that it flew around 37 minutes until it touchdown in the waters of the East Coast of Korea, believed to be in the Japanese Exclusive Economic Zone waters. So, of course, the -- what we're looking at for now is: what kind of missile?

We are hearing as well, significantly, from local media, quoting Pyongyang radio that North Korea will make a special announcement at 3:00 Pyongyang time. That's in about an hour and a half's time, so 3:30 p.m. Seoul time. So, we will be waiting to see what kind that special announcement will be. It is rare and it's usually quite significant if North Korea highlights a special announcement. Michael.

HOLMES: Certainly is. We'll be checking in with you for that, Paula, do stand by. Kaori Enjoji in Tokyo and let's talk about the Japanese reaction because not for the first time this apparently or allegedly landing in that exclusive economic zone which makes Japan very nervous.

KAORI ENJOJI, TOKYO BUREAU CHIEF FOR CNBC: It does. And I think there have been so many missile launches over the last 12 to 18 months in particular. But I think the comments from the Japanese Prime Minister were particularly strong today. Prime Minister Shinzo Abe about an hour after this launch was confirmed, called it a clear sign that the threat from North Korea is increasing. And although the North Korea missile launches have been very numerous this year, particularly in May, I think this is the strongest language that the Prime Minister has used in reaction to those. Also saying that Japan has issued a strong protest of what it called a clear violation of U.N. Resolutions.

I also note today that it took just 1o minutes for the government to acknowledge that a missile has been launched. And I think that very short span of space is also unprecedented in -- since the start of this year. It also is worthy to note, this is just a day after the Prime Minister of Japan, Shinzo Abe, had a phone call with U.S. President Trump and of course, comes on the heels of a G-20 Summit meeting. And South Korea, Japan, and the United States will be holding a dinner, a trilateral, on the sidelines of that meeting.

And so, I think this is a very significant timing and one that is being taken very seriously by the Japanese government. And I also have to say that although the number of missile launches has been fairly frequent, I think there's growing public awareness, growing public sense of urgency about these missile launches, which I think the Japanese government is trying to heighten. I mean, I can note that school children are bringing back flyers from their schools recently telling them how to behave should a missile be launched: go into subways, go into buildings where there are no windows.

I mean, the government itself is trying to highlight a sense of urgency among the Japanese public. And certainly, the comments from the Prime Minister, Shinzo Abe, today are clear -- are fairly strong and that he's saying that it's a clear sign and the threat from North Korea is intensifying.

[01:05:42] HOLMES: That really is a regional problem. Kaori, thanks so much. Andrew Stevens, let's turn to you now in Hong Kong. You know, the U.S. President had a phone conversation with Mr. Xi Jinping of China before this test. Of course, we got Mr. Xi meeting with his Russian counterpart, Vladimir Putin, a matter of hours from now. When there is talk about China doing more, as Mr. Trump has suggested, what more can it do?

ANDREW STEVENS, CNN ASIA PACIFIC EDITOR: Well, there is undoubtedly more candid quite a lot more, Michael. China remains the biggest partner -- trading partner, economic partner to North Korea, even though it is abiding by U.N. sanctions, which includes stopping North Korean coal exports to China. But there are still a lot of fuel flows that go across the border, general trade.

In fact, that general trade is increasing. Latest numbers from the first quarter of this year suggest that the North Korean-China trade is actually getting bigger. But China will say we are doing everything, we have supported every U.N. sanctions and every U.N. move against North Korea. We are committed to a deneutralized Korean Peninsula and there actually (INAUDIBLE 06:48). But China does hold the key and that is what Donald Trump has repeatedly said, he wants to see a lot more economic pressure brought to bear by China on North Korea. You saw that tweet talking about; perhaps, China "put a heavy move on North Korea economically."

Now, what the China has been saying is we don't want to do unilateral action. That is not the way forward, now is the time for dialogue. Just 24 hours ago, in fact, the Chinese Ambassador to the United Nations and China just assumed at the head of the Chairmanship of the Security Council, the Ambassador of China to the U.N. had this to say:

(BEGIN VIDEO CLIP)

LIU JIEYI, CHINESE AMBASSADOR TO THE UNITED NATIONS (through translator): We have never stopped working on various parties so that dialogue and negotiations can take place to get us on the track of resolving the problems of denuclearization and peace and stability on the Korean Peninsula. We cannot afford to wait for too long without dialogues taking place to see the situation having the possibility of worsening still.

(END VIDEO CLIP)

STEVENS: Now, we haven't had an official comment since that missile launched from North Korea by China. And the message coming from Washington on dialogue is a little unclear at this stage, Michael, but just to sort of cloud the waters further, the relationship between China and the U.S. is seeing additional strains. President Xi spoke to Donald Trump 24 hours ago, that's ahead of that G-20 meeting where they are expected again to meet on the sidelines and North Korea will be a key topic there.

But there are tensions, there was the U.S. Naval vessel that sailed close to what China says is its own sovereign waters. There was the unilateral move by the U.S. to impose sanctions on a Chinese bank which have been dealing with North Korea. And also there's this arms deal between the U.S. and Taiwan. All these -- the Chinese are calling it, having a negative impact on the relationship. So, as always, it's very complex and at this stage, China is talking about dialogue.

HOLMES: Good points, all. Thanks so much to you Andrew Stevens in Hong Kong, also Paula Hancocks in Seoul and Kaori Enjoji in Tokyo. I appreciate it. All right, let's turn now to Bruce Bennett, he is a Senior International and Defense Researcher at the RAND Corporation and talks a little bit more about this. You know, it was interesting, Andrew is talking about the phone call between Mr. Xi and Donald Trump.

You know, the White House described that as talking about the growing threat of North Korea's weapons. But the Chinese put out a far more detailed statement and they spoke about the relationship with the U.S. being affected by "some negative factors," so a little bit of tension starting up there. When it comes to China's desire for talks, South Korea would like talks as well. There've been a lot of talk about talks and there have been talks on even then non-official level, the North Korea has always been firm in saying no, no, no. We are on a path and we're sticking to it.

BRUCE BENNETT, SENIOR INTERNATIONAL AND DEFENSE RESEARCHER, RAND CORPORATION: Yes, the North Koreans don't want multi-lateral the talks; they want bilateral talks with the United States. They want that because Kim Jong-un wants to appear to be a peer of the United States. He needs that for his internal political purposes. He's got a weak country. He's got a weak role as the leader of North Korea, but he's supposed to be immensely powerful and he doesn't look that way.

[01:10:24] HOLMES: So, you've got us also a situation where the U.S. has said whether it comes to an Intercontinental Ballistic Missile with a nuclear warhead, one the North Koreans get to the point of miniaturizing that and making that a doable thing. The U.S. has said, not going to happen. Not going to happen. Meanwhile, you've got the North Koreans who seem hell-bent on making that happen. Where does that end? That's not a good dynamic right there.

BENNETT: Well, and you look at this launch. We still don't know all the details but a 37-minute flight that they're talking about, that's more than likely an ICBM capability. So, that kind of ICBM wouldn't reach the United States. An ICBM is a 5500-kilometer range or more. That's not going to reach the United States but they're getting close. And so, they're pushing that threshold. This is a problem for the United States and for President Trump in particular.

HOLMES: And so, when it comes to putting pressure on and Donald Trump says he wants China to do more. You know, the U.S. has put some secondary sanctions on recently, there's room to do more of that. How much more pressure can be put on North Korea, particularly in the context of they're the most heavily sanctioned country in the world. It isn't working. BENNETT: Well, and the problem is North Korea's building most of

their missiles internally. They're not relying on external parts, so you can't put economic sanctions on to stop the missile program. You do it to cause pain to the country and you hope indirectly that that will convince the country to take a different action. So far, it hasn't been successful. What Trump is suggesting is China should cut off the oil flow to North Korea. But we've just had information from a North Korean defector that North Korea also gets substantial oil flow from Russia that we had been hearing about before.

HOLMES: Do you -- very quickly, do you worry about where this is headed?

BENNETT: Oh, absolutely. This is the kind of thing where there is a confrontation in Kim Jong-un's mind with President Trump and he's got to try and look like he succeeds. This is dangerous.

HOLMES: All right. I have to leave it there, unfortunately. Bruce Bennett with the RAND Corporation, thank you so much. I appreciate, you coming in.

BENNETT: You bet. Thank you.

HOLMES: In Northern Syria, there has been a major new development in the battle against ISIS in its defector capital, Raqqa. The U.S. Central Command in the last couple of hours said that U.S.-backed Syrian forces have now breached a wall surrounding Raqqa's old city, a very historic wall. And this is key because ISIS militants have been using that wall and a couple of gaps that they created in it as a strategic fighting position. They planted mines and IEDs all along that wall and at those anchors that they created. Now, the U.S. President, Donald Trump, is expected to talk about Syria when he meets with the Russian President, Vladimir Putin, in just a few days; more now on this from our Pentagon Correspondent, Barbara Starr.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT: U.S. Marines in Syria, firing artillery at ISIS positions. The unprecedented video, much of it shot from a drone overhead, underscoring the growing danger from more than an estimated 700 U.S. combat forces on the ground. The U.S. war against ISIS in Syria is at a critical stage. U.S.-backed forces, including snipers, are now inside Raqqa, trying to end the Islamic State that Abu Bakr al-Baghdadi declared three years ago this month. But tens of thousands of civilians are still at risk from ISIS and Syrian President Bashar al-Assad. President Trump is about to meet with Russian President, Vladimir Putin, for the first time. And the White House says the war in Syria is likely to be discussed. The U.S. goals:

H.R. MCMASTER, ADVISOR, NATIONAL SECURITY: The need to de-escalate the Syrian civil war, to defeat ISIS there and to end the humanitarian catastrophe.

STARR: But it's about to get a lot tougher.

LT. COL. CEDRIC LEIGHTON, CNN MILITARY ANALYST: Putin believes that he's in the catbird's seat at this point.

STARR: What the U.S. no longer regularly calling for Assad's removal, there is little pressure on Putin's backing of Assad. And this recent firing of Russian cruise missiles, also an indication that Moscow support for Assad fits Vladimir Putin's own goals.

LEIGHTON: He is going to seek to enhance that Russian influence because he believes Syria is the jumping off point for further Russian activity in the Middle East. I don't think President Trump necessarily understands that.

[01:15:09] STARR: President Trump's special envoy, Brett McGurk, has just been to the outskirts of Raqqa to figure out what happens next. Raqqa will need money, organization, and manpower, but it's not likely the Trump administration would supply that full effort.

HEATHER NAUERT, SPOKESWOMAN, UNITED STATES STATE DEPARTMENT: Once Iraq is liberated, that we believe it's critical for local officials from the area to take over responsibility and take over responsibility for post liberation security. But most importantly, governance down the road.

STARR: But the fundamental question remains to what extent, will the Trump administration expand the U.S. effort to help rebuild these war- torn areas? Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

HOLMES: There is a lot to talk about, so joining me now CNN Military Analyst, retired Lieutenant Colonel Rick Francona. Rick, always great to see you and now there's a lot to talk about as I said. We'll get to Mosul in just a moment. But Mosul isn't Raqqa and Raqqa has a pretty complicated neighborhood, does it not? When we're talking about the various combatants, you've got Kurdish fighters, you've got the Arab fighters who are part of the, you've got Americans, you've got regime fighters and then you've got the desperate group of tribes who all have varying opinions on what should happen. It's a complicated landscape, so the important thing is what happens after Raqqa is taken, right?

RICK FRANCONA, CNN MILITART ANALYST (via skype): Well the only thing we have going now that everybody agrees on is we have to get rid of ISIS. Then once you get past that then everybody has, you know, different goals, different aims of how this should turn out. The United States is trying to, you know, thread that needle on how we do just what others have said. We need to provide some sort of governance some sort of relief agencies, and somehow once ISIS is gone, set that city back up. You know, we're breaking a lot of things now we've got to rebuild them. How do we do that?

HOLMES: But a lot of people also worry about that, Raqqa is going to fall, it's going to fall there's no doubt about it ISIS is going to be the faith of devil. A lot of people worried that those who do the liberating are they're going to turn and fight each other it's possible, is it not? FRANCONA: Well that's was the big concern. This is what the Turks were trying to warn us about. You can't use the Kurds to liberate in Arab city because the population wont warm up to them they won't accept it. And then what happens after they liberate the city, are the Kurds going to remain there or they go into and try governing Raqqa. These are all questions that have to be answered and what I'm hearing from the people in Raqqa, they really don't care who liberates them. They just want to be liberated then we could fix the hurdle after that. So I think we're focused right now on the actual fighting to get ISIS out of there and then the real problem begins is how do you handle the city afterwards. And you're r right everybody got desperate interest there; everybody wants a piece o of this. There's even been talk of allowing the Syrian government to come in and provide that governance and we've seen that in other cities in the Kurdish area.

HOLMES: Yes, and a lot of disagreement among those tribes I mentioned as well there and there's a lot of them, in real terms what does or will the fall of Raqqa represent in terms of ISIS itself. The caliphate goes but ISIS does not, right?

FRANCONA: Well it's just another step in them losing their territory. We see what's happened in Iraq there almost out, once Mosul's falls there's only a few more areas and they'll kick them out of there and then we work on Syria. But if you, you know, and ISIS knows this is coming. So they've been preparing for this for over a year now, they've been slowly moving a lot of their operations down the Euphrates Valley. So you've got this one area between Mosul and Raqqa in the Euphrates Valley where they've set up another state, another capital, if you will, and there resort area and that's where the next battle's going to be. And you see the Syrian army moving that way, you see the Kurds moving that way and hopefully we're going to see the Iraqi push of the Euphrates Valley to the Iraqi border and really squeeze them but, you know, ISIS knows this is coming.

HOLMES: It's not over. And I do want to talk with you about Mosul and let's bring people up to date on that first months of grinding street battles in Mosul, in Iraq could end at any moment. Iraqi troops on the verge of ousting ISIS from that city. But on Monday fighting was still raging; you see that yellow patch there? That's in the old city. It's right near the river near Tigris river there and that's where ISIS is being push through. Compare that though to a year ago when all that territory in green was under ISIS control. It's believed there are probably just a few hundred, perhaps 500 ISIS militants left according to rioters. Iraqi forces do expect to have full control of Mosul by the end of the week. So Rick Francona, let's talk a little bit about that. Once Mosul falls, as it surely will in the days ahead, there are some significance and you tap stone when you talk about Euphrates river there are some other significant towns and places that are yet to fall in the geographical sense, Tal Afar and places like that.

[01:20:17] FRANCONA: Right, and once Mosul falls, then the Iraqis have to turn their attention to these other pockets. I think the most significant one's called that her wage of pocket and it's kind of like a triangle south-southeast of Kirkuk, I'm sorry south-east of Mosul, south west of Kirkuk. Quite a significant piece of territory, it's - it sits very close to the main supply lines. So I think the Iraqis will turn their attention to that next. And just like Mosul, it's already surrounded they will continue to reduce that pocket until that's gone. And then they turn their attention to the west and they go up in Anbar province and go up Euphrates Valley and that's when we really see the pressure coming from both sides from the Syrian side and the Iraqi side. But this isn't going to happen overnight and I disagree with the Iraqis, it's not two days they've got another week in the old city of Mosul. And then they still have -- there's one more neighborhood in Mosul caught that they have to take as well.

HOLMES: Good point and to be honest the Iraqi military or the Iraqi government is being a little bit optimistic when they have given timelines in the past. And probably are right now, you know, there is an -- you've been familiar with old Vietnam wars saying that we had to destroy the village in order to save it. Much of Mosul, I was there in October, November last year and much of it is in ruins. I mean, how important in a sectarian sense is the rebuilding, giving people back a city to go back to. You know, that's before we talk about the issue of reconciliation.

FRANCONA: Yes, I mean, that the pictures are horrific. I saw the Iraqis raise a flag over a hospital today and I-- they should have said what was left of a hospital. Because you're right, it's just ruins. The question will be after Mosul falls, what is the Iraqi government going to do? And this will be a real test for the reintegration of Mosul into Iraq and more importantly, the reintegration of the Sunnis into mostly, you know, a Shia dominated Iraq. Is the government going to put the resources required to rebuild that city? This will be billions of dollars. It is going to take a lot of time, are they going to make the commitment?

HOLMES: Yes. And if they don't, you have the whole issue of trust in the central government which was the beginning of it all in terms of Mosul falling in many ways. This is some sort of not just sheer reconciliation. I didn't want to end without talking to you about that, not just Shia and Sunni reconciliation but on the ground there, I was hearing a lot of concerns about Sunni on Sunni retribution after Mosul fall. You know, they -- you've got tribes who will say to other tribes, your kid was supporting ISIS, your kid killed my kid and there's already been some retribution killings. How to bring that together is key to what the place is going to look like in years ahead.

FRANCONA: Yes. And the Iraqis, once they take the city, they can't leave. They've got to go in there and secure it and make sure that sort of thing doesn't happen. That's always going to be a problem because Iraq is full of militias, and not only Shia militias. Everybody is always talking about the Iran Shia militia. There are Sunni militias and they're all tribally based. And you know that was a big deal in Sudan area in Iraq. Hopefully we won't see that again but we need a strong presence from the Iraqi government and less reliance on these Shia militias. We see a lot of them to the west of Mosul and I think the population is wondering, are they going to leave or are they planning on sticking around? HOLMES: Yes. And even Turkey has a view of that, as well, on the involvement of those militias as well. Great points as always, retired Lieutenant Colonel, Rick Francona, always a pleasure. Thank you, Sir.

FRANCONA: Good to be with you, Mike. The U.S. President Donald Trump getting ready for his biggest foreign policy test yet. The world leaders he'll meet this week in Europe and what's on the agenda is next on NEWSROOM L.A.

(COMMERCIAL BREAK)

[01:26:25] HOLMES: Welcome back, everyone. U.S. President Donald Trump preparing for a huge week on the world stage, including a much anticipated meeting with Russia's Vladimir Putin. They are expected to discuss, of course, Syria and Ukraine on the sidelines of the G20 Summit in Germany. But White House officials say Mr. Trump probably won't bring up Russia's attack on the U.S. election last year.

Meanwhile, Mr. Putin is hosting the Chinese President, Xi Jinping, in Moscow right now. Joining me now to talk about all of this, California talk show radio host Ethan Bearman and California Republican National Committeeman, Shawn Steel. Let's talk about the G20 gentlemen.

This whole idea and I think it was McMaster who said the President will set his own agenda, but when it comes to talking to Vladimir Putin, this motion that he won't raise Russian meddling in the U.S. election seems extraordinary.

ETHAN BEARMAN, TALK SHOW RADIO HOST: Yes. I mean, well, let's go back to the whole idea of not setting an agenda, right. Normally in negotiation, you want to set forth some ideas, what you would want to accomplish out of it. And on top of it all, if you don't ask for certain things, I mean, really, is that a great way to negotiate? Why not bring up the election and the hacking? There's a real concern that I have right now from the Republicans here in the United States which is this denial of an attack on the sovereignty of the United States which is our elections is part of our sovereignty. Denying what had happened, whether or not there was collusion, this needs to be addressed and I would expect the Russians -- the -- excuse me, the Republicans to lead that charge.

HOLMES: A lot of Republicans are concerned about the meddling in the election. They have raised this. It's the President who's not talking about it. Do you -- would you find it extraordinary that you finally get to see Vladimir Putin and you don't say, hey, cut it out.

SHAWN STEEL, REPUBLICAN NATIONAL COMMITTEEMAN, CALIFORNIA: I'm pretty confident that Donald Trump's completely aware about the Russian meddling. And of course, the big turn of events that took place last week when it finally came out that Obama's known about this since the summertime, did nothing about it. So Trump is cleverly turning this around back to Obama, what were you doing all that time?

HOLMES: Why doesn't he do the opposite? STEEL: He's effectively turned this around and I'm pretty sure he's

going to have some nice talks with Putin about this because the last thing Trump needs is having nasty counterattacks thrown against him for something that he didn't create, that he wasn't involved in. And my guess is that Putin's going to get quite a discussion that he didn't expect?

HOLMES: You think he will?

STEEL: Oh, I'm pretty sure of it because Trump doesn't like problems and he doesn't like surprises and let's face it, Putin's representing a country that's practically Second World, if not Third World. It's not nearly the power of China. The real discussions will be with China. Putin's just kind of a side show right now. He wants to be number one but he doesn't have the economic wealth.

BEARMAN: But it's no side show when they're actually attacking the sovereignty of all elections; the French elections, the German elections, the Ukrainian elections.

STEEL: Either way, I agree. I actually agree. It's not that significant. Obama said himself it didn't change the election; it had no effect on the results. And countries have always tried to --

(CROSSTALK)

BEARMAN: The Russians have been hacking us since the commercialization of the internet. And so if we don't take this seriously, now that they've made a concerted effort toward our election --

STEEL: Mr. Bearman, you are not going to be more anti-Communist than I am.

HOLMES: I do -- we've got limited time in this hour, though you will be back next hour so this is just a prelude.

But I did -- you mentioned China and the conversations there. It was a bit of a lovefest initially with the president and Mr. Xi, saying -- after he visited at Mar-a-Lago.

[01:30:06] It was -- everybody was happy and cheerful and liked. But you know, the dynamic is really Chinese in the little while. You have this, you know, a little bit of concern from China over the arm sales to Taiwan, which of themselves is not unusual, but President Trump realizing that perhaps that China isn't going to solve the North Korea issue.

You've got the tensions building in the South China Sea. There are some tensions starting to develop there. Are you concerned about that?

STEEL: I like the Teddy Roosevelt quote. He's speaking softly, being really nice. He even had his granddaughter sing a nice song in perfect Mandarin to Chairman, or whatever, Party Leader Xi. The key is that he's already -- that Trump is testing them in the South Pacific by going to their -- to the so-called islands they've created.

North Korea is the number one problem in the world. The Chinese are not doing much about it except to join the show. And that's something that's getting closer and closer. North Korea just a few hours ago shot another missile that went some 600 miles. So they're getting awfully close to Seattle nowadays.

HOLMES: Ethan, very quickly, they're yelling at me to get out.

Very quickly, last word for this hour?

BEARMAN: Yes, the negotiations with China are way more complicated that President Trump imagined. And it's actually the number one issue even more than Russia or North Korea.

HOLMES: All right. Shawn Steel, Ethan Bearman, we'll be back next hour. So thanks very much for that.

Meanwhile, we'll take a break here on the program. We'll be right back.

(COMMERCIAL BREAK)

HOLMES: Welcome back, everyone. You're watching CNN NEWSROOM live from Los Angeles. I'm Michael Holmes. And I'll bring you up to date with the headlines this hour now.

(HEADLINES)

HOLMES: Beer is big business in Vietnam. Now while the bigger brand of beers are common, now it appears craft breweries are on the rise there. Kristie Lu Stout with the story.

(BEGIN VIDEOTAPE)

KRISTIE LU STOUT, CNN CORRESPONDENT (voice-over): It's Monday night in Ho Chi Minh City and friends are meeting for beer. The post-work activity is a national pastime in Vietnam. Last year the Vietnamese downed almost 3.8 --

[01:35:00]

STOUT (voice-over): -- billion liters of beer, making Vietnam the biggest market for the beverage in Southeast Asia.

UNIDENTIFIED MALE: There's so much more to beer culture in Vietnam now than just that particular image. The story about craft beer has really taken off in the last couple of years.

STOUT (voice-over): Today, the streets of Saigon are buzzing with IPAs, ghosis (ph) and other small batch brews from brands like Heart of Darkness and Winking Seal.

UNIDENTIFIED MALE: As Vietnam has continued to experience income growth, that's where craft beer has really come in. The taste and the preferences of Vietnamese consumers are changing and evolving. And there are lots of people trying to rush to that market.

STOUT (voice-over): More than two years, John Reid, an America, bet that Vietnam's fondness for beer could extend to craft.

JOHN REID, BEER ENTREPRENEUR: We wanted to create something in Vietnam for them to have a local craft beer brand but not an American brand. We wanted a Vietnamese brand that we started here. And everything was local and it was created from Vietnam.

STOUT (voice-over): Picking up international awards and recognition Pastor Street (ph) Brewing Company is available nationwide in Vietnam as well as in Malaysia and Thailand.

UNIDENTIFIED MALE: We've got a lot of fun stuff in the tanks right now.

STOUT (voice-over): This year, the company started exporting to the U.S. market.

REID: About a year into it, about 10, 15 breweries started opening up and we didn't see any decrease in sales for our taproom or our distribution. It just all grew. So it just showed that all these breweries are opening up, all helping to build the culture together.

STOUT (voice-over): State-produced beer and multinational brewers still fill the glasses of most Vietnamese. But craft breweries hope that better quality and taste can lure customers despite the higher cost.

For Loc Truong, founder of East West Brewing Company, one sip is all it takes.

LOC TRUONG, EAST WEST BREWING COMPANY: A lot of people, they didn't know that there's so many different flavors in beer out there. Once they tried craft, they never went back.

STOUT (voice-over): In a move to educate the public, this taproom's beers are made onsite.

TRUONG: We cannot really show what craft beer is when you don't have a craft brewery to really guide them through.

STOUT (voice-over): This year, the Southeast Asia Brewing Conference is being hosted for the first time in Ho Chi Minh City, a toast of sorts to the growing influence of Vietnam's microbreweries

TRUONG: I think aside from maybe owner of Ferrari, owning a beer company is the next best thing. The market is still so open and the possibilities of what you want to do, how you want to shape the market, it really depends on yourself.

STOUT (voice-over): Kristie Lu Stout, CNN.

(END VIDEOTAPE)

HOLMES: Next up on NEWSROOM L.A., if you've been waiting to get your Tesla Model 3, that wait is almost over. The reason the automaker is speeding up production -- when we come back.

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HOLMES: Welcome back.

Tesla's long-awaited Model 3 is expected to roll off the production line as soon as --

[01:40:00]

HOLMES: -- Friday. Tesla CEO Elon Musk says the car passed all the regulatory requirements two weeks ahead of schedule. The electric automaker is aiming to dramatically ramp up production of Model 3s in the months ahead.

Musk also tweeted there will be a, quote, "handover party for first 30 customer Model 3s on the 28th!"

A lot of people on the waiting list for that.

Stilt houses and dried seafood, that is what the Hong Kong fishing village is of Tai O is known for but they may soon gain a reputation for clean electricity. World Wildlife Fund Hong Kong hopes that's just the beginning as well, as our Kristie Lu Stout reports.

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STOUT (voice-over): Lantau is the largest of Hong Kong's 262 islands. Centuries ago it was home to many fishermen. The village of Tai O still looks similar today, famed for its stilt houses and dried seafood.

The annual Dragon Boat holiday connects the past and present with customs to honor the water and gods. It also draws big crowds to this community.

Cammy Wong leads the Chun Y Dragons (ph). He says the team has won the local race for the last 10 years.

CAMMY WONG, DRAGON BOAT TEAM LEADER: Hello! Oy!

(Speaking foreign language).

STOUT: That's your team here in Tai O. That's incredible. Tell me a little bit more about Tai O and the traditions here.

WONG (through translator): So for generations, my grandparents, parents, they've all lived here as fishermen. Pretty much all the people in Tai O fished for a living. And then in the more recent years, there were more young people here and kids have to go to school. So they started to go back to the shore.

STOUT: Your family has lived here for generations.

How have you preserved the culture of Tai O?

WONG (through translator): So every year during special festivals, the younger generation returns to celebrate and to take part in traditions, like going to the temples, praying to the gods and joining the water parade. They're all things that we still want to preserve.

STOUT (voice-over): And now the residents of Tai O are finding a new use for their natural resources. Last year, WWF Hong Kong introduced them to solar power. Olivia To says the villagers quickly warmed up to the idea of free electricity. She says that pilot program showed the panels could provide a household with one-third of its electricity.

OLIVIA TO, WWF HONG KONG: We are really looking forward to solarizing all Hong Kong but not only in Tai O. Right now Hong Kong is far lagging behind from other countries. They don't really have their renewable energy target. Our renewable energy only share about 0.1 percent of the electricity (INAUDIBLE). This is terrible.

STOUT (voice-over): WWF wants clean energy to power at least 5 percent of Hong Kong by 2030. It's also urging the government to commit to a long-term buyback program to pay people for excess electricity that goes back to the grid.

In Tai O, 20 villagers have now applied to install solar systems on their rooftops. Cammy Wong and his family were part of the initial test round. He says he's seen a reduction in the electric bill but that's not the only benefit.

WONG (through translator): It also does feel like we're putting an effort to protect the environment. It's more comfortable. It's not like burning coal, where it pollutes the air, too.

STOUT (voice-over): As Tai O transforms with time, its traditional stilt houses could be a symbol of positive change.

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HOLMES: Now you've been watching CNN NEWSROOM, live from Los Angeles. I'm Michael Holmes. Thanks for your company. "WORLD SPORT" coming up next. I'll be back with more from around the world in about 15 minutes or so. You're watching CNN.

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