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Apple's Sales Warning Sparks Stock Selloff; Pelosi: We're Not Doing a Wall; Political Tide May Be Turning for Gun Control; Russia: Arrested American Had Classified Info; Canadians Detained in China Since December 1st; New U.S. House Passes Bills to Reopen Government; Russian Report: Arrested American Had Classified Info; North Korea's Top Diplomat in Italy May Have Defected. Aired 12-1a ET

Aired January 4, 2019 - 00:00   ET




JOHN VAUSE, CNN ANCHOR (voice-over): A trillion-dollar tech giant no more. Apple stock continues to tumble, pulling more than $400 billion from the company's value and sending shock waves around the world, spreading fears of a global economic slowdown.

She is back, the first woman ever to be Speaker of the U.S. House of Representatives is now the second woman to be Speaker. Voted in by a Democratic majority united in their opposition to Donald Trump.

And the case against Paul Whelan, Russia formally charging the former U.S. Marine with espionage.

Thank you for joining us. I am John Vause and you are watching CNN NEWSROOM.


VAUSE: Apple has seen the biggest one-day drop in its stock price in six years, down 10 percent on Thursday after the tech giant issued a revenue warning blamed on a dramatic slowdown in iPhone sales in China.

The negative forecast from Apple hit financial markets around the world while also sparking concern about the impact on the U.S.-China trade war. Here are the numbers. In Asia, the Nikkei is catching up, down by almost 3 percent. Hong Kong regained some lost territory, up by 1.3 percent. Shanghai up almost 2 percent. You can see in Australia, the ASX200 down by just over one third of 1 percent.

In New York, the Dow plunged 660 points on Thursday.

Joining us, Kaori Enjoji is live in Tokyo and in Los Angeles, global business executive, Ryan Patel.

Kaori, first to you; concerns over slowing economic growth have been weighing on the Asia market for some time. Add to that this new revenue warning. KAORI ENJOJI, JOURNALIST: That's right. This is a big selloff on the first day of trading for Tokyo stocks. The session is still underway here at the Tokyo stock exchange, the market as you pointed out, down, is still down close to 3 percent. Some over 500 points, 19,453 on the Nikkei. Ditto for the TOPIX index, which is a broader index.

I think the market is playing catch up because this is the first trading day of the year. We haven't seen this kind of drop on the first day of trading in the New Year in about three years.

There were signs of concerns about a global slowdown as the market was edging to a close in 2018. But I think what they are calling this flash crash, particularly in the currency market, we're seeing a big selloff of equities here in Tokyo, big enough that the finance ministers, the regulators and the central bank of Japan are holding an emergency meeting this afternoon to discuss the volatility.

The Apple effect hitting a lot of the company's shares here in Tokyo, talking about suppliers to Apple, people who make the chips and the components that go into the phones, the screens and so forth.

And because Japan is such a liquid market, some of the Japan companies are proxies to the China plays. So when we are talking about a potential slowdown in China, it might be bigger than initially expected. A lot of investors choose, such as construction companies in Japan, to trade that play.

We are also seeing big moves in the bond market as well. Japanese government bond yields on the benchmark 10-year slipped below negative, 0.05 percent in negative territory for the first time in more than two years.

What is also fanning the fears in the equity market is the big drop we saw on Thursday, what traders are calling a so-called flash crash. A lot of this had to do with computerized trading in a very, very thin market.

Remember, yield and interest rates have been so low in Japan that most Japanese investors over the years have chosen to keep their money overseas. So when you see this kind of risk in the global market they tend to repatriate that money. Hence we're seeing a surge in the end -- John.

VAUSE: Ryan, on Thursday, Wall Street was reeling from Apple's announcement. Along came the chairman of the White House Council of Economic Advisers, Kevin Hassett, to soothe everything. This is what he said.


KEVIN HASSETT, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS: The rest of the world is slowing and that is having an impact on earnings. And it is not going to be just Apple. I think there are a heck of a lot of U.S. companies that have a lot of sales in China that are going to be watching their earnings be downgraded next year until we can deal with China. (END VIDEO CLIP)

VAUSE: That was like taking a can of gasoline and throwing it on an already burning fire. It wasn't so much what he said but he was implying that --


VAUSE: -- falling corporate profits are good news.

RYAN PATEL, GLOBAL BUSINESS EXECUTIVE: Well, that's what he said in the interview, he was saying this was all good, this was planned. But he also said, at the end of it, he needed the deal. So to me, I don't really know where his point was going.

But Apple is the epicenter of this topic. When they are saying consumer spending is hurting overseas in China, that's sending shock waves. You saw today's stock market from Caterpillar, Boeing, everyone that was affiliated had put the brakes on.

This is different. This topic isn't about the U.S. The sales we are talking about are in China. And the GDP for China coming down, it is not like we didn't know that. But now we are starting to see the effects into numbers.

Trust me, CEO Tim Cook did not want to come out and say expectations for the end of the quarter, they were going to hit sales. This is the last thing any CEO wants to say. He know they were not going to hit it and he chose the time to do it now.

And it is a warning not just to China but to the U.S. and to the administration, yes, if you think there are going to be other companies, then somebody in the admin needs to settle this trade policy.

VAUSE: Tim Cook wasn't the only CEO to come out and warn that earnings will be hit. We had FedEx slashing forecasts for profits last month, the CEO blaming the trade tensions between the U.S. and China.

Starbucks said in November long-term growth in China could be as low as 1 percent.

Luxury retailer Tiffany's noted Chinese shoppers are buying less from their stores when traveling abroad.

And Daimler, Jaguar Land Rover, BMW, have all said they will be hit by falling demand at some point, blaming the U.S.-China trade tensions for those falling sales.

So Ryan, using tariffs to win concessions from China on issues like intellectual property rights, it is a bit like the old saying, to a man with a hammer, everything looks like a nail. It's hard to believe there isn't a better, smarter way of doing this that doesn't bludgeon so many people along the way. PATEL: That's why the rhetoric, even with the clip that you played to me, nobody is really talking about IP, in the sense of what is going to need to be accomplished to come off these tariffs. We haven't had that rhetoric. It was just tariff back and forth. there has been no real deal value to talk about IP rights.

So to me, they can have whatever meetings they want. Whatever deal they walk away, if the U.S. administration does not come across with something that has teeth in IP, I would consider that a failure on the U.S. administration's side if they can't get that. Because this is why we started this.

And you know, you also mentioned the other companies. What was interesting about Apple, they have been fairly benign about this trade war and pretty optimistic. And this is why it signaled a pretty big departure for Apple to vocally say it's going to hurt the bottom line even more now. VAUSE: One quick question, Ryan, there used to be a saying, as long as Apple is doing OK, then the market is fine. Apple is not doing OK.

Is that an Apple specific problem or is it a much bigger problem?

Where is your head at with that?

PATEL: I think there's actually two steps. One, the China play is a big deal for them and why you saw them succeeding took a hit.

There is a second play, actual sales in the market with their iPhones coming down. Right now everyone is paying $750. They have an issue of upgrades that they haven't have four years ago. Apple is having less people with upgrades and spending the money because the competition has gotten so much stronger. People are not wanting to upgrade and that's why services and content has become something Apple needs to focus on.

VAUSE: Here's a recent headline from Bloomberg, $5 trillion wiped from Asian stock markets, this is 2018. The report notes that the Shanghai Composite ended the year down 25 percent, making it the worst major performing stock market in the world.

The trade war it says, wiped out about $2.4 trillion.

The Communist government in Beijing remains in power because it promises a level of economic prosperity. With the stock market plunging, the economy slowing, that deal breaks down.

How does that play into China's calculations here about how long it can keep this trade war going with the United States?

ENJOJI: For the Japanese companies here, they have been watching this rhetoric go back and forth between U.S. and China for so long, there have been sort of ominous signs throughout the latter half of 2018 that the talks are breaking down.

It is not just the Apple effect here in Japan; companies that do actual business in Japan, like the construction companies, consumer electronics, even general products like automobiles and so forth.

Although there have been no direct warnings yet from Japanese companies about the impact of the trade dispute between China and the U.S. on Japanese earnings near-term, I think the fear has always been lingering out there, particularly over the last --


ENJOJI: -- couple of months and we're seeing that play out again in 2019.

For Japan, it is going to be a very, very difficult balance. Japan has played very close to the U.S., the Trump administration, particularly because of the threat of North Korea. It wants to project an image that it's moving in lockstep with that.

But I think now that we are seeing this kind of selloff in the equity and the currency market, it might be a hard story to sell, particularly for some of the local companies.

VAUSE: Kaori, thank you there in Tokyo.

And Ryan, you as well in Los Angeles. Most appreciated.

Well, it is a whole new world in U.S. politics but it seems nobody told the president. Just hours after Democrats took control of the House of Representatives, the vice president said if Donald Trump did not get funding for his border wall with Mexico, then there would be no deal to end the now two-week long government shutdown.

With Nancy Pelosi elected Speaker of the House for a second time, the Democrat majority passed two bills to re-open the government. Both similar to measures passed last week in the Republican controlled Senate. All of them had zero funding for the president's wall.

Earlier, the new Speaker called for both sides to work together for the greater good.


REP. NANCY PELOSI (D-CALIF.), HOUSE MINORITY LEADER: I look forward to working for you in a bipartisan way for the good of our country, respecting our constituencies, your -- every one of you, I respect you and the constituencies who sent each and every one of us here.

They expect and deserve for us to try to find our common ground. And we must try to do that. Stand our ground where we can't but always extend the hand of friendship.


VAUSE: It was that rarest of news days here in the United States with most of the attention focused on the Democrats and Nancy Pelosi and not on Donald Trump. That may explain a late afternoon staff by the White House. Here is CNN's Kaitlan Collins reporting from the White House. (BEGIN VIDEOTAPE)


KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: The blame game for who owns the government shutdown continues to shift tonight. But President Trump now faulting the politics of the upcoming 2020 presidential election, claiming Democrats are going all out on the desperately needed wall and border security so they could win.

That despite White House officials telling reporters last night Nancy Pelosi wanted to keep government shutdown so she could win enough votes to become House Speaker, even though she ran unchallenged.

The president's aides now trying to place the blame squarely on Democrats, despite Trump saying this in front of the cameras in the Oval Office last month.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I will take the mantle. I will be the one to shut it down. I'm not going to blame you for it.

COLLINS: Late today, in yet another attempt to change the narrative, the president made a surprise appearance in the Briefing Room, surrounded by members of the union that represents border patrol agents, Trump once again saying a wall is needed, refusing to answer questions from reporters about the shutdown.

Sources telling CNN Trump doesn't want to lose face with his base by caving on his signature campaign promise to build a wall. Though what that wall will look like is now an open question.

KELLYANNE CONWAY, COUNSELOR TO PRESIDENT TRUMP: If you listen to him yesterday, he clarified that. He said that you can call it whatever you want. In other words, we need border security. It may include a wall. It may include steel slats.

COLLINS: Democrats, still enjoying their newfound power, are vowing not to give up any ground.

PELOSI: This has become a Trump shutdown through and through.

COLLINS: But before even being officially elected today, Pelosi throwing a punch, suggesting in an interview with NBC News that a sitting president can be indicted.

PELOSI: It's not the wall. Everything indicates that a president can be indicted after he's no longer President of the United States.

UNIDENTIFIED FEMALE: What about a sitting president?

PELOSI: Well, a sitting president when he's no longer President of the United States.

UNIDENTIFIED FEMALE: A president who is in office.

Can Robert Mueller come back and say I'm seeking... PELOSI: That is an open discussion. I think that is an open discussion in terms of the law.

COLLINS: That wasn't her only job, Pelosi also not denying telling members of her caucus that the wall is a quote, manhood issue for Trump.

PELOSI: I wish that members had not repeated that outside the room. But there's no justification for this wall. It is not the way to protect our border.

COLLINS: CNN has told the White House as formally invited congressional leaders back for further talks Friday. But expectations for a quick fix remain low after talks went nowhere this week.

CONWAY: Nancy Pelosi can't ignore. Yesterday, they just ignored and interrupted him. Frankly, it was just very rude and dismissive of our Secretary of Homeland Security.

COLLINS: White House officials telling CNN they're strapping in for a lengthy shutdown, with one aide adding, "We could be here a while."

Now sources tell CNN that senior White House officials are not encouraging the president to accept those Democratic proposals and neither are his allies on Capitol Hill, including --


COLLINS: -- Senator Lindsey Graham, who encouraged the president to wait for a better offer from Democrats -- Kaitlan Collins, CNN, the White House.


VAUSE: Much has been made of the historic diversity of this 116th Congress, notably there have never been this many women before, 102 in all, including the first Native American women, the first Muslim women and the youngest woman ever elected to Congress.

There's a record number of black, Hispanic and openly gay Congress men and women. On one side of the House, we have the incoming Democratic lawmakers being sworn in. And then on the other, the Republicans.

And comparing both parties side by side, it raises the old question which is often asked on "Sesame Street."


COOKIE MONSTER, MUPPET: Can you guess which thing is not like the other thing before I finish my song?


VAUSE: Joining us now live, Larry Sabato, director of the Center for Politics at the University of Virginia. Larry, one of these things is not like the other. Beyond that, beyond the striking visuals here, what is the implication here, one political party which looks like America and the other looks like "Gran Torino," yelling, "Get off my lawn"?

LARRY SABATO, UNIVERSITY OF VIRGINIA: Coming off of Cookie Monster, it's tough. But I would say basically it is what you just suggested. It is not that one party looks like America so much as one party looks like the future because America is developing in a very diverse way. That's good news for Democrats over time. Doesn't mean every election is going to go their way. But the fact that Republicans are stuck at a tiny number of women, for example, essentially the same number they had back in 1988, tells you all you need to know.

VAUSE: This is another first for this Congress, the first time Congress has hit the gavel during a session during a government shutdown. Just a few hours ago, vice president Mike Pence told FOX News that Donald Trump wants his wall and he will not budge.


MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: The president made it clear, we are here to make a deal, a deal that results in achieving real gains on border security. And you have no border security without a wall. We will have no deal without a wall.


VAUSE: You know, when you are digging yourself into a hole, the best advice is to stop digging. But this administration just keeps on digging with this issue with the wall.

SABATO: Although everyone knows Vice President Pence will be one of the last people to know what Donald Trump will do. And he'll have to change his mind somewhat. He may define the wall as border security. And Democrats may define border security as not the wall. That may be the eventual solution but it is going to go on for a while.

VAUSE: One thing that has actually happened, Democrats have passed a budget measure that will actually fund the government. Speaker Nancy Pelosi earlier had made it pretty clear what will not be included in that budget.


PELOSI: We are not doing a wall.

Does anybody have any doubt that we are not doing a wall?

UNIDENTIFIED MALE: Do you worry about backlash --


PELOSI: It has nothing to do with politics. It has to do with a wall is immorality between countries. It's an old way of thinking.


VAUSE: She says it is not all about politics but it's a little bit about politics. When you look at this new Democrat majority coming from where the president has very little support, they have no incentive to compromise on the wall or anything else.

SABATO: No, they really don't. They hold the cards when it comes to getting something passed through Congress because, under our system, both houses have to agree and then it has to be signed by the president.

If you have one house determined to say, no, that is the end of anything. So that is the Democrats' great advantage other than investigatory powers. I don't see why Nancy Pelosi should yield; the next election is two years off.

VAUSE: What's interesting, too, is that with this new Democratic majority, a pro-gun control group looked at the numbers of the incoming lawmakers and found that Americans have now a gun safety majority in the House of Representatives.

Republicans have a slim majority in the Senate but isn't that a glimmer of a possibility that a lot of issues like stronger gun laws that never could seem to get traction before might actually get passed by lawmakers?

SABATO: It might get passed by the House but not by the Senate and certainly will not receive the signature of Donald Trump. But it does set the table for the future. Now maybe it is the near future or maybe the distant future.

But believe it or not, there will come a time when there is a Democratic president, a Democratic Senate and a Democratic house. And if they worked out the bugs in all of this legislation that they really want in a wide variety of areas, including gun control, it will be much easier to pass it quickly --


SABATO: -- once you have the stars aligned.

VAUSE: You mentioned the power of the House of Representatives, one of the issues is investigatory powers. Nancy Pelosi was asked specifically about the Mueller investigation, the Russia investigation and if a sitting president can be indicted and here is what she said.


PELOSI: Everything indicates that a president can be indicted after he is no longer the President of the United States.

UNIDENTIFIED FEMALE: What about a sitting president?

PELOSI: Well, a sitting president when he is no longer President of the United States.

UNIDENTIFIED FEMALE: A president who is in office?

Can Robert Mueller come back and say, I'm seeking --

PELOSI: I think that that is an open discussion. I think that is an open discussion in terms of the law.


view That's a break from the Justice Department guidelines, which says a sitting president cannot be indicted.

So what are the implications here?

Because it seems to be loaded at least politically.

SABATO: Well, I think it is very, very unlikely that Mueller would come back and try to indict a sitting president. She's right on that. She didn't want to close the door because there is this school of thought that suggests that a sitting president can be indicted. There's nothing in the Constitution that prohibits it.

So I suppose in that sense it is a possibility. But Democrats have a clear road open to them. It is looking into things that Bob Mueller is not. They need to wait for the Mueller report. It is subpoenaing information that they need to see and they can see even before the Mueller report.

And also there's this little thing called Trump's taxes. The only presidential candidate or president since the 1970s not to release his tax forms. So there's a lot for them to work through. They'll be wise to avoid any real discussion of impeachment until after they read the Mueller report.

VAUSE: When that is coming is anyone's guess at this point but maybe soon. Larry, thank you so much as always.

SABATO: Thank you, John.

VAUSE: Next up here on CNN NEWSROOM, Russia lays out part of the case against Paul Whelan, an American arrested in Moscow accused of being a spy.

And later, it could be just a coincidence. After the arrest of a high profile Chinese executive in Canada, 13 Canadians have been arrested in China. But it's probably not a coincidence.




VAUSE: A Russian news outlet is reporting that classified information was found in Paul Whelan's possession when the American was arrested in Moscow last week.


VAUSE: CNN attempted to verify that report but CNN's Matthew Chance has spoken with the Russian lawyer assigned to represent Whelan.


MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: It's at this former KGB prison in a suburb of Moscow that Paul Whelan, now formally charged with espionage, is being held.

His Russian defense lawyer told CNN his detention is unwarranted but he says he has now been granted access to the former U.S. Marine, whose mood he describes as cheerful with no depression. It's the first public indication we've had of how Whelan is holding up behind bars.

"The only thing is a problem with hygiene items," the lawyer said, "such as a razor, shaving foam, toothbrush, toothpaste, underwear. Paul asked for these items and investigators will ask the prison administration to supply them."

It was at this upscale hotel in Central Moscow, the five-star Metropol, where Whelan was staying when he was detained.

There's still been no official explanation of the circumstances except that he was, quote, "caught spying by the FSB, Russia's main counterespionage agency."

But now, one private Russian news agency, Rosbalt, quotes an intelligent source as saying Whelan was arrested in his room at the Metropol five minutes after he accepted a flash drive with a list of employees working at a classified security agency.

The report also makes reference to Whelan's presence on Russian social media. Rosbalt's source says the security consultant sought out Russian Internet users, tracked and selected in advance by American intelligence.

CNN can't independently verify the report and the unnamed intelligent source may have an incentive to build this narrative around the arrest. But if Whelan is convicted of this true or not, he faces up to 20 years in a Russian jail.

That's plenty of time to be swapped for this woman, Maria Butina, a Russian gun activist now facing a prison sentence of her own in the United States after pleading guilty to conspiracy. Prosecutors accused her of infiltrating U.S. conservative groups on behalf of the Russian state. She's been cooperative with U.S. investigators.

There are other possibilities for a prisoner swap, too, like Viktor Bout, notorious Russian arms trafficker dubbed "the Merchant of Death," currently languishing in a U.S. jail, or Konstantin Yaroshenko, convicted in 2011 of conspiring to import cocaine to the United States.

Russia's foreign ministry says Bout and Yaroshenko are hostages in Washington. Now Russia may have an American bargaining chip with which to trade -- Matthew Chance, CNN, Moscow.


VAUSE: According to Canada's global affairs department, 13 Canadians have been detained in China since December 1st. As it so happens, that's the same day Meng Wanzhou, the chief financial officer of tech giant Huawei, was arrested in Canada at the request of Washington. Why they were detained remains unclear. At least eight have been released so far. But two of the rest may be Chinese retaliation for Meng's arrest.

China has accused Michael Kovrig, a former Canadian diplomat and Michael Spavor, a business man, of threatening the country's security. Prosecutor says there is, quote, "no doubt" they broke the law. Canada is demanding their immediate release.

Still to come North Korea's top diplomat in Italy has not been seen in weeks.

Could this be a rare defection of a high-ranking North Korean official?

If so, what value would he be to the West?


CYRIL VANIER, CNN INTERNATIONAL ANCHOR: This is the 100 Club, our look at companies that are 100-years old or older.

FERGUS BRADY, ARCHIVIST, GUINNESS: The most iconic document in Guinness history is the 9,000-year lease on some James Gate Brewery, and that was signed by Arthur Guinness, on New Year's Eve, 1759. And one of the really nice things on the lease is the Arthur Guinness signature which you find them there at the bottom right hand corner.

And just over 100 years later, we see that Arthur Guinness signature turning up in the very, very first Guinness trademark label in 1862. So, this is one of our oldest brewing recipe books in the Guinness archives, on the 14th of December, 1801, the first recipe for export beer in the Guinness portfolio, a beer called West India Porter.

About the later 1800s, Guinness had grown to be the largest brewery, not just in Ireland, but actually the whole world, and was known as a city within a city, with its own railway, with its own fleet of ships.

JOHN VAUSE, CNN INTERNATIONAL ANCHOR: And welcome back. I'm John Vause, with an update of our top news stories this hour.

Stocks in the Asia Pacific region are mixed, after another bad day on Wall Street. These are the latest numbers. And the first day of trading for the Nikkei, down by almost three percent there, Hong Kong, though, up by almost 1-1/2 percent, Shanghai composite up by almost two percent, and in Australia, the ASX 200 down about by a third of one percent.

New York, the Dow sank 660 points after a warning from Apple, but the tech giant says its sales target for the fourth quarter will fall way short of expectations.

Democrats officially took control of the U.S. House of Representatives, on Thursday, and once again, Nancy Pelosi is Speaker of the House. One of the first orders of business was to pass legislation to end two weeks of a partial government shutdown.

The Republican-controlled Senate is not expected to take any action on that because the White House has threatened to veto.

A Russian news site reports that the American detained for spying in Moscow was caught with a flash drive, containing classified information. CNN has not verified the allegation against ex-marine Paul Whelan. His Russian lawyer says he has appealed Whelan's detention and applied for bail.

North Korea's top diplomat, in Italy, and his wife have been missing for months, raising suspicions they've defected. Ambassador Jo Song Gil hasn't been seen since November. His posting was scheduled to end later that month, another sources have told a prominent South Korean newspaper that he is seeking asylum in the west.

If true, Jo would be the highest-ranking North Korean official to defect since 2016. Italy says it's not aware of any asylum request.

CNN's Alexandra Field joining us now live from Hong Kong. So, Alexandra, we're hearing from former North Korean defector, reportedly saying that Ambassador Jo may actually have information about Pyongyang's nuclear plants. If true, and these things are often exaggerated, but this would clearly mean that he is of high value to the U.S., if he has, in fact, defected.

ALEXANDRA FIELD, CNN INTERNATIONAL CORRESPONDENT: Yes, certainly any diplomatic high-ranking defected from North Korea would be of interest for U.S. officials to talk to, as for some positions that he would have information about a nuclear plant.

Well, this is somebody who has been posted abroad since 2015, not clear how much information the diplomat would really have to that and that would be advantageous to the United States, but certainly, as you surmise, it would be of interest.

There could also be interest for U.S. officials in understanding whether or not this is somebody who would have any insight into alleged illicit activities conducted by North Korea's embassies abroad, which have often been accused of conducting black market activities to try and raise funds for the regime.

So, certainly, there is a wealth of information that could potentially be gleaned here. But the big question really is, where is Jo Song Gil right now, and who knows where he is, do officials in Italy know where he is? We're hearing from the foreign ministry there that he disappeared from his post a few weeks before it was set to end.

That they were only informed that he would no longer be in-charge of business there, but that there is no official request for asylum. As for officials in South Korea, well, the Blue House there, the president's office has no comment, and the National Intelligence Service cannot confirm whether this is defection, but certainly, the disappearance has been noteworthy enough to be brie South Korean lawmakers. John?

VAUSE: Yes. Pyongyang has long been paranoid about defections, from its overseas postings. I remember in Beijing, among the security measures, for example, North Korea envoys (INAUDIBLE) you know, they could only ever leave the embassy in pairs. They were never allowed to go out alone.

So, how difficult would it be for someone like Ambassador Jo, to actually defect from the embassy there, in Rome? And what are the potential consequences for his relatives, back in North Korea, if he has defected?

FIELD: Right. The regime obviously has concerns and they implement various security measures in order to prevent these defections, obviously.

[00:35:10] There was the high profile embarrassment of the 2016 defection of a former deputy envoy from North Korea, to the U.K. He defected from his post, in the U.K. So you have to imagine that security measures have even been strengthened.

That said, certainly, it is easier for diplomats who are operating in other countries from North Korea, to potentially have the access to defect, that you certainly would find to be much more difficult if you were coming from inside North Korea.

So, perhaps slightly easier, you're already out of the country, you already have access to officials from other countries, though there would be security measures, of course, we do know and it is been well documented by other defectors, that there are great risks to families that could remain in North Korea.

Many of these diplomats posted abroad have to leave a child or children behind in North Korea. We know that families there can pay heavy consequences in terms of punishment, they can even pay with their lives, or with sentences to work in labor camps, so a very heavy price often to pay and something that would weigh heavily on the mind of anyone posted abroad from North Korea, John.

VAUSE: Alex, thank you. Alexandra Field there, live for us, in Hong Kong.

VAUSE: Well, Pope Francis says a culture of abuse has damaged the credibility of the Catholic Church. In a letter to U.S. bishops, the pontiff called for a renewed approach to solving the widespread problem. More details now from Barbie Nadeau, reporting in, from Rome.


BARBIE LATZA NADEAU, CNN NEWS CONTRIBUTOR: Pope Francis did not mince words in the letter to U.S. Catholic bishops, who are meeting in a spiritual retreat outside of Chicago, this week. In the letter, he called for them to be discerning and for conversion. The United States is not the only country that has been subject to widespread clerical sex abuse in recent years, but it is by far one of the most problematic.

Over the summer, the Pennsylvania grand jury issued a damning report that outlined decades of clerical sex abuse by hundreds of priests against thousands of children. Several other states in America have followed suit with their own investigations.

In his letter to the U.S. bishops, he writes, in recent years, the Church in the United States has been shaken by various scandals that have gravely affected its credibility. These have been times of turbulence in the lives of all those victims who suffered in their flesh the abuse of power and conscience and sexual abuse on the part of ordained ministers, male and female religious and lay faithful.

But times of turbulence and suffering also call for their families and for entire people of God.

Pope Francis has called leaders of the church to meet in February in Rome, to discuss the global clerical sex abuse crisis. Hopefully, they'll be able to find solutions that will pacify the victims and will allow the faithful to continue to have faith in their church.

Barbie Latza Nadeau for CNN, Rome.


VAUSE: It hasn't happened for decades, but in Thailand, they're hunkering down and bracing for a tropical storm, details in a moment. Also, China's Winter Wonderland, on full display, as the world's largest ice and snow festival kicks off.


[00:40:06] VAUSE: Well, it has been almost two weeks since a deadly tsunami which triggered -- which was triggered, rather, by a powerful volcanic eruption in Indonesia. But new satellite images show the volcano before and after the eruption on December 22nd.

About two-thirds of the volcano slid into the ocean, as you can see there, in the picture on the right that triggered a three-meter wave that crushed into the Sunda Strait, sweeping away beachfront homes and hotels, and killing more than 400 people.

Thailand is embracing for what could be the most devastating storm there, in decades. The effects of Tropical Storm Pabuk, just now being felt on Thailand's popular tourist islands, thousands have already been evacuated. Wind and storm surge will be dangerous, but the biggest concern, flooding, as well as mud slides.

Meteorologist Derek Van Dam has more for us now on the forecast, and what can be expected. Derek.

DEREK VAN DAM, CNN METEOROLOGIST: John, the popular tourist destinations, Ko Pha-ngan, Ko Tao, Kho Samui, Phuket, The Phi Phi Islands, they will be in the thick of it for the next 12 to 18 hours. Strong winds and very rough seas and heavy rainfall for these areas as well.

Here's the latest radar, here's Kho Samui in the north. Fortunately, it looks like the strongest part of the storm, the eye wall, is going to make landfall just south of that very popular tourist destination. But nonetheless, they are feeling the outer bands of the storm. And this what they can expect, waves in excess of three to five meters for the next 24 hours.

But the real threat here is, the potential for flooding and mud slides, because there is a large mountain range that runs along the west coast of the Malay Peninsula. It's called Phuket Mountain Range. This is going to wring out all the available moisture and produce a significant amount of rain in that area, more on that in just one second.

This storm was the last named storm of 2018, it carried on in 2019, from the South China Sea, into the gulf of Thailand, and now, we're about seven hours away from landfall, along the eastern coastline of Thailand, 95-kilometer per hour sustained winds.

Why am I so concerned about this storm? It's because people here are not used to tropical systems, the last storm, typhoon back in 1989, and the last tropical storm, 1962 that was Harriet. That, unfortunately, killed over 900 people.

So, they are not used to this type of weather, in this area, and unfortunately, other concerns here with rainfall totals over 250 millimeters, it will cause widespread devastation across this area. You can see some of the rainfall totals already tallying up here, in southern Thailand. John?

VAUSE: Well, we wish them well. Obviously, you know -- a very anxious and nervous couple of days, so thank you.

Hundreds of thousands of tourists are heading to the northern part of China for a cold weather spectacular. It's that time of the year, the Harbin International Ice and Snow Sculpture Festival kicks off, this weekend. CNN's Michael Holmes takes us through the dazzling displays.


MICHAEL HOLMES, CNN INTERNATIONAL CORRESPONDENT: Welcome to ice and snow world. It's an annual festival of ice sculptures and colourful lights in China's Northeastern City of Harbin, or Ice City, as the locals call it. On display, there are cathedrals and palaces more than 10 meters high, alongside smaller, more delicate exhibits.

It's hard work for the sculptures, but the reward of having a guaranteed audience to admire their creations, makes it all worthwhile.

GUAN HONGLIANG, SCULPTOR (through translator): Unlike other sculptures which are always placed somewhere after being finished, and we do not know who will see them. We know that the ice and snow sculptures here will definitely be seen by lots of tourists.

HOLMES: The ice festival attracts more than a million Chinese and international visitors to Harbin, every year. And not even the sub- zero temperature manages to dampen the party atmosphere.

UNIDENTIFIED MALE: We made sure to wear lots of clothes to keep warm. But I think we could use some more. But I think it's definitely worth it because I don't think there are many places in the world where you can see the things that we can see here.

HOLMES: The festival will remain open until February, when temperatures start to warm up. Michael Holmes, CNN.


VAUSE: And just a tip if you're in Harbin, do not eat hot pot in a frozen room, one that's been made out of snow, because the roof will melt.

Thank you for watching CNN NEWSROOM. I'm John Vause. Stay with us. "WORLD SPORT" is next. You're watching CNN.


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