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Tuesday, February 28, 2006

Rights Group Reports Crackdown on Dissent


Human Rights in China (HRIC) reported Tuesday that Shanghai authorities have been rounding up petitioners and other dissenters in an apparent move to impose order on major urban areas on the eve of the new sessions of the National People’s Congress and Chinese People’s Political Consultative Conference in Beijing.

Today's news followed yesterday's HRIC report that a Chinese journalist has been charged with subversion--for posting articles on the Internet. The journalist, Li Yuanlong, had earlier written newspaper articles about unemployment and rural poverty in southwest China.

He was formally indicted on February 9, after being detained in September.

An international nongovernmental organization, HRIC was founded by Chinese scientists and scholars in 1989. The group is based in New York, with a branch office in Hong Kong.

China Reacts Sharply to Taiwan Move


China's rulers reacted sharply today to Taiwan's provocative pro-independence gesture--a decision to formally dissolve a defunct but symbolically important mainland reunification advisory body.

The Communist Party and the cabinet's Taiwan Affairs Office said the decision was pushing Taiwan towards formal independence, a move that "will only bring disaster to Taiwan society."

China's President Hu Jintao took the unusual step of commenting personally on the Taiwanese move. State media quoted Hu saying: "We will continue to strive for peaceful reunification, but we will absolutely not allow Taiwan to break away from the motherland."

There was no threat of military action on the Chinese sid; nor did any official or spokesperson elaborate on what sort of disaster Beijing was predicting.

Taiwan claims China has 700 missiles pointed at the island and is expanding and upgrading its armed forces so that it can successfully invade and conquer it.

Monday, February 27, 2006

Taiwan Provokes Beijing, Disappoints Washington


An unnecessary provocation?

Taiwan President Chen Shui-bian announced Monday that he is formally dissolving a government agency that is responsible for eventual reunification with mainland China.

For days, Chinese authorities have been warning Chen Shui-bian against getting rid of the long defunct National Unification Council--which, in Beijing's eyes, had symbolized hope that the mainland and Taiwan would eventually reunite.

Last week, Li Weiyi, spokesman for the mainland's Taiwan Affairs office, warned that getting rid of the council would spark a serious crisis in the Taiwan Strait.

He said that while Beijing would do its best to maintain peace and stability in the region, it still firmly opposes Taiwan independence.

China has hundreds of missiles pointed at Taiwan, which Beijing claims as part of its territory.

Despite the warnings, Chen announced his decision to scrap the advisory body after a meeting with his national security team. However, the Taiwan leader asserted the move is not intended to change the status quo in relations with Beijing.

Taiwan has been self-governed since 1949, when two million Chinese nationalists fled there after their defeat by the Communists in the Chinese civil war. The nationalists ruled by force; but they gradually democratized over the next five decades and incorporated the native population within the governing structure. In 2000, Taiwan underwent its first peaceful transfer of power from the Nationalist to the Democratic Progressive Party. Throughout this period, the island prospered and became one of East Asia's so-called economic Tigers.

Chen's decision to abolish the unification council comes one year after Beijing passed an anti-secession law authorizing the use of force against Taiwan if it moves toward independence.

Reelected in 2004 on a pro-independence platform, Chen has angered Beijing by calling for a new constitution--which the Chinese Communist leadership views as a further push toward independence.

Although it has pledged to help Taiwan defend itself against an attack, the United States says it does not support Taiwan independence.

In line with this policy, the US downplayed Monday's development. The US State Department said the US understanding is that the council has been frozen, not abolished, and that Chen is not altering the status quo with Beijing.

China Confidential has learned that there were urgent US diplomatic contacts with Taiwan before the announcement.

The diplomacy obviously failed.

Energy-Starved China Embracing Nuclear Power


A private Chinese business group--led by Huaneng Power International--plans to build a commercial nuclear power plant in China's eastern province of Shandong.

The new Chinese design, which uses so-called pebble-bed technology, can only be used in smaller capacity reactors and is said to be safer than older nuclear power technologies.

The Shandong reactor is the fifth planned nuclear power plant announced in the last three months.

Energy-starved China is embracing nuclear energy. With nine nuclear power plants in operation, two under construction, and many reactors in various stages of planning, Beijing is aiming for a fivefold increase in nuclear power capacity by 2020.

The country aims to become self-sufficient in reactor design and construction.

Nuclear power development in China dates to 1970. Until now, the country has relied on foreign companies, including Mitsubishi, and Westinghouse, for key technology. The pebble-bed technology was developed at Beijing's elite Tsinghua University.

Gary Chiu, an energy analyst at Macquarie Securities in Hong Kong, says China wants to reduce its heavy reliance on its main energy source, coal, which is polluting the environment.

"Currently, nuclear power accounts for less than one percent of total power generation in China," says Chu. "Because nuclear power is more environmentally friendly than coal-fired power plants the Chinese want to increase this percentage in the next 15 years."

Sunday, February 26, 2006

China Warns Massive Bird Flu Outbreak Possible


China's agriculture minister is warning of a possible massive bird flu outbreak followiing confirmation of two new human cases of the deadly H5N1 flu strain.

China's state-owned media reported today that Agriculture Minister Du Qinglin told authorities to be on "high alert" and step up efforts to control the disease. He says China culled 22.5 million birds last year to stem the spread of the virus.

Officials are worried that wild birds will infect farm poultry as they return from their winter migration.

Citing a Health Ministry statement, the Xinhua news agency said Saturday a nine-year-old girl from Zhejiang province and a 26-year-old woman from Anhui province tested positive for the H5N1 virus, and are in critical condition.

In France, President Jacques Chirac urged people not to panic after confirmation of the deadly strain of bird flu at a turkey farm near Lyon.

Saturday, February 25, 2006

Underground Catholic Priests Arrested


The Chinese government has arrested two more priests of the underground Catholic Church.

The US-based Cardinal Kung Foundation reports that Father Lu Genjun and Father Guo Yanli of the Baoding diocese were taken into custody on February 17.

No explanation was given for the arrests.

Lu had been arrested on three previous occasions since his ordination in 1990, and has served three years in a labor camp. After the arrest last week he was taken to an undisclosed location. For Guo, who was ordained in 1998, it was a first arrest. He is reportedly being held at the Xushui County detention center.

The arrests took place in the Hebei province, where government officials have been most aggressive in their campaign against the underground Church. Hebei, just outside Beijing, is home to China's largest Catholic community, and local authorities have put heavy pressure on leaders of the underground Church to acknowledge the authority of the government-backed Catholic Patriotic Association.

Bishop Jia Zhiguo, the most prominent prelate of the underground Church in Hebei, was arrested in November 2005, and is still in custody. Jia has been arrested on eight different occasions, and served 20 years in prison.

China Reports Two Human Cases of Bird Flu


Chinese state media reported two new human cases of bird flu Saturday, affecting one girl and one woman in separate eastern provinces.

Citing a Health Ministry statement, Xinhua news agency said a nine-year-old girl and a 26-year-old woman tested positive for the deadly H5N1 virus. The two are hospitalized in critical condition.

Meanwhile, Indonesia said a 27-year-old woman who died Monday in Jakarta had the virus.

Officials say 20 people in Indonesia have died of bird flu since July.

In Europe, French President Jacques Chirac urged citizens not to panic after confirmation of the deadly H5N1 strain at a turkey farm near Lyon. In comments at an agricultural show in Paris, Chirac said there is no danger in consuming well cooked poultry or eggs.

But an official of the country's agricultural union expressed concern the development will hurt French exports.

Elsewhere, scientists in Hong Kong are conducting further tests on a dead magpie suspected of having H5N1. New cases in birds were also discovered in Germany and India.

Indian officials say the deadly H5N1 strain of the virus was found in chickens on a poultry farm in Utchal in Gujarat state. The area is very close to a region in Maharashtra state where bird flu was first reported a few days ago.

Officials say measures have been taken to prevent bird flu from spreading in the Utchal area.

Indian authorities have culled hundreds of thousands of birds in the Navapur area of Maharashtra to stamp out the virus. There are no reports of humans being infected so far.

Friday, February 24, 2006

Angola Involvement Shows China's Africa Strategy


China's great leap into Africa--a rush to invest, lend, and assist ahead of the pack--is paying off for Beijing.

Big-time.

Across Africa, China is widely regarded as more responsive to local needs than Western nations. Over and again, China has proven its ability to build dams, roads, and bridges more quickly and inexpensively than the United States and European countries.

American and European Critics may deride the projects as old fashioned--prestige public works not necessarily serving the needs of the people--but African government and business leaders disagree. They see China as both a powerful friend and possible development model--most of all, a rising global power willing to take real risks in Africa.

China's involvement in Angola, a country ruined by more than two decades of civil war, is a case in point. The country is an oil man's dream and a banker's nightmare. Angola's appeal as sub-Sahara's second largest oil producing nation after Nigeria is overshadowed, financially, by its inhospitable business environment. Widespread land mines still mar the countryside. Subsistence agriculture provides the main livelihood for 85 percent of the population--a population in which only one in six people have known the absence of war. Corruption is rampant.

Enter China. The Chinese have embraced Angola, offering a $2 billion oil-backed credit at a time when Western banks and international institutions have been cautious about lending. An agreement between Angola and the International Monetary Fund has been held up, largely because of IMF concerns about how the government manages its oil money.

Similar misgivings have prevented the holding of an international donor's’ conference.

"The Chinese are offering the loan as an alternative to working with the IMF," says Princeton Lyman, director of Africa policy studies at the Council on Foreign Relations in Washington.

Many believe that the deal is mutually beneficial, as oil-hungry China looks to Africa and elsewhere to satisfy its growing demand for energy.

Angola provides Beijing with crude in return for credit, and also opens the door to possible future exploration prospects.

China already imports around 30 percent of Angola's oil, just behind the United States, which buys 40 percent of production.

But China is late to the production game. The top foreign oil companies operating in Angola are US-based ChevronTexaco and ExxonMobil , France's Total , UK's BP , UK /Dutch Shell, and Italian Agip/Eni Oil Company.

Given Angola's vast untapped potential--Angola ranks third in new oil discoveries behind Iran and Saudi Arabia--it's only a matter of time before Chinese companies join the above list.

China-Japan Trade Hits Record High


Despite a chilly political climate, trade ties between Japan and China are hot.

The Japan External Trade Organization (JETRO) reported today that trade between the two Asian economic giants grew for the seventh consecutive year to a record high of $189 billion in 2005.

For the first time imports to Japan surpassed $100 billion as Japanese continue to purchase Chinese computers, printers, other office equipment and portable music players. Imports of textile products also rose as last year's cold winter boosted demands for clothing, JETRO said.

But the rate of growth last year was slower than the 20 percent levels touched in the two previous years, JETRO said, noting a slowdown in demand from China for microchips.

The trade report contends that the revaluation of China's currency and last year's anti-Japanese protests in several Chinese cities had little impact on bilateral trade.

While exports to China rose 8.9 percent to $80.4 billion, the rate was slower than in 2004, when it expanded 29 percent. The decline was led by decreasing exports of machinery and electronic appliances as Japanese companies shifted production to China, JETRO reported.

The United States is Japan's leading export market, accounting for 22.4 percent of Japanese exports, followed by the European Union at 15.7 percent. China is a third biggest market with a 13.1 percent share.

JETRO said Japan's trade deficit with China rose to $28.7 billion, a record high, from $20.4 billion in 2004.

Jack Straw: UK Welcomes China's African Advances


While Washington worries about China's growing influence in Africa, London welcomes it. At least, that's the party line, as expressed by Britain’s Minister of Foreign Affairs, Jack Straw.

Straw wrote in an op-ed essay in the French daily Le Monde that his government welcomes the “increased presence” of China in Africa, and states that it could greatly contribute to the continent’s overall development.

“We have observed, over the last couple of years, a striking increase in the presence and visibility of China in Africa. The UK considers this good news,“ Straw wrote in his piece, in which he outlines Africa’s “Ten Biggest Stakes” for the next decade. Straw notes that London would like this increased presence and visibility to contribute to the agenda of the African Union.

China is establishing a position as Africa’s top commercial partner behind the US and France, overtaking Britain.

Thursday, February 23, 2006

Economic Interests Drive China's Africa Policy


World revolution is out; world business is in.

Following a foreign policy that clearly favors economic interests over political ideology, Beijing is building on old friendships as it pursues resources and markets in Africa.

Oil is critical. China's thirst for oil has grown with its economic expansion--and Africa is a major source. Experts estimate that between 25 and 30 percent of China's oil imports come from Africa. Beijing has signed big oil deals with South Africa, Nigeria, Angola, Sudan and many other African countries.

As for minerals, China has invested in copper and cobalt mines in countries like Zimbabwe and Congo.

But Beijing knows the importance of goodwill. It's engaged in building infrastructure and development projects in some of Africa's poorest countries as a means of enhancing economic and cultural influence.

A key point: Chinese business is actively engaged in countries that are not resource-rich. Even in Sierra Leone, a Chinese-built hotel is operating, proving China's willingness to take risks.

According to official Chinese statistics, trade between China and Africa has grown in the past year by nearly 35 percent to more than $39 billion. And, as the world's second-largest consumer of oil, China has become Africa's third most important trading partner, after France and the United States.

Some analysts argue that Beijing is positioning itself in Africa at the expense of the US and Europe. In this regard, China has an advantage over the West that allows it more flexibility to work with Africans on more than one economic level. When it becomes involved with an African country, China is able to provide a complete package through its state-owned and affiliated companies.

In Nigeria, for example, China signed a $2.3 billion deal in January for the exploitation of an oil field. Beijing also agreed to a $2 billion loan; and a Chinese company is going to help rehabilitate Nigeria's ailing railways.

This strategy, as outlined in a policy paper issued last month by the Chinese government, is conditional only on limiting African nations' recognition of Taiwan. In contrast, many western countries, including the US, often tie foreign aid to the recipient country's willingness to implement political and economic reforms.

Most observers point out that China does not question its African friends about their political records. And some experts worry that African leaders reluctant to embrace democracy may seek to copy China's brand of free-market dictatorship.

Some Africans are less than thrilled with the China's economic invasion. They decry a virtual "tsunami of cheap Chinese goods," as one African business executive put it. Chinese textiles, for example, have cost South Africa and Nigeria thousands of jobs and put hundreds of local manufacturers out of business. Just this month, South Africa convinced China to curb its textiles exports to give local industries a chance to compete.

China Has World's Most Stressed Business Owners

Business owners in China--including the mainland and Hong Kong--and Taiwan are among the most stressed in the world according to the key findings of this year's Experian Grant Thornton International Business Owners Survey (IBOS).

Taiwan is the highest globally with 89% of mid-size business owners feeling increased stress over the previous year. The mainland is a very close second with 87%. Hong Kong itself (69%) is fifth in the global rankings.

The global average increase in stress levels among the 7,000 business owners interviewed is 57%. In East Asia the average stands much higher at 77%.

"Stress levels in East Asia as a whole have a higher average, but of significance is the fact that business owners in China are not only reporting the highest levels of increased stress in East Asia, but also the rest of the world", says Dr Tapan Datta, Experian's global economist.

The research further studies the possible factors contributing to stress and the extent to which these factors cause stress.

One of the findings shows a direct correlation between the reported increase in stress and the number of days of holiday taken by executives around the world (excluding public holidays). In East Asia, most of the business owners who suffer from increased stress levels take fewer holidays, whereas in Europe, the case is the opposite. Europeans generally report lower levels of stress but take more holidays.

"China business owners only have a range of eight to 11 days of holiday on average per year below the global average of 15.4 days and the higher EU average of 21.7 days," says Desmond Yuen, who heads Grant Thornton's China services division.

Stress as a result of business travel is also studied. The findings show that 20% of business owners in the mainland regard business travel as a cause of stress, in Hong Kong (13%) and Taiwan (5%) the numbers are below the global average of 14%.

"The mainland ranks second highest in East Asia and fourth globally, possibly due to the large geographic area of the mainland and the developing infrastructure," says Yuen.

Now in its fourth year, the IBOS was carried out among 7,000 owners of medium-size businesses from 30 territories/countries during late 2005. Among them, 300, 250 and 150 mid-size businesses were surveyed in the mainland, Hong Kong and Taiwan respectively.

Grant Thornton is a leading accounting, tax, and business advisory organization. The China subsidiary has offices in Hong Kong, Beijing, Shanghai, Guangzhou and Shenzhen and employs more than 500 people.

All of whom, we would like to think, are incredibly calm.

China-Iran Oil Deal Going Forward

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Beijing Sending Envoy to Tehran

China is sending an envoy to Iran for three days of talks on resolving the impasse over Tehran's nuclear programs.

China's announcement that it is sending Vice Foreign Minister Li Guozheng to Tehran came Thursday after Beijing said there is still time to resolve the standoff between Iran and other nations.

Ministry spokesman Liu Jianchao said the visit's aim is to find a peaceful solution. He said Chinese and Iranian officials will exchange views on the nuclear issue and discuss how to resolve the matter through dialogue and consultation.

Beijing has urged Tehran to suspend all uranium enrichment, but has opposed any strong action against Iran--one of China's main oil suppliers.

The Chinese official's visit to Tehran, which begins Friday, comes ahead of a March 6 meeting of the International Atomic Energy Agency to discuss Iran's nuclear activities--a step that may lead to UN sanctions.

The United States and some European governments accuse Iran of trying to develop nuclear weapons--a charge Tehran denies.

Wednesday, February 22, 2006

Farmers Could Be Allowed to Sell Land

Chinese farmers may eventually be allowed to sell something they don't own--land.

The Chinese Communist Party's top rural affairs expert, Chen Xiwen, told a news conference in Beijing yesterday that while farmers in the coming years would most likely still not be permitted to own land--and would instead have to settle for continuing to lease land that is "owned collectively" by villages--they could possibly be given control over farmland sales.

Those sales are now the province of government officials, whom the farmers charge with corruption and greed.

Party leaders--plainly worried by a rising tide of rural discontent--concede that China's struggling farmers have little to show for a massive transfer of wealth--more than 200,000 hectares (20 million acres) of farmland sold each year to commercial and residential developers.

But Chen stressed that Beijing would move carefully on actual land reform.

"If it went out of control, there would be major losses of China's precious land resources," he said.

An advisor to Premier Wen Jiabao and other senior party officials, Chen helped draft China's ambitious plan to build a "new socialist countryside." The plan, which was released this week, aims to narrow the stark gaps in income, health and schooling that have divided urban and rural citizens.

Last year, rural residents earned an average 3,255 yuan (US$400) each in annual income, while urban residents earned an average 10,493 yuan, Chen noted.

Reducing that still widening gap would be a "long process, but the gravity of the problem has attracted serious attention from all sides," he said.

Clearing away mounting rural government debts and directing more government revenues and bank loans to farmers would be "crucial" to the government's plans, he added.

In the late 1990s, those debts reached 360 billion yuan (US$44.7 billion), as local officials rushed to increase staff and build showcase projects, Chen said.

He added that the government would embark on a nationwide audit of rural government debts and then decide how to deal with them.

Critics say the socialist countryside plan is too little too late--a mixed bag of programs and promises dwarfed by deep, structural problems that cry out for sweeping reform, if not radical change.

Borderline Volleyball Builds China-India Trust


What--no table tennis?

The Hindustan Times reported today that the militaries of the world's two most populous countries--China and India--will conduct volleyball matches and other sporting events along their disputed border--known as the Line of Actual Control--as part of an overall effort to enhance mutual trust and reduce tension ("Militaries of India, China....").

In related news, a high-level Indian Army delegation conducted talks this week in Beijing with senior officers of the Chinese People's Liberation Army, including the Commander of the Beijing military region, Zhang Li.

The Indian delegation visit coincides with Pakistani President Pervez Musharraf's high-profile state visit to China, which has included the signing of a new China-Pakistan military cooperation agreement. China is Pakistan's closest ally.

Running from the border of Bhutan in the west to Myanmar in the east, the Line of Control was created in the aftermath of the 1962 Sino-India War. The line is regarded by India as a permanent national border, but is not recognized by China as anything more than a temporary boundary.

Outspoken HK Bishop Becomes Cardinal

In a move certain to be seen as signaling China's increasing importance for the Vatican, Hong Kong's Bishop Joseph Zen has been elevated to cardinal.

Zen told reporters he was "happy" to hear the news that he was among the first group of cardinals appointed by Pope Benedict XVI.

In all, the Pope named 15 new cardinals to help run the Roman Catholic Church, marking his first appointments to the church elite since he became pontiff last year. The Pope read out the names Wednesday during his weekly audience at the Vatican.

Zen said other regions in the world could have had a cardinal selected, but it was not their turn--because the Pope is more concerned about China. Zen said he is grateful for that.

The 74-year-old prelate has been an outspoken critic of the lack of religious freedom among Catholics in China--where only officially sanctioned churches are allowed to operate.

He has also criticized the Hong Kong and Beijing governments over the lack of full democracy in Hong Kong.

But the bishop, who was born in Shanghai, has also supported the establishment of formal diplomatic ties between Beijing and the Vatican.

Those ties have been severed for more than 50 years, since the Communist Party took power on the mainland.

China generally will not establish relations with any government unless that government cuts all ties with Taiwan and refrains from interfering in China's internal affairs--which, as defined by Beijing, includes agitating for religious freedom.

Vatican officials have said the Holy See is willing to cut its diplomatic ties with Taipei in order to establish relations with the mainland.

Zen said the Vatican would only accept normalization with Beijing if religious freedoms on the mainland are guaranteed.

One major area of disagreement between the two is the issue of appointing Catholic bishops in China.

The Vatican traditionally insists that it has the sole right to do this. But China is wary of allowing its people to pledge allegiance to any foreign power--including the Vatican--and has insisted on appointing leaders of the officially sanctioned Patriotic Catholic Church.

Zen was ordained as a priest in 1961, and took over as bishop of Hong Kong in 2002.

Tuesday, February 21, 2006

US SEC Ending Reverse Merger Shell Game

It's over.

The reverse merger shell game--an alternative, or back-door, method of going public in the United States--used by many Chinese and other foreign companies in recent years--has apparently come to an abrupt end. China Confidential has learned that a new ruling by the US Securities Exchange Commission--an agency assigned to protect the rights and interests of US investors--states that if a (domestic or foreign) company is going to do a reverse merger with a public shell the company will need to file audited financial statements and the equivalent of a full-blown Initial Public Offering registration statement within four days of the merger.

The SEC ruling would seem to make publicly traded shells--companies with no real business or meaningful assets, except, in some cases, cash--utterly useless.

To understand the traditional appeal of a reverse merger transaction, think of a minnow swallowing a whale. The public shell (similar to a so-called zombie company in Japan) acquires an operating private company by issuing so many shares for its stock that the private company effectively becomes the public company without having to go through a costly and time-consuming SEC registration.

Reverse mergers--or shell deals---have historically been controversial because of their inherent potential for abuse. Top-tier investment houses have almost always avoided them, as have leading venture capital firms. But the popularity--and price--of public shells increased as more and more Chinese companies rushed to go public over the past 18-24 months.

China Promises 'New Socialist Countryside'

Chinese premier Wen Jiabao will disclose his government's ambitious rural revival plan at a news conference in Beijing on Wednesday, according to state media.

Responding to rising rural discontent resulting from the growing gap between China's booming urban centers and declining villages, China's cabinet--the State Council--and Communist Party leadership on Tuesday made public a December 31-dated document describing programs designed to bring about a "new socialist countryside." The program's objectives include increased support for farmers and improved education and healthcare for rural families.

The program also promises an end to the discrimination and exploitation suffered by rural migrants who have flocked to China's cities to better their lives.

China's leaders have staked their legitimacy on lifting the country's poorest out of poverty. While the new economic policies have raised some 300 million people into the middle class, the plight of hundreds of millions of left-behind rural (and urban) poor remains deeply embarrassing--and a potential source of instability and unrest.

According to state statistics, rural residents last year earned an average 3,255 yuan ($405) per head, which is less than a third the urban average.

China Urges Iran to Suspend Uranium Enrichment


China is urging Iran to stop all uranium enrichment activities, raising hope for a compromise arrangement with Russia that would meet Iran's peaceful nuclear energy needs.

China has opposed strong action against Iran over its nuclear ambitions, saying Tehran's dispute with the West should be resolved through negotiations.

On Tuesday, as talks were taking place in Moscow over the Russian offer, Chinese Foreign Ministry spokesman Liu Jianchao said Beijing supported those negotiations.

Liu called on Iran to back off on its threat to start enriching uranium on its own--at least as long as the talks with the Russians continue.

"Given the current circumstances, China hopes Iran will restore suspension of all activities relating to uranium enrichment, and create the conditions for appropriately resolving the Iran nuclear issue through negotiations," the spokesman said.

Even as Liu was talking, however, word came from Moscow that the talks there had broken up, and the Iranian delegation was returning to Tehran. But an Iranian official was later quoted as saying the talks would continue in Tehran next week.

Iran has raised international concern with its nuclear development policy, which the Iranians insist is only for peacetime energy. The United States and many European countries believe Iran's hard-line Islamic regime really intends to build nuclear weapons.

Earlier this month, at the urging of Washington and some of the European capitals, the International Atomic Energy Agency decided to refer the dispute to the United Nations Security Council for possible sanctions.

Tehran responded by saying it would no longer allow unannounced inspections by UN monitors--and would begin enriching uranium on its own.

In Tokyo Tuesday, German Foreign Minister Frank-Walter Steinmeier said Europe, too, hopes for a diplomatic solution to the dispute. But he said he could not "completely rule out" the possibility of imposing sanctions on Iran.

Monday, February 20, 2006

Survey Says Most US Firms in China Making Money

A survey by the American Chamber of Commerce in Beijing shows that three quarters of US companies in China are making a profit.

Teresa Woodland, member of AmCham's board of governors, says China's market growth and an improved regulatory environment have contributed to the success of US companies.

US businesses have gained easier access to domestic markets and a growing number are setting up companies without a Chinese partner, which was difficult a few years ago.

But challenges remain, Woodland notes, including China's often complicated regulatory system and a shortage of top-level workers.

"The biggest challenges--it remains transparency and bureaucracy," Woodland says. "The number one challenge has been and continues to be management-level human resource constraint."

In other business news ... in China's southern territory of Macau, Banco Delta Asia says it has cut all business links with North Korea and will implement a new anti-money laundering program to restore its reputation.

The US government designated the bank last year as a "primary money laundering concern" because of its close ties to North Korea. The US and other governments accuse North Korea of raising money by trading in illegal narcotics and counterfeiting.

The Macau government took control of the bank last September, after the US accusations prompted its customers to try to empty their accounts.

Sunday, February 19, 2006

Does China Have a Wal-Mart Problem?

Here's an item that should interest American public relations agency executives.

China Confidential has learned that certain officials in Beijing are concerned about the ways in which Wal-Mart affects China's international image, especially in the United States, where the company has become synonymous with products--and, in the eyes of millions of Americans and many of their elected representatives--unemployment--made in China. The official Chinese thinking supposedly goes like this:

(1) Wal-Mart in the US serves as both an awesome pipeline for Chinese products and a constant, in-your-face reminder of a politically potent issue--America's ballooning trade deficit with China. More than 70% of the products sold in Wal-Mart stores are made in China, and the company alone accounts for a whopping 10% of America's trade deficit with China.

(2) The world's largest retailer may be feared and respected, but it is not liked--even by many of its customers. PR-savvy Chinese officials suspect that even while filling their Wal-Mart shopping carts, average Americans actually despise and resent the American giant for crushing competition and wiping out Main Street stores in communities across America. Feeling powerless in the face of Wal-Mart's staggering size and success, American consumers--and lawmakers--according to the Chinese, increasingly direct their anger at Beijing.

(3) Wal-Mart's hard-line labor policies--the company is notoriously anti-union and short on benefits--no matter how understandable in the context of contemporary global competitiveness--attract unwanted media interest in China's harsh treatment of a huge segment of its own workforce. A recently released documentary film, for example, Wal-Mart: the High Cost of Low Price, focuses on both ends of the Wal-Mart-China pipeline, taking viewers inside a Chinese factory that manufactures goods for Chinese companies that supply Wal-Mart's suppliers. The film features Chinese workers who make less than $3 a day--and must work seven days a week for six days' pay--pleading on camera with American consumers to consider the conditions that make it possible for them to enjoy the inexpensive, Chinese-made consumer products to which they are addicted.

Saturday, February 18, 2006

Togo President Concludes China State Visit

Togolese President Faure Essozimna Gnassingbe left Shanghai Saturday morning, concluding his week long visit to China.

At the invitation of Chinese President Hu Jintao, Faure arrived in Beijing on Feb. 12 for a state visit to China.

During his China tour, Togo President successively visited the Chinese capital, Northwest China's Shaanxi Province, and China's economic hub Shanghai.

Friday, February 17, 2006

Net Freedom vs. Net Profits: Hear the Hearings

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Corporate America and Chinese Censorship: Angry US Lawmakers Grill Giant Company Representatives


The Chinese market has become so attractive to Internet companies that companies are sacrificing fundamental rights of privacy and freedom of speech in order to win approval by the Chinese government. Those concerns prompted hearings in Washington, DC this week by American lawmakers.

Members of the US Congress grilled leaders of four major technology companies, accusing them of cooperating with Chinese officials to censor the Internet and crush dissent in return for access to its booming Internet market. Representatives from Microsoft, Yahoo, Cisco Systems and Google faced harsh questioning from lawmakers from both political parties at the hearing of a House of Representatives International Relations subcommittee.

Republican Party Congressman Jim Leach accused the Internet firms of cooperation with the Chinese government to block access to Web sites that Beijing objects to in return for allowing them to make money in the country. "I think you just have affirmed a novelty in American commerce: worst practices you've studied and adopted. That is an astonishing circumstance--and for a government…. And so if this Congress wanted to learn how to censor, we go to you."

Google public relaltions chief Elliot Schrage (vice president of global communications) said his company's decision to censor its Chinese search engine was a difficult one. "This was not something we did enthusiastically, or not something we're proud of at all," Shrague said. "Secondly, we are taking steps that others have not taken, at the very least, make people inside China and those outside China aware of the detail and extent of the filtering that we are required to impose".

Information technology companies are scrambling to gain access to China and its nearly 200 million Internet users--even if it means restricting the flow of information.

Says Saria Rees-Roberts, a spokesperson for the human rights watchdog group Amnesty International: "It brings up a whole issue of freedom of expression, and this is the latest in a string of examples of global internet companies who are caving into pressure from the Chinese government and censoring their internet sites in one way or the other."

Google's site, for example, omits search results about human rights, Tibet, and other topics that are deemed to be sensitive by Beijing. Instead, users are directed to government-approved websites.

In China Thursday, government officials defended the country's Internet censorship policies, saying they are fully in line with international norms and practices. China also denied detaining people simply for writing online.

Yahoo officials acknowledge that the company's compliance with Chinese law has led to "serious and distressing" consequences, but says it can't tackle the problem on its own.

Although some US companies have been doing business with oppressive regimes for years, it's a new development for Internet companies that ironically profit from an industry built on the free exchange of information.

Thursday, February 16, 2006

Construction Firms Warned About Energy Waste

Vice Minister of Construction Qiu Baoxing told reporters Thursday that design and construction companies will have to meet new national standards for energy efficiency, or face stiff penalties--including loss of contracts.

Qiu said the government will improve the enforcement of laws and regulations and offer tax cuts and discount loans to construction companies that use energy efficient materials.

Experts say China wastes vast amount of energy, particularly for heat in the bitter winters felt in the country's central and northern regions.

One problem is that fuel prices are not always set by the market. In some northern areas, energy bills are based on location rather than the amount of fuel used--which means consumers often use more than needed.

"Fifty to 80 percent of the electricity the customer gets he wastes," said James Brock, an energy consultant in Beijing. "So, there's tremendous opportunities in the system here to improve it. And, these costs are fairly low. It requires simply the decision to do so."

China's explosive economic growth has pushed energy consumption past its capacity.

Power shortages have triggered brownouts in some major industrial areas, hurting manufacturing output. This has happened despite a massive campaign to build hydroelectric stations and nuclear power plants and to find new sources of oil overseas.

The country's reliance on aging, dirty coal power plants also adds to the thick air pollution that blankets most of its cities. The pollution is creating health problems and is causing concern to neighboring governments, which often see their skies filled with pollutants from China.

The vice minister's remarks suggest the leadership is turning its attention to making more efficient use of energy resources.

Togo President Tours Shanghai

Visiting Togolese President Faure Essozimna Gnassingbe on Thursday expressed the hope for further expanding trade with China, particularly in textiles and agriculture.

"My visit to Shanghai aims primarily at enhancing our cooperation on trade and investment," Faure told Shanghai Vice-Mayor Tang Dengjie, who briefed Faure on Shanghai's economic development in recent years.

This is Faure's first China tour since he assumed the presidency last May.

As China's biggest port city, Shanghai's economic boom has attracted worldwide attention, Faure said, adding, "Chinese businessmen are welcome to invest in Togo."

The trade between Shanghai and Togo has kept increasing over the past few years, as statistics showed that the import and export volume in 2005 rose nearly 30 percent.

Faure flew to Shanghai at noon Thursday from Xi'an, capital of northwest China's Shaanxi Province, the second leg of his week-long tour.

During his stay in Shanghai, Faure visited towering Oriental Pearl Tower and Shanghai City Exhibition Center Thursday afternoon.

The visit will also take Faure to Yangshan Deep-water Harbor, a mega-port project on the Eastern China Sea.

Short on Pilots, China Shops for Airplanes

As the number of air passengers in China expands rapidly, the country is going on a shopping spree to buy new planes. But there is a problem: China does not have enough pilots to fly the new planes. Experts estimate the country needs at least 3,500 additional pilots just to accommodate the existing orders of about 350 planes.

Last year, 138 million people traveled by plane in China, more than twice as many as five years earlier. Chinese aviation authorities predict the number of air passengers will double again over the next five years, soaring to 280 million by 2010.

To keep up with the growth, China's airlines, which now have a combined fleet of fewer than 900 planes, are going on a major shopping spree. China's civil aviation administration says the country will add more than 100 new planes to its fleet annually over the next five years.

Which brings us back to the pilot problem. As China cannot train enough pilots fast enough, its only option is to recruit more foreign pilots, which some private airlines have started to do. But an overseas recruitment drive is not going to be easy. China faces the same problem that India, which also desperately needs pilots, confronts--namely, salary rates that are significantly lower than the rest of the world.

To compete with airlines in places that pay high salaries, such as Europe and the United States, Chinese airlines will have to offer hefty packages to foreign pilots. And to keep Chinese staff happy, airlines will have to raise local pay.

Higher labor costs are a problem because Chinese airlines are not yet profitable. One reason: the major three airlines--Air China, Air Southern and China Eastern--have recently merged with other, smaller airlines. All of them are plagued by ineffciencies, including bloated payrolls, overlapping management--the usual suspects, so to speak, in Chinese state-owned enterprises.

Wednesday, February 15, 2006

SEC Said to Step Up Scrutiny of Chinese Companies

The evidence is anecdotal, but seemingly significant.

In the United States, some veteran securities lawyers--attorneys specializing in the complex rules and regulations relating to the issuance and trading of stocks and bonds and other securities--are reporting increasingly intense scrutiny on the part of the US Securities Exchange Commission (SEC) of registration statements and other public filings made on behalf of Chinese corporate clients. The reason, reportedly, is mounting SEC concern over the accuracy of the financial information provided by Chinese companies, especially smaller ones that have entered the US capital markets through so-called reverse mergers with publicly traded US shell companies.

Said one securities lawyer who has helped many Chinese companies enter the US (and, like his colleagues, insisted on anonymity, saying he wanted to avoid offending regulators and scaring away clients): "In the eyes of the SEC, filings by Chinese issuers are like red flags nowadays--no pun intended. We're getting a lot more comments, and it's taking longer to clear than it did a year ago."

The SEC---a national agency with the primary mission of protecting US investors--typically responds to registration statement filings--such as a proposed prospectus filed by a domestic or foreign company seeking to raise capital through an Initial Public Offering, or IPO--with what are known as comments--questions and requests for clarification and suggested modifications of language. The more comments a company and its lawyer receive from the SEC, the longer it usually takes to pass through--or clear, in securities law parlance--the agency.

US investors were disappointed by a wave of Chinese companies that went public and then performed poorly when questions were raised about corporate governance and compliance with the newly passed and more stringent corporate governance legislation that followed America's huge corporate scandals--for example, Enron. Financial disclosure and reporting concerns, should they become widespread and credible, would have a much more negative impact on the China sector.

Veteran Chinese Communists Criticize Censorship


Mao would be mad as hell.

A group of veteran Chinese Communist Party members and academics has issued a joint statement criticizing the government for excessive media censorship.

The statement released to reporters Wednesday warned Beijing of unrest if some measures of free expression were not permitted.

The statement in particular referred to last month's closure of a popular supplement to the China Youth Daily. Freezing Point was a more than 10-year old publication that gained popularity for its bold articles.

The joint statement was signed by 13 people, many of whom formerly were high-ranking officials.

Among the signatories were Chairman Mao's former secretary Li Rui; the former head of the Communist Party's Propaganda Department, Zhu Houze; and Li Pu, the retired deputy director of the official Xinhua news agency.

Tuesday, February 14, 2006

US Internet Unit to Fight Chinese Censorship

Beijing is not going to like this....

The United States State Department said Tuesday it is setting up a task force to combat efforts by foreign countries to restrict access to the Internet. Some US high-tech firms have been accused of complicity with governments trying to censor the Internet or use Internet-derived information against dissidents.

The creation of the State Department's Global Internet Freedom Task Force reflects growing concern among US officials, computer experts, human rights advocates and others about efforts by some countries to limit access to the Internet, or turn the system against domestic critics.

The new task force will be made up of experts from various State Department bureaus, including business and human rights, and is to examine foreign policy aspects of Internet freedom, including the use of technology to track and repress dissidents or to restrict Internet political content.

Human rights activists have accused some US firms of collaborating with foreign governments to censor Internet content, including service provider Yahoo, which is alleged to have given the Chinese government information that led to the jailing two dissident E-mail users.

At a press event launching the task force, Undersecretary of State for Economic, Business and Agricultural Affairs Josette Shiner called the Internet the greatest purveyor of news and information in history--and a nightmare for would-be censors. But, she said, there are severe challenges to its openness, in China and elsewhere.

"We have very serious concerns about the protection of privacy and data throughout the Internet, globally, and in particular some of the recent cases raised in China," Shiner said. "And we will continue to press our concerns with the government of China. We will continue to work with our companies, and we applaud their efforts to take voluntary steps that would help insure privacy of data and protection of data on the Internet."

Announcement of the task force came on the eve of joint hearings by two US Congressional subcommittees into what lawmakers say are actions by US-based Internet companies that violate American principles.

A senior member of the House International Relations Committee, Democrat Tom Lantos, earlier this month complained that US firms have caved in to the Chinese government for the sake of profits.

Internet firms including Yahoo and the leading search engine Google have said they must comply with terms set by China or risk losing access to that market.

China, believed to have the second-largest number of Internet users after the US, says it has adopted management steps to limit what it terms harmful, immoral or illegal Internet content.

China-Togo Trade Ties Expanding


China and Togo agreed to further expand trade ties during Togolese president Faure Essozimna Gnassingbe's first China tour since he assumed presidency last May.

"Sino-Togolese relations have entered into a new stage of growth," Chinese president Hu Jintao told Faure in their talks Monday afternoon, proposing the two sides to improve economic and trade relations in spheres such as agriculture, infrastructure construction, telecommunication and power generation.

"Togo has become one of China's important trade partners in western Africa," the Chinese president noted.

In response to Hu's proposals, Faure said Togo is ready to enhance exchanges and cooperation with China in such fields as economy, trade, telecommunication, science, technology and infrastructure in an bid to further promote Togo-China relations.

After the summit meeting, the two countries signed a series of economic and technological cooperation agreements.

In his talks with Premier Wen Jiabao Tuesday afternoon, Faure highlighted that the bilateral cooperation in the fields of economic and trade, agriculture, power generation, culture and education and public health has substantially helped Togo's economic and social development.

The Togolese president called China an "old" and "true" friend of Togo when meeting with Chinese leaders.

Togo admires and is encouraged by the achievements China has scored in the economic construction and the country is ready to join hands with other African countries to cement friendly cooperation in various fields, Faure said.

Information from the Chinese Ministry of Commerce showed that China exports textiles, machinery and electronic products, and shoes to Togo and imports raw cotton from the country.

China also grants tariff-free treatment to Togo, which is regarded as the one of the most underdeveloped African countries.

Official statistics showed that the two-way trade reached $508 million in the period from last January to November, growing 27.54 percent over the same time the previous year.

On Tuesday morning, Faure canceled a scheduled sightseeing to the the Forbidden City and attended a meeting with Chinese business leaders and entrepreneurs instead, according to a source with Togolese delegation.

The president met with people from six Chinese enterprises covering oil and gas, telecom, mining and infrastructure construction sectors, which includes heads from the China National Offshore Oil Corporation (CNOOC), one of China's big three oil giants, the source added.

Faure arrived here last Sunday for a visit to China at Hu's invitation. Besides Beijing, the Togolese president will also travel to Shaanxi Province in the northwest and Shanghai in east China.

Though Togo is poor compared with resource-rich African nations, such as Nigeria, Gabon, and Congo--and therefore of less economic interest to booming, energy- and mineral-hungry China--the visit by the Togolese president is a further sign of increased Chinese involvement in Africa.

Japanese Buddhist Leader Sees Improved China Relations as Key to Peace in Asia

The leader of Japan's largest Buddhist organization has called for improved relations between his country and China.

In his annual peace proposal, Soka Gakkai International (SGI) president Daisaku Ikeda reaffirmed his long-held view of China-Japan relations as the key to peace in Asia, urging a renewal of "political efforts" to build friendship between Beijing and Tokyo. He also streesed the importance of cultural and educational exchanges between people, especially students and young adults, asserting that these programs can "build bonds that transcend and outlast changes on the political level."

Ikeda's emphasis on the "soft power" of people's consciousness reflects a humanistic Buddhist perspective. In his yearly message he writes: "A transformation in the inner life of a single individual can spur and encourage similar changes in others… I am confident that this kind of 'people's power' has the potential to accelerate efforts for disarmament and bring to full flower a global culture of peace."

SGI claims more than 12 million members in 190 countries and territories. A prolific author, poet and peace activist, who, in 1968, became one of the first Japanese citizens to call for normalization of relations with mainland China--then firmly in the grip of Maoist Communism--Ikeda is the founder of several educational, cultural and research institutions. He is internationally recognized as a leading interpreter of Buddhist pilosophy.

Monday, February 13, 2006

Policy Paper Presents China's Africa Aims

Question: Which rising regional power with global ambitions last month published an important foreign policy paper that was practically ignored by Western news media?

Answer: China.

Reason: The paper deals with China's relations with a continent--Africa--which in many ways has ceased to exist in Western eyes, except as a monolithic source of terribly bad news (e.g. genocide, disease, famine).

But energy-hungry China sees resource-rich Africa quite differently, as shown by Beijing's release of its first-ever policy paper on the region. The document, which is more than 3,000 words long in English, covers "the objectives of China's policy toward Africa and the measures to achieve them."

In its African Policy Paper, issued on January 12, the Chinese government presents its proposals for cooperation with Africa in various fields in the coming years, with a view to promoting the steady growth of China-Africa relations in the long term and bringing the mutually-beneficial cooperation to a new stage.

The paper is divided into six parts, including: Africa's position and role; China's relations with Africa; China's African policy; enhancing all-round cooperation between China and Africa; the Forum on China-Africa Cooperation and its follow-up actions; and China's relations with African regional organizations.

According to the paper, enhancing solidarity and cooperation with African countries has always been an important component of China's independent foreign policy of peace. The general principles and objectives of China's African policy are listed in typical Chinese government style: sincerity, friendship and equality; mutual benefit, reciprocity and common prosperity; mutual support and close coordination; learning from each other and seeking common development.

As previously mentioned, this is the first time the Chinese government has issued a paper elaborating its policy toward Africa. Among the 53 countries in Africa, 47 have established diplomatic relations with China.

Chinese Assistant Foreign Minister Lu Guozeng said this year marks the 50th anniversary of the starting of diplomatic relations between China and African nations.

"Although profound changes have taken place in international situations and the situation of China and Africa in the past 50 years, the foundation of China-Africa cooperation and the general situation of China-Africa friendship have not changed," Lu said.

Lu said both China and Africa share a strong desire, under the current new historical condition, to further promote the traditional friendship between the two sides, to increase equal and mutual-beneficial cooperation, and to seek for common development. Under this background, the Chinese government made the decision to issue the African Policy Paper.

Said Lu: "It is an important diplomatic activity of the Chinese government to issue the paper. The Chinese government and leaders always attach great importance to Africa and the relations with Africa. China always puts the development of China-Africa relations high on the agenda of its foreign affairs."

Lu said the issuance of the paper would further cement China-Africa friendship, enhance China-Africa cooperation, and promote the international community to pay more attention to Africa, in a bid to boost "the harmonious and balanced development of the world."

Presidents Vow Enhanced China-Togo Ties

Chinese president Hu Jintao and his Togolese counterpart Faure Essozimna Gnassingbe promised Monday to enhance bilateral relations between their countries. The two leaders met for discussions in Beijing's Great Hall of the People and attended a signing ceremony for the economic and technological cooperation agreements between China and Togo.

"The cooperation between the two sides has scored remarkable achievement in political, economic and trade, cultural, educational and public health fields, and Togo has become one of China's important trade partners in western Africa," Hu said.

Hu also noted that the two sides established mutual understanding and close collaboration on international issues, expressing his appreciation for the Togolese government's focus on China-Togo relations, support for China's reunification cause and adherence to the one-China policy.

On the increasingly important issue of China-Africa relations, Hu said Beijing remains guided by "the consolidation of China-Africa traditional friendship, unity and cooperation and support for the renewal and development of African countries."

China will host the first summit of the China-Africa Cooperation Forum this year, which Hu described as a significant event for China-Africa relations.

Faure agreed with Hu's suggestion on promoting bilateral relations, saying that China has made remarkable achievements in economic and social development.

Togo is ready to enhance exchanges and cooperation with China in such fields as economy, trade, telecommunication, science, technology and infrastructure in an bid to further promote Togo-China relations, Faure said, expressing the willingness of Togo to work with China in promoting regional and world peace and development.

Faure stressed that the Togolese government would never change its stance of firmly adhering to the one-China policy.

China Confidential has learned that the Chinese government is stepping up humanitarian assistance to Togo--a poor nation with few known natural resources, in contrast with Nigeria and other oil-rich African countries to which energy-hungry China is increasingly drawn--while building a new presidential palace and state house as a gift to the Togolese government.

Australian Firm Buying 25% of China Pacific

Australia's largest car and home insurer, Insurance Australia Group, announced today that it will buy 25 percent of China Pacific Property Insurance. China Pacific, based in Shanghai, is China's second-largest general insurer, with a market share of 12 percent.

The final purchasing price will be determined after an audit has been carried out.

Sunday, February 12, 2006

Stock Market Envy (Audio Version)

this is an audio post - click to play

Stock Market Envy: India Soars, China Slumps

This is a tale of two (actually three) stock markets.

China and India are both on the fast track to become the world's biggest economies, but you would never know it by following, let alone investing in, their respective stock markets. While India's market has performed brilliantly in recent years, and is attracting record flows of foreign capital, the opposite is true in China.

India's main stock market index hit a record high last week, closing above 10,000 points for the first time. Analysts said the milestone is a reflection of investor confidence in the Indian economy, which is growing by eight percent a year.

India's economic rival, China, has had an even bigger average growth rate of more than nine percent for the past few years, and is now the world's fourth biggest economy. But while India's stock market has soared in recent years, the opposite has happened in China.

Over the past five years, the Shanghai Stock Exchange index has slumped 40 percent, making it one of the world's poorest performers.

Robert Broadfoot, director of the Hong Kong firm Political and Economic Risk Consultancy, says the main reasons for the differences are the inadequacies of China's capital market.

Says Broadfoot: "China's market is much younger. It is dominated by state-owned companies, where the government still owns so many of the shares, that whenever the government tries to dispose of those shares, it depresses the market. So, it's a relatively illiquid market. India is an older market. It has got more private companies on. It has got more genuinely interesting companies on."

India's currency is more freely traded, and there are fewer restrictions on capital. That makes it easier for foreign and domestic investors to move money in and out of the stock market. On the other hand, restrictions on capital flow in China work against the development of a stock market there.

Another reason China lags behind, Broadfoot says, is that many Chinese simply have no confidence in their country's stock market.

"There is just a lack of trust," Broadfoot says, citing a poor regulatory climate. "The people that tend to invest in the market in China, which is not nearly as open as the Indian market, tend to be - it's insider trading. People are just wary of that now."

In contrast with Shanghai, the Hong Kong stock market is internationally respected. Hong Kong is the market of choice for Chinese companies in search of investor capital--and mainland Chinese investors in search of opportunity. The market is decades old and tightly regulated; and capital flows in and out of the city easily.

Though it reverted to Chinese sovereignty from British colonial rule in 1997, Hong Kong enjoys a high level of autonomy, compared to other Chinese cities. It also has a British-style, independent judiciary and well-established contract law.

Saturday, February 11, 2006

Japanese Press Probes 'China Bubble'

Bubble or boom?

The world wants to know.

While Western news media still use words like miracle and boom to describe China's fast-growing economy--the world's fastest--Japanese newspapers are increasingly inclined to see it as a bubble bound to burst. An opinion article "Could China's Red-Hot Economy Collapse?" in the Feb 11 Asahi Shimbun is an interesting example. The article, attributed to Professor Lim Hua Sing at Waseda University's Graduate School of Asia-Pacific Studies, draws parallels between the current overheated, asset-based Chinese economy and Japan's fatal boom of 15 years ago. Excerpts appear below.


The Chinese economy has been steaming ahead for several years, fueled mainly by a construction boom and rapid growth in the auto industry. A lot of momentum is also coming from strong exports (especially to the United States) and two big upcoming national events: the 2008 Olympics in Beijing and the world exposition in Shanghai in 2010.

Observers have been warning for some time about the overheating of investment in the construction and auto sectors. Many point out that Chinese industry is awash in excess capacity, causing a large output gap between actual and potential production. The Chinese steel industry, for instance, produced 350 million tons of steel in 2005 but has the capacity to produce 470 million tons annually. When new plants currently under construction go online, production capacity will top 600 million tons.

The Chinese auto industry is overcrowded, with more than 120 companies. The domestic auto market grew explosively by 50 percent between 2002 and 2003.

Again, there is excess capacity: the industry can churn out more than 8.70 million vehicles, but only 5.72 million cars were sold in 2005.

For many Chinese workers, cars remain a luxury beyond their reach. The average annual income of Chinese workers is about 5 percent that of their Japanese counterparts, yet Japanese cars are sold in China at prices three times higher than in Japan. The big question is how long the Chinese car market can continue to expand.

The current building boom is also troubling. Rare is the vacant lot in Beijing where a new building is not being put up. The construction frenzy seems to be leaving little space for those public facilities essential to a comfortable living environment, such as green zones and parks.

In Shanghai, there are mounting concerns about land subsidence, stemming from a growing forest of high-rise buildings and excessive exploitation of underground water.

Luxury houses and condominiums are sprouting up in many parts of the nation. Sales of high-end condos and mansions with price tags well above 100 million yen are robust.

After a recent international conference in Shanghai, I took a quick post-conference tour around one of the city's upscale neighborhoods. The average house was a two-story, 460-square-meter mansion, built on a 660-square-meter plot, with three garages and a 25-meter swimming pool, going for an eye-popping 38 million yuan (about 540 million yen). There was even one palatial mansion worth 200 million yuan (about 2.85 billion yen).

Assuming that the monthly pay of professors at Beijing or Tsinghua University is about 4,000 yuan, the 38-million yuan price of the average house in this district is equivalent to 800 years' worth of salary.

Professors from Canada and Australia who joined the tour said similar houses in their countries would cost them more like 10 years' worth of annual income, while a professor from Singapore estimated that in his country it would be about 30 years' worth.

Although the buyers of these fancy houses are not necessarily Chinese, their hefty prices inevitably limit the size of the potential customer base. They symbolize the wide and growing income gap between a small number of newly rich urbanites and the rest of China, as well as the growing asset-price bubble.

Like the rapidly deteriorating environment, this is one of the increasingly urgent problems facing a nation whose economy has now grown steadily for the last 27 years.

The Chinese government has been trying hard to curb the expansion of its own bubble economy, one driven by excessive capital investment and industrial production. The government has instituted restrictions on lending by banks and other financial institutions. It has also started taking steps to stem the rise of property prices.

These steps will help ease the red-hot Chinese economy into a sustainable cruising speed. There is still, however, a pretty good chance that the bubble will continue at least until the Beijing Olympics in 2008 and the Shanghai expo in 2010.

KMT Chief Denies Pro-Beijing Tilt

Chiang Kai-shek must be rolling in his grave.

The Taipei Times reported Saturday that Chinese Nationalist Party (KMT) chairman Ma Ying-jeou has denied that the KMT's cross-strait policies are tilted toward Communist China, saying that the KMT unwaveringly supports Taiwan and its people.

According to the newspaper, Ma told a press conference at the end of his one-day visit to Geneva Thursday that the KMT's stance on cross-strait relations is starkly different to that of the Democratic Progressive Party (DPP) government, but that this did not imply that he and the KMT were "pro-Beijing."

Ma said that the KMT firmly advocates closer cross-strait exchanges and the opening of direct postal, trade and transportation links between Taiwan and China.

The policy was based on the needs of Taiwanese businesspeople operating in China and was aimed at helping these enterprises make more money and become more competitive in the world market, he said.

Ma reportedly dismissed DPP criticisms that the KMT supports unification with China, saying that while the KMT does consider "ultimate cross-strait unification" an option in its cross-strait policy, unification can only be achieved after China has evolved into a country of freedom, democracy and prosperity, and on condition that the majority of Taiwanese voters consent to it.

The Taipei Times said Ma added that none of these conditions for the implementation of cross-strait unification had been met, and that the KMT had no timetable in this regard.

Asked about his goals and responsibilities as KMT chairman, Ma said he would see to it that the KMT wins back power in the 2008 presidential election.

Friday, February 10, 2006

US-China Trade Gap Hits New High

Bad news for Beijing in Washington.

The United States Commerce Department reported today that the US trade deficit with China rose to a record $201.6 billion last year--the highest gap ever recorded with any country and 24.5 percent above the previous record of $161.9 billion set in 2004. Part of that increase reflected a 42.6 percent increase in imports of Chinese clothing and textiles, which soared at the beginning of the year after the removal of global quotas.

The news was certain to bolster the arguments of US lawmakers and manufacturers who contend that China is hurting the US economy by keeping its currency artificially low relative to the dollar and through its low-wage manufacturing advantage. American manufacturers, arguing that the US textile and clothing industries were losing thousands of jobs, got the administration to negotiate a three-year agreement with China to reimpose quotas in a number of categories.

The US also recorded record deficits with Japan at $82.7 billion. Until it was surpassed by China in 2000, Japan was the country that had the largest trade gap each year with the US.

More Human Deaths From Bird Flu Reported

Bird flu deaths are adding up.

China and Indonesia are reporting new human deaths from the deadly H5N1 strain of the virus.

China's Health Ministry confirmed Friday, that a 20-year-old woman in central Hunan province died on February 4. She is China's eighth bird flu fatality.

Indonesian officials confirmed Friday that a woman there died from bird flu and that a second woman suspected of having the virus is in critical condition at a Jakarta hospital. Indonesia has reported 17 deaths from bird flu.

Health officials in Hong Kong Friday confirmed that two more dead birds there tested positive for the avian flu.

Meanwhile, the World Health Organization said it is sending a team of experts to Nigeria to help deal with the first reported cases of bird flu in Africa. Nigeria has confirmed outbreaks of the virus in four poultry farms.

Bird flu has killed nearly 90 people in southeast Asia, China and Turkey since 2003.

Japan and China Again Try to Thaw Chilled Ties

Japanese and Chinese officials are again meeting in an attempt to warm ties chilled by the Japanese prime minister's repeated visits to a war-related shrine. Today's meeting was held in Tokyo. Saturday's session will try to thaw the chill even further, by moving to one of Japan's rural hot springs resorts.

This is the fourth round of the comprehensive policy discussions between Japan and China since May of last year. There has been no such meeting since October, when a session was held in Beijing.

Since then, ties between the two Asian neighbors have remained chilly, due largely to China's dissatisfaction with Prime Minister Junichiro Koizumi's repeated visits to the Yasukuni Shrine. The shrine honors Japan's war dead, including a number of war criminals from the second World War.

China says the shrine visits are insensitive in view of the aggression committed by Imperial Japan during the first half of the 20th Century. South Korea has also called the visits insensitive.

Japan is attempting to keep the current round of discussions low key, releasing few details. Foreign Ministry spokesman Tomohiko Taniguchi says that is necessary in order to preserve the proper mood.

"It is basically a closed-door meeting," Taniguchi said. "The press is not allowed to see what's happening. In order to maintain the atmosphere, in order to maintain the spirit, in which they can talk freely, without any constraint, I should refrain from making any other comment."

The Japanese delegation is led by Vice Foreign Minister Shotaro Yachi. Vice Foreign Minister Dai Bingguo heads the Chinese delegation.

While spokesmen in both Tokyo and Beijing have been silent about the contents of the discussions, Japanese media say Tokyo wants to pave the way for dialogue between Prime Minister Koizumi and Chinese President Hu Jintao.

The media here are reporting that the talks will also likely cover the impasse over China's natural gas exploration in the East China Sea. Japan contends that the project may be sucking undersea resources from Japan's maritime economic zone.

Thursday, February 09, 2006

Yahoo Accused of Aiding Chinese Police

An international journalism advocacy group has said the US-based Yahoo Internet company works regularly with Chinese police to supply information on dissidents who use its service.

In a statement issued Thursday, the Paris-based organization Reporters Without Borders called on Yahoo to release a list of all the dissidents on whom it has provided data.

The group said it has discovered that Yahoo provided information relating to the arrest of at least two jailed dissidents, one in 2003 and the other last year. Reporters Without Borders said the men received sentences of eight and 10 years, both based on electronic data supplied by Yahoo.

Yahoo spokeswoman Mary Osako said that when the company receives subpoenas it is not usually told how the information is being used.

A US Congressional committee will hold a hearing next week on ethical responsibilities of Internet companies.

China Announces New Pollution Reporting Rules

China's State Environmental Protection Administration this week said environmental accidents must be reported to officials within an hour and those officials must then investigate immediately.

Factories that do not comply with the new rules will face fines or closure and government officials could be dismissed for failing to report problems.

The announcement coincides with public warnings to 11 high-polluting factories.

Environmental protection officials say the new reporting system will keep the public updated with the latest and accurate information.

Officials originally kept quiet about a November chemical spill in the northeastern Songhua River until it threatened the drinking water for millions of people. During the past few months there have been several industrial pollution accidents that have fouled the water or air in China.

Chinese media quotes a top environmental official as saying the government needs to be more open on pollution problems. The official said environmental protection issues are the least politically sensitive and the best area for experiments in socialist democracy and rule of law.

Wednesday, February 08, 2006

Oldest T-Rex Fossil Found in China

Enter the Crowned Dragon.

Scientists working in China say they believe they have discovered the oldest known ancestor of the Tyrannosaurus Rex.

In a report to be published Thursday in the science journal Nature, researchers say the newly-discovered dinosaur lived about 160 million years ago, during the late Jurassic period.

The report says two fossil specimens of the dinosaur were found in northwestern China's Junggar Basin.

Scientists say the prehistoric animal was about two meters in length. Its most striking feature was an ornamental crest on its head, similar to those found on some modern day birds such as hornbills and cassowaries. Researchers believe the crest was used to attract mates.

Because of the crest, scientists are calling the new dinosaur Guanlong Wucaii, derived from the Mandarin word for "crowned dragon."

China Calls Taiwan President Troublemaker

China on Wednesday responded sharply to Taiwan's President Chen Shui-bian, calling him a troublemaker for suggesting the island should start forgetting about reunification with the mainland.

Chinese Communist officials waited more than a week to respond to a speech by Chen in which he said the island should start thinking about getting rid of its National Unification Council.

The council was set up 15 years ago to govern issues relating to Taiwan's eventual reunification with the mainland, but it has been dormant for several years.

Li Weiyi, a spokesman for the mainland's Taiwan Affairs Office, blasted Chen Shui-bian for provoking conflict. "This demonstrates once again that he is a troublemaker and saboteur of cross-strait relations and peace and stability in Asia," Li said.

Taiwan has been governed separately since 1949 when Chinese Nationalists retreated there following their defeat by the Communists under Mao Zedong. The Communist government of Beijing has vowed to retake control of the democratic island, by force if necessary.

Taiwan's leadership used to consider itself the government in exile of all of China, but virtually abandoned that stance years ago as more Taiwan residents began to call for formal independence. Chen Shui-bian has taken those calls a step further by pushing for a new constitution--which China would see as an all-out move toward independence.

The growing pro-independence sentiment on Taiwan has made Beijing nervous, prompting it to undertake a massive military buildup and enact an anti-secession law last year. The law allows the use of force against Taiwan if the island takes steps toward independence or is slow to reunite with the mainland.

China has been on a campaign to show it wants peaceful reunification by encouraging trade deals, offering pandas to Taiwan, and welcoming visits by Taiwanese opposition leaders.

The United States, which has pledged to help Taiwan defend itself from unprovoked attack, has urged both sides to avoid doing anything to change the status quo. US officials last week criticized Chen's remarks, saying Washington does not support Taiwan independence.

US officials have praised China's interaction with the Taiwanese opposition, but have called on Beijing to also seek dialogue with the island's elected leaders.

Monday, February 06, 2006

China's Strategy of Containing India

The following excerpt is from China's Strategy of Containing India, an article written by Dr. Mohan Malik for the Power and Interest News Report. PINR is an independent organization that utilizes open source intelligence to provide conflict analysis services in the context of international relations.

Dr. Malik is a professor at the Asia-Pacific Center for Security Studies in Honolulu, Hawaii. He is the author of Dragon on Terrorism, The Gulf War: Australia's Role and Asian-Pacific Responses, co-editor of Religious Radicalism and Security in South Asia, and editor of Australia's Security in the 21st Century (1999), The Future Battlefield, and Asian Defence Policies. He has also written for the International Herald Tribune, The Japan Times, and the Australian, among other publications.


On the surface, relations between India and China are positive. India's economic ties with China are booming. China is set to emerge as India's leading trade partner in the near future, leaving its current number one partner, the United States, behind. Between 2000 and 2005, trade with China registered a hike of 521 percent, whereas India's trade with the US increased by only 63 percent during the same period.

There are regular high-level meetings between Asia's two rising powers. India and China have just concluded their second round of bilateral "strategic dialogue" and declared 2006 as a Sino-Indian friendship year. More importantly, they have agreed to cooperate, rather than compete, for global energy resources. The incipient Sino-Indian entente has prompted some to argue that it has the potential to alter Asian geopolitics radically.

Long-time observers of India-China relations, however, maintain that some improvement in the rhetoric and atmospherics notwithstanding, India-China ties remain fragile and as vulnerable as ever to a sudden deterioration. The combination of internal issues of stability and external overlapping spheres of influence forestall the chances for a genuine Sino-Indian rapprochement.

Though both sides are working to expand and deepen economic cooperation, there is as yet no strategic congruence between the two giants. Indeed, the issues that bind the two countries together are also the issues that divide them and fuel their rivalry because they have different positions in the international system, contrasting strategic cultures, world views, political systems, and competing geostrategic interests.

In the power competition game, China has clearly surged far ahead of India by acquiring potent economic and military capabilities, and the existing asymmetry in power and status serves Beijing's interests; therefore, China has resisted any Indian attempts to narrow the power gap. Unlike China, India's fractious polity continues to limit its economic and military potential. Nor has New Delhi been able to lend a strategic purpose to its foreign and economic policies.

Saturday, February 04, 2006

Pentagon Report Analyzes China Threat

A major policy document published by the United States Defense Department on Friday identifies China as the emerging world power most likely to threaten US status as the world's only superpower. More important, perhaps, the document calls for several steps to counter that potential threat.

The Defense Department document says China's military buildup "puts regional military balances at risk." It says the US needs "counter strategies" to deal with any move by China to deploy military capabilities that could threaten what it calls "traditional US military advantages."

At the same time, the document, called the Quadrennial Defense Review, emphasizes a desire to work with China to moderate its military buildup and to try to ensure that the country plays a constructive role in world affairs. US Undersecretary of Defense Ryan Henry coordinated the year-long process behind the wide-ranging document.

Said Henry: "We want to partner with them to manage their successful rise. We think that some of the attributes of that is one of transparency, one of acquiring military capability but one sufficient for its regional needs, one that will be a constructive partner in the community of nations. And we want to work with them to be able to do that."

Henry indicated that the extent of US willingness to accept the projection of Chinese military power beyond its immediate area will depend on what sort of foreign policy the country pursues.

"We think China should have a military capability sufficient to meet its genuine security needs," Henry said. "Now, how that is translated has a lot to do with what sort of country (China becomes), and how China is going to be contributing to world stability."

Henry said the US needs to be prepared in case China chooses a course that results in confrontation.

"We also want to be able to have a capability to be able to dissuade (China) from any course of action or things that would not be helpful that they might do," he said.

The Quadrennial Defense Review notes that China has increased its defense spending at least 10 per cent in all but one of the last ten years, and it laments the fact that the rest of the world knows little of the Chinese leadership's motivations or goals. It calls on China's leaders to clarify their military plans.

US Defense Secretary Donald Rumsfeld carried that same message on his first official visit to China last October.

The Pentagon report lays out several challenges for the US military to confront as it prepares to respond to any hostile moves by China. It says the US must develop the capability to sustain its forces over a long distance, improve the military capabilities of what it calls "partner states" in Asia and their ability to work with US forces, and improve multi-lateral intelligence, communications, missile defense and related capabilities.

The report categorizes China as an "emerging power," along with Russia and India. But it says China is the most likely of the three "to compete militarily with the United States." The report says Russia is in transition, and the US wants to work with it on shared goals, such as fighting terrorism and the proliferation of weapons of mass destruction.

In contrast with its analysis of China, the defense document says India is emerging as "a great power and a key strategic partner" for the US.

Thursday, February 02, 2006

US Experts Push China Environmental Cooperation

Leading environmental officials and experts in the United States say they believe Washington and Beijing can work together toward resolving environmental problems, which are expected to increase along with China's growing economy.

"Whether it's air quality, or water quality or availability, or land degradation, China's facing a very serious set of problems," said Elizabeth Economy of the Council on Foreign Relations, America's most important and influential foreign policy think tank (publisher of the prestigious journal Foreign Affairs).

Economy testified Thursday before the US-China Economic and Security Review Commission.

"But, I think, if you were to ask anybody in China what the most serious environmental challenge that they face is, they would focus on the issue of water," she said. "About one third of the water that flows through China's seven major river systems and their tributaries is not even suitable for agriculture or industry. [About] 300 million people drink contaminated water on a daily basis. [Of that number] 190 million of those, and these are Chinese statistics, 190 million of those drink water so contaminated that it is making them sick."

Economy added that environmental problems in China are not only a major internal problem, but also greatly affect other countries.

"Just to give you a sense of some of the implications that we are seeing, one of the most recent changes is that China has now become a significant contributor to marine pollution," she added. "In the Yangzi River Delta, 50 percent of the sewage is discharged untreated, and flows into the Pacific. In terms of trans-boundary air pollution, both in terms of acid rain and contaminated dust, clearly Japan, South Korea have long been affected. And, the United States, periodically, has also been affected from this contaminated dust."

In his testimony to the commission, the Environmental Protection Agency's Jerry Clifford said Washington has been concerned about the state of China's environment.

"Our challenge, here in the US, is that their pollution is ultimately affecting the lives and the public health of citizens in the United States," he noted. "That's what drives our interest in China. And, to that end, that's where we hope to be able to help them make improvements."

He pointed to a lack of manpower as one of China's main problems.

"We have roughly 18,000 people at the EPA," he added. "They have less than 500 people in their State Environmental Protection Administration. They are able to tap--that's bolstered because they're able to tap in to some of the research organizations for the research part of the work. But their ability to enforce their laws and regulations is modest, at best, with those type of resources."

Clifford said the EPA's work with China has increased dramatically over the last few years. He added that the Chinese government has what he described as "very solid laws on the books at the national level" to protect the environment. But he added that a serious stumbling block is implementing those laws, standards and regulations at the local level.

Wednesday, February 01, 2006

US Firms Accused of Helping Beijing Block the Net

American Congressmen are accusing American companies of helping China limit public access to the Internet. The criticisms were aired Wednesday in a briefing sponsored by the Congressional Human Rights Caucus.

The main focus: determining the role played by American technology companies--including Yahoo, Google, Microsoft, and Cisco Systems--in providing China with the tools that make Internet censorship possible.

Recent developments include Google's decision to block politically sensitive terms on its new Chinese search Website and Microsoft's move to shut down an Internet journal that discussed politically sensitive issues. Last year, Yahoo provided Beijing with email account information that led authorities to arrest a Chinese journalist and sentence him to 10 years in prison. Cisco, which makes computer routers, has been accused of providing China with the computer filtering hardware.

Although the companies did not send representatives, they all sent written comments.

Google said it is trying to balance local conditions, with the interests of the users and efforts to expand access to information. The company says that is why it is disclosing to its Chinese users what information has been blocked.

In a joint statement, Microsoft and Yahoo said beyond commercial considerations, they believe they have helped bring wider access to independent sources of information in China. They also warned that there are Chinese officials and domestic competitors who would want to see big American companies withdraw from countries like China.

Cisco said the routers it sells in China have the same features that are currently used by libraries and schools to block content authorities deem improper, and have not been altered for the Chinese market.

Hong Kong Reports New Bird Flu Cases

Hong Kong's government says two dead birds, a crested myna and a chicken, have tested positive for the H5N1 strain of bird flu.

Authorities say three villagers may have come into contact with the infected chicken, and are being isolated in a hospital. They say the three people are being tested for bird flu, but have shown no obvious symptoms.

The dead chicken was purchased by a Hong Kong villager in mainland China.

The dead myna was found in a playground in an urban area of Hong Kong.

Authorities say they will close a local bird sanctuary and all public aviaries beginning Thursday as a precaution.