China Confidential

Yet another inconvenient truth about rising China: its environmental disaster may be bigger and more complex than previously reported.

2006 has seen a number of unusually strong sandstorms in northern China. Beijing and other cities have days in which sand fills the air, blocking the sun and creating long-lasting health hazards. Those who have been through the storms compare the experience to walking into a flour mill. Breathing is extremely difficult. Reports of residents in affected areas caulking windows with old rags to keep out the dust recall the American Dust Bowl of the 1930s.

The worsening problem threatens to drive up the price of food and cause tens of millions of desperate Chinese to become environmental refugees.

Dust storms have been recorded in China for more than 2,000 years, but they are now increasing alarmingly both in size and in number. Some gigantic dust clouds have reached North America. Early this spring, Beijing residents woke one morning to find that 300,000 tons of sand had been dumped on their city. The sand was whipped up by fierce winds in the Gobi desert more than 1,000 miles away.

The potential for catastrophic damage--in China and other countries--is real and significant.

Desertification is partly--perhaps even largely--to blame. Basically, a giant dust bowl is forming in northwestern China, as overgrazing, overuse of land, and drought combine to created the biggest transformation of productive land into desert that world has ever seen.

It's a vicious phenomenon. Once the vegetation has been removed by overgrazing, strong winds that blow in from Siberia and Mongolia dry the land and kick up dust; after the small particles are gone, the sand blows.

Official estimates say the deserts, advancing by thousands of square kilometers a year, now make up between 18 and 27 percent of China's surface.

Land abandonments are forcing massive migrations of people, also reminiscent of the American migration from the southern Great Plains to California during the Dust Bowl years.

Adding to the direct damage to soil, the northern half of China is becoming drier and sources of natural irrigation more scarce. Aquifers are being depleted by overpumping.

Falling food production could become a serious issue. The United Nations estimates that 400 million Chinese people live in areas threatened by expanding deserts, which could force many into cities in search of jobs. The Asian Development Bank says at least 4,000 villages have already been buried by sand and their occupants forced to move to greener areas.

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China has launched a major disinformation campaign about its relationship with belligerent, nuclear-armed North Korea. Officials, diplomats, think tank intellectuals and state media journalists are telling anyone worth telling that Beijing has limited influence on Pyongyang.

Baloney.

The secretive Stalinist state of North Korea's deranged Dear Leader, Kim Jong-il, is utterly dependent on China. North Korea is China's vassal. Beijing supplies a third of North Korea's total food donations, and as much as 70 to 90 percent of its fuel aid. China is also North Korea's number-one trading partner. Sino-North Korean trade rose 14 percent in 2005, to a record of more than $1.5 billion.

North Korea's other sources of economic aid are drying up. Japan, which was North Korea's second-largest trading partner until 2001, has cut its trade and imposed sanctions on Pyongyang; and South Korea suspended its sizable food aid after North Korea defied international warnings and test-fired seven missiles on July 4.

China could end Kim's missile threats--and the Kimist regime--in a heartbeat. Instead, China protects and supports the regime, balancing a need to appear "responsible" in international eyes with an appreciation for North Korea's continued usefulness as both a buffer state separating China from American forces in South Korea and a vicious attack dog against America and Japan.

Should the attack dog (and the comparison is admittedly insulting to dogs) be brought to heel, it would be seen by China as a major victory for the United States. Worse, a truly contained North Korea could cause the collapse of the Kimist regime, resulting in an all-democratic Korean peninsula--an anathema for China.

The emergence of a united, democratic Korea, coupled with the continued survival of self-ruled, democratic Taiwan, would contribute significantly to Chinese fears of encirclement by the US.

In a related development, China is also trying to downplay its alliance with Iran in anticipation of Tehran turning down Western incentives to halt its disputed uranium enrichment program. The party line: China has no leverage over the oil-rich Islamist nation; but Russia does; so the road to Tehran passes through Moscow, not Beijing.

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Allah's Axis?

China's Middle East experts--led by Liu Yazhou, a Lieutenant General and Deputy Political Commissar in the People's Liberation Army Air Force--are apparently convinced that Iran is close to creating a new alliance in the Middle East that will unite Shiite and Sunni Muslims in an Islamist-led struggle against Israel and the United States. Grouping Shiite Iran with its Lebanese Shiite proxy, Hezbollah, the Sunni Palestinians and Syria and Shiite-controlled Iraq, the new anti-American axis, or bloc, would have widespread support throughout the region.

In China's view, the currents of power in the Middle East are about to change. Hezbollah's leader, Sheikh Hassan Nasrallah, is fast emerging as a popular folk hero. His army's ability to hold out against Israel for more than two weeks is inspiring the proverbial Arab street--as well as Arab artists and intellectuals--in a manner not seen since Egyptian President Gamal Abdel Nasser electrified the Middle East--and the Third World--by nationalizing the Suez Canal.

It's been 50 years, exactly, since Nasser's stunning blow for Egyptian dignity and freedom; and Arab and Muslim masses are apparently hungry for another victory against the despised West.

"Nasrallah is this month's Nasser," says an Israeli analyst. "But next month, it could be Mahmoud Ahmadinejad's turn."

If the Iranian president, who has sworn to wipe Israel off the face of the earth, can even come close to striking a decisive blow against the Jewish State, his power and influence would increase dramatically.

And Iran's ally, China, would benefit tremendously. Following Beijing's successful experience with the increasingly influential Shanghai Cooperation Organization, a Chinese "energy diplomacy" tool that groups China and Russia with the countries of Central Asia--with Iran as an observer--Chinese Communist Party grand strategists are already dreaming of a Middle East version of the SCO.

Liu and other Chinese Arabists argue that the bloc has the potential to seriously weaken Israel and other US "assets," including the regimes of Saudi Arabia, Jordan, and Egypt, which is threatened by the Sunni Muslim Brotherhood that constitutes the core of Al Qaeda.

But events could spin out of control in unforeseen ways. Nasser's nationalization of the Suez Canal and support for Palestinian terrorists triggered an Israeli-French-British invasion of the Sinai Peninsula. Nearly a decade later, Nasser's saber rattling and threats to "push the Jews into the sea" unleashed a dynamic that led to Egypt's disastrous defeat at the hands of the Israel Defense Force in the Six-Day War of June 1967.

The Arab world has yet to recover from that debacle.

After 39 years, it would be incredibly ironic if a non-Arab Shiite Islamist were to bring about a similar sequence of events--in compressed time. Unlike Nasser, Mahmoud Ahmadinejad could one day be remembered for taking the Arab world from the illusion of victory to true military catastrophe in a single summer.

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Confident of Chinese support at the United Nations, Iran is escalating its proxy war with Israel, intensifying efforts to involve Syria in the conflict, and accelerating its secret nuclear weapons development program.

The next 48 hours could be critical. Some Israeli and American analysts believe (a) Hezbollah is poised to strike Tel Aviv, and (b) Syria is preparing to enter the conflict.

Iran could even strike Israel directly, according to some experts. Not for nothing, they say, have Iranian leaders been threatening to "wipe Israel off the map."

And Al Qaeda's call for global jihad--and unprecedented appeal for support from non-Muslims among the world's "downtrodden"--as previously reported, could also signal preparations for all-out Islamist war against Israel and the West.

Friday's developments seemed truly ominous. Hezbollah fired more than 100 missiles into Israel--including previously unknown long-range rockets--wounding at least six people. The longer-range "Khaibar 1" missiles landed in an open area near the town of Afula, around 33 miles from the Lebanese border. The rocket--named for Mohammed's battle with Jewish tribes in Medina--carried a 100 kg (220 lb.) payload of explosives in its warhead.

The strike matched the farthest distance that Hezbollah rockets have landed inside Israel since the fighting began on July 12. In all, the Shiite terrorist army, which is funded and directed by Iran, has fired more than 1,500 rockets into the Jewish State since starting the conflict with a cross-border raid.

In addition to Afula, the Israeli towns of Kiryat Shemona, Nahariya, Rosh Pina and Karmiel were hit on Friday.

Hezbollah leader Sayyed Hassan Nasrallah (pictured above) has vowed to take the war deeper into Israel, suggesting there could be strikes south of the city of Haifa. Should Hezbollah missiles hit Tel Aviv, Israel would almost certainly respond with a massive retaliation, including, possibly, attacking Iranian/Hezbollah ally Syria.

In Iran's view, an Israeli retaliatory strike against Syria would compel a counterattack. Conventional wisdom says Syria would lose badly in a military confrontation with Israel. But Tehran may be counting on a Hezbollah barrage of longer-range missiles--some of which could be equipped with chemical warheads--to strengthen Syria's offensive capabilities.

In the event of a wider war, Syria could conceivably recover all or part of the Golan Heights, which Israel captured during the Six-Day War of June 1967. More likely, a humiliating Syrian defeat by Israel would lead to the fall of Syria's secular regime. Sunni Islamists--the long suppressed Muslim Brotherhood--could come to power.

Either way, Iranian influence throughout the region would increase. As shown by the impressive degree of coordination between Sunni Palestinian Hamas and Shiite Lebanese Hezbollah, Islamists are setting aside their traditional religious rivalries to challenge Israel and its ally, the United States.

And China ... under US pressure to influence its oil-rich ally, Iran, and control its nuclear-armed, missile-proliferating vassal, North Korea ... could not be happier.

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Ayman al-Zawahri's unprecedented appeal to non-Muslims to join Al Qaeda's war against "tyrannical Western civilization and its leader, America" confirms China's somewhat sympathetic view of the terrorist group. Beijing sees Al Qaeda as the both the vanguard of populist, political Islam and a potential catalyst for a global uprising by the world's impoverished nations--"the downtrodden," in the words of Al Qaeda's No. 2 leader--against the United States, Europe, and Israel. In the message broadcast on Thursday by the Al Jazeera satellite television network, the Egyptian-born physician--a member of the Muslim Brotherhood that constituted Al Qaeda's core--called on Muslims worldwide to rise up in a holy war against Israel and join the fighting in Lebanon and Gaza until Islam prevails from Spain to Iraq. But he also called on non-Muslims to join the battle....

... China has plans to increase its investment in genocidal, Islamic-leaning Sudan--specifically, in its oil and armaments industries. Sudan is China's largest overseas oil provider; and energy-hungry China is Sudan's largest arms supplier. China has invested over $14 billion in Sudanese oil through the state-owned China National Petroleum Corporation, which contributes Chinese-made tanks, fighter planes, bombers, helicopters, machine guns, rocket-propelled grenades, and firearms to the Sudanese military. China has also established three arms factories in Sudan....

... China's rogue vassal, North Korea, received more than 90 per cent of the 576,582 tons of cross-border food aid provided by China in 2005, according to the United Nations World Food Program (WFP). China has long been North Korea's most important supplier of fuel and food. But the WFP data spotlights the extent of the regime's reliance on its neighbor and belies Beijing's arguments that it has little influence over North Korean Dear Leader Kim Jong-il.

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China is effectively exploiting the Middle East conflict to divert attention from Beijing's failure--or refusal--to control its nuclear-armed vassal, North Korea, and influence its nearly-nuclear-armed ally, Iran.

At the United Nations, China has masterfully maneuvered the United States into blocking a Security Council statetment condemning Israel's accidental aerial attack on Tuesday on a UN outpost on the Lebanese border. In a stunning piece of diplomatic linkage, China warned the US Thursday that its opposition to the statement condemning the deadly bombing could have a "negative impact" on UN talks on Iran's nuclear ambitions.

"This is a serious matter," China's UN Ambassador Wang Guangya told reporters. "It is an attack on the UN peacekeepers."

Four UN military observers, including a People's Liberation Army Lieutenant Colonel, were killed in the incident, which for the first time revealed a Chinese presence in the combat zone. (The slain PLA officer was probably a spy--scroll down to read yesterday's story.)

China's proposed statement was worded to suggest that the attack was deliberate, which US ally Israel has strongly denied. The draft language alluded to UN Secretary-General Kofi Annan's accusation late Tuesday that Israel seemingly struck the UN site intentionally. Annan later appeared to retract the statement; but the damage was done; and there is widespread suspicion among UN diplomats that Annan was pressured by the US into softening his stance.

The proposed condemnation of Israel was Beijing's second attempt this month to isolate the US at the UN. On July 13, China, Russia and eight other Security Council members voted for a draft resolution calling for an end to the "disproportionate" Israeli military actions in Gaza. China showed no inclination to compromise. Reason: Beijing wanted to force a US veto; that way, if China has to cast a veto to protect North Korea or Iran, it can cite the US vote to protect Israel.

Meanwhile, China has successfully encouraged the Association of Southeast Asian Nations (ASEAN) Regional Forum to condemn Israel for its "apparently deliberate" attack on the UN outpost. And China has also brought Iran to the party; in a surprise move, Tehran's foreign minister, Manouchehr Mottaki, was expected to arrive in Kuala Lumpur Thursday for the security meeting, which will also be attended by US Secretary of State Condoleezza Rice.

ASEAN includes Indonesia, the world's most populous Islamic country, as well as Malaysia, which currently chairs the Organization of the Islamic Conference (OIC). Iran has been pushing for an emergency OIC session to discuss the fighting in Lebanon between its terrorist proxy force, Hezbollah, and Israel.

While the crisis is likely to dominate the ASEAN meeting, the North Korean nuclear issue will also be addressed. But the secretive Stalinist state--which days ago called Rice an "imbecile"--has flatly refused to participate in a proposed resumption of six-party talks on the sidelines of the regional conference.

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The Chinese United Nations observer killed in an accidental Israeli air strike in Lebanon was probably engaged in espionage on behalf of Beijing's oil-rich Islamist ally, Iran, which is sponsoring Hezbollah guerrillas as a proxy force against Israel and the United States.

In addition to the Chinese national, People's Liberation Army Lieutenant Colonel Du Zhaoyu, three other UN observers--an Austrian, a Canadian, and a Finn--were killed in Tuesday's strike on the Lebanese border town of Khiam.

But Du's death was especially newsworthy, revealing for the first time the presence of Chinese observers in southern Lebanon.

Du was one of 180 Chinese officers, soldiers and observers working in Lebanon as part of the UN peacekeeping mission, according to China's official Xinhua news agency, which said the victim had been in Lebanon since January.

China was quick to condemn the Israeli air strike. The government summoned Israel's ambassador to Beijing to demand an apology--which it got, along with a promise to fully investigate the attack--and called for an immediate ceasefire between Israel and Hezbollah.

Chinese state-owned media websites played the news as the lead item; and anger over Du's death dominated Internet chat rooms and message boards that are controlled or manipulated by Communist Party propagandists. A posting on the website of the People's Daily Communist Party mouthpiece said: "Condolences to the victims! If Israel despises the United Nations and breaks faith with other countries, it's because they have the support from the United States."

Israel's foreign ministry issued a communique saying it deeply regretted the deaths of the UN observers; but UN Secretary also condemned the strike and alleged that Israel may have deliberately targeted the UN team.

Many UN missions are used as covers for spying operations, Israeli analysts assert. Sources tell China Confidential that the Chinese group stationed in Lebanon included a number of intelligence officers.

Tuesday's incident recalled the 1999 US bombing of the Chinese embassy in Belgrade, which housed sophisticated spying equipment that was used to monitor the performance of US aircraft, missiles and smart bombs. Tens of thousands of people took to the streets across China in protest after that attack, which killed four people.

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The Australian Government has raised concerns with China about reports it is harvesting organs from executed members of the outlawed Falun Gong movement. The issue was raised in Canberra yesterday with a Chinese delegation of foreign, judicial and security officials.

Australian Foreign Affairs Department deputy secretary David Ritchie spoke about the reports with Chinese assistant foreign minister Cui Tiankai.

Cui told reporters: "It always puzzles me why some people are always interested in a very small number of people who violated the law, while paying very little attention to the interests and concerns of the overwhelming majority of law-abiding citizens in China."

Falun Gong is a peaceful meditative practice, sometimes called "Chinese yoga." The movement says it has 70 million practitioners in China, hundreds of thousands of whom have been illegally detained. More than 100,000 of them have reportedly been sent to labour camps without trial.

Former Canadian secretary of state for Asia and the Pacific David Kilgour has backed a report alleging there is a trade in the body parts of Falun Gong members.

In 2004, the United States State Department reported: "Tens of thousands of practitioners remained incarcerated in prisons, extrajudicial re-education-through-labor camps and psychiatric facilities. Several hundred Falun Gong adherents reportedly have died in detention due to torture, abuse and neglect since the crackdown on Falun Gong began in 1999."

China has seen a steep, unexplained rise in transplants over the past six years. There were 18,500 transplants from 1994 to 1999. The number rose to 60,000 from 2000 to 2005.

The source of 41,500 additional transplants for the six-year period is unexplained.

Websites for Chinese medical facilities advertise that it is quick and easy to get a human organ in China. One site boasted, "It may take only one week to find out the suitable (kidney) donor."

The maximum wait time is one month.

Customers are prepared to pay up to $170,000 for a major organ such as a lung or heart.

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Early Warning.

Western intelligence agencies are concerned that North Korea may have helped Iran to test-launch a sea-going Scud missile.

The short-range missile is believed to have been successfully fired from the deck of an Iranian cargo ship.

Although Scuds carry conventional explosives, the missile was originally developed for the purpose of carrying a nuclear warhead. The ability to use a mobile, sea-going platform would mean that Tehran need not seek long-range missiles to attack distant targets. The Iranians--or their terrorist proxies--could mount short-range missiles on civilian ships, and launch them from sea, near the coastlines of the United States or Israel.

US Secretary of Defense Donald Rumsfeld has referred to an attack by a ship-launched ballistic missile as one of the most serious security threats facing the US. Thousands of cargo ships move through US waters every day. If a Scud-B missile armed with a nuclear warhead were to hit a major port city, such as Los Angeles, or Long Beach, California, tens of thousands of people would be killed and injured.

Iran is also said to be working out the technical issues for firing a longer-range Shahab 3 or 6 missile from a cargo ship.

Western analysts are also worried that Iran or North Korea could eventually have the capability to detonate a nuclear weapon at high altitude to create an electromagnetic pulse, or EMP, along with radiation and blast effects. Experts say an EMP weapon detonated high in the earth's atmosphere over America's Midwest region could cause catastrophic damage to the country's infrastructure, destroying 70 percent of the electrical grid and computer systems for finance, transportation, and emergency services.

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South Korean analysts say their northern neighbor's deranged Dear Leader, Kim Jong-il, has made some revealing additions to his huge personal library of films and television programs.

Along with the thousands of porno flicks--perhaps the largest collection of its kind--James Bond films, and cartoons, the mass murdering madman has reportedly beefed up his portfolio of feature films and documentaries dealing with the 1960s Cuban missile crisis.

The North Korean leader is said to be obsessed with the episode, which, while bringing the United States and the Soviet Union close to nuclear war, was also responsible for assuring the survival of Moscow's Cuban Communist ally, Fidel Castro.

The crisis ended when the Soviet Union backed down and removed the missiles Moscow had secretly installed in Cuba to threaten the US. But, as we now know, the secret agreement between US President John Kennedy and Soviet Communist Party boss Nikita Khrushchev forbade any invasion of Cuba, not just by the US, but also by any other group or nation in the Western Hemisphere. And thousands of Soviet troops and KGB officers already in Cuba were allowed to remain on the island, bolstering an anti-American regime just 90 miles from Florida.

Shortly after the missiles were removed, the US, in accord with its covert deal with the Soviet Union, pulled American missiles out of Turkey. And US President Lyndon Johnson, following Kennedy's assassination, reaffirmed Washington's hands-off-Havana pledge.

The key lesson for Kim: missiles--and nukes--mean survival. Without weapons of mass destruction, Castro would have been long gone, another victim of US "imperialist aggression."

Which explains why the North Korean leader is also said to be obsessed with the Iraq war. As Kim supposedly sees it, Saddam Hussein would still be in power had he really had a nuclear arsenal to deter the US and Britain from attacking him.

Sources say Kim has spent hours screening news footage of the US invasion.

The criminally insane head of the Hermit Kingdom is also reported to have a somewhat nonconventional explanation for the longevity of his ally and protector, China. Kim watchers say Dear Leader credits the survival of China's ruling Communist Party with its development of nuclear weapons, including an arsenal of intercontinental ballistic missiles capable of striking cities throughout the US. When China went nuclear, Kim allegedly argues, the US came courting: Nixon visited Beijing, China was given Taiwan's seat in the United Nations, and the breakaway island was kicked out of the world body--after more than two decades of steadfast support by Washington.

Though it has not yet tested a nuclear weapon, North Korea is believed to have a small but growing arsenal of nuclear weapons, along with the missiles to rain atomic warheads down on South Korea and Japan. The secretive Stalinist state is also capable of hitting US military bases in Okinawa.

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They don't call him Kim Jong-Hill for nothing.

For United States Assistant Secretary of State Christopher Hill, diplomacy appears to be an end, not a means. The chief advocate of appeasing North Korea--dubbed Kim Jong-Hill by Bush administration hawks--told reporters on Friday that the US was considering holding five-party talks about North Korea's nuclear program--without North Korea. Said Hill: "We just don't want a situation where we don't meet at all because one party doesn't want to meet."

Not a bad thought, perhaps, provided the purpose of the meeting is to plan the destruction of the North Korean regime. But Hill had something else in mind--the illusion of progress, with Chinese participation.

Beijing had other ideas. Less than a day after Hill's silly remarks, China signaled its reluctance to go along with talking about its Stalinist vassal for the sake of talking. Japanese media reported that Chinese Foreign Minister Li Zhaoxing told a senior Japanese diplomat in Beijing that China would not meet without North Korea.

Hill desperately wanted to meet in Malaysia. Top diplomats of the six nations involved in talks over Pyongyang's weapons programs--the two Koreas, China, Japan, the US and Russia--will be in Kuala Lumpur for annual talks on defense and security in Asia.

The six-party talks stalled last November after North Korea objected to US financial sanctions imposed on the regime of Dear Leader Kim Jong-il for allegedly counterfeiting US currency, money laundering, and drug trafficking.

The United Nations Security Council voted unanimously on July 15 for a resolution demanding North Korea halt its ballistic missile program and requiring nations to prevent Pyongyang from acquiring advanced weapons. But China used the threat of a veto to remove critically important (Chapter 7) language that would have authorized use of force against North Korea; so the final version, though praised by Hill and other diplomats, is essentially a triumph of symbolism over substance.

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Senior Chinese officials and intellectuals specializing in the Middle East believe Iran is trying to suck Syria into Tehran's proxy war with Israel.

The Iranians, according to the Chinese, see a no-lose opportunity. On the one hand, Iranian ally Syria could surprise Israel and recover the Golan Heights, which the Jewish State captured during the Six-Day War of June 1967. On the other hand, should Syria suffer a humiliating defeat at the hands of Israel's superior military forces, the secular Baathist regime in Damascus would almost certainly be toppled by the Islamist Muslim Brotherhood. Either way, Iranian influence in the region would increase, even though the non-Arab Iranians are Shiites and the Syrian Islamists are Sunnis.

That's how Iran sees the situation, according to the Chinese experts, including: Leu Yazhou, the People's Liberation Army Air Force Lieutenant General and Deputy Political Commissar, who is considered an architect of China's alliance with Iran; Wu Guanzheng, a leading pro-Arab member of the Standing Committee of the Political Bureau of the ruling Communist Party's Central Committee and secretary of the party's Central Commission for Discipline Inspection, the government body charged with rooting out corruption among party cadres, who has a relationship with Syrian President Bashar al-Assad; Zhang Xiaodong, a researcher with the Institute of West Asian and African Studies of the Chinese Academy of Social Sciences (CASS); and Shen Jiru, a researcher with the CASS Institute of World Economics and Politics.

Israeli analysts, meanwhile, would like to know everything China knows about Iran's intentions and capabilities. Some Israelis are concerned that Iran's mad dog President Mahmoud Ahmadinejad may have more bite than previously assumed to back up his rabid, anti-Jewish, anti-American barking. Hardly a day goes by without the Iranian leader threatening to wipe Israel off the map or questioning the reality of the Holocaust. His bizarre, neo-Nazi-like letter to Germany's pro-Israel president is especially ominous in Israeli eyes.

Also ominous: a speech by Iranian Parliament Speaker Gholam-Ali Haddad 'Adel, which aired on the Iranian News Channel on July 18. Referring to Israel as "an artificial, false, and fictitious state," the Iranian said: "The confrontation (with Hezbollah) is not only in Lebanon, but deep inside occupied Palestine."

" No place in Israel will be safe," he warned. "The Palestinian refugees should return to the land of their forefathers, and you, who came to Palestine from other countries, should return to your homes too....

"Today is the day of the liberation of Palestine, and the day of resistance....

"The war has just begun."

Oil-rich Iran is engaged in a standoff with the West over Tehran's nuclear development program. It's still a distinctly minority view, but some Israelis fear that Iran could be just one or two months away from assembling a nuclear weapon.

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Kim's missile madness and Biden's blunder.

Two days after North Korea's July 4 missile tests, China Confidential predicted that United States Senator Joe Biden of Delaware, a Democrat and 2008 Presidential candidate, will regret his rapid-fire ridicule of Pyongyang's provocative move. Within hours of the tests, Biden called the secretive Stalinist state, ruled by North Korea's mass-murdering Dear Leader Kim Jong-il, a "paper tiger."

We suspected that there was more to the tests than met the eye. Unfortunately for the US and its allies, it seems that we were right; and, assuming he bothers to keep up with the news, Biden is probably already regretting his snappy, sound-bite response to North Korea's missile madness.

Disturbing details are seeping into the public domain. As reported by China Confidential and other outlets, and confirmed yesterday by the US State Department, a delegation of visiting Iranians observed the tests, which seem to have been conducted as part of a simulated response to a US air attack. The long-range Taepondong-2 missile that plunged intact into the Sea of Japan--after staying aloft for nearly two minutes and not 40 seconds as initially reported by the US--was meant to simulate a nuclear weapon strike on US allies--probably Japan--or assets. Two or three intermediate-range ballistic missiles were also fired, as China Confidential reported yesterday, in addition to three or four short-range missiles.

US, Japanese, and Israeli analysts believe the Iranian contingent--which traveled to North Korea via Beijing--included scientists, technicians, and 10 or more Iranian Revolutionary Guards officers, including members of the elite Partisans of the Mahdi group. Sources say the Iranians paid for the tests and were keen to observe the results as Tehran's strategic and tactical missile system was built by North Koreans, using Chinese designs. Iran's Islamist leadership is apparently convinced that the US intends to attack it--directly or through Israel.

Sources say the Iranians and their North Korean hosts were satisfied with the test results. Contrary to media reports, the exercise was successful.

Ironically, It was US Assistant of State Christopher Hill--a prominent dove on North Korea--who confirmed the Iranian presence at Pyongyang's test-firings. Appearing before the US Senate Foreign Relations Committee Hill underscored US concern about growing ties between China's vassal, nuclear-armed North Korea, and ally, nuclear-wannabe Iran.

Under questioning by Republican Senator George Allen of Virginia, Ambassador Hill said that Iranian representatives were on hand to witness North Korea's fireworks.

ALLEN: "Is it not true that there was at least one or more Iranian officials there to watch those missile launches?"

HILL: "Yes, that is our understanding."

When asked if the United States found the relationship between Pyongyang and Tehran worrisome, Hill said that was "absolutely correct."

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CHING CHEONG: Human rights and media advocacy activisits are calling on the Chinese government to release Ching Cheong, a reporter for the Singapore-based Straits Times, who has been detained for over a year on charges of spying for Taiwan. Ching was arrested in southern China in April 2005. A month later, the Chinese foreign ministry announced that Ching had confessed to being a spy in the pay of foreign agencies, gathering intelligence information. In fact, Ching was trapped by an intermediary while trying to obtain recordings of secret interviews with former communist party leader Zhao Ziang. Zhao died under house arrest in January 2005 while being investigated for his role in negotiating with pro-democracy demonstrators in 1989. China has not produced any evidence against Ching, who faces a possible death sentence. His sentencing is scheduled for later this month, which has alarmed media groups, such as the international group Reporters Without Borders. Ching is a resident of Singapore and holds a British National Overseas passport, a category of passport given to citizens of Hong Kong....

... FU XIANCAI: Human Rights in China (HRIC) reports authorities in Zigui County, Hubei Province are keeping friends and family members of injured Three Gorges activist Fu Xiancai under close surveillance that is tantamount to harassment. HRIC says Fu Xiancai has recovered movement to his arms and feeling in his fingers since surgery on June 18 to mend vertebrae crushed in an assault on June 8. According to HRIC, Fu still relies on a chest tube because of pulmonary difficulties resulting from his injuries. Hei was paralyzed from the shoulders down after suffering a blow to the neck from an unidentified assailant shortly after he was called to the Zigui County Public Security Bureau for questioning regarding an interview he had provided to a German television station. The attack was the latest in a string of harassment and threats Fu had suffered over the course of more than a year because of his petitioning on behalf of villagers in resettled for the Three Gorges Dam project.

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China's top military officer, General Guo Boxiong, lied several times this week during discussions with United States defense secretary Donald Rumsfeld and US officials and military officers in Washington, DC.

As ranking vice chairman of China's Central Military Commission, Guo is the highest-ranking Chinese military officer to visit the Pentagon.

He said that Beijing is doing all it can to persuade North Korea to reach agreement on its nuclear and missile programs, but cannot force it to change course. Alluding to North Korea's reclusive regime, he also joked that he learned more about North Korea's military plans from meetings with Americans than through talks with his counterparts in Pyongyang.

None of that is true.

North Korea is wholly reliant on China for food and fuel. And Chinese and North Korean military officers regularly coordinate and cooperate on a wide range of matters.

In fact, some intelligence analysts suspect that China knows a lot more about North Korea's July 4 missile tests than previously assumed--specifically, that Pyongyang test-fired two or three intermediate-range ballistic missiles, or IRBMs, in addition to the long-range missile capable of hitting the US and three or more short-range missiles.

Iranian scientists and military and intelligence officers may have been present as observers for those tests. The Iranians, as China Confidential has reported, are believed to have transited through Beijing.

US and Israeli officials are concerned that North Korea may have supplied Tehran with some IRBMs.

Guo's Washington visit parallels US fears that there is an internal debate in China regarding the country's no-first-use nuclear strike policy.

A Pentagon spokesman offered no details about the general's meeting with Rumsfeld. The spokesman emphasized that the visit affirms a consensus reached in recent high-level meetings, that both countries should have more military-to-military exchanges and contacts. Rumsfeld visited Beijing last October.

State Department spokesman Sean McCormack said Guo is also meeting with US Secretary of State Condoleezza Rice.

The spokesman said the crisis over North Korea's nuclear program will definitely be discussed, adding that the US government is also concerned about the need for "greater transparency" in China's military activities and policies.

Beijing's ruling Communist Party leadership has announced plans to boost defense spending to $35 billion, an increase of nearly 15 percent. The Pentagon and other military analysts outside China say that figure may be three times higher.

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About face.

China is scrambling to cozy up to a formidable force it recently condemned and actively opposed--Nepal's Maoist guerrillas.

The impoverished Himalayan state sandwiched between China and India is inching towards a new, interim government, in which the Maoists are expected to be the dominant partner.

China's move comes some three months after street protests led by a coalition of seven major opposition parties toppled Nepal's despised, corrupt King Gyandera. The absolute monarch seized power in a February 2005 coup and ruled with the help of the military.

China's problem: it backed the wrong horse. Beijing branded the guerrillas as insulting the image of Mao Zedong. China also sentenced two Nepalese Maoists to death in absentia, accusing them of smuggling arms and explosives into neighboring, Chinese-controlled Tibet. More important, China supplied Nepal's monarchy with arms and ammunition after India, the United States, and Britain suspended military sales to the regime. The Chinese arms were used against the Maoist guerrillas and to suppress the anti-monarchy protests,

In April, just days after the new government was formed, Beijing rushed a diplomatic team to Nepal to mend fences with the Maoists, who claim to have 36,000 fighters.

Leading the Chinese delegation was Wang Hongwei, a leading government intellectual best known as an India expert. Wang, a professor at the Chinese Academy of Social Sciences, met with the Maoists and assured them of Beijing's support.

Interviewed by the weekly Maoist mouthpiece, Janadesh, which was banned by the king, Wang praised the Maoists as representing "the aspirations of the poor people of Nepal."

"Even though India and the US dubbed the Maoists terrorists, Chinese officials never called them that," Wang said. "It is wrong to brand the party terrorists. I feel Washington is trying to play the terrorist card to further its own vested interests in Nepal."

The decade-long fight by the Maoists for a Communist state left more than 13,000 dead. The Maoists declared a three month truce after Gyanendra handing over power to an interim multi-party government. The truce ends next weekend; but the Maoists are expected to extend the ceasefire.

Maoist leaders have said that they want to see Nepal become a republic--a federation with nine autonomous regions representing "the oppressed classes, nationalities and genders." Defense, foreign and monetary matters would be controlled by the central government, with the Maoists calling the shots.

Covert Chinese ties to Nepal's monarchy date to the early 1960s. China sided with the royalty in the context of its intense rivalry with India for influence in South Asia.

Nowadays, relations between China and India are at their highest point in years--which is why New Delhi is following events in Nepal with some concern. India fears that once in power, the Maoists of Nepal will step up support for their comrades across the border--the ultraleft Naxalites whose Maoist insurgency in India's rural heartland is a growing security threat.

Back in the 1960s, China encouraged the Naxalites, describing their uprising as "spring thunder" and a "prairie fire." By the early '70s, however, China lost interest in the movement, which split into various factions and suffered several defeats at the hands of Indian police and security forces.

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China is pursuing a troubling, tricky alliance with radical, rightwing Islam, or Islamism, despite concerns about its own restive Muslim population.

In China's view, the potential rewards of cozying up to Islamist countries and terrorist groups outweigh the risks. In forging ties to Shiite Iran, its Lebanese terrorist proxy, Hezbollah, and the Sunni Palestinian Hamas, Beijing believes it can effectively buy protection against the export of Islamism to China's western province of Xinjiang, which is home to some 55 million Muslims, including radical fundamentalists and ethnic separatists.

The policy has the blessing of the Chinese military, which is also supporting and dictating policy toward North Korea (more about this below).

The architect of the pro-Islamist policy, Liu Yazhou, is an extremely influential Lieutenant General and Deputy Political Commissar in the People's Liberation Army Air Force, best known for his essays and books on international affairs and strategy. The 51-year-old non-combatant officer is a dedicated nationalist and hardliner toward the United States, Japan, and Taiwan--and the only serving PLA general to have visited the self-ruled island. He has traveled extensively overseas, including a stint in the US as a visiting professor at Stanford University (so much for the silly notion that cultural and educational exchange programs automatically foster warm feelings toward the host nation).

A son-in-law of the late Chinese president Li Xiannian, Liu is a so-called princeling--meaning, a privileged offspring of a high Communist Party official--who has also been linked to the Shanghai clique led by China's unpopular former president, Jiang Zemin.

Liu's wide-ranging views include the idea that the West is engaged in a losing civilizational clash with rising, radical Islam and that the world of military strategy has forever been changed by the US invasion of Iraq. Like other PLA theoreticians, he advocates "unrestricted warfare"--use of a variety of methods to isolate, weaken and ultimately defeat the enemy--and "winning without fighting" whenever possible, i.e. making maximum use of deception and diplomacy in the face of a technologically superior enemy, such as the "US hegemon." Liu also likes to talk in terms of the "Maoization" of the military, though it is not always clear what he means by this.

Liu deserves much of the credit for energy-starved China's warm relations with oil-rich Iran and for an agreement signed last month between Chinese Premier Wen Jiabao and Egyptian Prime Minister Ahmed Nazef. The accord aims to deepen strategic and cooperative relations between Beijing and Cairo: Chinese state-owned enterprises will increase investment in Egyptian energy, textiles and electronics industries, while Egypt will provide preferential treatment to Chinese enterprises.

As the second largest US foreign aid recipient after Israel, Egypt gets $1.7 billion a year in economic and military assistance from the US. But China is seeking to exploit a downturn in US-Egyptian relations, partly stemming from US criticism of Egypt's human rights record.

China is also attracted to Egypt's increasing importance as an energy producer--its oil and gas industry is booming--and the potential opportunity of edging out the US in the event of a radical political change. Chinese intelligence officers have established contacts with the Egyptian Muslim Brotherhood--the Islamist organization that constituted the core of Al Qaeda--which seeks to topple the present secular regime and replace it with a Sunni theocracy. At least one of the officers dealing with the Brotherhood (which was responsible for the assassination of Egypt's peace-making President Anwar Sadat) is also aiding Hamas--specifically, its military wing.

China's military meddling is not limited to terrorist groups. In an audacious disregard for US interests, the PLA has recently initiated military contacts with a growing number of Washington's allies in the region, including Qatar, Kuwait, Saudi Arabia, and the United Arab Emirates.

Nor is Liu's strategic influence limited to the Middle East and political Islam. In April, he accompanied Chinese defense minister Cao Gangchuan during his four-day visit to Pyongyang. North Korean state media (the only kind) reported that the PLA officers and their Korean People's Army comrades discussed ways to “strengthen military ties” and exchanged “valuable” opinions.

Analysts tell China Confidential that they also discussed Iran. A delegation consisting of 10 Iranian missile scientists and Iranian military and intelligence officers, we are told, were on hand for North Korea's provocative July 4 (US time) missile tests. Japanese sources say the Iranians stopped in Beijing on their way to the secretive Stalinist state.

North Korea, as China Confidential reported yesterday, has supplied Iran with Chinese-made missiles, technology and know-how, which Tehran has in turn transferred to its terrorist Lebanese proxy, Hezbollah. It would not be surprising if some of the Iranians who were present for the North Korean tests have also participated in Hezbollah's missile attacks against northern Israel.

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The human rights group Amnesty International reported early last month that China has become the "most secretive and irresponsible" exporter of arms that help fuel conflicts in many parts of the world.

At approximately the same time as the report's release, the United States froze the assets of four Chinese companies and one US company accused of helping Iran in its pursuit of missile technology. But the US sanctions have no punitive effect; and China is under no real pressure to introduce transparency in its over $1 billion-a-year arms export trade, including secret sales to rogue nations.

So the Amnesty report, like so many other warnings about China, may have come too late to do much good.

The war in the Middle East proves the point. China's rogue Islamist ally, Iran, is essentially using its Lebanese terrorist proxy, Hezbollah, to attack Israel--with Chinese-designed, Iranian-manufactured missiles.

The missiles are far more advanced than the old Russian Katyusha rockets Hezbollah has fired at northern Israel in previous attacks. In contrast with the Katyushas, which Iran used in its war with Iraq in the 1980s, and have a range of only five miles, the Iranian-supplied missiles reportedly have ranges of 25-60 miles. The new missiles also have more powerful payloads than the Russian rockets.

Hezbollah has hundreds of these up-to-date weapons, in addition to thousands of Katyushas, which can be fired from multiple launchers.

The Fajr class missiles that hit Israel's major port city, Haifa, 18 miles from the Lebanese border, were made in Iran with the help of North Korean and Chinese expertise.

The Iranian military recently reported successful test-firing of a Fajr-3 missile with multiple warhead missile with stealth capabilities; however, Pentagon analysts are skeptical about the claim.

The missile that stuck an Israeli warship last Friday was certainly stealthy--a C-802 antiship cruise missile, made in Iran with Chinese technology and expertise. Also known as the Noor, the radar-guided C-802 is the Iranian version of China's Jing YJ-82 missile. Iran claims the missile, which has a 60-mile range and uses a small turbojet engine in place of a solid rocket engine, can be fired from aircraft, ships, submarines, and land-based vehicles.

The missile has an interesting history. Iran reportedly bought over 60 Jing YJ-82 missiles from China between the end of the 1991 Gulf War and 1997, along with 20 Chinese patrol boats. Not satisfied with the original version, Iran is said to have turned to North Korea for assistance; and the present C-802 is believed to be the result of a joint upgrading effort.

Iran, which is engaged in a standoff with the West over its nuclear development program, has also developed and tested a medium-range ballistic missile, the Shahab-3, which is based on North Korea's Nodong-1 missile. The Nodong is based on Russian and Chinese Scud missile designs. The Iranian missile can easily reach Israel.

Iran gives Hezbollah over $100 million a year. US and Israeli sources say most of the missiles in Hezbollah's arsenal have been delivered through Syria,

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While the United States tries hard to present Saturday's watered down United Nations Security Council resolution as a great diplomatic victory that sends a message that world powers can work together, the intended recipients of the message--nuclear-armed North Korea and nuclear wannabe Iran--are certain to see things quite differently.

The Security Council unanimously adopted a resolution that imposes limited sanctions on North Korea for its recent missile tests--including the firing of a long-range rocket capable of reaching the US--and demands that the secretive Stalinist state suspend its ballistic missile program.

Key word: limited. The resolution, which capped 10 days of negotiations, bans all UN member states from selling material or technology for missiles or weapons of mass destruction to North Korea, and bans all countries from receiving missiles, banned weapons or technology from the secretive Stalinist state.

However, in a major concession to North Korea's principal ally and protector, China, the final text dropped mention of Chapter 7 of the UN Charter, which allows for the use of military force to assure compliance.

China, which provides Pyongyang with the fuel and food that it needs to survive, had threatened to veto any resolution that mentioned the critically important language.

And so the words were omitted. The toothless resolution states that the Security Council was "acting under its special responsibility for the maintenance of international peace and security."

But all was not lost. In a diplomatic display of sartorial solidarity with supposedly helpful China, the US ambassador to the UN, John Bolton, wore an official Beijing Olympic Games tie to the UN vote.

Too bad Bolton's tie can't be used to bind--or strangle--North Korea's lunatic leader, Kim Jong-il. Less than an hour after the less than historic vote, his criminally insane regime said it "totally rejects" the resolution and vowed to continue its provocative missile launches--in the name of "self-defense."

North Korea's UN envoy also accused the Security Council of trying to isolate his country.

Over to Iran, which is using its terrorist Lebanese proxy to distract world attention from Tehran's disputed nuclear development program while seeking to dramatically diminish American influence in the Middle East.

Iran's clerical fascists are confident that they can count on China and Russia to block meaningful Security Council action; and the North Korean resolution is not likely to change their thinking, except, perhaps, to further encourage tactics that are more deceptive than openly defiant.

Beijing is cautiously optimistic about the outcome of Iran's intrigue. For Chinese President Hu Jintao and his Leading Small Group (LSG) on foreign affairs, Tehran's management of the Shiite terrorist group Hezbollah provides fresh proof that China's deepening ties to the oil-rich, Islamist nation--and developing alliance with China's former Communist rival, oil-producing Russia--are smart, low-risk investments with great upside potential.

In keeping with the Chinese military doctrine of "unrestricted warfare" and the military's public embrace of the ancient Chinese concept of "winning without fighting," Hu's LSG basically believes that anything that hurts the US--the "hegemon" that presently finances but, in the military's view, also seeks to prevent China's rise through policies of containment and encirclement--is good for China.

Anything? Yes, anything, from a terrorist megastrike, such as the awful attacks of September 11, to the runup in world oil prices, even though energy-starved China is now the world's second largest oil consuming nation after the US. Beijing bets that it is better equipped to deal with high oil prices because its mercantilist foreign policy--or so-called energy diplomacy--makes it possible for China's state-controlled oil giants to lock up reserves in corrupt African countries through state-supported "wellhead deals" against which no normal private sector company, no matter how large, can possibly compete.

The bottom line is that with nuclear weapons within its grasp, Iran's is effectively exploiting its China relationship. In an effort that recalls the temporary alliance between the followers of the Ayatollah Kohomeini and various leftwing groups that toppled the pro-US Shah, the Shiite mullahocracy is closely coordinating strategy with China's atheistic, Communist Party rulers, keeping them informed of important events and developments in the region.

And also tipping them off about pending terrorist attacks. China Confidential has learned that in talks on the sidelines of the recent meetings of the Shanghai Cooperation Organization and African Union, Iranian intelligence officers told their Chinese counterparts that war in the Middle East was imminent and that Beijing and Moscow could both benefit from the coming crisis.

Iran was an official observer at the meeting of the once obscure, Chinese-dominated SCO, which groups China and Russia with the countries of Central Asia, and also at the AU semiannual summit--which banned Israeli participation while providing a platform for Iran's hate-mongering President Mahmoud Ahmadenijad to condemn Israel and for Venezuela's populist demagogue, Hugo Chavez, to rant against "US imperialism."

China is a crucial player in the Iranian nuclear dispute. It is an influential member of the P5 Plus 1 group--Germany and the five permanent members of the Security Council--which came up with the package of incentives for Iran aimed at ending the standoff. The world is waiting for Iran's response to the package; but the regime in Tehran is playing for time.

For Iran, the manufactured Middle East crisis conveniently complicates matters. Though Syria is getting more than its share of the blame, Iran was the prime mover in creating, bankrolling, and arming Hezbollah, which is raining rockets down on Israel with the assistance of Iranian military advisers.

And in an impressive show of radical Muslim unity, Shiite non-Arab Iran also supports Sunni Palestinian Hamas terrorist attacks against the Jewish State.

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The politically potent combination of continued Chinese economic expansion at America's expense and Chinese backing for America's avowed enemies--nuclear-armed North Korea and nuclear wannabe Iran--is certain to fuel protectionist sentiment among American lawmakers, labor leaders, manufacturers, and ordinary citizens.

Monday's news stirred things up. With world attention focused on Pyongang's provocative missile tests and Tehran's likely rejection of Western incentives aimed at ending its nuclear program, China posted a record trade surplus with the rest of humanity--the largest monthly trade imbalance any nation has ever recorded.

Ironically, China's announcement that its surplus in June reached $14.5 billion--a record for the second consecutive month--coincided with the swearing-in of the new US treasury secretary, Henry M. Paulson, Jr. As chairman and chief executive of the globalizing Wall Street investment bank Goldman Sachs, Paulson played a "pivotal role" in expanding the firm's China business, as The New York Times noted. He reportedly made 70 trips to China during his tenure.

Which explains why China's US critics were so critical of Paulson's appointment. Putting this well known China champion in charge of US China business is a little like putting Dracula in charge of a blood bank, they say.

"I'd like to have him (Paulson) be very, very tough on China's currency issues," US Senate Finance Committee Chairman Charles Grassley said in an interview on the US cable television network CNBC.

The Senator was echoing complaints by US manufacturers that China undervalues its managed, or manipulated, currency by as much as 40 percent, giving Chinese companies an unfair price advantage in international trade.

The US Trade Enhancement Act of 2006 (USTEA), which Grassley, a Republican, is sponsoring with Democratic Senator Max Baucus, would seek to "correct for trade imbalances that are created or maintained when a country intervenes in foreign exchange markets in an effort to prevent its currency from adjusting to market forces." Though purportedly not aimed explicitly at China, it would become USTEA's principal target, given its $202 billion trade surplus with the United States in 2005--a 24.5 percent increase over the previous year.

Another bill, co-sponsored by Democratic Senator Charles Schumer and Republican Senator Lindsey Graham, would impose a temporary tariff of 27.5 percent on Chinese goods until China eliminates its unfair trade advantage.

US Senator Olympia Snowe, a Republican, who chairs the Senate Committee on Small Business and Entrepreneurship, responded to China's announcement that its exports in June were worth $14.5 billion more than its imports by condemning China's "unfair trade practices such as currency manipulation" and urging the Chinese government to bring the yuan in line with underlying market conditions."

Snowe said she would continue to press for Senate consideration of the Fair Currency Practices Act, legislation she introduced "to force nations to live up to their treaty obligations and stop undervaluing their currencies."

The proposed legislation has three key provisions. The first would change the criteria by which the Treasury Department is required to enter into negotiations with foreign countries that it labels as currency manipulators. The second would further clarify the working definition of manipulation under the Exchange Rates and International Economic Policy Coordination Act of 1998. The act would also instruct Treasury to undertake an extensive examination of China's trade surplus, with particular attention paid to China's suspect trade data, and report on its findings.


A bipartisan bill proposed by Representatives Tim Ryan, a Democrat, and Duncan Hunter, a Republican, would let US companies petition for duties on imports to compensate for the effect of an undervalued currency from the exporting nation. The bill has the support of the largest US manufacturers' association, the National Association of Manufacturers, despite objections by multinational companies doing business with China.

US steelmakers weighed in Thursday by urging action against Beijing at the World Trade Organization over heavy subsidies to the Chinese steel industry, saying it is growing so fast it threatens global economic stability. The chairman of a large US steel maker told reporters: "Since 2000, we have lost over three million manufacturing jobs in the United States, directly related to these subsidies and directly related to China."

Organized labor has also been active against China. The AFL-CIO trade union federation has filed a petition with the US Trade Representative charging the Chinese government with violently suppressing workers' basic rights as part of a systematic effort to maintain an unfair trade advantage in the global marketplace.

The 301 petition, named after the relevant section of US trade regulations, says China's failure to protect workers' rights amounts to an unfair trade practice that has cost more than a million US jobs. The petition calls on US President George Bush to use his authority under US law to impose sanctions against China and to implement a system to verify compliance with internationally recognized workers'' rights.

Pro-Chinese voices in Washington are clearly concerned. They urge caution, saying a massive currency revaluation in China could hurt US financial markets and the dollar by discouraging China from buying US securities. Opponents of tariffs see America's reliance on foreign capital as the country's Achilles' heel, arguing that by dumping US Treasury bills and other dollar-denominated assets, China, which holds more federal US debt than any other country, could cause the value of the dollar to plummet, plunging the US economy into a severe recession.

All told, foreign central banks, led by China and Japan, hold close to $1 trillion of US Treasury bonds and bills, almost a quarter of the publicly held US debt. If China stopped buying US bonds, or sold them outright, many economists contend, bond prices would fall, and their yields, which move in the opposite direction, would rise, causing mortgage rates to rise, in turn depressing home sales and weakening the economy.

Not everyone agrees that the US is so vulnerable. Former Federal Reserve Chairman Alan Greenspan, no slouch when it comes to monetary matters, has said that while foreign central bank holdings are large, they are actually small compared with the total trading volume in US debt markets, and their sales could be easily absorbed. Moreover, most foreign central bank holdings are short-term bonds, according to Greenspan, meaning maturity of two years or less. Such yields, unlike those on 10-year bonds, tend to be influenced more by the US central bank's monetary policy than day-to-day trading.

Other economists argue that fears of Chinese economic retaliation are overblown because Beijing would also be hurt in the process of destabilizing US markets. If China stopped buying dollars, its currency would rise, hurting exports--the engine driving China's economic expansion.

In other words, China needs the American consumer to keep buying its goods to assure continued job growth and social stability. A financial crisis could trigger a political crisis, possibly leading to the collapse of the regime.

Meanwhile, US consumers could be tempted to take matters into their own hands, so to speak, by boycotting Chinese goods. In principle, they could cause considerable harm by turning against one US company that is most responsible for growing China's economy.

That company is Wal-Mart, of course, the firm that used to proudly promote the "Buy American" motto of its founder, Sam Walton.

Today, at least 70 percent of non-food items sold at Wal-Mart stores have a Chinese component.

Importing an estimated $18 billion in products from China each year, Wal-Mart is China's eighth largest trading partner, surpassing entire countries like England and Russia.

A "Made in China" boycott may seem far-fetched. But North Korean missile launches and threats to "annihilate US imperialism" with nuclear weapons once seemed far-fetched, too.

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Some South Korean analysts suspect that senior Chinese military leaders have welcomed--and perhaps even encouraged--North Korean threats to attack Japan, even though the bellicose statements are likely to spur a major Japanese military buildup, including, possibly, nuclear weapons development.

The People's Liberation Army (PLA), according to these experts, assumes it is only a matter of time before Japan upgrades its offensive military capabilities because of Tokyo's alliance with the United States, which, in the PLA's view, is committed to an anti-Chinese policy of encirclement and containment.

The analysis contradicts conventional wisdom, which holds that a militarily stronger, nuclear armed Japan is China's worst nightmare.

"Not true," says a Seoul-based China expert. "The Chinese military has no fear of Japan. In fact, the military sees benefits in Japan building itself up sooner rather than later."

A key "benefit," this expert contends, would be political: creation of an enemy that would clearly justify continued Chinese military modernization and expansion, effectively answering US defense secretary Donald Rumsfeld's rhetorical question: "Who threatens China?"

On the domestic front, a Japanese military buildup would also fuel Chinese nationalism--an increasingly potent and useful force for a regime that has based its entire claim to legitimacy on continued material progress.

Chinese nationalism and anti-Americanism go hand in hand. In their 1999 book "Unrestricted Warfare," two PLA political commissars, Qiao Liang and Wang Xiangsui, actually praised the tactics of Al Qaeda leader Osama Binladen, arguing that his tactics are as legitimate as those used by US General Norman Schwartzkopf in the Gulf War. Focusing on alternative means of warfare, including, in addition to terrorism, economic warfare, the book argues China can only defeat a technologically superior opponent such as the United States by using these methods and avoiding the need for direct military action.

More recently, an archived article initially published on the English-language PLA Daily website on June 8, titled, "Widening the View on the United States," accuses the US of "ceaselessly looking for enemies, ceaselessly playing up crises, and ceaselessly sending out troops for military actions ... in order to build a unipolar world and to ... create a parity situation among different regions so that different regions will hold up and restrict each other."

The "US-Japan alliance," according to the article, which is bylined by Li Bingyan and apparently based on an interview with "America issue expert" Dr. Lu Dehong, "is an alliance by which the US holds Japan in its arms."

The article predicts that "the future that lies before us is a coexistence of opportunities and crises, and crises will generate from opportunities."

Urging the Chinese people to "bravely rise to challenges," the article concludes: "In order to build a unipolar world, the US has hit out everywhere, resulting in its ever-growing battlefront and accumulating more and more contradictions. If things go on like this, the US will eventually prove to be true (to) an old Chinese saying: Big ones have their own troubles. Biting off more than one can chew, and the old will certainly decline."

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Perception is not reality.

For reasons known only to himself--and presumably also to his boss, United States Secretary of State Condoleezza Rice--US nuclear envoy Christopher Hill was less than truthful Wednesday in his public comments concerning the current crisis over North Korea's missile madness.

An Assistant Secretary of State and longtime, leading advocate of peace talks with North Korea, Hill accused Pyongyang of refusing to cooperate in efforts to end the impasse over its missile and nuclear weapons programs.

This is true.

What is not true is that China, as Hill told reporters, is "really trying" to use its leverage as North Korea's principal ally and aid donor to persuade the rogue regime to stop its provocative missile test-firings and return to six-party nuclear disarmament discussions.

In fact, as we have reported, China has done next to nothing to moderate North Korea--and may even have encouraged its belligerent behavior.

Hill met the press after meeting with Chinese Foreign Minister Li Zhaoxing. The US diplomat said he had "very good" discussions with Li but reported no progress.

"China's really trying," Hill said. "We're trying. Everyone is trying except, unfortunately, the DPRK (Democratic People's Republic of Korea). So far the DPRK seems to want to choose a road of deeper isolation."

Hill, who was sent to Asia to coordinate a consensus response to North Korea's July 4 (US time) missile tests in the Sea of Japan, said Chinese officials who have traveled to Pyongyang have yet to get all of the appointments they requested.

US hawks have in the past accused Hill of appeasing North Korea. Some Bush administration officials have been known to privately refer to the diplomat as "Kim Jong-Hill" after North Korean dictator Kim Jong-il.

The United Nations has delayed voting on a US-backed Japanese resolution to sanction North Korea. Pyongyang's neighbors are divided on the issue. China, like Russia, opposes sanctions. South Korea wants the international community to condemn the missile launches, but also opposes sanctions.

The UN resolution would ban North Korean missile tests and authorize use of force to prevent the regime from acquiring or exporting missiles and missile technology or weapons of mass destruction and their components.

China and Russia introduced an alternative, watered-down UN resolution Wednesday that reportedly "strongly deplores" North Korea's missile tests but eliminates language that could have led to military action against Pyongyang.

In Washington, State Department officials did their best to downplay Chinese-Russian obstructionism, with some officials going to great lengths in discussions with reporters to put a positive spin on China's actions.

But Japan--which, like its ally, America, has been threatened with nuclear attack by North Korea--said Wednesday it will continue to press for a vote on its resolution if Pyongyang's only concession is an agreement to return to nuclear disarmament talks.

"It is natural that North Korea will need to return to the six-party talks without any preconditions," Chief Cabinet Secretary Shinzo Abe told a news conference. "However, that alone will not mean we will not vote on the resolution."

China has urged the US to comply with North Korea's demands to lift financial sanctions against its businesses--a North Korean condition for returning to nuclear negotiations.

Hill rejected that demand, and repeated Washington's position that the restrictions are a response to illegal money laundering and are not related to the missile and nuclear issues.

Meanwhile, major powers agreed Wednesday to send another Chinese ally, Iran, back to the UN Security Council for possible punitive sanctions, saying the Islamist regime has given no sign it intends to negotiate seriously over its nuclear program.

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Latin American sources report that China is engaged in covert talks with oil-rich Venezuela to cut crude exports to the United States, increase shipments to Beijing--and begin selling oil to its impoverished ally, North Korea.

China is the world's second largest oil-consuming nation after the US, which buys around 18 percent of its oil from Venezuela, the world's fifth largest oil-producing nation.

Venezuela's populist president Hugo Chavez, an avowed enemy of the US, recently announced plans to visit North Korea in late July. Chavez also intends to visit Russia and Iran (more about Caracas-Tehran ties below).

China Confidential has learned that an oil-for-arms deal is in the works, involving North Korean conventional weapons, missiles--and, incredible as it may seem, maybe even an atomic bomb--under cover of a pending "strategic alliance" and a so-called science and technology cooperation agreement.

Should Chavez and North Korean dictator Kim Jong-il dare to deal in missiles and nukes it would constitute the biggest threat to US national security from a Western Hemisphere nation since the Cuban missile crisis of October 1962, when the Cold War between the US and the Soviet Union came close to nuclear conflict.

Nearly 44 years later, a crisis caused by Cuban ally Venezuela teaming with Stalinist North Korea could trigger a new kind of Cold War--with China. In the wake of North Korea's provocative missile tests and nuclear threats, Washington would not hesitate to blame Beijing for allowing a Pyongyang-Caracas axis to develop.

In fact, relations between North Korea and Venezuela have been warming dramatically. Senior Venezuelan government officials have made statements in support of North Korea's missile tests, and high-level North Korean political and trade officials--and intelligence officers--have visited Venezuela. In May, a delegation of Venezuelan foreign ministry officials visited Pyongyang, just a month after Caracas opened its first-ever embassy there.

Chavez, who proudly considers himself a protege of Cuba's Communist dictator Fidel Castro, is also forging an alliance with another Chinese ally, oil-rich Iran, which is engaged in a nuclear enrichment standoff with the West.

Energy-starved China has tried to downplay deepening ties to Venezuela. While increasingly interested in the South American country's oil--including the huge, untapped heavy crude deposits of the Orinoco River belt--Beijing is concerned that relations with Chavez could needlessly antagonize Washington and hamper efforts by Chinese state-run companies to secure supplies of oil and other raw materials in a region historically considered within the US sphere of influence.

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The United States now spends more than $500 billion a year on defense, including supplemental spending on Iraq. New weapons, as reported in today's edition of The New York Times, are expected to cost at least $1.4 trillion over the next three years, including $320 billion on Air Force fighter jets, $80 billion on advanced Navy submarines, and $130 billion in computerized replacements for Army tanks and other vehicles--all part of a Pentagon plan to technologically transform the US military with supposedly superior and more lethal war-making "megasystems."

At the same time, the US seems to find itself hopelessly hamstrung in its dealings with the North Korean military menace, relying on North Korea's chief ally and protector--and America's foremost rising adversary--China, for questionable diplomatic support.

The US appeals for assistance--from authoritarian China--as a rogue nation threatens and provokes the US and thumbs its nose at the world, boasting of its intentions to retaliate against real or perceived attacks with nuclear weapons.

The sole surviving superpower ... the world's greatest democracy ... the country that defeated Nazism and Fascism and contained Soviet Communism until it collapsed from within ... a powerful, post-industrial nation armed to its high-tech teeth ... prostrating itself at the altar of appeasement.

What's wrong with this picture?

Plenty. And more and more Americans, we suspect, share our view. In fact, if there is any consolation at all to be found in the current Korean crisis it is this: threats to annihilate American cities by the criminally insane Kimist regime are likely to spur debate about the primary purpose of US foreign policy and the value and direction of US defense spending.

Interrupted by 9/11, the defense debate is long overdue.

Asks a veteran American analyst: "What good are all those high-tech weapons if they can't be effectively used against countries that clearly threaten America's national security?"

Indeed. What good are the weapons? Even Washington's reaction to the Islamist attacks of nearly five years ago--the worst-ever attacks on American soil--calls into question the fundamental value of the advanced arsenal. Instead of responding swiftly and decisively to destroy and defeat the Islamist enemy operating from Afghanistan (with significant Pakistani and Saudi sponsorship and assistance), the US apparently took too long to counterattack and relied on notoriously unreliable Afghan warlords for much of the fighting, allowing Al Qaeda leader Osama Binladen, Taliban head Mullah Omar (anyone remember that monster?) and their most senior henchmen and followers to escape. (Washington also diverted American anger and resources away from Saudi Arabia and Pakistan to focus on what most Americans now seem to see as an unnecessary invasion of a contained, secular foe, Iraq, with no weapons of mass destruction and no meaningful Islamist/Qaeda connections. But that's another story.) Instead of delivering destruction to its enemy, eliminating its fighting capacity by any and all necessary military means, the US restrained itself--the proverbial cooler heads prevailed--and opted for a protracted politico-military conflict with shifting, unclear objectives and aims.

No wonder North Korea's nuclear-mad, Communist killers--more than a half-century after the close of the Korean war--appear to be utterly unafraid of the mighty US.

No wonder Iran's clerical-fascist regime--headed by a fundamentalist Shiite tyrant who makes a point of mixing Islamist rhetoric with neo-Nazi hate speech--takes its sweet time to ponder a Western package of incentives aimed at ending the nuclear enrichment impasse.

No wonder a second-rate, tropical Mussolini like Hugo Chavez brazenly urges Africans and Latin Americans to unite against "US imperialism" and praises and announces plans to visit--and presumably plot anti-American strategy with--his Iranian and North Korean comrades.

No wonder....

Inspired by China's challenge to "US hegemony," aided by Beijing's treachery, as previously noted, America's avowed enemies are emboldened and encouraged by the classical Communist Chinese view of the US as a "paper tiger." Americans have the arms, they sneer, but lack the will to use them.

Heaven help the world if America's enemies--and their Chinese helpers--turn out to be right.

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Pyongyang is no longer capable of preventing migration within the country or out of the country to China by hungry or starving people. Hundreds of thousands of North Koreans have crisscrossed the country in search of food. At least 100,000 people have sought temporary refuge in China, with thousands attempting to defect. China, which supplies North Korea with food and fuel, fears that a collapse of the regime would send a flood of refugees across the border....

North Korea is home to the world's most oppressive personality cult. The legitimacy of Dear Leader Kim Jong-il is derived directly from his status as the son of the late Great Leader--and Eternal President--Kim Il-sung, who is depicted as personifying the revolutionary struggle of the Korean people for independence, unification, and respect. His birthday and death are public holidays. Statues, portraits, and propaganda posters depicting his heroism are ubiquitous. Indoctrination stresses the centrality of the family as a unique, revolutionary clan....

There are at least six known North Korean concentration camps, with an inmate population of at least 200,000 at any given time. A distinguishing feature of the camp system is the philosophy of "guilt by familial association" or "collective responsibility" whereby whole families within three generations are imprisoned--and, in at least one "control zone," killed in gas chambers. Multigenerational murder, torture and imprisonment has been practiced since 1972 when Kim Il-sung stated: "Factionalists or enemies of class, whoever they are, their seed must be eliminated through three generations." Baby killings and forced abortions are also commonplace....

Despite increasing cross-border Chinese and South Korean cultural influences, including illicit use of VCRs and mobile phones connecting defectors and their relatives, North Korea has managed to keep most people almost completely reliant on official media for information and suspicious of propaganda from the United States or South Korea. North Korean televisions and radio sets are fixed so that they can only receive one approved station. Most people have no access to external print media. Even if they get access to South Korean or Chinese newspapers and magazines, their ability to read these materials is hampered. While the North Korean populace has a high rate of basic literacy, with at least seven years of education, many North Koreans cannot read Chinese characters, only the indigenous Hangul syllabary. Decades ago, Pyongyang purged its writing system of Chinese characters that are still used in South Korean and Japanese publications.

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Contrary to Chinese propaganda depicting its North Korean ally's military madness as a desperate plea for help by an impoverished, increasingly isolated regime, Pyongyang is pursuing its provocative nuclear weapons and missile development programs so that it can eventually threaten Japanese and American cities with annihilation in the context of achieving North Korea's primary foreign policy objective--reunification of the Korean peninsula.

This is the view of a small but influential group of hawkish Japanese and American defense analysts, who argue that 53 years after the end of the Korean War, North Korea remains committed to conquering South Korea.

Irrational as this goal may appear, it is said to be the reason for the reclusive Stalinist state's continued allocation of scarce resources to the military. Nuclear-capable rockets are not necessary for controlling a terrorized, starving population; secret police, paramilitary forces, and a network of concentration camps--"control zones" in North Korean parlance--are quite sufficient to prevent any serious challenge from below. But "the supreme national task," as North Korean state media refer to reunification, requires military modernization and expansion--more specifically, the means to effectively threaten and deter North Korea's arch-enemy, the United States.

Analysts adhering to this view of the current crisis note that the regime of North Korean Dear Leader Kim Jong-il considers the entire Korean peninsula as constituting its sovereign territory.

"North Korea does not recognize South Korea as being a separate nation, nor the government of South Korea as legitimate," says a Washington-based expert. "When North Korean media refer to 'our country' or the 'fatherland,' they mean the entire Korean peninsula. Kim sees the southern half of his country as occupied by US imperialists and the government of South Korea as puppets serving imperialist masters.

"In North Korean terms, the word defense does not mean defending North Korea. It refers to defending all of Korea. So defense of the fatherland, a popular theme in North Korean propaganda, refers to reclaiming that portion of Korea--South Korea--which is occupied by the US."

Analysts who regard themselves as Hermit Kingdom hawks assert that North Korea's worsening economic plight could fuel a final conflict with the US. The thinking is that if North Korea views its economic decline as deep and irreversible, it could opt for preventive war as a last-ditch means of attaining reunification on its terms.

Even without resorting to use of its small but growing atomic arsenal, North Korea could inflict terrible devastation on South Korea. Experts estimate that North Korean artillery hidden in caves would rain a million artillery shells an hour on Seoul in the first day of a conflict. North Korea could also fire 200 mobile rocket launchers and launch up to 600 Scud missiles. US and South Korean casualties, excluding civilians, would probably exceed 300,000 and could reach 500,000 in the first 90 days of fighting.

An arsenal of nuclear-armed missiles capable of striking US cities--in addition to South Korea and Japan--would decidedly tip the scales in North Korea's favor, says an analyst in Tokyo, adding: "If you think US military options are already limited in the current missile crisis because of fear of possible North Korean nuclear retaliation against US and South Korean forces, imagine what it would be like if North Korea is ever in a position to credibly threaten US cities with destruction."

North Korea has the world's fourth largest military. Most experts agree that the country is four to five years away from possessing the nuclear weapons and warheads and long-range missiles capable of effectively threatening the US.

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China's ruling Communist Party is conducting its biggest overseas propaganda drive since the 1960s, when Beijing believed it was going to win friends and allies across the world--from privileged students, intellectuals and artists in Western countries to guerrilla fighters and peasants in developing nations.

Just as it was during the '60s, today's war for foreign hearts and minds is being waged by the party's International Liaison Department, with help from the party's Propaganda Department, which is tasked with making certain that domestic media follow the party line in all relevant political matters.

Both departments come under the party's powerful Central Committee, with Chinese President and party chairman Hu JIntao deeply involved in all important aspects of the campaign. Hu's foreign affairs leading group, or leading small group (LSG), is coordinating key initiatives and activities and calling the shots in terms of both strategy and tactics.

But this is not your father's Communist campaign. There are important differences between the party's Mao-era efforts and those of today. The most obvious difference is ideology: it has been set aside for the idea of a pragmatic, peacefully rising China, opened up to the world, innocent of totalitarianism, democratizing at its own pace and in its own way--a land of boundless opportunity for foreign investors and a shining example for the developing world.

All media are employed in the enterprise, which also uses Chinese journalists, academicians, think tank workers and state-owned company officials and executives--especially in energy and banking--to influence important foreign visitors and overseas opinion leaders.

The overall objective is to create a kind of global consensus regarding key issues, including China's military buildup ("it threatens nobody"), the Taiwan Question ("reunification is inevitable"), and democracy ("continued economic expansion and growth will spur political reforms").

Hu's LSG can count on the propaganda apparatus for special missions as the need arises. For example, in the wake of China's failure to prevent its impenetrable North Korean vassal from provocatively test-firing missiles in defiance of world opinion, Chinese propagandists have revived the theory of internal North Korean factions and competing power centers. The notion has no basis in fact. North Korea's "Dear Leader" Kim Jong-il is an absolute despot.

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China is supporting North Korean belligerence in an effort to counter perceived anti-Chinese policies by the United States and Japan.

So say a number of analysts in the US, Japan, and Taiwan. These experts claim that Beijing has given its vassal a green light to continue its provocative missile and nuclear development programs, provided the Hermit Kingdom confines its testing to missiles and does not get swept up in its nuclear war-mongering rhetoric.

"China won't tolerate a nuclear test," says a Tokyo-based authority on Chinese-Korean relations. "That's the red line--no pun intended. But occasional missile launches are acceptable in China's view, as long as the rockets land harmlessly in the ocean."

North Korea's missile and nuclear programs originated in China--its covert technology transfers made the programs possible in the first place. And Chinese food, fuel and other forms of economic assistance have kept the reclusive Stalinist state from collapsing. Preventing a North Korean collapse, or implosion, is a chief Chinese aim, because such an event could bring US troops right up to the border with China along the Yalu and Tumen rivers, and send thousands of starving North Korean refugees streaming into China.

Another Chinese aim: use North Korea to distract and harass the US. Beijing acccuses Washington of working with its client Japan to contain China's rightful rise.

China is therefore committed to keeping North Korea around for the foreseeable future as both a buffer state and a useful anti-American menace. In this respect, China will continue to disappoint US policymakers seeking Chinese help in further isolating--and ultimately toppling--the North Korean regime.

For China, the stakes--and risks--are obviously high for many reasons, not the least of which is the fact that North Korea's dictator, "Dear Leader" Kim Jong-il, is a certifiable lunatic who makes mass-murdering Mao--the "Great Helmsman"--seem sane by comparison. A fanatic film buff whose film library includes the world's largest porno collection, numerous copies of every James Bond feature, and thousands of cartoons--Daffy Duck is said to be his favorite animated character--Kim once had his special forces kidnap a South Korean actress just to improve his country's cinema. His current uniforms are supposedly modeled after the costumes worn by classic Bond movie villain Dr. No.

With Kim's finger on the nuclear trigger, it makes sense that Chinese President Hu Jintao is personally directing his country's North Korean policy. Hu heads a so-called leading group of Politburo members dealing with Pyongyang. The group is a subset of the foreign affairs leading group, which Hu also commands.

But Hu's hands-on management is not likely to benefit the US. Since 2004, China's president has met and repeatedly praised Kim and pledged to "boost cooperation" with North Korea--a signal to Pyongyang that it can count on Chinese support in a confrontation with the US.

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China may have more in common with its North Korean vassal than meets the eye. Like the reclusive Stalinist state, which has starved, killed, and tortured millions of its people--and operates a network of concentration camps, complete with gas chambers--China is no stranger to Nazi-like atrocities.

China's treatment of the outlawed Falun Gong is an example. Calling it a crime against humanity, an independent Canadian human rights report confirms that detained followers of the movement (also known as Falun Dafa) are having their kidneys, heart, liver and corneas harvested without consent. The bodies are then cremated and their organs sold to foreigners, the report says.

Winnipeg human rights lawyer David Matas and former Liberal cabinet minister David Kilgour authored the report, following a two-month investigation.

"What we've got here is a new, shocking, different form of evil," Matas told reporters at a news conference. "The Chinese Communist party sees the Falun Gong as an ideological threat to the regime, because of the large numbers, the ability to mobilize a large group of people, their commitment and their tenacity."

"Who would have believed the Holocaust before it happened?" he asked.

Said Kilgour: "We've both been very shaken up by these stories. It's hard to believe this can go on anywhere in the world in this new century where human beings are supposed to matter."

The report was conducted at the request of the Coalition to Investigate the Persecution of Falun Gong in China and the Ottawa-based Falun Dafa Association, with the support of seven sitting MPs. The Canadians worked as unpaid volunteers.

The Chinese Embassy in Ottawa dismissed the report as a "groundless and biased" Falun Gong smear effort based on "rumors and false allegations."

China's foreign ministry has in the past admitted that organs from prisoners have been used in transplants, saying, however, it was only in "a very few cases" and with the express permission of the convict.

Kilgour and Matas said their research was conducted independently of the coalition and any other organization or government.

Denied visas to visit China, they gathered testimony from witnesses in Canada, the United States, France and Australia, consulted the websites of Chinese transplantation centers, and studied transcripts of Mandarin conversations with doctors and other officials at Chinese hospitals and detention centers.

"We believe that there has been and continues today to be large-scale organ seizures from unwilling Falun Gong practitioners," the report says. It estimates that 60,000 transplants occurred in China from 2000 to 2005. Of these, approximately 18,500 would have come from legitimate sources, the report adds, leaving 41,500 unexplained transplants.

One of the key witnesses was the wife of a surgeon who confessed to having removed more than 2,000 corneas of unwilling Falun Gong detainees over a two-year period, Kilgour said.

"She said he started having nightmares and that is when he confessed. And she details how it was done how many a day, what anesthetic they used. And what happened to him when he tried to stop."

Neither the surgeon nor his wife are involved with Falun Gong in any way, Kilgour added.

The report also notes a number of family members of Falun Gong practitioners who died in detention reported seeing the corpses of their loved ones with surgical incisions and body parts missing.

"The authorities gave no coherent explanation for these mutilated corpses," the report says.

The report calls on governments and international human rights organizations, such as Amnesty International, to thoroughly investigate and boycott China's booming, highly secretive, and extremely controversial transplant industry.

Australian and British transplant surgeons are among those who have asserted that China is harvesting organs from thousands of executed prisoners each year to sell for transplants.

In April, the British Transplantation Society condemned the practice as a violation of human rights. Professor Stephen Wigmore, chairman of the society's ethics committee, said China's speed of matching donors and patients suggested that prisoners were being selected before execution.

According to the official Xinhua News Agency, the purchase and sale of human organs are now banned in China after a new regulation came into effect last Saturday.

Xinhua said: "Strict rules have also been imposed on human organ transplants in response to fierce overseas criticism of China's transplant industry. Hospitals will be banned from taking organs without written consent from the donors, who are entitled to withdraw their decision at the last minute."

But critics doubt the new regulations will be strictly enforced. One reason: too many important Communist party officials are financially involved in the transplant industry.

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EDITOR'S NOTE: According to the Jewish religion, God removed the gift of prophecy from the world after the destruction of the First Temple. We're not qualified to comment on that belief; however, we think it's safe to say that it does not take a prophet to forecast at least the near-term future of the North Korean missile crisis. A sound understanding of recent history and present-day politics is all that is required, in our opinion, to make some reasonable predictions, such as those offered below.

1. The United States and China will both try their best to downplay the significance of North Korea's test-firings--the US, in order to avoid admitting it was wrong to continue the Clinton administration's policy of trusting China to moderate North Korean behavior; China, to avoid responsibility for supplying its criminally insane, bankrupt vassal with missile technology and sustaining it with food, fuel and other forms of economic assistance.

2. Regardless of what North Korea does, China will oppose sanctions against its ally and continue to support and protect it in the interest of: (a) maintaining a buffer zone between China and the US military in South Korea; (b) preventing a collapse of the North Korean regime that would send thousands of refugees across the border into China; and (c) distracting and weakening the US while China goes about its global business of locking up supplies of oil and other raw materials and setting itself up as a competing pole of power and influence among developing nations.

3. The appeasement camp in the US--including academicians, journalists, and diplomats whose careers and livelihoods depend on maintaining access to China--will blame the Bush administration for North Korea's audacious acts, accusing Washington of ignoring North Korean calls for help. Clinton's China/North Korea appeasement policies will be hailed as models of diplomacy for the global era. Appeasers will urge the US to begin bilateral talks with North Korea.

4. North Korea will launch more missiles, most likely including another long-range Taepondong-2 missile capable of reaching the US.

5. The next North Korean missile barrage will be more impressive than the first; if another long-range missile is launched, it will perform better than the last one, probably flying over Japan before dropping into the Pacific.

6. North Korea will again threaten to attack the US with nuclear weapons.

7. US Senator Joe Biden of Delaware, a Democrat and 2008 Presidential candidate, will regret calling North Korea a "paper tiger." Critics will compare his rash remarks to Bush's "bring 'em on" dare to Iraqi terrorists.

8. Iran will take advantage of the North Korean crisis to play for time in its nuclear enrichment standoff with the West.

9. Venezuelan demagogue Hugo Chavez will threaten to acquire North Korean missiles for defense against "US imperialism."

10. Cuban dictator Fidel Castro--an old hand at threatening the US with missiles--will make a long, boring speech.

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One disappointment down, two to go.

North Korea's defiant, 4th of July (US time) rocket show was meant to upstage America's Independence Day celebrations, including its Discovery space shuttle launch.

The provocative test firings of a series of missiles--including an intercontinental ballistic missile (ICBM) capable of reaching the United States--followed a series of stern warnings from the US and Japan and an appeal for restraint from China, on whom North Korea is dependent for food and fuel and other forms of economic assistance.

The military exercises also followed North Korean threats to respond to US attacks with "annihilating" nuclear strikes ... and a Chinese signal, as we reported last week, that a launch was imminent.

China's role is most interesting. The country that is mainly responsible for North Korea's missile and nuclear development programs, owing to years of covert Chinese technology transfers to the reclusive Stalinist state, showed the world that when it comes to moderating North Korean policies and actions, Chinese diplomacy is either utterly useless, at best, or destructive and deceitful, at worst.

Simply put, Beijing either failed to persuade Pyongyang not to launch the missiles or fooled Washington and Tokyo into thinking it was trying.

We think the so-called failure was for the most part deliberate, (a) because China is committed to keeping North Korea as a buffer between China and US-allied South Korea, and (b) because Beijing believes that it is in its interest to isolate and harass the US "hegemon" through proxies and clients.

The tests failed, fortunately, as the ICBM and at least five shorter-range missiles fell into the sea of Japan seconds after launch.

But that is beside the point--which is that North Korea went ahead, despite US and Japanese warnings, and that China was unwilling or unable to stop the launch.

That's one disappointment. Iran is likely to be next. Energy-starved China is secretly supporting the oil-rich, Shiite Islamist nation and closely coordinating strategy with it in its nuclear standoff with the West. Following China's advice, Tehran is likely to play for time while trying to divide the US from its European allies over the critically important nuclear enrichment issue.

The third looming disappointment? Hamas. China has developed a solid working relationship with the Sunni Islamist, Palestinian terrorist group currently controlling the Gaza district and parts of the disputed West Bank. Although Beijing called on Hamas to free a recently kidnapped Israeli soldier (while also urging Israeli restraint in its efforts to free the soldier), it is deepening ties to the financially strapped organization.

Some Israeli analysts suspect China of making substantial cash payments to Hamas foreign minister Mahmud al-Zahar; and a veteran Chinese intelligence officer, Gong Xiasheng, is suspected of providing covert aid to Hamas from his West Bank base in Ramallah. Gong is a Division 8 Minister of State Security (MSS) officer attached to the China Institute of Contemporary International Relations, an MSS think tank and espionage arm.

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IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
He has affected to render the Military independent of and superior to the Civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
For Quartering large bodies of armed troops among us:
For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
For cutting off our Trade with all parts of the world:
For imposing Taxes on us without our Consent:
For depriving us in many cases, of the benefits of Trial by Jury:
For transporting us beyond Seas to be tried for pretended offences
For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated Government here, by declaring us out of his Protection and waging War against us.
He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

Chinese President Hu Jintao has earned a reputation as a conservative, which, in terms of Chinese elite politics, means a left-leaning leader, in contrast with one advocating accelerated capitalist-style reform.

But China's Paramount Leader is also showing himself to be a master of the political martial arts, capable of using both hard and soft styles and techniques to strike, block, and altogether upset the equilibrium of his critics and opponents--from the five or six Politburo Standing Committee members still loyal to the Shanghai clique headed by Hu's predecessor, Jiang Zemin, to Old and New Left officials and intellectuals seeking a return to Mao-era socialist principles, to the United States government and internationally respected human rights groups.

Think of Hu's fighting style as Tai Chi (soft) meets Kung-Fu (hard, except for certain styles).

Last Thursday, for example, Hu reportedly told a special study meeting of the 24-member Politburo that China needed to deepen democracy--in a Marxist context.

According to the official Xinhua News Agency, Hu said: "Governing democratically is an elementary demand of a ruling Marxist party.... Democratic governance means adhering to rule for the people and relying on the people to govern."

Hard and soft: Hu's remarks come in the wake of his public condemnations of corruption, recent high-profile arrests of senior officials--including a deputy commander of the navy--and a continuing crackdown on the media, including announcement by the ruling Communist Party (a) of its intention to "purify" the Internet of "unhealthy" blogs and search engines, and (b) of a draft law that would fine "irresponsible" media outlets engaging in unauthorized reporting of disasters and demonstrations, including the rural uprisings and protests that have become increasingly commonplace and threatening to the regime.

The law, which threatens fines of 50,000 yuan (around $6,250) to 100,000 yuan, could cover foreign reporters, a Chinese official said on Monday.

"If information released is untruthful or inaccurate, or if information is bogus, it can spark unnecessary panic in society and even create grave social harm," Wang Yongqing, Vice-Minister of the State Council Legislative Affairs Office, told a news conference in Beijing. "A fundamental goal of this law is to force the government to give timely information."

Right. And if you believe that, this reporter would like to sell you a bridge in Brooklyn, New York, or the Eiffel Tower.

The proposed law, which is almost certain to be adopted, requires reporters to seek and obtain government approval before reporting on natural disasters, outbreaks of disease, riots and other "sudden events" or "contingencies."

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China did it, as China Confidential predicted on Saturday.

While Beijing's high-tech railroad was making its way to Tibet to further dominate that conquered country, Chinese diplomats were on hand in authoritarian Gambia as the African Union (AU) semiannual summit meeting degenerated into a hate session against the United States, Israel, the West and other "imperialist enemies" of the developing world.

The 10-member Chinese delegation arrived last Thursday for meetings with AU officials, including China's number one agent of influence in Africa, Alpha Oumare Konare, who chairs the organization's administrative branch, called the Commission. China's other AU stooge, Chairman Denis Sassou Nguesso, whose full-time job is looting the oil-rich Republic of Congo, was also a willing participant in the two-day summit that saw fit to invite as honored observers the presidents of Venezuela and Iran.

Our sources in the Congolese capital Brazzaville say it was China's idea to include the two antidemocratic hate-mongers, and that the idea was discussed in some detail when Sassou, a former Marxist who has ruled Congo for 22 of the past 27 years, met Chinese Premier Wen Jiabao during his recent African tour.

Venezuelan President Hugo Chavez was the keynote speaker at the summit's opening ceremonies. In a speech reminiscent of the Nonaligned Movement's Cold War-era conclaves, he called on Africa to counter "colonial meddling" and unite with Latin America against the "US hegemony."

Citing the example of Venezuela and Bolivia, he urged Africa to seize greater control of its energy resources, described the low royalty payments made by some foreign oil companies as "robbery," and referred to the US oil industry as "Count Dracula."

Said Chavez: "We should march together, Africa and Latin America, brother continents with the same roots ... Only together can we change the direction of the world....

"The world is threatened by the hegemony of the North American empire."

With a glance in the direction of Iranian President Mahmoud Ahmadinejad, Chavez hailed Iran's right to develop nuclear technology for peaceful purposes.

""Long live Africa, long live Arabia and long live Iran in freedom and equality," Chavez said.

The former paratrooper, who plans to visit Iran and North Korea later this month, proposed four areas of cooperation among the peoples of Africa, Latin America and the Caribbean in the spirit of China's heavily promoted South-South strategy: joint energy projects, dubbed PetroSouth; a media venture dubbed Telesur (TeleSouth); a joint bank Banco del Sur (Bank of the South); and a University of the South.

Venezuela is the world's fifth largest oil exporter.

Chavez also expressed solidarity with the Palestinian people "who are today being attacked".

Picking up on that theme, Iranian President Mahmoud Ahmadinejad condemned the migration of European Jews to Israel to "displace the Palestinian people".

Gambia, which hosted the AU summit, is a notorious human rights violator. Before the summit began, the press freedom advocacy group Reporters Without Borders urged journalists covering the meeting to remember repressive conditions faced by their Gambian colleagues, many of whom have been killed and beaten by government-sponsored gangs.

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A black day for Tibet.

Chinese technology and imperialism were on full display Saturday, as Beijing inaugurated a rail link to the Tibetan capital Lhasa. The $4.2 billion "miracle railway" to the roof of the world fulfills a long-time goal of China's ruling Communist Party, which is showing increasing impatience with Tibet's restive native population and renewed determination to dilute the conquered country's culture by overwhelming it with Chinese migrants.

Many of whom, according to Communist Party planners, will travel by train.

The inaugural service from Beijing, which left in the evening amid much fanfare and publicity, is scheduled to arrive in Lhasa after a 48-hour, 4,000 kilometer journey reaching altitudes of 16,400 feet on the Tibetan plateau.

Tibetans in Dharamsala in India, where Tibet's universally admired spiritual leader, the Dalai Lama, presides over a government in exile, called Saturday a "black day" for Tibet and launched a website in protest.

China's army invaded and occupied the Himalayan nation in 1950 to impose Communist rule. Nine years later, the Dalai Lama fled to India after a failed uprising.

China claims the railway will boost Tibet's economy and reduce transport costs. In fact, Tibetans are rapidly becoming an underclass in their own country as a result of the government-sponsored Chinese influx and persecution of Tibetans. Since marching its troops into Tibet, Beijing has moved millions of Han Chinese into the country.

The new railroad is also a politically motivated environmental menace. Crossing permafrost and towering mountains, the train is certain to damage fragile, frozen highlands, according to environmental experts.

None of which seems to matter to China's president. Chinese state television showed Hu Jintao cutting a large red ribbon at the inaugural ceremony. In a speech to workers and others gathered at the station, he said that China is "ambitious, self-confident, and able to stand among the world's advanced nations."

He left out "peacefully rising."

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As Americans prepared for their long Independence Day weekend Friday, the African Union (AU) was gathering in Gambia for a Chinese-manipulated summit meeting, which, as of this writing, seemed dangerously close to degenerating into an anti-American hate-fest recalling the Cold War-era conclaves of the Nonaligned Movement.

In fact, some familiar faces and types from that twisted time are attending the July 1-2 meeting, including: the supposedly rehabilitated Libyan leader Muammar Khadafy; Cuban Foreign Minister Felipe Perez Roque; and Denis Sassou Nguesso. A former Marxist, Sassou is the current chairman of the 53-member AU and the president of the Republic of Congo, a Central African kleptocracy, which, like so many Third World nations, manages to be both oil-rich and pathetically poor at the same time.

The new faces are the most newsworthy: Iranian President Mahmoud Ahmadinejad and Venezuelan President Hugo Chavez.

Both leaders were invited at China's suggestion, according to our African sources.

Ahmadinejad and Chavez are expected to overshadow debate of important regional issues, such as the refusal by Chinese-backed Sudan to accept United Nations peacekeepers in conflict-torn Darfur, the rise of Islamist warlords in anarchic Somalia, and a doomed proposal aimed at preventing presidents from installing themselves for life (like Sassou, say, who has ruled Congo for 22 out of the past 27 years).

The Iranian president is seeking to mobilize African support for Tehran in its nuclear standoff with the United States and its European allies.

Chavez, who is also planning trips to Iran and North Korea, was scheduled to deliver the keynote address at the opening ceremonies on Saturday. Aside from lashing out at the US, extolling his "Bolivarian revolution" for Latin America, and articulating his vision for a "socialism of the 21st century," the Venezuelan leader was expected to ask Africa to support his country's current bid to become a non-permanent member of the UN Security Council, after Argentina vacates its place as Latin America's representative.

Venezuela, which is the world's fifth largest oil exporter, has been an AU observer for more than a year.

China is represented at the AU summit by a 10-member delegation. The group arrived in the Gambian capital Banjul on Thursday for private talks with Alpha Oumare Konare, the former president of Mali, who chairs the AU's administrative branch, called the Commission.

Konare is one of China's champions in Africa. China Confidential has learned that he managed the summit invitations to Admadinejad and Chavez and also helped coordinate a recent meeting between Sassou and Chinese Premier Wen Jiabao during his seven-nation African tour.

In addition to approving the invitations to the Iranian and Venezuelan leaders, Sassou, who has made five state visits to China, promised Wen that he would attend the Sino-Africa summit that Beijing is planning to hold this November.

Our sources in Brazzaville say Sassou is attracted to the Chinese-Venezuelan-Iranian concept of a so-called south-south alliance of developing nations. But his embrace of Ahmadinejad and Chavez is a diplomatic stab in the back to the Bush administration--specifically, the State Department, which recently persuaded the White House to upgrade a photo opportunity with Sassou into a somewhat more meaningful meeting when he visited President George Bush in Washington early last month.

Fast-growing, energy-starved China buys oil from the Congo, which is home to some of the planet's poorest people. Though the Central African country exports some $4 billion of oil annually, per capita income for its 3.8 million people is less than $700, according to the World Bank. The bank, which is now headed by former US deputy defense secretary Paul Wolfowitz, a leading Congo critic, ranks the country as one of the most corrupt on earth--right below Albania.

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