China Confidential

China released its version of a defense white paper Friday, announcing increased investment in technology and equipment in order to counter an independence movement in tiny Taiwan.

The report highlights so-called separatist forces within Taiwan as a problem for Beijing.

China has repeatedly vowed to invade Taiwan if it moves toward declaring formal independence, or, even more ominously, as set forth in China's Anti-Secession Law, if peaceful attempts at reunification ultimately fail.

China and Taiwan split at the end of a civil war in 1949; but China continues to claim sovereignty over the democratic, self-governing island.

The defense report outlines upgrades in battle equipment for its army, new fighters and missile technology for its air force and modernization of its navy. On Wednesday, Chinese President Hu Jintao told a Communist Party meeting that China needs a powerful, combat-ready, "blue water," or deep sea navy. Hu's comments were splashed all over the front pages of the major state-owned newspapers.

The white paper also addresses nuclear weapons policy, saying China will maintain a credible nuclear deterrent force to maintain national sovereignty but will never enter into a nuclear arms race with any other country.

The "fundamental goal" of China's nuclear strategy "is to deter other countries from using or threatening to use nuclear weapons against China," the defense document says. "It has never entered and will never enter into a nuclear arms race with any other country."

The white paper, the fifth since 1998, says China remains firmly committed to the policy of no first use of nuclear weapons at any time and under any circumstances.

According to the paper, China "unconditionally undertakes not to use or threaten to use nuclear weapons against non-nuclear-weapon states or nuclear-weapon-free zones, and stands for the comprehensive prohibition and complete elimination of nuclear weapons."

The report, released by China's State Council, says the increase in defense spending is in line with China's national economic development.

China says it spent $35 billion in 2006 on its military; but experts believe the actual amount is several times higher.

The report covers regional security, and highlights what it calls "growing complexities" within the Asia Pacific region. The document says that United States weapons deals with Taiwan and military ties with Japan are two of many key issues needing attention.

Here we go again.

On the fifth day of Christmas, China Confidential gazed into an oversized (and possibly regifted) crystal ball and predicted 2007 will be a bad year for Radical Islam, following its defeat in Somalia.

Iran's monstrous mullahocracy and its Sunni Palestinian ally, Hamas, and Shiite Lebanese proxy, Hezbollah, will go down in flames.

The Iranian regime's dramatic departure from the world stage will isolate Shiite Islamist militias in Iraq and help stabilize the country.

Secular Syria will draw closer to the West.

The Taliban will finally be driven from Afghanistan.

Islamism will undergo a crisis of faith, causing many fanatics to doubt their most cherished beliefs and desert the movement.

So much for good-news forecasting. Here's the dark side: In desperation, Al Qaeda is likely to attack in Europe, where the problem of assimilating a huge, hostile Muslim population will seem more daunting than ever. In addition to terrorist attacks in Britain, a new Muslim uprising could engulf France. An assault on posh and privileged Paris is a distinct possibility.

Autonomous, ideologically-linked Islamist terror cells could strike the US, spurring renewed calls for better border security--and politically charged but popular demands for temporarily revoking the visas of aliens from predominantly Muslim nations and seriously curbing immigration from the Muslim world for years to come.

Approaching the 2008 Presidential race, Democrats will be under enormous pressure to show that they are not soft on national security and truly committed to winning the war against the new Nazism, known as Islamism.

Peacefully Rising China? As American television's fictional Mafia godfather Tony Soprano might say, fawgettaboutit!

Chinese President Hu Jintao said Wednesday that his country needs a powerful, combat-ready navy that is prepared to carry out missions at any time.

Speaking at a Communist Party meeting, Hu urged the navy to continue its efforts to build a "blue water" or deep sea fleet that can adapt to the navy's historic mission.

Hu's comments were carried on the front-pages of the Thursday editions of major state-owned newspapers, including the People's Daily and People's Liberation Daily, with photos of him dressed in an army-green suit.

As head of China's Central Military Commission, Hu is also the nation's commander-in-chief.

Hu's comments reinforce the views of senior Chinese military officers who argue that China needs a navy that can deploy far from the country's coastline to protect its huge maritime, trade including crucial imports of oil and raw materials.

Western naval analysts say that China could use an expanded fleet of new ships and submarines to counter any American intervention if a conflict arose with Taiwan. China says it will attack the island if it declares independence.

China is putting the brakes on its super-fast-growing auto industry.

The government is extending economic restrictions to the industry and setting higher thresholds for fresh investment. Automakers must prove their sales exceeded 80 percent of last year's authorized output before they can expand factories next year.

The new rules are part of official attempts to slow sectors of China's booming economy, including two interest rate hikes in 2006 and further curbs on construction and industrial project approvals. Officials reason that a slowdown in the auto industry will affect related industries and decrease demand for energy and other resources.

China has the world's third largest auto industry, growing more than 25 percent between January and November in 2006. Analysts predict sales will exceed eight million vehicles in 2007. But officials warn that the more than 100 automakers in the country could be headed toward a production glut.

Foreign experts have warned Chinese car manufacturers that overproduction will eventually lead to price-drops that could kill or delay the dream of becoming a high profit foreign car manufacturer.

China's gross domestic product is expected to grow more than 10 percent this year. The country has averaged annual growth of nine percent over the past 20 years.

The Chinese government said Wednesday that it will continue its controversial one-child family policy because it is crucial to the country's modernization plans.

Prime Minister Wen Jiabao told a conference on population and family planning in Beijing the policy is especially important in China's highly populated countryside.

Wen called on the government to extend rewards and subsidies, including social insurance, for people living in rural areas. He said migrant workers should be offered the same incentives.

The one-child policy was introduced to ensure that China, which has historically been prone to floods and famine, could feed all its people.

Since the late 1970s, the government has limited most urban couples to one child, and rural couples to two, in an effort to slow population growth.

The head of the National Population and Family Planning Commission, Zhang Weiqing, has said China's population would be 400 million higher if not for the family planning policy.

The policy has a dark side, say critics. Enforcement has worsened a cultural preference for sons to carry on family names and tend the graves of ancestors.

Widely available ultrasonic and thermographic scans allow the sex of unborn children to be determined at early stages of pregnancy, and in many cases females are then aborted.

The death rate for girl babies and children is also significantly higher in rural areas as families give more medical treatment and better nutrition to sons. There are also thought to be several million girls whose births have not been registered so their parents can try for a son.

Some experts predict that if the situation is allowed to continue unchecked, by 2020 there will be 30 to 40 million marriage-age men who will be single all their lives, leading to a surge in prostitution and crime, including, possibly, the kidnapping of girls and young women in rural areas.

Chinese sources say a Spanish doctor who recently examined Cuban President Fidel Castro told the truth--albeit in an edited fashion--when he said the Communist leader does not have cancer.

Jose Luis Garcia Sabrido told reporters in Madrid on Tuesday that Castro is recovering from intestinal surgery and that no more operations are planned. The physician said the Cuban dictator is in good physical and intellectual shape and wants to return to work.

Chinese sources tell a different tale. They say Castro had cancer, but was at least temporarily cured by controversial shark cartilage treatments.

The 80-year-old Cuban dictator is said to have been given shark cartilage enemas. Shark cartilage is believed to contain a protein that inhibits angiogenesis (rapid blood vessel development), which is associated with malignant tumor growth as well as with normal development and wound healing. Without angiogenesis, cancerous tumors shrink and die.

The cartilage under a shark's dorsal fin and near its tail is supposedly most potent. Chinese folk medicine has long prized the fin, crediting it with almost magical properties.

The popular American television news magazine-style program, 60 Minutes, reported on Cuba's shark cartilage cancer research and therapy back in the 1990s. Veteran correspondent Mike Wallace narrated the segment, which launched a mini-shark cartilage food supplement industry--and boosted the credibility of natural medicine, generally.

Most Cancer specialists doubt that natural shark cartilage, administered rectally or orally, can be an effective angiogenesis blocker.

Castro underwent surgery for an unspecified illness in July. At the time of the operation, he handed power to his brother, Raul.

Castro has not appeared in public since then and was last seen in a video broadcast in late October. The Cuban government says Castro's health is a state secret, fueling speculation about his condition.

America's director of national intelligence, John Negroponte, recently said Castro is very ill and could die within months.

EDITOR'S NOTE: United Nations correspondent Ian Williams contributed the following Christmas Carol. He says it was commissioned and then rejected by a business magazine that thought that its Chinese advertisers may be upset by it. Capitalist marketeers self-censoring to protect China's Communist Party rulers ,,, even Mao would be impressed! Williams is the author, most recently, of Rum: A Social and Sociable History. He has visited and reported on China since the early 1970s.

A CHRISTMAS CAROL

We three sharks of Orient are
Bearing stocks we travel afar
Field and roadshow, selling an IPO
Extolling yonder share


O share of wonder, share of might
Share of rosy prospects bright
Upward trending, never bending
Guide us to thy dizzy height


Born state-owned on the Yangtse plain
Golden prospects down the lane
Rising forever, dropping never
Over us all to rain

O share of wonder, share of might, etc.


Mind ye not the dodgy loan book
With Chinese banks, best not to look
Stock brokers are such jokers
Keep accounts in a Little Red Book

O share of wonder, share of might, etc.


A prospectus offered have I
The SEC cannot come nigh
Privatizing, launch price rising
Send your cash to Shanghai

O share of wonder, share of might etc.


Your few shares outvoted are
Beijing owns more stock by far
Minor holder gets cold shoulder
Even more than Delaware

O share of wonder, share of might etc.


Beijing rules, so best presume
The Comrades run the board-room
Party blundering, bleeding, plundering
Sealing your stake's doom

O share of wonder, share of might, etc.

On the second day of Christmas--a public holiday in Britain known as Boxing Day because of its (upper class) origins as a day for boxing up and giving gifts to tradesmen, postal workers, paper boys, charitable institutions and the needy--China Confidential elaborated on its Christmas Day prediction concerning talks with Syria and added two more predictions for 2007 as follows:

1. The United States and Israel will engage and make peace with secular Syria--and attack and militarily defeat Islamist Iran.

2. North Korea will escalate tensions on the Korean peninsula and defy the world by conducting new nuclear and missile tests; but relations between the Stalinist/Kimist regime and the US will dramatically improve as summer approaches with the lifting of US sanctions on Pyongyang and direct talks between the two nations.

By year end, the US will appease North Korea by recognizing the regime and guaranteeing its security--and allowing it to remain a nuclear power as long as it halts further development of atomic arms and agrees not to proliferate. In return for accepting arms control (as opposed to disarmament), submitting to international inspections, and promising not to menace democratic Japan--a vitally important US ally and the world's second largest economy--economically ruined North Korea will be showered with offers of financial assistance.

3. China will undergo a major urban uprising in addition to or as part of a massive rural rebellion. The government will crush the protests; but the brutality of the paramilitary riot police and other security forces will shock the international community and trigger calls for a boycott of the 2008 Summer Olympic Games in Beijing.

Good news from the Horn of Africa.

In a decisive turnaround, Islamist killers in Somalia are suddenly in retreat.

The Taliban-like fanatics are fleeing government forces and (Christian-dominated) Ethiopian troops who are advancing on three fronts in a battle for control of Somalia.

The country's internationally backed government on Tuesday called on the Islamists to surrender and promised them amnesty if they lay down their weapons and stop opposing the government. But Somalia's wannabe Mullah Omar, Sheik Sharif Sheik Ahmed, leader of the Council of Islamic Courts, vowed to keep on fighting, even while running.

The Council is an Al Qaeda front that seeks to turn Somalia into a fourth front, after Afghanistan, Iraq--and Indonesia-- in radical Islam's war against the West.

The United States says four Qaeda leaders, believed to be behind the 1998 bombing of the US Embassies in Kenya and Tanzania, are controlling the group, which has received financial aid from Eritrea as well as the Muslim Brotherhood in Egypt and Yemen and Wahhabi institutions in Saudi Arabia.

People living along Somalia's coast have reported seeing hundreds of foreign Muslims entering the country in answer to calls from the Islamic militia to fight a holy war against Ethiopia.

In July, an internet audio message attributed to Qaeda leader Osama Binladen warned the world against interfering with the Council.

"We pledge that we will fight your soldiers on the land of Somalia and we will fight you on your own land if you dispatch troops to Somalia," the voice on the 19-minute tape said.

The Council drove US-supported, secular Somali warlords out of the capital, Mogadishu, last summer and have seized most of the southern half of the country.

Somalia has not had an effective government since a longtime dictatorship was toppled in 1991.

In October 1993, 19 US Rangers were killed in a battle in Mogadishu that became the subject of the feature film Black Hawk Down.

An interim administration, organized two years ago with United Nations help, has been unable to exert control beyond the area around the western city of Baidoa.

The country lies at the entrance of the Gulf of Aden, which leads to the Suez Canal, one of the world's most important shipping lanes.

Indonesia's devastated Aceh province is still struggling to rebuild two years after the December 26, 2004 Indian Ocean tsunami swept across two continents killing some 230,000 people.

It has been two years since a 9.0 magnitude earthquake triggered a tsunami that devastated Aceh, the closest point of land to the quake's epicenter. The giant wave killed nearly 170,000 people in Aceh and destroyed over 800 kilometers of coastline and most of the region's infrastructure.

Since then, the Achenese have been struggling to rebuild their homes and their lives with the help of an unprecedented outpouring of aid from the international community, totaling nearly $6 billion.

But two years after the disaster, not even half the estimated 128,000 homes needed to house survivors have been built. And many of the 50,000 to 60,000 homes constructed since late 2005 are poor quality structures, built with substandard materials.

The painfully slow pace of rebuilding means that many people still live in temporary barracks or tents that lack even basic sanitation.

Survivors and relatives of those who died in the tsunami observed Tuesday's second anniversary of the disaster with moments of silence, prayers and low-key ceremonies.

Sri Lanka marked the anniversary with Buddhist prayers for its 35,000 dead, and by constructing the first of 100 coastal towers to warn of impending disasters.

Elsewhere, multi-faith ceremonies were held in India, which lost 18,000 people to the tsunami, and in Thailand, where 8,200 people died, about half of them foreign tourists.

EDITOR'S NOTE: In most of the Western Church, the 12 days of Christmas begin on December 25 and end the night of January 5th, before the morning of Epiphany on January 6th.

Twelve Days of Christmas is also a popular English Christmas song, adapted from an 18th century children's ryhme, which enumerates a series of gifts given on each day of the festival. It is one of the most-recorded songs in American history--a cumulative song in which each verse is built on top of the previous verses. There are twelve verses as follows: Twelve Drummers Drumming Eleven Pipers Piping Ten Lords a-leaping Nine Ladies Dancing Eight Maids a-milking Seven Swans a-swimming Six Geese a-laying Five Gold Rings Four Calling Birds Three French Hens Two Turtle Doves and A Partridge in a Pear Tree.


On the first day of Christmas, China Confidential predicted:

The United States will engage Syria in direct talks in an attempt to isolate Islamist Iran and undercut its influence in the Middle East. Responding to bipartisan pressure from foreign policy critics, Washington will try to end the unholy alliance between Tehran's turbaned tyrants and the secular dictatorship in Damascus.

Tibet's exiled Buddhist spiritual leader has handed a Christmas gift to China's Communist Party rulers--a new and clear call for political autonomy, not independence, for his oppressed homeland.

The Dalai Lama said Sunday that Tibet's interest is to remain a part of China; but he insisted that Tibetans should be permitted to preserve their culture and protect their environment.

He also appealed to India to play a role in making Tibet a "zone of peace."

Addressing an audience in New Delhi, the Dalai Lama said: "To remain with the People's Republic of China is in our interest. But we are seeking political freedom to preserve our culture and environment and are opposed to cultural genocide being promoted by China due to increasing influx of the Han people and spread of Chinese language in Tibet."

The Dali Lama described the increasing Chinese Han population and deployment of People's Liberation Army in Tibet as the main 'hindrance towards attaining political Autonomy of Tibet." He asked Beijing to downsize its military presence in Tibet and stop shifting mainland Han Chinese to the Himalayan land, which is sandwiched between China and India.

The Nobel Prize winner also said he was not against Chinese economic development of the Himalayan region.

"If you want, modernize Tibet," he said. "Every Tibetan wants a modernized Tibet."

From nuclear armed North Korea, one of the planet's most horrific hell-holes, comes a new face ... sort of ... and new threats.

The North Korean army's chief of staff, Kim Yong Chun, whom the regime occasionally allows to be quoted, said Saturday his country will respond with tougher measures if the United States imposes more sanctions. He did not specify what North Korea might do.

This latest round of six-party talks on North Korea's nuclear program ended in Beijing without a breakthrough earlier this week. They were the first held by the six nations in more than a year, and the first since Pyongyang conducted a nuclear test in October.

North Korea promised in principle to disarm in 2005. But it has refused to negotiate implementation until the US lifts financial sanctions imposed last year in response to North Korea's alleged counterfeiting and money laundering.

A typical Kim Yong Chun quote: "If the enemies encroach upon an inch of our land, waters and sky, the People's Army will mercilessly annihilate them and give a thousand-fold death to the invaders and thus defend the party and socialism and reunify the country."

The nonmilitary United Nations sanctions imposed on Iran today will not deter the Islamist nation from developing nuclear weapons. On the contrary, in response to the unanimously passed UN Security Council measure, Iran is likely to accelerate its nuclear arms activities and escalate its war-like rhetoric, including new threats to destroy Israel and drive the United States from the Middle East for once and all.

We believe the mullahocracy is weeks away from possessing a nuclear bomb; it may already have several so-called dirty bombs--radiological devices that can be handed over to terrorist groups and proxy armies, including Hamas and Hezbollah.

Nothing but bombing will stop Iran's nuclear madness.

Chinese officials suspect that America's dovish Assistant Secretary of State Christopher Hill (nicknamed Kim Jong-Hill by Bush administration hawks) was hopelessly hamstrung in this week's six-way nuclear talks with North Korea.

Sources say the Chinese view is that Hill was set up for failure by Secretary of State Condoleezza Rice, who wanted to use the Beijing negotiations to send a message to North Korea's nuclear tag-team partner, Iran, ahead of today's United Nations vote on sanction slapping Washington's implacable, Islamist foe.

Chinese officials contend that in the run-up to resumption of talks, Rice had allowed, even encouraged, Hill to convey the impression that the United States was prepared to lift its sanctions and consider coexisting with a contained nuclear armed North Korea in return for concessions from the Stalinist/Kimist regime--namely, no proliferation and a permanent end to further nuclear development. Instead, Hill stuck to a hard-line position, denying any linkage between US sanctions and the nuclear issue, and stressing that the US seeks to disarm--and not merely control--Pyongyang.

Something, says China, that North Korean Dear Leader Kim Jong-il will never accept.

The six-way forum seems dead as a doornail.

Regardless of how the West ultimately resolves the nuclear standoffs with Islamist Iran and Stalinist/Kimist North Korea, one thing is clear: the two rogues almost certainly possess biological weapons in violation of their treaty commitments. Iran and North Korea are members of the 31-year-old Biological Weapons Convention, a 155-state treaty that prohibits the development, production and stockpiling of biological and toxin weapons.

South Korean sources say North Korea may have up to 4,000 tons of biochemical weapons and three crude nuclear weapons that use plutonium extracted before Pyongyang allowed international inspections in 1992.

The week-long, six-way talks in Beijing aimed at persuading North Korea to give up its nuclear weapons program ended in deadlock Friday--a total flop.

Which is worse than a mere fizzle.

In fact, tne negotiations, which were attended by delegates from both Koreas, the United States, China, Japan and Russia, may have done more harm than good. Following the failed talks, China's Stalinist/Kimist vassal may now feel a need to detonate another atomic device to escalate tensions on the Korean peninsula. Provocative new North Korean missile tests are also possible.

The tests would constitute a defiant New Year's message from North Korean despot Kim Jong-il. The planet's leading lunatic leader probably feels cheated and betrayed as a result of the resumed negotiations. South Korean analysts--admittedly critical of US handling of their northern neighbor--say Washington led Pyongyang to believe that US sanctions would be lifted once the talks got underway. Instead, the US stuck to a legally sound but diplomatically unwise position that its sanctions and nuclear issues aren't linked.

North Korea had also been given the impression, South Korean sources say, that the so-called US red lines had shifted following North Korea's provocative, first-ever explosion of an atomic bomb on October 9 (an event that China Confidential accurately predicted). The US had hinted that it was prepared to go on living with a nuclear North Korea--the test only confirmed what Washington already knew--provided Pyongyang halted arms development and agreed not to proliferate subject to submitting to an international inspections regime. But US negotiators took a surprisingly hard line at the Beijing talks, as indicated by chief US envoy Christopher Hill's statement to reporters Friday morning.

Our goal is de-nuclearization--period," Hill said. The Assistant Secretary of State added: "They (North Korean negotiators) need to show some seriousness of purpose on de-nuclearization."

South Korea's chief negotiator at the talks, Ambassador Chun Yung Woo, and other South Korean officials, including Foreign Minister Song Min Soon, have stressed the need for concrete progress in the first round of talks. Otherwise, the South Koreans say, the validity of the negotiating forum will be questioned.

EDITOR'S NOTE: The following essay, by United Nations correspondent Ian Williams, originally appeared in Foreign Policy in Focus. He is a frequent contributor on UN and international affairs.

China's arguments against Taiwanese self-determination are not particularly legal or ethical. They boil down to the fact that Beijing has over a billion people, a huge economy, and over 900 missiles pointing at the nearby island.

The latter figure, growing by 50 rockets a year, should give a clue to the weakness of Beijing's arguments. In the modern world, few governments can pledge with a straight face to “liberate” an island full of people it pretends are compatriots by blowing them off the map. Equally, while China's “one nation—two systems” transition period for Hong Kong has not been a total failure, Beijing's clumsy interference in Hong Kong's politics and refusal to allow democratic reforms have not done much to reassure the Taiwanese.

There is scope for wrangling on historical and legal claims. But the real question is what status the people of the territory themselves want. Do the people of Taiwan and their democratically elected government have a right to decide their own fate? And will they use that right to get politically closer or more distant from the mainland?

According to modern international practice and the principles of democracy, the Taiwanese do indeed have the right to “declare” what is manifestly already true: that they are an independent, sovereign state. It is also clear that the Taiwanese, on the political level, do not want to be ruled by Beijing. If the threat to the island's (and the islanders') existence were removed, a very strong majority would support outright independence.

This is not just romantic nationalism. The Taiwanese pragmatically believe that falling under Beijing's thumb would be a major step backward for a prosperous democracy of 23 million people, with its developed economy, developed social democracy, and amenities such as a national health system.

Taiwan has long been trying to shore up its global position by joining international bodies, notably the UN. For the first decade or so of the UN's existence, the “universality” of membership was not at all evident. But now UN membership is generally regarded as a sort of certificate of sovereign statehood. Indeed, after the invasion of Kuwait in 1990, every last microstate came rushing for membership precisely to get anti-annexation insurance. Some members barely qualify for sovereignty. For instance, the former U.S. trust territories in the Pacific, such as Palau, the Marshal Islands, and Micronesia, have constitutions that entrust the United States with their defense and with consultation over foreign policy. Such contingent sovereignty is reflected in their lonely UN votes supporting Washington over Israel. Indeed, at the time of their admission to the UN, British diplomats, for the record, queried the degree of the islands' sovereignty.

Add economic autonomy, and Taiwan clearly has more attributes of sovereignty than many UN members. If not for the continuing threat from the PRC, Taiwan's leaders might realistically accept their anomalous status. One only has to think of avian flu to realize that it is not in the global interest for Taiwan to be outside the World Health Organization or any of the other institutions of international standard-setting.

By blocking Taiwan's entry to the UN, China is ignoring the same right to self-determination it proclaimed in its more revolutionary days of anti-colonial struggle. This hypocrisy explains in part why the nagging consciences of the non-aligned at the UN impel them to ensure that the admission of Taiwan is not even on the agenda for discussion, despite clear rules to the contrary. In any debate they would have to acknowledge that Beijing's obdurate stand contravenes not only of the right to self-determination but also of the inviolability of colonial boundaries that most African countries accept.

It is worth considering why the Chinese are so unbendable on this issue. Perhaps the biggest problem is that the Communist Party of China has all but abandoned any social agenda other than the maintenance of power, and that leaves only nationalism as a ruling ideology. The “reunification” with Taiwan is a token over which the cadres in Beijing can jostle for leadership by out-shouting each other.

However, Beijing's claim to sovereignty over the island is not well founded at all, unless you accept it as the successor state to the Middle Kingdom that claimed to rule the world. In historical terms, the mainland's one unquestioned period of control over Taiwan lasted between the end of the Second World War and the ouster of Chiang Kai-shek from the mainland. The islanders were never consulted, and Chiang's Kuo Min Tang (KMT) made sure that their views went unheard by massacring some 30,000 of them beginning February 28, 1947. Even when driven from the mainland in 1949, Chiang's regime maintained its increasingly tenuous claim to be the legitimate government of China, which included Mongolia as well.

Only after Chiang's death did the island move toward democracy and into the real world, by dissolving the all-China shadow government structures maintained by the KMT. Strangely, the comrades in Beijing were happier with an island claiming to represent the whole of China than they are with one that currently purports only to represent itself.

In the modern world, with a few notable and messy exceptions such as in the Balfour declaration, irredentist claims based on ancient history have been unsuccessful in the face of popular sovereignty. There is more to a nation state than a shared language, common ethnicity, or certainly former imperial sovereignty.

According to its arguments based on former control, Beijing could seize Vietnam or parts of Korea. Indeed, if reunification of the former Chinese empire is the issue, then China should really consider the examples of Canada, Australia, New Zealand, and the United States. Luckily, there has been no British call for reunification. Austria and a large part of Switzerland speak German, but Germany has not revived calls for anschluss. Spain has learned to live with the absence of most of Latin America.

Historical claims are essentially worthless. In a modern, civilized world, the views of the people themselves matter most. For example, no British government, not even one as control-minded as Tony Blair's, could force Scotland to stay in the United Kingdom if a clear majority of its people wished otherwise. The Chinese leadership, on the other hand, often confuses “terrorism” with “secessionist activities,” which includes simple advocacy of autonomy and independence. As such, the Chinese equivalent of the Scottish Nationalist Party in Beijing would serve time in jail, not in parliament.

Although it is not helpful in the adjudication of modern sovereignty claims, history does offer some examples of pragmatic solutions that could produce a degree of mutual satisfaction. For example, if the PRC had demonstrated more trustworthiness over Hong Kong, then something like the “compacts of association” between the Pacific trust territories and the United States would have been conceivable. But it would be a foolhardy Taiwanese leader who would accept even a token garrison from the People's Liberation Army in view of Beijing's recent threats.

Perhaps a more exiguous form of association could be developed on the model of the dominions of the British Commonwealth, where the British head of state is also head of state of Australia, Jamaica, Canada, and New Zealand. For the last half century at least, this arrangement didn't imply any degree of British control and left the various parties harmoniously linked but independent.

However, for all these imaginative solutions, the Taiwanese need reassurance that some powerful members of the global community have the spine to argue with Beijing, to educate its leaders that their eccentrically Sinocentric view of the world is wrong, and to persuade those same leaders that threats of military action are completely counterproductive as well as unacceptable.

Why should the rest of the world care? Last year, the “Responsibility to Protect” accepted by the UN heads of state codified the instinctive feelings of many. The world should not stand by and watch military action crush a vibrant, successful democracy. And in terms of self-interest, Taiwan has wisely and morally eschewed the nuclear option. Faced with a United States in economic thrall to China and increasingly unlikely to back up its security guarantee against China's developing military capacity, Taiwan certainly has a case for pursuing such a deterrent. But the world is dealing with enough threats to the current arms control regimes and does not need another nuclear power.

Taiwan should take the initiative and propose some such pragmatic solutions to the mainland. Although rejected, such proposals would at least have the effect of putting the onus on Beijing. In fact Taiwan could learn some lessons from Cyprus, where the leaders have for years suggested reasonable-sounding solutions they know are, for some obscure reason often barely discernible to outsiders, completely unacceptable to the other side. At the same time, Taiwan should abandon some of the more ritualistic restrictions on trade and travel across the Strait. And Taipei should make plain that it does not hold a “Two China” policy but rather a “one China, one Taiwan” policy. Like Austria and Germany, or Australia and Britain, Taiwan is close to China—but separate.

Will Borat cover the funeral?

One of the world's most notorious--and clearly crazy--despots died last night, Turkmenistan's President for Life Saparmurat Niyazov.

The 66-year-old authoritarian leader died suddenly of cardiac arrest, according to a solmen announcement aired on Turkmen state television. He had ruled the Central Asian nation with an iron fist for more than 20 years.

Niyazov long had a heart condition and received treatment from various heart specialists. However, the full extent of his illness was never been made public.

A former Communist Party boss, Niyazov renamed himself leader of all ethnic Turkmens, "Turkmenbashi" ("Chief of the Turkmen"), after taking full control of the desert republic following the collapse of the Soviet Union. He established an elaborate personality cult and allowed no political opposition or media freedom in the country of five million people.

Niyazov also built golden statues to himself, one of which revolves during the day, in order to always face the sun.

His image is everywhere--from huge billboards to the national currency to bottles of vodka and perfume.

He also constructed various palaces, including one made of ice--in the middle of the desert.

Niyazov was able to spend widely because of Turkmenistan's vast oil and gas reserves. Hardly any of this wealth trickled down to the majority of the Turkmen people, who live in poverty.

A book he supposedly wrote has become the core of the educational curriculum. Niyazov even renamed some months of the year after himself and his relatives.

The country's future is uncertain because there is no clear successor, although a deputy prime minister has been appointed to make plans for a funeral.

Niyazov's death leaves North Korean Dear Leader Kim Jong-il as the undisputed maniac-in-chief of a nation state, with Iran's Hitler-admiring, nuclear-mad Mahmoud Ahmadinejad in second spot.

The United States has imposed economic and military sanctions on the Pacific island of Fiji including a travel ban on the leaders of this month's military coup.

The US State Department announced Tuesday that it is freezing more than $2 million in direct aid to Fiji. Senior military officials and leaders of the interim government will also be barred from traveling to the US or attending US sponsored events in other countries.

The State Department condemned the coup and says the sanctions will remain until President Bush or Secretary of State Condoleezza Rice determines that a democratically-elected government has returned.

A military coup on December 5 drove Prime Minister Laisena Qarase and several other top officials from office. The coup leader, naval Commodore Frank Bainimarama, said the action was necessary to clean up what he called a corrupt government.

Commodore Bainimarama has turned down an invitation to attend a meeting with the island's Council of Grand Chiefs Wednesday. He says the invitation he received used his military title of "commodore" instead of "interim president." Fiji's chiefs have the power to appoint the president and vice president. They have not yet recognized the military government.

Chinese police Tuesday announced the discovery of seven money laundering services worth more than $1.75 billion. The so-called underground banks--which provided many banking services--were discovered as part of China's efforts to crack down on economic crimes and prevent the funding of criminal gangs and terrorist groups.

China's Public Security Bureau (PSB) said the seven illegal operations were found in Shanghai and in four provinces of in the South and Northeast. The PSB said they arrested 44 people suspected of involvement in the illegal financial activities.

In the largest of the illegal operations, a Singaporean and three others whose nationalities were not revealed were arrested in Shanghai, for illegal financial activities involving more than $630 million.

The gang allegedly ran a network in 25 cities across China, providing remittances, foreign exchange, and other banking services between Singapore and China.

Chinese authorities said they seized or froze more than $7 million during their investigation into the illegal banks.

The United States is (finally) serving notice that it wants the process of imposing United Nations sanctions on nuclearizing, Islamist Iran completed as soon as possible--meaning, within days.

The latest sanctions resolution under discussion bans the sale or provision to Iran of materials and technology that could contribute to its nuclear and missile programs. Additionally, the draft resolution slaps a travel ban and asset freeze on senior Iranian figures in nuclear and missile development programs.

Rising China and resurgent Russia are opposed to meaningful sanctions.

US officials say recent Iranian actions, including hosting an international conference of Holocaust deniers, should be more than enough incentive to act against Tehran's nuclear ambitions.

"You don't need any other reason than taking a look at Iran's behavior last week, the behavior of this regime in sponsoring the conference that was aimed at denying the existence of the Holocaust," State Department Spokesman Sean McCormack told reporters Monday. "Pair that up with the idea that Iran is seeking nuclear weapons (and Iranian President Mahmoud Ahmadinejad's threats to destroy Israel) and I don't think you need any more reason than to raise your hand in the affirmative and vote for the resolution that we have right now."

The five permanent UN Security Council member countries and Germany offered Iran a package of incentives in June if it stopped enrichment and returned to negotiations over its nuclear program. But Ahmadinejad, while declaring that Iran's nuclear intentions are peaceful, has refused to stop enrichment and has said his government is not intimidated by the prospect of sanctions.

Defiance and disingenuousness.

North Korea and the United States got off to a bad beginning Monday at the resumption of six-party nuclear disarmament talks.

The US said it would never accept a nuclear North Korea; the North demanded an end to sanctions against it--specifically, United Nations sanctions imposed after Pyongyang's provocative, first-ever nuclear test in October, and US sanctions imposed on the North for alleged complicity in counterfeiting and money-laundering.

The US sanctions led the secretive Stalinist/Kimist state to break off negotiations with the US, China, South Korea, Japan and Russia 13 months ago.

North Korea made clear that it wants to be treated as a nuclear state and actually threatened to add to its nuclear arsenal if its demands are not met. In addition to lifting sanctions, the North's laundry list includes donation of a nuclear reactor for civilian energy use.

The US offered in its opening comments to normalize relations with Pyongyang, but only after it stopped nuclear development.

The lead US negotiator, Assistant Secretary of State Christopher Hill, told reporters the international community will not accept North Korea as a nuclear state.

Said Hill: "If they want a future with us, if they want to work with us, if they want to be a member of the international community, they are going to have to get out of this nuclear business."

The US position is less than straightforward; Hill's comments, not quite candid. As analysts well know, the US accepted North Korea as a de facto nuclear state prior to the October test; and Washington's red lines are by no means clear. There is reason to believe that the US is prepared to coexist with a nuclear North Korea as long as it halts further weapons development and agrees to verifiable safeguards against proliferation.

Our forecast: North Korea will conduct a second atomic test to escalate tensions rather than abandon its arms and demands for an end to sanctions.

Not for nothing has it been said time and again that China takes the long view.

With assistance from one of China's leading state-run think tanks, Sun Bigan, the diplomatic mastermind behind a just concluded seminar promoting a direct Chinese role in the Middle East peace process (scroll down), is quietly promoting a novel scheme for neutralizing Israel.

Politically, that is.

The plan revives a a forgotten proposal by one of Israel's founding architects, the late World Jewish Congress president Nahum Goldmann, who died in 1982. An outspoken dove, Goldmann advocated armed, Swiss-style neutrality for the Jewish state from its inception. Throughout the Cold War, his idea was ignored or dismissed as hopelessly naive; but Beijing believes the concept has merit and that it dovetails with China's energy diplomacy and drive for a multipolar world.

The Chinese rationale, which Sun shared with selective seminar participants, goes like this: A neutralist Israeli foreign policy would make it possible for China and Russia to join the US and other nations in permanently guaranteeing Israel's security in the context of a comprehensive land-for-peace pact that would include the creation of a Palestinian state in Palestinian-controlled Gaza and the contested West Bank territories.

In accord with Goldmann's vision, Israel, with US help, would maintain its military might and edge for the foreseeable future. Sun reasons that even many of Israel's harshest critics would appreciate the need for continued Israeli military deterrence in the context of a final settlement of the country's conflict with the Palestinians and Syrians.

Iran is another matter. Sun, who is China's special envoy to the Middle East, is said to acknowledge that his country's key Islamist ally is almost certain to remain an implacable foe of the Jewish state regardless of how much land it gives up and how far it goes to change its foreign policy. Same for Iran's Shiite Lebanese proxy, Hezbollah, which Israel failed to defeat in more than a month of fighting this summer. But Sun supposedly believes that the Iranian-Hezbollah threat can be seriously undercut if Israel (a) makes peace with Syria and the Palestinians, and (b) ends its "client state" relationship with the US.

Sun's idea includes the long-term stationing of international peacekeepers, including large contingents of Chinese troops, on Israel's shrunken borders.

Former Palestinian and Israeli ministers have called on China to play a more direct role in the Middle East peace process, which they indicated is dominated by the United States and its bias toward Israel.

At a Beijing seminar on the Middle East, the first of its kind in China, the former ministers said the Chinese government is uniquely positioned to help broker a comprehensive peace agreement.

The seminar was the brainchild of China's special envoy to the Middle East, Sun Bigan. Alone among media outlets, China Confidential has steadily reported Sun's stepped-up involvement in the Middle East, including his advice to China's Islamist ally, Iran, in its nuclear standoff with the West. (Readers are urged to search the archives for Sun Bigan.)

The four-day seminar, which ended Sunday, produced a joint statement calling on China to join the Middle East Quartet seeking peace between the Israelis and Palestinians.

The Quartet, made up of the United States, the United Nations, Russia and the European Union, has failed to broker a lasting peace between the two sides.

The former ministers said one reason for the failure was a lack of balance in the peace process, which they indicated was the fault of the US and its "bias" towards Israel.

Abdel Kader Hamed, a former Palestinian minister of state, said the will of the international community in the mediation was sometimes represented by what he called "the first power in the world".

Yossi Beilin, a former Israeli minister of justice, says China's willingness to talk to anyone, including governments some Western nations consider unsavory, also puts it in a unique position to help broker peace.

"The importance of China, among other things, is quite unique," Beilin said. "Because, it is accessible to all parties in the Middle East. It talks to everybody, unlike some of the other important players in the world. And, on the other hand, nobody can ignore China."

The ministers said China's early recognition of and support for a Palestinian state have earned it credibility in the Middle East.

They said China's status as a permanent member of the UN Security Council and an emerging superpower also means it has the responsibility to pay closer attention to the Middle East conflict.

Beilin said he did not know if China would seek to join the Quartet or support a peace plan the former ministers crafted in 2003 known as the Geneva Initiative.

Sun Bigan would not say when Beijing would seek to join the peace process.

He said even though China is not a member of the Quartet, the government would continue to contribute to the Middle East peace process in its own way.

A growing number of influential Israelis support peace talks with Syria in an effort to undercut Iranian influence in the Middle East. The most significant evidence of the trend is a statement issued Saturday by opposition Likud party chairman Benjamin Netanyahu that he believes Israel can negotiate with Syria if it ends its alliance with Iran, stops transferring weapons to Iran's Lebanese Shiite proxy, Hezbollah, and shuts down Palestinian terrorist offices in Syrian territory.

The key condition, sources say, is cutting the Iranian connection. In contrast with Islamist Iran, Syria is a secular dictatorship. Netanyahu is said to believe that the United States and Israel may have missed an opportunity to divide the two Axis of Evil partners in the immediate aftermath of the 9/11 terror attacks. Syria has a long history of battling and suppressing the Sunni Muslim Brotherhood, which has constituted the core factions of Al Qaeda, the group responsible for 9/11, and Hamas, the Islamist Palestinian terror organization.

Netanyahu stressed that talks with Syria (which has been talking peace while threatening--and apparently also preparing--for war) must be coordinated with the US. He also said Israel should remain in the Golan Heights. Syria has vowed to recover the territory that it lost to Israel nearly 40 years ago, in the Six-Day War of June 1967, even warning, recently, that Syrian guerrillas are mobilizing to attack Israeli targets in the Golan.

Many Israelis regard former prime minister Netanyahu (nicknamed "Bibi") as head of a government in waiting. The current prime minister, Ehud Olmert, is viewed as an incompetent and weak leader who mismanaged a possibly unnecessary summertime war with Hezbollah that Israel surprisingly failed to win. The war is blamed for eroding Israel's deterrent power--hence, Olmert's recent allusion to Israel's never-before-acknowledged nuclear arms capabilities--and bolstering Israel's implacable foe, Iran.

Netanyahu has branded Iranian president Mahmoud Ahmadinejad a "new Hitler." The Iranian leader, who is engaged in a tense standoff with the West over Tehran's suspect nuclear development program, has repeatedly threatened to destroy Israel. He has also sponsored and appeared at two international, neo-Nazi-like events in the Iranian capital--a conference and a cartoon contest--aimed at denying and ridiculing the Nazi murder of six million Jews during World War II, known as the Holocaust.

Intelligence sources say Iran has stepped up support for Holocaust-denying groups and individual activists in Europe and Canada and maybe even the United States. The mullahocracy is bent on isolating and delegitimizing Israel while plotting coordinated attacks against it by its proxy, Hezbollah, and ally, Hamas, including, possibly, a mega-terror strike.

Beijing and Washington have reached an agreement for United States-based, Japanese owned Westinghouse Electric Company to build four civilian nuclear power plants in China.

The $5.3 billion deal was signed Saturday in Beijing by US Energy Secretary Samuel Bodman and senior Chinese planning official Ma Kai.

Bodman says the project will create or sustain about 5,500 jobs in the US and help narrow the huge US trade deficit with China.

The Bush administration is under pressure from US lawmakers to address the trade issue, which is blamed for destroying the country's manufacturing sector.

Under the agreement, Westinghouse will build two reactors at Sanmen in Zhejiang province and two at Yangjiang in Guangdong. The company hopes to have the plants operational by 2013.

Westinghouse, which was bought by Japan's Toshiba Corporation for $4.16 billion in October, is the world's pioneering nuclear power company and a leading supplier of nuclear plant products and technologies to utilities throughout the world.

The Pennsylvania-based company was competing for the lucrative Chinese contract with French nuclear group AREVA and Russia's AtomStroyExport.

The four new plants will be based on Westinghouse AP1000 technology, which the company says is ideally suited for the international nuclear power marketplace. The AP1000 is considered the safest, most advanced--yet proven--nuclear power plant currently available worldwide. It is modular in design and more economical to build and operate than competitive plants.

In a bid to sustain its energy-hungry economy, China is building more than 20 new nuclear power plants with the help of technology from overseas companies. The country is turning to nuclear energy to reduce reliance on oil and cut coal pollution.

In related energy news, China on Saturday called on the world's leading oil importing nations to work together to achieve stable energy supplies and develop alternative energy sources. Addresssing energy ministers from China, the US, India, Japan and South Korea--countries which together consume almost half the world's oil output--Mai Kai said importers can benefit from a joint approach to solving such problems as growing energy demand and rising crude prices. He called for increased cooperation in dealing with key issues, including energy efficiency.

Six-party talks on North Korea's nuclear program officially open Monday in Beijing, with the possibility of an informal session Sunday evening.

Our forecast: the Stalinist/Kimist regime will never disarm because it sees nuclear weapons as the ultimate security guarantee and bargaining chip. At most, the regime might eventually agree to end its nuclear weapons development program and allow international inspections in return for financial aid, security guarantees, and diplomatic recognition from the United States.

North Korea wants nothing less than a turnaround in US policy. That's the bad news. The good news is that the regime's ambitions are probably limited to the Korean peninsula. In any event, the US is absolutely committed to defending and protecting Japan, an important ally and democracy--and the world's second largest economy.

A lifting of US financial sanctions, imposed by Washington over alleged North Korean complicity in money laundering and counterfeiting of US currency, is a precondition for serious discussion. Absent an end to the sanctions, Pyongyang can be expected to use every negotiating trick and stalling tactic in its diplomatic playbook.

The nuclear talks bring together the US, China, Japan, Russia and North and South Korea, after a 13-month hiatus during which Pyongyang provocatively tested missiles and an atom bomb.

In addition to nuclear weapons and missiles, North Korea maintains an offensive program for biological weapons. Analysts fear the regime has developed, produced and weaponized the banned germs--and has probably also shared them with its nuclearizing Islamist ally, Iran.

Without the benefit of a naval blockade and internationally backed interdictions and inspections at sea of suspect ships, it is extremely difficult to prevent Pyongyang from peddling nuclear bombs, bomb-making and missile technologies. Blocking bio-bomb proliferation is virtually impossible, according to most experts.

China and the United States will try to remedy their trade imbalances.

So says US Treasury Secretary Henry Paulson.

"We will each take measures to address global imbalances, notably through greater national savings in the United States and through increased domestic consumption and exchange rate flexibility in China, and maintaining open investment in both countries," Paulson said Friday after another round of high-level economic talks between the two nations.

The so-called Strategic Economic Dialogue is not likely to produce meaningful results.

The US trade deficit with China, which not exceeds $200 billion, is a politically potent issue. Many US lawmakers blame China's manipulation of its managed currency, the yuan, for the imbalance. They say an artificially weak yuan gives Chinese exporters an unfair trade advantage.

China argues it needs more time before letting the yuan float freely, because it is still a developing country. Translation: Exports drive China's economic expansion, which is the key to stability. The ruling Communist Party's claim to legitimacy is based on its ability to continue delivering material progress to the rising middle class.

The Japanese government promised families of Japanese abducted by North Korea Thursday that the fate of their relatives will not take a back seat to improving ties with the secretive Stalinist state.

Prime Minister Shinzo Abe told relatives of those abducted by North Korean agents during the Cold War era that his government will not consider the issue solved until all of those taken from Japan return home.

Abe, speaking at the first government-sponsored conference on the abductions, said there is no more important duty for a prime minister than protecting the nation's citizens. He said the abductions are an unsolved crime of a national importance.

Japan officially puts the figure of those abducted by North Korea at 17, saying they were snatched during the 1970s and '80s. Five returned home in 2002, after North Korean leader Kim Jong-il admitted his country had kidnapped 13 Japanese.

Pyongyang maintains that the other eight are dead; but Japan says there has been no proof of that.

Earlier in the week, a Japanese government official told the conference that it is likely an additional 30 Japanese were kidnapped by North Korea.

Also at the conference were relatives of those from other countries, including South Korea and Thailand, believed to have been forcibly taken to North Korea.

An activist group in Seoul says that nearly 4,000 South Koreans, mostly men, have been taken north since the Korean War in the early 1950s. The organization claims some 500 are still being held against their will.

After Thursday's conference, Foreign Minister Taro Aso met with representatives of the Japanese families.

Aso said Japan will raise the issue at the six-party talks on North Korea's nuclear weapons development, scheduled to reconvene in Beijing on Monday.

Pyongyang has harshly criticized Tokyo for raising the abduction issue in those talks, which also involve the United States, China, South Korea and Russia.

Earlier Thursday, Aso said that even if the parties at the talks agree to provide economic assistance to North Korea, Japan will not donate any aid until the abduction issue is resolved.

The Bush administration is publicly ignoring China's challenge to United States space dominance--a critically important defense advantage--including recent attempts to blind or disable US satellites with ground-based lasers.

Instead of condemning the Chinese attacks, the administration is warning against threats by unidentified terrorist organizations (UTOs?) and other nations against US commercial and military satellites.

"We reserve the right to defend ourselves against hostile attacks and interference with our space assets," the senior US arms control official, Undersecretary of State Robert G. Joseph, said Wednesday. "A number of countries are exploring and acquiring capabilities to counter, attack, and defeat US space systems."

Joseph told a forum organized by the George C. Marshall Institute, a public policy group, that terrorists "understand our vulnerabilities and have targeted our economy in the past, as they did on 9/11." He added that terrorists and enemy states might view the US space program as "a highly lucrative target."

Sophisticated technologies, he said, could enhance enemy abilities to interfere with US space systems and services.

Beijing's economic forays into Africa are driven by China's need for natural resources and establishing energy security.

in 2002, the last year China officially reported assistance, it provided $1.8 billion in economic support to all of Africa. For 2005, the China Export-Import Bank reported $800 million in aid money to Africa.

And that's just part of the story, just one piece of a much larger puzzle. By November of this year, according to the World Bank, Chinese loans to Africa's infrastructure sector alone already totaled more than $12.5 billion.

It's a no-strings situation, except for one--Beijing's sacrosanct One-China policy. China wants to make sure that as few countries as possible recognize Taiwan.

Nepal's government and Maoist rebels have started new talks to finalize a temporary constitution--a crucial step in the ongoing peace process between the two sides.

Prime Minister Girija Prasad Koirala and his coalition partners met Wednesday with Maoist rebel leader Prachanda and his deputy Baburam Bhattarai at the prime minister's residence in Kathmandu.

Details of the talks were not released, but reports from Kathmandu say the aim was to patch up their differences on Nepal's political future.

The peace deal calls for an interim constitution until next year's election for a special assembly that would create a new constitution and decide Nepal's political system.

The assembly also would determine the future of King Gyanendra.

The king was forced by violent street protests to relinquish his absolute powers and reinstate multi-party democracy in April.

The world is topsy-turvy; the times, terribly twisted.

Consider the evidence:

Five years after 9/11....

Iran turns out to be the real Iraq--an implacable Islamist foe developing weapons of mass destruction.

Iraq has been transformed into the real Vietnam--a falling domino capable of triggering a global chain reaction of terror and violence.

China is emerging as the next United States--a rising hegemon, for which a century is being named.

Russia is, well, Russia--authoritarian and aloof, resurgent and ruthless.

There is more sympathy in elite intellectual and political circles for bashing Israel than for bombing Iran ... more support for turbaned tyrants than for their victims....

... And the year isn't even over.

At least eight foreign banks have applied for retail banking licenses in China--a country estimated to have up to $4 trillion in domestic savings.

Chinese authorities announced the news as a World Trade Organization deadline came due for China to open up its banking market to outsiders.

The foreign institutions applying for retail banking licenses in local currency in China come from the United States, Japan, Britain, the Netherlands, Singapore and Hong Kong.

Several dozen foreign banks operate in China. They are mostly limited to dealing in foreign currency and are not expected to grab a big market share in the booming retail banking sector. Instead, they are likely to concentrate on high-end, mainly corporate, business.

Most foreign banks are buying stakes in joint ventures with Chinese partners instead of trying to enter the local market alone.

Chinese banks are modernizing their services so as to better compete with the foreigners.

United States officials released a barrage of statements Monday prodding China to do more to reform its economy.

US Trade Representative Susan Schwab wrote Monday in the Financial Times newspaper that China's slow economic reforms put the "Chinese and global economies at risk."

Schwab complained that Chinese government intervention in the economy increased in the last year and that Beijing has done too little to protect intellectual property.

Schwab is expected to join Treasury Secretary Henry Paulson and other officials in talks in Beijing this week. The talks will center on trade imbalances, intellectual property rights and currency reforms.

In its annual report on Monday, US trade representatives warned that Washington would not hesitate to sue China at the World Trade Organization if bilateral talks fail.

The report also said that US companies were suffering "unacceptably high" losses.

Paulson also said on Monday that relations between Beijing and Washington were at a "pivotal moment," and that he hopes the trip to China will lay the groundwork for important progress down the line.

He said the upcoming meetings will be a good opportunity to take a more comprehensive look at US-China economic relations.

Chinese officials promised today to respond "positively" to US concerns, adding, however, that currency policies are a matter of national sovereignty.

China denies that it manipulates its managed currency, the yuan, in order to unfairly support the country's booming, export-driven economy.

China will reluctantly support the imposition of largely symbolic United Nations sanctions on Iran to punish it for failing to meet an August 31 UN deadline to freeze uranium enrichment.

China, which wants to be seen as a responsible stakeholder in the international community, has for roughly two decades irresponsibly provided its non-Arab Islamist ally with nuclear technology, guided missiles and missile subsystems, guidance kits and related dual-use items, and equipment and technology for producing chemical weapons.

The United States, which desperately wants Chinese help in dealing with nuclear armed North Korea, is turning a blind eye to China's disturbing role as one of Iran's top two arms suppliers (with Russia) and principal diplomatic protector.

China's involvement in Iran's nuclear program dates to secret scientific and technical cooperation agreements in the mid-1980s. Serious nuclear assistance began in January 1990, when Iranian Defense Minister Ali Akbar Torkan and Chinese General Jiang Xua signed a 10-year nuclear cooperation treaty in Tehran. Jiang was deputy director of China's Commission on Science, Technology and Industry for National Defense, or COSTIND, which in those days was virtually in complete control of the country's arms development and export programs.

In the "if-it-isn't-true-it-should-be" category, comes the following item from Japan:

A Tokyo publishing house is rumored to be working on an alternative history of America's War on Terror. The fictional work can be seen as a hawkish, conservative critique of the war.

In the novel, sources say, the United States responds to 9/11 by declaring war on Afghanistan and attacking it within days of the terrorist outrage. US forces use tactical nuclear weapons to wipe out Al Qaeda and the Taliban--and their respective leaders, Osama Binladen and Mullah Omar.

A foreign correspondent familiar with the project provides these additonal plot highlights:

In an unprecedented display of patriotic zeal, millions of Americans march in the streets to demonstrate support for the retaliatory action and demand more bombing. Thousands of "Homeland Defense" patrols are spontaneously organized.

Citing evidence of ties between Iran and Al Qaeda--and an ongoing Iranian program to develop nuclear warheads and other weapons of mass destruction--President Bush also gets Congressional backing for an all-out assault on Tehran. Massive military strikes swiftly defeat the mullahocracy; following its unconditional surrender to US forces, the enemy, like Afghanistan, is transformed into a pro-Western democracy. Islamist organizations are permanently banned.

Bush virtually ends immigration from Muslim lands, revoking the visas of nearly all aliens from "enemy nations" and rounding up and deporting tens of thousands of illegal visa-overstayers. In a televised address, the President notes that Binladen family members are among the visitors who have been detained for questioning by the FBI.

Suspect Islamic institutions, including Saudi-financed Wahhabi mosques, are investigated and shut down.

Saudi Arabia is warned that it must crack down hard on the Wahhabis and also lower oil prices to ease the burden of the US war effort and compensate the country for the attacks. The Saudis give in to the demands.

Across the Middle East and Muslim world, secular regimes are bribed and pressured into crushing their domestic Islamist movements. The Egyptian-based Muslim brotherhood, which forms Al Qaeda's core, is essentially eliminated within 90 days. Egypt is rewarded with an additional $1 billion in annual assistance.

An Arab/Palestinian-Israeli agreement is rammed down the throats of the Palestine Liberation Organization and Syria, which is promised annual aid of over $2 billion to abandon its dream of recovering the Golan Heights and make peace with the Jewish state. The PLO, with tacit Israeli support, fights and wins a devastating civil war with Hamas.

The US avoids attacking Iraq, apart from striking Ansar al-Islam villages in Kurdish northern Iraq on the Iranian border. Bush explains that there is no need to go after a contained secular enemy, adding it can always be bombed into the Stone Age if it truly threatens US national security in any way. Liberal media, led by The New York Times, condemn his rhetoric; but the polls show overwhelming popular support, at home and abroad, for the President's statement and overall handling of the War on Radical Islam.

Outside the Middle East, US special forces destroy all known Islamist terrorist bases and training camps.

The US works closely with European military and intelligence agencies. The Europeans move on several fronts to put an end to the Islamist menace. In Italy, the government even enlists the services of the Sicilian Mafia for assassinations and other "black" assignments, recalling US cooperation with the American Mafia during the Second World War.

Washington's relations with China and Russia improve dramatically after the White House gives the two countries a green light to stamp out their own Islamist insurgencies and suspect groups without regard to US State Department human rights concerns. Again, The New York Times protests--but the editorials fail to resonate.

North Korea joins Libya in abandoning WMD programs.

Venezuela offers to leave OPEC and proposes a Western Hemisphere Energy Alliance with Canada and the US.

In the name of energy independence, Bush vows to "end the oil age" before he leaves office. His poll ratings skyrocket to unprecedented heights.

The US and its allies win the war within three years of the terrorist attacks.

The novel is supposedly titled "9/12."

Alternative history is a popular publishing genre in Japan.

A summit conference of East Asian leaders collapsed completely Saturday, before the meeting even began, as a dangerous tropical storm headed toward the summit site, the Philippine city of Cebu.

But a meeting between Chinese and Japanese foreign ministers saved the event from complete failure.

Cebu was drenched by rain as Typhoon Utor bore down on the island-province south of Manilla. The storm squelched months of excitement and preparation for the biggest diplomatic event planned for the Philippines in a long time.

The last-minute postponement of the ASEAN and East Asia Summits, now rescheduled for some time in January, also followed warnings by the United States, Britain and Australia of possible terrorist attacks during the meetings.

Philippine officials insisted that it was the weather and nothing else that caused the postponement. Foreign Secretary Alberto Romulo Saturday said the delegates appreciated the concern "the Philippine government has shown for the safety and welfare of all the participants."

"They also fully understood that this decision will allow the Philippine government to give its undivided attention to any effects this major (weather) disturbance may have," the foreign minister said.

Utor is due to pass over Cebu on Sunday, the day on which heads of state and government were scheduled to be arriving. Although the storm is much less powerful than Typhoon Durian, which caused more than a thousand deaths in the Philippines last week, landing government leaders in the middle of a major storm was apparently considered too great a risk.

But Chinese Foreign Minister Li Shaoxing and Japanese Foreign Minister Taro Aso had already arrived in Cebu for a ministerial meeting scheduled for Saturday. They proceeded to hold an hour-long meeting Saturday to discuss bilateral differences brought about by territorial and historical disputes.

In a sign of mending relations, Aso invited Chinese President Hu Jintao and Prime Minister Wen Jiabao to visit Japan early next year. Beijing has not given an official response to the invitation, which is in line with efforts by Japan's new Prime Minister, Shinzo Abe, to improve his country's relations with rising China.

The Chinese and Japanese foreign ministers also talked Saturday about another item that was due to be a major focus of the summit--the stalled, six-party North Korea nuclear talks.

Li Zhaoxing and Taro Aso said both their countries would work for progress in getting Pyongyang to abandon its nuclear weapons. Efforts are being made to resume the talks later month. There are widespread media reports that the negotiations will begin on December 16, but the host, Beijing, has not yet officially announced a date.

The annual ASEAN and East Asia Summits bring together the leaders of 10 Southeast Asian nations, and their counterparts from China, Japan and South Korea. Leaders of Australia, New Zealand, India and East Timor were also expected to attend.

Early Warning: Israel is preparing for war against its implacable, Iranian-backed, Islamist foes, Hamas and Hezbollah, and their secular ally, Syria.

Preparations are also underway for possible preemptive strikes against Iran itself in order to end its nuclear weapons program.

Israeli military commanders and intelligence analysts are increasingly convinced that Iran is masterminding a plan for a multifront assault on the Jewish state, which could commence early next year.

A sense of deadly encirclement grows stronger by the day in Israel, following its failure to defeat Hezbollah in the summer war and deepening ties between Hamas, which refuses to recognize Israel's right to exist, and Shiite non-Arab Iran. Formidable military buildups by the Sunni Palestinian movement, which now boasts a 10,000-man army in Gaza, and Shiite Lebanese Hezbollah, which is steadily receiving Iranian arms through Syria, are considered clear indications of a coming conflict. Both groups are expected to hide behind civilian human shields and to use civilian homes and apartment buildings, and mosques, schools, and hospitals as operational bases and to increase the chances of civilian casualties for purposes of stimulating support and sympathy abroad.

Amid attempts to seize control of war-torn Lebanon, Iran's proxy is likely to trigger hostilities by firing antiaircraft missiles--under United Nations cover--at overflying Israeli military planes. Hostilities could escalate quickly and sharply once the shooting starts.

There is a growing consensus in Israel that the international community is ignoring the seriousness of the Iranian threat--to Israel and the West. The report by the Iraq Study Group, co-chaired by a notoriously anti-Israel former United States Secretary of State, James Baker, reinforces the impression. The bipartisan, Congressionally funded panel recommended direct talks with Iran and Syria to defuse the Arab/Palestinian-Israeli conflict and stabilize the rapidly deteriorating situation in Iraq. This is codespeak, say Israelis, for appeasing Iran and Syria by ramming a comprehensive land-for-peace pact down Israel's throat. Israelis fear appeasement of Iran will lead not to peace, but, at best, to the piece-by-piece dismantling of their country, and, at worst, to falling victim to a surprise attack resulting in a catastrophic defeat.

We agree with the Israeli assessment. In fact, Western denial of the Iranian threat dates to the months preceding the overthrow of the pro-US Shah, when the Carter administration dumped America's ally and old friend in a craven attempt to curry favor with his emboldened enemy, an Islamist-Left alliance led by Ayatollah Ruhollah Khomeini.

Weeks before the January 1979 revolution, this reporter repeatedly predicted--on the front page of an influential American weekly publication--that the Ayatollah would establish a terribly repressive and fanatically anti-American, anti-Western, anti-Israel regime resembling a kind of clerical fascism.

Which, unfortunately, is exactly what happened.

But the nuclear issue--Iran's development of nuclear weapons under the guise of civilian energy research--raises the Islamist threat to a new and terrifying level. Whereas the mullahocracy has from its inception used the Palestinian issue as a rallying flag and tool for spreading Iranian influence in the region, it now regards the liberation of Palestine--meaning, the annihilation of Israel--as a strategic objective. This is why the regime's embrace of neo-Nazi Holocaust denial is so significant: Iran is preparing the ground, ideologically and philosophically, for Israel's extinction.

Not to say that Iran necessarily intends to fire nuclear-tipped missiles at Tel Aviv. Tehran's plot to wipe Israel off the map, in the words of Iranian monster-in-chief Mahmoud Ahmadinejad, could involve coordinated Hamas and Hezbollah assaults, augmented by Syrian conventional and chemical attacks and conventional long-range Iranian missile strikes. Use of nuclear weapons could be deemed too risky by Iran, inviting sure-fire retaliatory strikes from the Jewish state, which is assumed to have 200 or more nuclear weapons and the means to deliver them accurately to distant targets.

While direct Iranian nuclear attacks against Israel cannot be ruled out, it is quite possible that Tehran's present nuclear program is aimed (a) at executing an indirect nuclear attack against the Jewish state, perhaps by using Palestinian terrorists to detonate a small nuclear device or so-called radioactive dirty bomb in the heart of the country's main population center, and/or (b) at intimidating and neutralizing Europe through the threat of nuclear war. The French understand this threat; hence, the unusually blunt warnings by French leaders that they will not hesitate to use their nuclear weapons if France is hit by a mega-terror strike.

The Iranians may even be instigating a new round of fighting in the Middle East in order to buy time for further nuclear development, as their standoff with the West is approaching the sanctions stage (though China and Russia will almost certainly prevent the imposition of truly tough sanctions involving possible use of force under Chapter 7 of the UN Charter).

Iran wants nuclear weapons for another reason: to deter the US from attacking and to drive the "Great Satan" out of the region for once and all. Iranian foreign policy is imperialist to the core in that it aims to alter the international status quo and permanently change the power relations among nations.

Iran could also be preparing for possible covert nuclear strikes against the US, as we have noted in the past, using cleverly concealed, nuclear-armed missiles atop seemingly civilian, foreign-flagged cargo ships. The US has no practical defense against an attack of this kind, which could be simultaneously launched against its coastal cities.

South Korean authorities yesterday charged five residents of Seoul--including a Korean-American businessman--with spying for North Korea. Prosecutors told reporters the five took orders from Pyongyang, and funneled an abundant amount of information to North Korean spies, including sensitive national intelligence.

The Friday indictments followed an intensive two-month investigation of the five defendants, who were arrested in October.

Senior South Korean prosecutor Ahn Chang-ho said all five men passed information to North Korea in violation the South's National Security Law, which forbids a wide range of activities viewed as colluding with the North.

Ahn said the five men spied in an organized way after receiving instructions from North Korea. He described the affair as South Korea's biggest spy case since a historic 2000 North-South summit led to a warming of relations between the two countries.

The two are still technically at war since the 1950s Korean War ended in an armistice instead of a formal peace. But in the six years since that the inter-Korean summit, contacts between North and South have expanded rapidly. As a result, the lines defining "pro-North Korean" activity here have blurred. In fact, the administration of South Korean President Roh Moo-hyun has called for the repeal of the National Security Law, as part of a government policy of increased cooperation with Pyongyang.

The five defendants, all of whom live in Seoul, belong to a group called "Ilsimhoi," or "One Mind." The leader of the group is 44-year-old Jang Min-ho, the Korean-American businessman, who first visited North Korea in 1989. He allegedly received political indoctrination during that first visit, and subsequently returned to Pyongyang several times. He is accused of eventually receiving more than $16,000 from North Korea and joining the North's ruling Korean Worker's Party.

According to prosecutors, Jang and three of the other defendants met with North Korean agents in Beijing on several occasions, and passed on information relating to the personal backgrounds of South Korean politicians and the deployment of US forces in the South. About 29,000 US soldiers are stationed in South Korea to deter the North from repeating its 1950 invasion.

All of the defendants except Jang are previous or current members of South Korea's far-left Democratic Labor Party, widely perceived as the most North Korea-friendly of the South's major parties. DLP officials dismiss the spying allegations, saying the case deals with information easily available over the Internet.

South Korean intelligence officials are expanding their investigation to see if any other South Koreans are connected to the alleged spying activities.

Fiji's ousted prime minister called Friday for peaceful demonstrations against the military regime that toppled his elected government earlier this week.

During an interview broadcast on Fiji Radio, Laisenia Qarase also urged bureaucrats not to cooperate with coup leaders. He spoke from his home village in Fiji's remote east.

Qarase was ousted Tuesday after a year-long power struggle with Fiji's military chief, Commodore Frank Bainimarama. It was the island nation's fourth coup in 20 years.

On Thursday, Fiji's new caretaker Prime Minister, Jona Senilagakali, warned that elections might not take place for another two years. He said the military will decide when new elections will be held.

The military picked the army physician Wednesday to head the government. He has no prior political experience.

Meanwhile, the Commonwealth, a grouping of former British colonies, is expected to suspend Fiji's membership when officials meet in London today.

Bainimarama had accused Qarase of corruption and complained that he was too soft on conspirators in Fiji's last coup in 2000. The military chief was almost killed in a failed assassination attempt linked to that coup.

The country's powerful council of tribal chiefs is refusing to recognize the military regime.

New Zealand and Australia have already imposed sanctions on Fiji, and the United States has suspended aid. Australian Prime Minister John Howard has termed the overthrow "brutal" and "unlawful."

Friday Persian Gulf gossip....

Qatar, an oil-rich, Persian Gulf emirate that tries to ride pro- and anti-American horses, while striving for an appearance of moderation and stability, is abuzz with rumors of a bureaucratic fight-to-the-death between the country's notoriously inefficient Foreign Information Agency and Foreign Ministry.

Sources say the issue reached embarrassing, crisis proportions on the eve of the recent international democracy conference in Doha. Over 100 invited officials were not able to attend because of overbooking of flights.

The information agency blamed the foreign ministry, which blamed the information agency, which blamed Qatar Airways, which blamed....

Many foreign journalists were also unable to attend the conference because tickets were improperly issued or never issued.

The information agency was set up to promote the country's overseas image. Sources say it is the target of a government investigation over alleged mismanagement of state funds.

The agency is headed by Qatari officials, aided by a Tunisian technocrat known only to foreign journalists as "Mr. Habib."

Tiny Qatar, which lives in the shadow of Saudi Arabia and Dubai--the largest ministate that makes up the United Arab Emirates--is ruled by Sheikh Hamad bin Khalifa Al Thani.

The 56-year-old modernizing monarch, who came to power in 1995, in a bloodless coup that overthrew his father, Emir Khalifa bin Hamad Al Thani, is best known in the West for funding the anti-American Al Jazeera television news network. The Sheikh reportedly provides the popular but money-losing satellite network with an annual subsidy of well over $100 million.

Qatar is currently hosting the 15th Asian Games, which have been hit by tragedy with the death of a South Korean event rider. Kim Hyung Chil, 47, died in a fatal fall.

A father -of-two, KIm was the oldest member of the South Korean equestrian team. He had represented South Korea at four Asian Games and was a member of the silver-medal winning team in Busan 2002.

The games, involving 13,000 athletes from 13 countries, have also been hit by an odd controversy: Iranian president Mahmoud Ahmadinejad, known for his fanatic Islamist political and religious views, was criticized by his country's hardline clerics after attending the opening ceremonies, which included female dancers and vocalists from Egyplt and India. Many performed without veils.

Women are forbidden to sing and dance before a male audience under Iran's Islamic legal code. Iranian officials are expected to excuse themselves from offensive performances when abroad; but TV and press images showed Ahmadinejad sitting with President Bashar Assad of Syria and Ismail Haniya, the Palestinian prime minister, during Friday's ceremony in Doha.

The United States said Wednesday it is ready to match good-faith North Korean actions in the six-party negotiations aimed at ending that country's nuclear program.

The New York Times earlier reported that US and North Korean diplomats discussed specifics of a disarmament accord in talks in China last week.

US officials, while not confirming details of the Times account, said Pyongyang has been given an outline of what it can expect in terms of aid and other incentives if it agrees to scrap its nuclear weapons program.

Senior US and North Korean diplomats held two face-to-face meetings under Chinese auspices in Beijing last week in the latest effort to restart the six-party talks on the nuclear issue, which have been idle for more than a year.

The Times Tuesday quoted US officials close to the talks as saying US envoy Christopher Hill described a detailed package of disarmament incentives for North Korea including food aid from the US, Japan and South Korea.

The newspaper said an agreement would hinge on North Korea agreeing to begin dismantling some equipment it has been using to expand its nuclear arsenal, including a plutonium reprocessing facility refining spent reactor fuel into weapons-grade material.

At a news briefing, State Department Spokesman Sean McCormack insisted the meetings between Hill, the Assistant Secretary of State for East Asian Affairs, and North Korean Vice Foreign Minister Kim Kye-Gwan were not negotiations. But he said they were aimed at providing the sides with a rational expectation of what an agreement might contain:

"The operating principle here again is that with a de-nuclearized Korean peninsula, all things are possible," McCormack said. "Without a de-nuclearized Korean peninsula, nothing is possible. So that same operating principle of good faith actions in return for good-faith actions was really the underlying message for what Chris [Christopher Hill] was talking about."

The six-party talks reached an agreement in principle in September of last year under which Pyongyang undertook to give up its nuclear program in return for aid and security guarantees.

But North Korea began boycotting the talks in November, 2005, after the US imposed penalties on a Chinese bank it said had been used as a hub for illicit North Korean activity including counterfeiting US currency.

The Bush administration has said it will not drop the penalties until North Korea halts the illegal dealings, but is ready to deal with the issue in the context of the six-party process.

Pyongyang announced it was prepared to return to the talks at the end of October, only a few weeks after conducting a nuclear test that led to United Nations sanctions against it.

US officials have expressed hope the talks might resume before the end of the year, but in recent days have said that no harm would be done if the process slipped to January.

The six-party talks, which include Russia, Japan and South Korea as well as the US, North Korea and host China, began in 2003 after the breakdown of a bilateral US-North Korean nuclear freeze accord reached in 1994.

Iraqi insurgents--including Iranian-supported Shiite death squads and Sunni Al Qaeda killers--are no doubt celebrating the release of the Iraq Study Group report.

Reason: the document--unprecedented in the history of American warfare--is worse than flawed. The report is a potential stab in the back for every American in Iraq--a prescription for military defeat, which is even worse than the strategic defeat the United States suffered in Vietnam.

The Congressionally-funded, bipartisan panel recommendations, as military experts well know, could lead to total catastrophe, including the massacre and kidnapping of US personnel and the wholesale slaughter of hundreds of thousands of innocent Iraqis. The idea of withdrawing US combat troops and embedding sitting-duck "advisors" in Iraqi units is even dumber than the notion of installing democracy in Iraq with the aim of transforming the Middle East and perhaps, even, the entire Muslim world.

Every honest, intelligent, and informed individual knows that there are only two honorable and logical solutions to the Iraq nightmare: win the war by any and all necessary means, or pull out as soon as possible--while providing a lifeline and escape route for everyone in that miserable country who has helped or supported the US.

China's Middle East experts--including special envoy Sun Bigan--are said to be increasingly concerned that Beijing's non-Arab, nuclear arming, Islamist ally, Iran, could be going too far in its efforts to isolate and delegitimize Israel. Sources say the Chinese fear that if Israel feels genuinely cornered, it could lash out against Iran with devastating preemptive military strikes that could in turn trigger a regional conflagration.

Iranian president Mahmoud Ahmadinejad has repeatedly vowed to wipe Israel off the map, while denying the reality of the Holocaust. The Iranian regime will play host next week to a neo-Nazi Holocaust denying conference in Tehran.

Iran is also rearming its Islamist, Lebanese Shiite proxy army, Hezbollah, which Israel failed to defeat in more than a month of fighting this summer, and stepping up support for its Islamist, Palestinian Sunni ally, Hamas, which refuses to recognize Israel's right to exist and speculates daily about its imminent disappearance.

Israeli Vice Premier Shimon Peres on Wednesday dismissed the possibility of peace talks with Hamas, saying the group is not ready to coexist with Israel even if the Jewish state were to withdraw to boundaries that existed before the Six-Day War of June 1967 and allow a Palestinian state to be set up in Gaza and the contested West Bank areas.

Five years after the Al Qaeda attacks of 9/11, the United States is on the verge of losing the war against Islamist terror and US foreign policy is generally in a shambles.

Iraq is an utter disaster. The long-awaited recommendations of the bipartisan Iraq Study Group add up to an astonishing admission of defeat. The only way out of the Iraq debacle, according to the Congressionally-funded report, is to basically beg two members of the Bush-branded Axis of Evil--Iran and Syria--for help in ending the bloody chaos that now threatens to engulf the whole Middle East.

That nobody in power seems to question if talking to secular Syria must also mean engaging nuclearizing, Islamist Iran is itself a sign of the times: the US foreign policy establishment is intellectually exhausted and apparently out of ideas, apart from the hoary favorite of former Secretary of State James ("F**k the Jews") Baker, the Iraq Study Group co-chairman, which is to sacrifice Israel in a cynical attempt to appease Arab regimes and Tehran's monstrous mullahocracy.

Across Asia, another Axis of Evil member, Stalinist/Kimist North Korea, is proving that it is just as capable as its nuclear tag-team member, Iran, when it comes to buying time in a standoff with the US and the so-called international community. Pyongyang is using every negotiating trick and stalling maneuver to develop and probably peddle its weapons of mass destruction. The US seems powerless, reduced to appealing for assistance from North Korea's ally and protector, China--whose rise to superpower status, Washington assures us, is in our national interest.

Happy holidays.

Fiji was generally peaceful Wednesday, but the area around the capital, Suva, has been cordoned off following the country's fourth coup in 20 years.

Meanwhile, Fiji's armed forces are tightening their grip on power a day after ousting the elected government. The army has declared a state of emergency, appointed a caretaker prime minister and dismissed the country's police chief after he refused to take orders from the armed forces.

The coup leader, Commodore Frank Bainimarama, who heads Fiji's military, declared a state of emergency Wednesday, allowing troops to impose curfews, call up reservists and cordon off parts of the capital.

Vowing to ruthlessly put down any opposition, Bainimarama dismissed the police chief after he refused to take orders from the military.

But Bainamarama also said the military leaders wanted a peaceful transition to an interim administration and democratic elections.

The military chief swore in a caretaker prime minister Wednesday to head the interim government, Dr. Jona Senilagakali. He is a respected military physician--with no political experience.

Fijians are waiting nervously to see what develops as the constitutional crisis continues.

Important institutions of Fijian society, which backed the coups of 1987 and 2000, have come out openly against the current coup. The Great Council of Chiefs, for example, which is the umbrella organization of the indigenous community, has condemned the takeover; and the Methodist church, to which 80 percent or more of Fijians belong, has also condemned the military move.

The military has flown ousted Prime Minister Laisenia Qarase out of Suva to his village on a remote island, rounded up his supporters and dissolved parliament. But Qarase remains defiant, saying he is still the country's legitimate leader.

The bloodless coup continues to attract international condemnation. The United States has suspended aid to Fiji and said the Qarase government should be reinstated.

Australia and New Zealand have also suspended military ties with Fiji and imposed travel sanctions.

The military says it deposed Qarase for alleged corruption and his plans to offer amnesty to those involved in a nationalist uprising six years ago.

Bainimarama, who was credited with rescuing the nation from chaos when he brokered a peaceful resolution to the 2000 coup, was almost assassinated by mutinous soldiers after that event. He has since been angry that some of the coup plotters and mutineers were let out of prison early and that two were made cabinet ministers by Qarase.

Bainimarama has also said that he acted to protect the ethnic Indian community, which comprises more than 40 percent of the island's population and dominates its economy. Many Indo-Fijians are returning home because of him.

Indo-Fijians are descendants of 19th century cane farmers recruited by the British colonial authorities

The coup has dealt a devastating blow to Fiji's tourism industry, which accounts for a quarter of the economy, earning $700 million a year in foreign exchange and employing more than 45,000. Bookings are down by a third--the same as after the 2000 coup--which the tourism industry has only just recovered from.

Some 400,000 tourists normally visit Fiji each year. Most never enter the capital, as the self-contained resort hotels are located away from the city.

As the Congressionally-funded Iraq Study Group prepares to present its recommendations to US President George W. Bush, the Middle East braces for more conflict and possible catastrophe.

Across the region, there is widespread concern that Iraq is beyond repair. The consensus is that the Shiite-Sunni civil war there is likely to escalate and expand into a regional conflict, fueled mainly by nuclearizing Iranian clerics bent on taking their Shiite revival to new heights.

While Saudis are preparing for regional religious war--and stepped-up Al Qaeda terrorism--Israel is readying itself for its greatest challenge since the Six-Day War nearly 40 years ago, and maybe since the Jewish state achieved independence, against all odds, in 1948. There is a growing realization among Israeli leaders that they can no longer count on the United States and Europe to stop Islamist Iran from acquiring nuclear weapons. Thus, the chances of a preemptive Israeli strike grow daily.

Despite its failure to defeat Iranian proxy Hezbollah in the summer war in Lebanon, Israel (for now) has the strongest military in the Middle East ... and some 200 nuclear weapons.

Anything can happen--at any time.

Anything....

The United States has condemned the military coup in Fiji and suspended aid to the Pacific island nation pending a formal determination of what has occurred.

At a news briefing on Tuesday, State Department Spokesman Sean McCormack condemned the coup announced by Fiji's military chief, Frank Bainimarama.

McCormack also noted that country's civilian leaders have refused to step aside and said the US does not view the stated military takeover as irreversible:

"At the moment events are still unsettled. The prime minister has refused to resign," McCormack said. "The president, the vice president, the head of the council of great chiefs, have rejected this move by the general. And we do not view this as something that is irreversible, so we call for those forces who are attempting to seize control of the Fijian government to stand down and to return to constitutional order."

McCormack said the US has suspended its $2.5 million annual military aid program to Fiji, which mainly involves training for Fijian officers and credits for purchases of military hardware.

He said the suspension will remain in place until US officials can make a formal determination about what has occurred in Fiji.

Under US law, military aid cannot be provided to a country where a duly-elected government is deposed by a military coup or decree.

Fiji's military commander, Frank Bainimarama, sees himself as the protector of multiculturalism in the Pacific island nation. He asserts that the deposed government of Prime Minister Laisenia Qarase was discriminating against the ethnic Indian minority, which makes up about 40 percent of the population.

"We consider that Fiji has reached a crossroads and that the government and all those empowered to make decisions in our constitutional democracy are unable to make decisions to save our people from destruction," Bainimarama said Tuesday.

The ethnic Indian minority, known as Indo-Fijians, are descendants of sugar cane cutters brought in by the British in the 19th century. Perhaps 90 percent of the community supports Bainimarama.

The army chief has been in dispute with Qarase for months over his plans to grant amnesty to those behind a nationalist uprising of six years ago. Bainimarama believes the earlier coup plotters were treated far too leniently.

There were further disagreements over controversial new laws that would have given more land and fishing rights to indigenous Fijians at the expense of the Indo-Fijians and also, some say, at the expense of the lucrative tourism industry.

Meanwhile, the military takeover of the democratically-elected government--Fiji's fourth coup in 20 years--has prompted widespread international condemnation.

British Commonwealth Secretary-General Don McKinnon told reporters Tuesday that Fiji will probably be suspended from the organization of former British colonies in response to the coup. Britain's Foreign Office issued a statement calling the coup a setback to democracy in the Pacific nation and announced an immediate suspension of bilateral military assistance to Fiji. The Foreign Office said further measures are being discussed with Britain's EU partners.

New Zealand Prime Minister Helen Clark also condemned the coup and cut defense ties with the Fijian military.

Australian Foreign Minister Alexander Downer had said earlier that Canberra would impose a similar sanction on Fiji if the coup went ahead.

Australian Prime Minister John Howard criticized the coup, but turned down a request from ousted Prime Minister Laisenia Qarase for Australian troops to intervene. Howard said he does not think it is in Australia's interest to become involved.

Nineteen Chinese AIDS patients have been awarded more than $2 million in compensation in a landmark lawsuit hailed by rights campaigners.

The 19 patients were infected by contaminated blood transfusions. Their award of 20 million yuan ($2.5 million) in compensation represents the biggest legal case of its kind in China.

Fifteen of the patients were infected while undergoing operations at a hospital in northern China's Heilongjiang province in 2004. Three of them subsequently passed the HIV virus on to their spouses. Another patient later unwittingly infected her five-year-old child, bringing the total number of victims to 19.

The patients are all said to be living in poverty. One has died.

The infected blood came from illegal blood sellers who commonly operate close to hospitals using makeshift blood donation equipment.

Li Dan, who runs the China Orchid Project to help AIDS orphans, says the case shows how the law in China can sometimes be used to benefit victims.

"One can now use legal channels to protect rights. This is an improvement. Some local governments are now thinking about how to resolve this problem," Li says.

Rights campaigners say this case signifies an important milestone in dealing with AIDS patients.

Last June, after an investigation, three of the hospital's staff were sentenced to jail for buying illegal blood.

It was also discovered that two regular blood donors living in the area had died of AIDS. Investigators suspected they may have been the original source of the outbreak.

Other similar cases are currently being heard in court.

But Li cautions against calling this suit a breakthrough, as many people in China are still ignorant of the disease and treat AIDS patients with suspicion.

Often there are no clean needles or sterilized equipment to receive blood donations, and the blood is rarely tested for viruses.

During the 1990s, hundreds of thousands of poor farmers in central China became infected through dirty transfusion schemes, as they sold blood in a desperate bid to make money.

It's over.

Fiji's military commander said Tuesday that the army had taken over the country from the elected government of Prime Minister Laisenia Qarase. Commander Frank Bainimarama announced the takeover in a news conference Tuesday in Suva, confirming the island's fourth coup in the past 20 years.

The military leader said he assumed the powers of president to dismiss Qarase and appoint Jona Senilagakali, a respected physician, as caretaker prime minister.

Bainimarama said he would next week ask the country's Great Council of Chiefs to restore executive powers to President Ratu Josefa Iloilo. The president would then appoint an interim government and elections would follow at an unspecified date, the military chief said.

Qarase said he was efectively under house arrest and powerless to stop the military takeover.

Bainimarama said he took control to end a political stalemate in the country. He has accused Qarase of being corrupt and too soft on the organizers of a coup six years ago.

The Fijian army chief called for people to remain calm and continue business as usual, saying there will not be a curfew.

New Zealand Prime Minister Helen Clark strongly condemned the coup and suspended defense ties with Fiji in response.

Australia also condemned the coup; but Prime Minister John Howard turned down a request from Qarase for Australian troops, saying he did not think intervention was in Australia's interest. Bainimarama had warned that Fiji forces would fiercely oppose any foreign intervention.

Before the coup announcement, heavily armed soldiers surrounded Qarase's residence in Suva.

In other parts of the capital, troops set up roadblocks, surrounded government buildings and seized official cars from ministers.

On Monday, the military disarmed police and ministerial bodyguards.

The military appears to have popular support, especially among local business leaders and citizens involved in the tourism industry--from taxi drivers to tour operators.

China's official news agency, Xinhua, reported that Suva was stable, with no signs of violence. The agency quoted a Chinese restaurant owner as saying that no one appears afraid of the coming government transition. The restaurant is located in the central district of the city.

There are over 7,000 Chinese living in Fiji, most of them in Suva.

As of this writing, Fiji's fourth coup is apparently underway.

Armed soldiers have attempted to enter the home of Fiji's prime minister, Laisenia Qarase, who told Radio New Zealand that there is "virtually a coup" taking place.

Soldiers arrived at Qarase's house Tuesday, where he was meeting inside with several cabinet ministers. Police stopped the soldiers from entering.

In other parts of the capital, Suva, troops surrounded government buildings, including the prime minister's office, and seized official cars from ministers. A day earlier, the military disarmed police and ministerial bodyguards.

Army chief Frank Bainimarama has threatened to depose Qarase for several weeks. The military commander says the prime minister is corrupt and too soft on the organizers of a coup six years ago.

Bainimarama said Sunday that a government "clean up" would begin Monday because Qarase failed to meet a Friday deadline to scrap legislation that would grant amnesty to the perpetrators of the 2000 coup.

New Zealand Prime Minister Helen Clark said she warned the army chief that international sanctions will be imposed if he carries through with the threat.

Qarase has remained defiant, saying he is still in charge of the government and will not step down.

With diplomatic backing from China and Russia, the world's new Hitler, Iranian president Mahmoud Ahmadinejad, is pursuing his regime's key foreign policy aims--the defeat of the United States in the Middle East and the physical destruction of Israel--in ways few observers could have imagined just one year ago.

In Iraq, Iran is supporting Shiite Islamist militias in their increasingly intense and ugly war with factions representing the Sunni minority, including Al Qaeda and other Islamists.

In Lebanon, where Shiites constitute a large minority--and probably a plurality--Iran is rearming its Shiite proxy army, Hezbollah, which is pushing the country toward civil war and preparing for a new round of fighting with Israel--this time, under United Nations cover.

The Iranian-led Shiite revival is understandably causing panic in the region. Incredibly, however, Iran is also bridging the Sunni-Shiite divide through its alliance with Hamas. The leadership of the Sunni Islamist Palestinian group shares Ahmadinejad's view that Israel's end is within sight.

Meanwhile, Iran's nuclear standoff with the West drags on, as the mullahocracy manages to buy the time it needs to develop weapons of mass destruction for purposes of attacking Israel and terrorizing--and, if need be, attacking--the US and Europe.

As impressive as the above achievements may appear, Ahmadinejad and his clerical-fascist crew should also consider the following: Israel is not without resources and options. Notwithstanding its failure to defeat Hezbollah in the summer war, Israel still boasts the strongest military in the Middle East. And the country's nuclear arsenal reportedly includes some 200 weapons--and the means to accurately deliver them to distant targets, including Tehran.

Iran is preparing to end Israel tomorrow; but Israel could end Iran today.

The radicals running Iran should think long and hard about that. They should also consider that there was a time when Ahmadinejad's hero, Hitler, also seemed invincible--only a few years before he brought destruction and defeat to mighty Germany.

The world's largest retailer, Wal-Mart--which used its China pipeline to devastate Main Street America--has set its sights on India's $300 billion retail market. The company plans to open hundreds of superstores in India over the next five years.

The stores will be owned by the Indian telecommunications company Bharti Enterprises and operated as a Wal-Mart franchise. The arrangement will allow Wal-Mart to pry open India's retail sector, which is closed to direct foreign investment, but allows outsiders to operate through franchisees.

Bharti chairman Sunil Mittal calls India the world's last, big frontier for retail. He says Wal-Mart's expertise in this area will help his company tap the sector's massive potential in India.

"Wal-Mart has now decades of experience," Mittal says. "More importantly, they have handled size, which is needed for India. India is a very large country, you need very large-scale technology intervention, and I think they will be the right partners."

Wal-Mart and Bharti will be facing domestic competitors. The toughest competition could come from India's largest private sector company, Reliance Industries, which plans to spend more than $5 billion to open more than 5,000 retail stores across the country. The first opened last month in the southern city of Hyderabad.

Large stores have only a three percent share of the retail market, but business analysts say there is enough room in India's sprawling retail market for several players. Revenues is expected to more than double in the coming decade--to more than $600 billion.

Raman Manglorkar, head of consumer and retail practice at consulting group A.T. Kearney, says modern retail is set for impressive growth, and other global retail chains like Tesco are also eying the Indian market.

"More encouraging is what we refer to as modern retail, which we anticipate growing at 25- to 30-percent annually," he says. "There is a lot of interest, and most of the major international players are pacing the sidelines, and building up their strategic plans, and getting ready to enter as soon as the opportunity opens up."

It is this potential that prompted Wal-Mart to get a head start in India, even though it had to tie up with a local partner.

The retail behemoth may face some opposition: India's left-leaning parties have threatened to launch a nationwide strike against Wal-Mart, accusing it of entering India through a back-door route.

India has kept the retail sector closed to outsiders for fear of endangering the livelihood of owners of 15 million small stores like Gurvinder Saluja's. Saluja is not worried yet, but says he is prepared for tough competition.

"If they will be able to sell cheap, we have to see, we have to compete, that is the only thing," Saluja says.

Saluja may have reason for concern. With fatter incomes and rising expectations, the Indian middle class is getting used to modern conveniences, and is ready to shop the way the developed world does.

It is millions of potential customers like these that have prompted business analysts to rate India as one of the world's most attractive retail markets.

A former chief economist at the World Bank says China must take urgent action against one of the greatest treats of the new century--global warming.

"If global warming was left uncontrolled, there would be very severe droughts in northern China, severe floods in southern China, and great water stress as a result of receding glaciers and snow caps in the Himalayas," says Stern, who was commissioned last year by the British government to put a price on global warming.

He estimated the cost would be as much as 20 percent of global GDP unless early action is taken and said developing countries would be worst affected.

Stern's report has particular relevance for China, where a rapidly industrializing economy has already resulted in widespread environmental damage. Polluting coal-fired power stations provide 80 percent of the country's electricity needs, and China will soon overtake the United States as the leading emitter of carbon dioxide, one of the gases thought to be changing the world's climate.

Glaciers in the Himalayas are already retreating, and high demand for water from factories and agriculture in northern China means the famed Yellow River sometimes dries up before reaching the sea.

Stern, who has met with government officials and economists in Beijing, says China is starting to move in the right direction, but not rapidly enough.

"There is a sense of urgency in China, but there is a very practical concern with the question of finance and technology," he said.

The country's recent five-year development plan included promoting reforestation and energy efficiency among its commitments.

Stern suggests using economic incentives as a way to encourage efficient energy use by industry, and investment in greener technologies.

But the Chinese government still seems to be of two minds about the climate. On the one hand, it talks a good game wen it comes to being environmentally conscious. On the other hand, China still subsidizes the cost of gasoline, and encourages car ownership--in a country whose roads are already crammed with vehicles belching out more and more emissions.

China promised this week to relax restrictions on foreign reporters ahead of the 2008 Summer Olympic Games, which will be held in Beijing. But it is not clear how long the new regulations will remain in effect.

Ironically, the loosening of restrictions coincides with a continuing crackdown on domestic dissent and media (scroll for stories).

Foreign reporters based in China have traditionally had to get permission from local government offices to travel outside their home base, to interview officials or to report on social unrest.

When Beijing was awarded the 2008 Olympics, media freedom groups protested such controls, saying they were incompatible with the spirit of the games.

Now, China has modified the rules, and according to Foreign Ministry Spokesman Liu Jianchao all a foreign reporter will have to do, starting January 1, is secure the consent of the person he wants to interview.

"When you travel, you enjoy the same rights as all foreign nationals in China," Liu said. "When you interview a person or a company, you do not have to apply to the local foreign affairs office for permission, and they don't have the responsibility of asking, 'What are you doing here?'"

As Liu was speaking to reporters, China's official Xinhua news agency released a decree signed by Premier Wen Jiabao, spelling out the new rules for foreign journalists. There are still restrictions: journalists wanting to travel to sensitive areas or who run across situations of social unrest will be submitted to unspecified controls.

In China, yesterday, it was Black Friday for supporters of freedom of the press and dissent.

On the same day that a Beijing court upheld a phony fraud conviction of a researcher for The New York Times (scroll down for the story), a county court in the eastern province of Shandong upheld its decision to sentence blind legal activist Chen Guangcheng to four years in jail in August on fabricated charges of damaging property and disturbing traffic.

A higher court recently overturned Chen's conviction, on the grounds of insufficient evidence, and sent it back to the lower court.

The charges against the activist were brought after he documented cases of officials forcing women to have abortions and sterilizations in line with China's one-child policy.

In related news, Hong Kong-based journalist Ching Cheong had his appeal rejected in late November by a Beijing high court. He had been sentenced for five years on charges of spying for Taiwan. His supporters say he was collecting sensitive information in his capacity as a journalist.

A Chinese journalist serving a three-year prison sentence in China on fraud charges stemming from his work as a researcher for The New York Times--America's most influential newspaper--has reportedly lost his legal appeal.

A lawyer for Zhao Yan told reporters Friday that the Beijing High Court has upheld a lower court verdict against his client.

Zhao was convicted of fraud in August, but acquitted of the more serious charge of revealing state secrets.

Charges were brought against the 44-year-old journalist after the Times published an article that correctly predicted former President Jiang Zemin would resign as head of China's armed forces.

Human rights and press freedom groups call the case politically motivated. They say Chinese state secret laws are kept deliberately vague in order for the government to be able to use them as tools of repression.

The Times has repeatedly denied that Zhao did anything improper. Before joining the newspaper, he was a well-known investigative journalist who reported on farmers' rights issues for the Beijing-based Zhongguo Gaige (China Reform) magazine. He reported extensively on the plight of thousands of peasants who were forced off their lands to make way for a reservoir.