Friday, March 31, 2006

HK Legislator Files Complaint Against Yahoo

A Hong Kong legislator has filed a complaint with the local privacy commission against Internet company Yahoo, alleging it helped Chinese officials convict a dissident journalist.

Hong Kong legislator and lawyer Albert Ho told reporters on Friday that he filed a formal complaint regarding the case of journalist Shi Tao. Shi was sentenced to 10 years in jail last year on charges of revealing state secrets.

Chinese officials cited an e-mail message Shi sent in 2004 that made public a government order barring Chinese media from marking the anniversary of the 1989 crackdown on pro-democracy activists in Beijing's Tiananmen Square.

Ho showed reporters a copy of the court verdict against Shi that he said confirms Yahoo's Hong Kong affiliate provided Chinese authorities personal information about the journalist.

Yahoo co-founder Jerry Yang said last year that his company was complying with Chinese law when it handed over information that led to the imprisonment of Shi.

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US Seeks Japanese Help to Fight Chinese IP Piracy

The United States and Japan need to cooperate more closely to safeguard intellectual property--against Chinese piracy.

That's the message, basically, from US Commerce Secretary Carlos Gutierrez (pictured here). On the heels of his visit to Beijing, he wrapped a week in Asia by telling American business executives Friday that they must work with Japanese businesses on the IP front.

Gutierrez a day earlier met Japan's trade minister, Toshihiro Nikai. The two agreed to what Nikai calls an "all out effort for the protection of intellectual property rights."

Speaking to the American Chamber of Commerce in Japan, the commerce secretary said one of his highest priorities is to safeguard patents and trademarks.

"We can't allow a world to be created where our intellectual property is not respected," he said. "So it affects both American and Japanese companies and workers probably more so than any other two countries in the world."

Under the accord, Tokyo and Washington will create a manual for companies to explain how they can seek remedies when their intellectual property rights are infringed.

Japanese officials told reporters the main target of the agreement is China, where piracy of trademarks and patents costs foreign businesses billions of dollar annually.

Gutierrez, who spent five days in China before arriving in Japan on Thursday, said he believes China is entering a phase of economic development that will prompt it to become more serious about cracking down on piracy.

"Interestingly in their five-year plan they're talking about becoming an innovation society," he noted, " which we think is very favorable because it forces them also to think about things like intellectual property, which we think is good for the world trading community."

US businesses complain they suffer major losses from piracy of music and films in China. For the Japanese, their major complaint is about Chinese theft of designs and trademarks, especially of appliances and motorcycles.

Last year, Washington and Tokyo began a process under the World Trade Organization to obtain more information about Beijing enforcement of intellectual property rights. But Japanese officials say China has yet to present any of the requested data.

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Thursday, March 30, 2006

Japanese Party Seeks Improved China Relations

Some Chinese policymakers and diplomats are quietly counting on the Japanese governing coalition's junior member--the humanitarian oriented New Komeito party--to improve strained relations between Beijing and Tokyo.

The party's championing of bilateral ties dates to the instrumental role played by its predecessor, the Komeito (Clean Government) party, in the 1972 normalization of diplomatic relations between China and Japan.

New Komeito has repeatedly protested Japanese Prime Minister Junichiro Koizumi's annual visits to the controversial Yasukuni shrine for Japan's war dead. A symbol of state Shintoism, the shrine includes several condemned (Class-A) war criminals. New Komeito leaders have urged Koizumi to refrain from future shrine visits and are calling for the construction of a secular national war memorial.

Most recently, the party criticized Tokyo's decision to freeze the flow of yen-denominated loans to China because of worsening relations between the countries.

"What meaning is there in putting this off?" New Komeito leader Takenori Kanzaki (pictured here) was quoted by Japan's Kyodo news agency as saying. "Such action that could delay the improvement of Japan-China ties should not be taken."

A relatively small party not well known outside Japan, New Komeito is essentially an offshoot of Japan's largest Buddhist lay organization, Soka Gakkai, whose leader, Daisaku Ikeda, has long advocated improved relations with China.

Soka Gakkai follows the teachings and practices of the Nichiren Shoshu branch of Buddhism (though the vibrant lay movement has split from the more traditional temple-centered sect).

While it is formally independent of Soka Gakkai, New Komeito can draw on the Buddhist organization's dedicated membership base for support; and the party's distinct focus on international diplomacy reflects its religious roots.

In sharp contrast with other domestic Buddhist groups, Soka Gakkai's founding leaders vigorously opposed Japan's pre-war militarist government, warning it would lead the country to disaster. The group's founders were persecuted and jailed; and the organization reconstituted and rebuilt tself after the war into a major force in Japanese society.

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Political Reform Key to Continued Peace, Prosperity

China's rise will be neither peaceful nor prosperous if fails to reform its outdated authoritarian system of government, according to a new study by the Australian Strategic Policy Institute.

"China's rise is generally to be welcomed," said the study's author, veteran China expert Ross Terrill. "It brings cultural enrichment and a market for Australian products....

"A united and strong China is more desirable for Australia, the United States and others than the sharp alternative--common historically--of a fragmented China.

"Not welcome on the other hand would be a rising China with territorial claims and a mandate of history based on self-entitlement, a China that grows strong while remaining authoritarian, threatening Taiwan, locking up democrats, making a vassal of Burma, squeezing religion in Tibet and blocking internet sites.

"Such a China could neither be stable nor a true friend to its neighbors."

Contrary to those who argue that China can keep its economics and politics separate, Terrill contends that an alarming array of social strains--including pressure for clearer property rights, rural discontent, use of the internet, huge unemployment and an aging population--are intensifying the contradictions of Communist Party rule over an increasingly free-market economy.

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Wednesday, March 29, 2006

US Treasury Official Warns Against Isolationism

A day for dire warnings.

Hours after United States Commerce Secretary Carlos Gutierrez warned China that it needed to do more to help counter a growing and potentially devastating protectionist trend in Washington, a top US Treasury official said Beijing should move faster toward adopting a market-based exchange rate because of US "isolationist" tendencies.

China has been "far too cautious" in its efforts to loosen the peg between the yuan and the dollar, Timothy Adams, undersecretary for international affairs, told members of the US Senate Finance Committee in a hearing on Wednesday. While Beijing has made some "important achievements" on the currency reform front, it "could easily move more rapidly towards greater flexibility" and "should do so now," Adams said in wide-ranging testimony on the unique US-China relationship.

Adams reiterated the Bush administration's opposition to proposed US legislation that would impose punitive tariffs on Chinese goods in retaliation for Beijing's alleged manipulation of the yuan--a practice allegedly aimed at keeping the currency artificially low in order to fuel the export engine driving China's economic expansion.

"There are several bills in Congress that would close our markets to Chinese goods if China does not move more on its exchange rate," Adams said. "We do not support those isolationist approaches. They would damage our economy and not achieve our shared goals."

While vowing to resist US (and European) pressures for currency reform, China did take small but perhaps significant steps last July to loosen the peg between the yuan and the dollar. The Chinese currency has since appreciated by around 3.2 percent against the dollar. But critics charge that the currency remains undervalued by as much as 40 percent--making Chinese goods more inexpensive than they should be and threatening further US job loss.

China has maintained the peg by buying hundreds of billions of dollars worth of US Treasury bills, corporate bonds, and mortgage-backed securities.

Though they tend to choose their words carefully, Bush administration officials are keenly aware of the incredibly complex ironies in the US-China relationship. In stark terms, the Cold War's surviving superpower is increasingly dependent on--and potentially threatened by--an ascending regional giant with global aspirations.

No wonder the undersecretary's testimony was wide-ranging.

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US Official Warns China About Rising Protectionism

America's Secretary of Commerce, Carlos Gutierrez, ended a trip to China Wednesday with a warning to Beijing that protectionist sentiment is growing in the United States. Gutierrez urged China to do more to help stem the trend, which, he said, could have a "very significant impact" on a still-fragile Chinese economy.

Addressing a gathering of American business executives in Beijing, Gutierrez suggested that proposed US laws threatening China are signs the country is in danger of slipping into a protectionist era.

This, he later told reporters, could hurt both the US and China.

"We are China's number-one customer, and I recall that in my days in the business world, the thought of my number-one customer changing strategy or changing policies that would affect my sales was a major issue for us," Gutierrez said. "So any time your number-one customer goes through a change as dramatic as would be going from an open market to a protected market, that would have a very significant impact on the Chinese economy and Chinese society."

America's surging $202 billion trade deficit with China is fueling the rise in protectionist thought. The deficit is certain to be high on the agenda when when Chinese officials travel to the United States for regular trade discussions on April 11 and when President Hu Jintao visits there later that month.

Many American politicians, manufacturers and labor unions blame China's currency policy for a big part of the imbalance. They accuse the Chinese of manipulating their currency, the yuan, to keep it undervalued--and Chinese products artificially inexpensive--in a further threat to US jobs.

Chinese officials deny the importance of the currency issue, say a drastic revaluation of the yuan could hurt China's economic growth, and vow to resist outside pressures for hasty change.

With the aim of pressuring the Chinese into allowing the yuan to float, two US Senators who have been consistent critics of China--Lindsey Graham and Charles Schumer--have sponsored legislation that would slap 27.5 percent tariffs on all Chinese imports into the US. A vote on the legislation was supposed to take place this week, but after visiting China themselves last week, the Senators on Tuesday decided to postpone the vote until September.

Gutierrez said the Bush administration is generally opposed to legislation that calls for sanctions against China.

"What we don't want is to convey contradictions and different points of view," he said. "However, we believe that the way to address issues, to address any conflicts that we may have with any of our trading partners, is through negotiation, is through dialogue, is through engagement, and not through legislation."

The Commerce Secretary said he urged top Chinese officials to help fight the protectionist trend. He also praised Beijing's efforts to combat intellectual property piracy, but added that China still needs to do more in this area. Washington says the illegal copying of US products is another major factor in the trade imbalance.

Gutierrrez also asserted that China is not meeting its World Trade Organization commitments to open its market to US products.

"Our companies still don't have the access that they were promised under the terms of China's (2001) WTO entry," he said.

Gutierrez would not say if Washington would back the European Union if it complains to the World Trade Organization about Chinese policies on auto component imports.

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Tuesday, March 28, 2006

China Largest Holder of Foreign Currency Assets; Two US Senators Postpone Push for Yuan Reform

China has overtaken Japan as the world's largest holder of foreign exchange reserves.

A report in the state-owned China Business News Tuesday says the country has amassed nearly $854 billion in foreign currency assets.

Analysts say the reserves are growing quickly and might top $1 trillion by the end of this year.

The foreign currency flood comes from payments for China's surging exports. The country's trade surplus with the rest of the world was nearly $102 billion last year.

China's critics, including officials and lawmakers in the United States, accuse Beijing of keeping its currency, the yuan, artificially low to unfairly boost exports.

Two US senators, Lindsey Graham, a South Carolina Republican, and Charles Schumer, a New York Democrat, have sponsored a bill that would punish China for allegedly manipulating its exchange rate. But the Senators said Tuesday that they would postpone pushing their bill--which would slap a 27.5 percent tariff on all goods imported into the US from China--because they had detected encouraging signs of currency reform during their recent trip to China.

At a news conference, Schumer expressed guarded optimism about China's efforts.

"Let me be clear: we expect continued progress on this issue," he said. "For the first time ever, the Chinese five-year plan says the currency should float. For the first time, they have put mechanisms in place that allow the currency to float, and we believe the progress we have seen in the last two or three weeks will continue."

Schumer said the bill enjoys strong bipartisan support.

Graham warned Beijing that he would not hesitate to call for a vote if currency reform slows in China over the next six months.

"If the Chinese renege on the efforts to reform their currency, they do so at their own peril," he said. "They will face the wrath of the Senate."

Graham added that he hopes Chinese President Hu Jintao will announce additional currency reforms when he visits Washington next month.

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Monday, March 27, 2006

China's Internet Cops on Lookout for Leftists

China's Internet cops are scanning the Web for signs of subversive activity--on the left.

From Marx to Mao, Communist keywords constitute potential red flags in the eyes of the hyper-sensitive e-police--thousands of trained analysts armed with the latest (American made) censor- and spy-ware. Unorthodox, repeated references to Lenin, say, or Lin Biao (Mao's Long March comrade-in-arms, who disappeared after a supposed coup attempt during the Cultural Revolution but nevertheless remains an inspiration to heretical overseas Maoists because of his theory of guerilla warfare) are as likely to attract attention as the taboo terms of democratic dissent and Tibet independence. But whereas the latter are automatic triggers for filtering and blocking by Beijing's Net guardians, irregular Internet use of the words of world communism invite snooping and monitoring.

Reason: Perhaps nothing frightens China's ruling Communist Party more, ironically, than the specter of serious leftwing opposition and rebellion. A regime that long ago abandoned its Marxist faith and for all practical purposes now bases its claim to legitimacy strictly on continued economic expansion and growth cannot entertain uncontrolled radical or activist tendencies in the name of The People. It's one thing to tolerate left-leaning party officials and intellectuals, as shown by unusually open debates over property law reform at the recently convened National People's Congress; another thing, entirely, to allow an underground movement to take root and flourish. A thing like that must be destroyed at the earliest signs of life.

China's leaders know that threats on the left, while still remote, are far from academic. The country's economic ascent has been meteoric, lifting some 300 million people out of poverty. But a widening gulf between rich and poor is creating conditions for rural and urban unrest. Left-behind farmers and city dwellers--a seething urban underclass growing in the belly of the boom--are increasingly restive and outspoken. People like this, China's rulers reason, could be tempted by the legacy and language of the left. Rising-up workers and farmers ... uniting and losing their proverbial chains ... unfurling red banners ... marching, storming ... advancing ... these nightmarish images, anchored in China's not-so-distant past, truly terrify the powers that be.

Which, along with more obvious and widely reported fears of democratic reform and freedom of the press, helps to explain why they deploy all those cops--more than 30,000 in all--to patrol and daily do battle in that most dangerous (for China) of all arenas--the commercially thriving but relentlessly troublesome and unruly Internet.

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Chinese Growth Companies Seek SPAC Mergers

Several cash-rich Chinese growth companies--the kind backed by blue chip venture capitalists--are pursuing mergers with cash-rich special purpose acquisition companies (SPACs) in the United States.

Similar to blind pools, SPACs are private equity investment vehicles that are run by senior management teams to acquire or capitalize as yet unidentified companies. Investors get the comfort of structured investment guidelines and a commitment to return their invested capital, minus a small management and expense fee, if an acquisition doesn't occur within a specified time period.

A typical SPAC sits atop $20 million in cash, though war-chests of up to $100 million have also been raised.

The additional SPAC cash is a tempting asset for China's new breed of young, elite entrepreneurs who have successfully started and built fast-growing companies in Internet, technology and other sectors. Unlike their struggling, old school counterparts--bloated outfits that are either entirely state owned or partially state owned--the lean and mean go-go companies can't qualify for loans from China's state-owned banks.

Some of the newer companies are already listed on foreign stock exchanges, where, for reasons unrelated to the actual running of their businesses, share prices have often been disappointing. So the prospect of a dual listing on a larger US exchange, such as NASDAQ, is attractive.

US investors are likely to be impressed by the quality of the Chinese management teams--executives educated at America's top business schools and accustomed to the style and ways of the country's most prestigious investment banking and venture capital companies. In contrast with the party hack-types involved in state-owned and second-tier outfits, the managers of the high-flying private companies naturally fit in with the global economy's emerging class of financial engineers and superstars.

"These are Chinese managers who would feel comfortable at Davos," said a SPAC investor, referring to the annual world economic forum in Switzerland.

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Sunday, March 26, 2006

US Investors See Dollars in Yuan Reform

Lawmakers and officials are not the only people in the United States rooting for Chinese currency reform.

Wealthy, sophisticated investors seeking to hedge against a possibly declining dollar are eyeing late-stage venture capital deals in China in part because of the potential to profit handsomely from a free-floating yuan.

Leading Chinese entrepreneurs and major US investment banking firms are promoting the deals, which have attracted big-name investors--institutional level individuals--including prominent business personalities in the entertainment and media industries, among others. Minimum investment is usually around $10 million, though investments of $2 million or less are reportedly also permitted.

The deals are typically structured as phased investments--the banks can call on investors for additional funds as needed, subject to certain terms and conditions--over a period of six years or so. Investors who ignore the funding requests run the risk of death by dilution: their equity can essentially be wiped out in future financing rounds.

"The real risk is political," says a venture-savvy US investor, who, like many of his peers, believes the dollar is likely to fall by as much as 30 percent in coming years. "It's not just a question of currency reform, though the prospect of a free-floating yuan rising in value relative to the dollar is certainly a sweetener. There are other questions. Will China crack up from within or continue to expand and grow? Will free market reforms continue? Will the rule of law be strengthened and enforced? Could an international crisis--an attack on Taiwan, for instance---trigger a conflict with America that would interfere with capital repatriation? These are serious questions."

Serious indeed.

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Saturday, March 25, 2006

Vatican: Time is Ripe to Restore China Ties

The Vatican's foreign minister says "the time is ripe" to work out differences with China and establish diplomatic relations.

Archbishop Giovanni LaJolo (pictured here) made the comment Saturday in a lengthy interview shown on a Hong Kong cable television station (I-Cable). He said the Vatican is ready to move its embassy from Taiwan back to Beijing.

LaJolo said it is clear the spiritual needs of several million Roman Catholics in China are more urgent than those of the 300,000 Catholics in Taiwan. He said now is the time for open and trusting relations between the Holy See and the Communist government in Beijing.

The two sides have begun talks aimed at repairing their strained relations. Diplomatic ties were cut 55 years ago, shortly after the Communist Party came to power in China.

Beijing rejects the authority of the Vatican and allows Catholics to worship only in state-approved churches. But millions of other Chinese belong to underground Catholic congregations loyal to Rome.

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China Resisting US Pressure to Reform Currency

In the weeks leading up to Chinese President Hu Jintao's April visit to the United States, Beijing shows no signs of bending to US pressure on the politically potent currency reform issue.

Chinese Commerce Minister Bo Xilai said Washington should not "play up" trade and currency issues, according to a report posted Frday night on his ministry's Website.

Referring to a bill threatening sanctions on China for failing to loosen controls on the yuan, Bo said: "If high tariffs are rashly imposed on Chinese goods, that will inevitably lead to a severe set-back in China-US trade. It would also affect jobs created in distribution thanks to Chinese exports."

On Saturday, the two US Senators sponsoring the bill--which would punish Beijing with a whopping 27.5 percent tariff on all goods imported from China--asserted it was in China's best interests to move to a freely floating currency.

"The bottom line is China's economy has evolved to the extent that they need to consume more and save less," Senator Charles Schumer, Democrat from New York, told a news conference in Hong Kong, following a five-day trip to China in which he and South Carolina Republican Senator Lindsey Graham met with officials.

"Allowing the yuan to float would help China in terms of increasing consumption and reducing savings," Schumer said.

China has a high savings rate equivalent to 45 percent of gross domestic product. Beijing says it is trying to encourage domestic consumption to make economic growth more balanced and less dependent on exports.

US officials and lawmakers partly blame their country's surging trade deficit with China on an artificially undervalued--manipulated, to put it less diplomatically--Chinese currency. Accoding to rules in effect since last July, the yuan can only rise or fall by 0.3 percent daily.

The Senators' bill is presently scheduled for a vote on March 31. However, there is a possibility that Schumer and Graham will postpone pushing the bill and use the threat of reviving it to further pressure China to let the yuan float freely.

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Friday, March 24, 2006

Harley-Davidson Ready to Roar into China


America's greatest motorcycle maker is returning to China after an absence of more than 50 years.

Harley-Davidson will open its first dealership in China next month. The retail outlet, on Beijing's Fourth Ring Road, will employ 14 people. It will be managed by Wan Jidong, founder of local dealer Feng Hou Lun, with which the iconic company has teamed up to enter the Chinese market.

The plan is to sell several models of Harley-Davidson bikes, parts, accessories and collectible goods, while also sponsoring special events and training.

Wisconsin-based Harley-Davidson, which began selling motorcycles in 1904, said it expects market entry into China to be a "gradual process."

The leisure-oriented market for premium, heavyweight motorcycles is just beginning to emerge in China, with market development limited by ownership and riding restrictions in most large cities and on highways, and by limited but growing disposable income.

In July 2004, China's first Harley-Davidson club opened in Guangzhou, in Guangdong province. It attracted 15 members after Chinese authorities approved their application to form the club.

Last year, Harley-Davidson sold 266,500 motorcycles in the United States and 62,500 through its global operations.

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China Blamed for Global Forest Depletion

Like we said earlier this week, there is more to the worldwide problem of disappearing forests than disposable chopsticks.

China's globalization of the timber industry is devastating forests and forest communities around the world.

So says Forest Trends, an international nonprofit organization based in the United States. The group's newly released in-depth study says imports of illegally cut timber into China are a major factor contributing to the destruction of many of the world's forests.

It's a vicious cycle. China imports mountains of raw wood--illegally sourced from rain forests and other environmentally sensitive areas--to turn it into cheap furniture, plywood and other processed products, some 70 percent of which China then exports to the US, Japan, and Europe.

This booming trade, coupled with China 's own domestic growth and demand for paper products, spells doom for forests.

The Forest Trends study says exports of wood based products going from China to Europe and the US have gone up 900 percent in just eight years, as China has captured one-third of the global trade in furniture.

"Few consumers realize that the cheap prices they pay are directly linked to the exploitation of some of the poorest people on Earth and the destruction of their forests,” says Andy White, lead author of the report, which is entitled China and the Global Market for Forest Products: Transforming Trade to Benefit Forests and Livelihoods.

The findings are the result of five years of collaborative research by organizations in the US, Indonesia, and China itself (the Center for Chinese Agricultural Policy, which is part of the Chinese Academy of Agricultural Science).

The report also finds that China has a tremendous opportunity to boost its own timber production, reduce its reliance on raw materials imports and alleviate rural poverty by strengthening property rights and removing policy barriers that have prevented local communities and people from investing in forest production.

"It is clear that China is in the middle of a global commodity chain, feeding consumption by consumers in the US and EU who are demanding low-priced forest products," says Forest Trends president Michael Jenkins. "There are key roles for consumer countries to play in transforming this trade into one that benefits forests and people.”

The report highlights connections between China 's domestic growth, the global economy's demand for cheap wood products manufactured in China , the widening gap between rural and urban populations within China itself, and environmental destruction and poverty in forest areas around the world. It also presents a number of recommendations for the importing country governments and industry.

Specifically, the report encourages the government of China to strengthen tenure and policy reforms, allowing the rural poor to boost timber production, while simultaneously allowing forestry to contribute more to rural development and reduced rural conflicts. In particular, the report urges Beijing to strengthen efforts to improve productivity within its own forestry sector and reduce its reliance on imports, and engage with other governments to explore new options to achieve the twin goals of ecosystem protection and timber production.

“For a number of years the global forest community has expressed disdain with the Chinese government and industry for driving illegal logging and negative impacts on forests, and encouraged greater action on their part,” Jenkins says. “While, to date, the US government has had a limited and ambivalent approach to addressing illegal logging and trade, US producers are beginning to recognize that they are being undercut by illegally sourced and traded wood."

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Thursday, March 23, 2006

Angola Gets Chinese Chamber of Commerce

More than 20 Chinese companies have established a chamber of commerce in Angola, one of the largest oil producers in sub-Saharan Africa.

Member firms include Sinosteel Corporation, China National Overseas Engineering Corp. and China Petroleum and Chemical Corp. (Sinopec).

China's increasing involvement in Angola--a country recovering from a ruinous 27-year civil war--is indicative of Beijing's aggressive push for African resources and markets.

China is the second-largest consumer of Angolan oil after the United States. Angolan crude accounts for just over 13 percent of China's crude imports.

Formation of the chamber of commerce follows Tuesday's news that Angola has chosen China Petroleum & Chemical as its partner in the development of a $3 billion refinery in the port town of Lobito.

The refinery, which at 240,000 barrels a day will be the country's biggest, will be 70 percent held by Angola's national oil company, Sonangol, with the rest owned by Sinopec, which outbid Total of France and PetroSA of South Africa.

Angola has favored Sinopec over Total before, forcing it to relinquish lead-operator rights to one of the country's large offshore oil concessions.

Construction of the Lobito plant will reportedly begin next year and will be carried out in two parts, with the first stage processing 120,000 barrels a day. The refinery will employ as many as 5,000 people in the first stage and as many as 8,000 people when finished. About 80 percent of its output will be exported to other African countries.

Angola already has a plant producing 65,000 barrels a day in Luanda, the capital.

Chinese companies have played a key role in Angola's oil-driven reconstruction boom.

In 2004, China's Eximbank approved a $2 billion oil-backed credit line to Angola to rebuild its infrastructure. As expected, many large contracts have gone to Chinese firms--for example, the contract to rebuild the Benguela Railway, which is valued at $300 to $500 million. Chinese companies are also refurbishing two other rail lines, several government buildings, and Luanda's new airport.

In addition to China's Sinopec and France's Total, the top foreign oil companies operating in Angola are US-based ChevronTexaco (which also recently lost concession rights) and ExxonMobil; UK Â’s BP; UK /Dutch Shell; and Italian Agip/Eni Oil.

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Japan Freezes Flow of Yen Loans to China

Japan announced today that it was putting a hold on new yen-denominated loans to China because of worsening relations between the countries.

Japan decided in March 2005 to extend about billion yen ($735 million) worth of loans, bringing its total loan aid to China to more than three trillion yen since 1979.

This is the first time the loans have been interrupted since the program began.

Chief Cabinet Secretary Shinzo Abe (pictured here) attributed the decision to the souring of relations between Tokyo and Beijing, telling reporters Japan needs time to consider its options.

A popular personality, known for his love of video games and manga comics--and candid comments to reporters--Abe said Japan won't give any more of the loans to China during the current fiscal year, which ends March 31. He said the government may release the loans again next month if the situation improves.

"We have decided to waive a plan to provide loans for fiscal 2005, considering the current situation surrounding the Japan-China relations," Abe said. "We will monitor future development in Japan-China relations while continuing discussion (on the loans) within the government."

Japanese Foreign Ministry spokesman Tomohiko Taniguchi tried to put the situation in more diplomatic terms. He said it is not a question of freezing the loan program; rather, the two sides failed to exchange required documents in time for the fiscal year that starts in nine days.

"There have been reports that the Japanese government has decided to freeze new yen loans to China," Taniguchi said. "That's not correct. What's correct is that we have been unable to make the exchange of notes about it."

Such exchanges normally take place near the end of one fiscal year, to arrange disbursements for the next. But the two countries have not held such a meeting since March 29 of last year.

China's reaction to Japan's announcement was quick--and cool.

Foreign Ministry spokesman Qin Gang told reporters in Beijing that his government was disappointed, and that the Japanese decision would not help to improve Sino-Japanese relations.

Qin said the loans from Japan have played a positive role in China's economic and social development, but have also benefited Japan. Therefore, the loans should not be seen as charity, Qin said.

Beijing says it needs new funds to keep its modernization on track, despite its huge trade surpluses. The official People's Daily newspaper wrote recently that China is still a developing country, and is in urgent need of capital for its many projects.

But many Japanese do see the loans as handouts--to a rising rival with a booming economy, modernizing military, and seemingly boundless needs and ambitions.

The leader of the junior partner in Japan's ruling coalition took a different view, however, expressing concern about the impact of the loan freeze on bilateral ties.

"What meaning is there in putting this off?" Takenori Kanzaki, leader of the New Komeito Party, was quoted by Kyodo news agency as saying. "Such action that could delay the improvement of Japan-China ties should not be taken."

A relatively small party not well known outside Japan, New Komeito is an offshoot of Japan's largest Buddhist lay organization, Soka Gakkai, whose leader, Daisaku Ikeda, has long advocated improved relations with China.

The Japanese Foreign Ministry spokesman sought to diminish the significance of the announcement by pointing out that Tokyo and Beijing had already agreed to end the program in the near future.

"By the time Beijing is going to host 2008 Olympic Games, the amount of new yen loans is supposed to become zero," Taniguchi said.

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Vatican Softening Stance on China Issue

Relations between the world's most populous nation and largest Christian denomination are apparently improving.

The Roman Catholic bishop of Hong Kong, Joseph Zen, seen here on the left, says the Vatican and China have begun talks aimed at repairing their strained relations, and that the church may offer concessions to Beijing on the issue of who has the right to appoint Catholic leaders in China.

The Vatican insists that only the Pope can select Catholic bishops; but Zen says the church may soften its position by agreeing to consider China's nominees for such positions. However, Zen, who is visiting Rome, told an interviewer for Hong Kong's cable television network Thursday that the church will not give Chinese authorities total control over such such appointments.

Diplomatic ties between the Vatican and the Beijing government were cut in 1951, two years after the Communist Party came to power in China.

Pope Benedict recently named Zen a cardinal, the clerical rank known as "prince of the church". He is in Rome to be formally elevated to his new position at the Vatican on Friday.

Zen has been an outspoken advocate of human rights and democracy.

The issue of bishops' appointments is one of the central disputes between the Vatican and Beijing, which recognizes a state-controlled group as the country's only Catholic church.

China rejects the authority of the Vatican--which represents about half of the world's more than two billion Christians. Beijing allows Catholics to worship only in state-approved churches, which claim four million followers. Millions of other Chinese, however, are known belong to unofficial Catholic congregations loyal to Rome.

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Wednesday, March 22, 2006

China, Russia Prevent UN Pressure on Iran

Efforts to bring United Nations Security Council pressure on Iran to curtail its nuclear ambitions have faltered in the face of stiff opposition from Russia and China--former rivals now increasingly aligned on international issues.

Britain and France are considering forcing a vote on the Iran issue.

Two weeks after the International Atomic Energy Agency (IAEA) referred Iran's controversial nuclear program to the Security Council, the council's five permanent, veto-wielding members are deadlocked on how to respond. The first preliminary step was to have been a statement listing Tehran's failures to comply with IAEA demands. The statement, drafted by Britain and France--with US support--urges Iran to suspend activities that could lead to nuclear weapons production.

But Russia and China object to large parts of the text. China's UN ambassador, Wang Guangya (seen above at a recent news briefing) told reporters Beijing and Moscow want a briefer document that concentrates on expressing support for the atomic energy agency.

"From the beginning, I proposed that if the Security Council is to support IAEA authority, it is to have a brief political statement," Wang said. "Support the IAEA, call on Iranians to cooperate, then put some pressure."

The full council was to have met Tuesday to consider adopting the statement by consensus. But the meeting was canceled when it became clear Russia and China would not budge.

Another meeting of the Council's so-called "Perm-Five" was held Wednesday to try to work out differences, but it too ended inconclusively.

The prospect of stalemate has prompted Western nations to consider replacing the statement with a resolution. While a statement requires support of all 15 Council members, a resolution could be adopted by a majority of nine.

That would force Russia and China to either approve or abstain--or kill--the measure by vetoing it.

British Ambassador to the UN Emyr Jones-Parry suggested that bringing the matter to a vote is a possibility. He said if there was no prospect of amending the text, efforts to do so would be abandoned.

French Ambassador to the UN Jean-Marc de La Sabliere told reporters he prefers a consensus statement, but would not rule out forcing a vote.

"I never ruled out that, but I am working hard for a consensus, but I never rule out another solution, but today we are working for a consensus, and I hope consensus is still possible," he said. "That's my assessment. It is still possible."

Senior US officials remain confident that agreement could be reached. Speaking to reporters during a visit to the Caribbean, Secretary of State Condoleezza Rice said: "Sometimes diplomacy takes a little bit of time but we are working very hard on it."

US President Bush said Wednesday it is important that Iran not be allowed to have a nuclear weapon. But he noted that diplomatic efforts are continuing.

"We're dealing with this issue diplomatically by having the Germans and the French and the British send a clear message to the Iranians, with our strong backing, that you will not have the capacity to make a weapon, to know how to make a weapon," Bush said.

A senior Iranian official Wednesday warned that US pressure on the Security Council to penalize his country for its nuclear policy would not succeed. News agencies quoted Iranian Foreign Minister Manouchehr Mottaki as saying what he called "the irrational American view" would not prevail in the council.

Iran has repeatedly denied it is trying to build nuclear weapons, saying its atomic program is for generating electricity.

But Western diplomats briefing reporters in recent days have said Iran is close to having 164 centrifuges. That would allow them to enrich uranium that could be used in weapons. One senior US official said if Tehran suddenly came into possession of several hundred pounds of highly enriched uranium, it could possibly produce a nuclear weapon within a year.

China Raises Chopstick Tax to Help Environment

From chopsticks to cars--consumption taxes in China will increase as the government moves to protect its ravaged environment and reduce energy use.

China is one of the world's most environmentally unsound countries--and deforestation is a major problem.

Environmentalists warn that at the current rate of timber use, China will soon have no forests left.

Disposable chopsticks are a big part of the problem. Around 25 million trees are cut every year in China to produce some 45 billion disposable wooden chopsticks. Most are used in restaurants and canteens around the country. Approximately a third are exported to Japan, South Korea and other countries.

To discourage the use of throwaway chopsticks, the Chinese government announced on Wednesday it will impose a five percent tax on them, starting April first.

A small step in a thousand-mile journey? More or less, say Chinese environmentalists, for whom the cheap, ubiquitous utensils are a prime target. Activists contend that a tax increase will not deter people from using disposable chopsticks, and that more action is urgently needed.

"For example, maybe the government should take the leading role not to use the disposable chopsticks in the first hand, then the government will lead a very good model for the rest of the people and to the community," says Hahn Chu, who works with the Hong Kong branch of Friends of the Earth. "But now in China they only use the tax as a means or a tool to do it. It's not enough, just only a first and very small step."

Of course, there's more to the deforestation story than throwaway chopsticks. Production of commercial lumber is a major cause of deforestation in China. Another contributor is slash-and-burn agriculture, which destroys vast areas. More forests are mowed down to make way for railroads, highways, and high voltage lines; and forest fires take a huge annual toll.

As one observer puts it: "Anyone who travels in the west of China will soon encounter entire hillsides where the timber has been razed to the ground, or travel on roads where the trees on both sides have been felled for tens of kilometers."

Each year, an average of 2,460 kilometers km (950 square miles) of vegetated land in China deteriorates into desert and a additional million hectares of land suffers from serious land erosion.

The damage extends way beyond China's borders.

China will soon be the leader in the global wood market. Increasing demand for wood products is putting pressure on forests in other countries. Much of China's timber imports come from countries where logging is poorly regulated.

So much for wood. Faced with growing pollution and energy shortages at home, China said it also will increase taxes on cars with high fuel consumption to encourage the production and use of more efficient cars. The top tax rate for cars with the largest engine will surge to 20 percent from eight percent. Tariffs on cars that have an engine capacity of less than a 1.5 liters will be cut to three percent.

Rising incomes in China's cities have spurred the sale of cars in recent years, making the country the third-largest auto market in the world. About half of the cars used have larger, 1.6 to two-liter engines.

The government said it also will tax a number of luxury goods--a move China's leaders hope will help narrow the gap between the rich and the poor in the country.

Buyers of luxury watches will face a 20 percent tax, while yachts, golf balls and golf clubs will be taxed at a rate of 10 percent. When the consumption taxes were imposed years ago, almost no mainlander would have thought of buying a yacht or playing golf, but economic development in the past 20 years have produced millions of wealthy Chinese.

Interestingly, Beijing will no longer tax soaps and shampoos. Considered luxury items a decade ago, they are now viewed as daily necessities.

China Rejects US Military, Trade Criticisms

China hit back at the United States this week, rejecting a White House national security report that criticizes Beijing's military buildup and trade policies.

China's state media on Monday quoted Foreign Ministry spokesman Qin Gang (pictured here) as saying the report was an interference in China's internal affairs, and harmed relations between the two countries.

At a Tuesday briefing, Qin dismissed suggestions in the report that China might pose a challenge to US foreign policy.

"China is resolutely following a path to peaceful development," Qin said. "China has made its due contribution to push forward mutual development of peace and stability in the world."

The White House report, entitled National Security Strategy, was released last week. It says China needs to abandon "old ways of thinking," such as not revealing true military spending.

Official Chinese figures show a double-digit increase in military spending over the past several years. But foreign experts say real military spending could be up to three times as high as the publicly released figures.

In an unusual linkage, the White House report also expresses concern about China's trade strategy, saying Beijing is trying to control markets instead of opening them up. The report says Beijing is acting as if it could "lock up" energy supplies around the world. It criticizes China's dealings with governments regardless of how they treat their people or behave internationally.

The Chinese spokesman also rejected a report by a United Nations torture investigator calling for extensive changes to China's police and court systems, in order to reduce what it called the "widespread" use of torture.

The UN report urges China to release political prisoners and to eliminate vague offenses such as "subverting state power," which are often used to prosecute political and religious dissidents.

Qin said much of the UN report's content was based on facts that had not been verified. He also said it exceeded the scope of the UN investigator's authority.

Tuesday, March 21, 2006

Taiwan President to US: No More Surprises

No more surprises.

That's the message from Taiwan President Chen Shui-bian, who assured the United States Tuesday that he will not push for formal independence from mainland China during the rest of his term.

Meeting with the new US envoy to Taiwan, Stephen Young, Chen said there will be "no more surprises."

The Taiwanese leader was referring to his decision last month to scrap a dormant but politically significant government body dedicated to unification with mainland China. The US requested clarification on the issue. China, meanwhile, reacted angrily to Taiwan, warning that the decision could bring disaster to the island.

Chen told Young he will maintain the status quo with China, and that Taiwan's government will continue to serve as a responsible contributor to maintaining peace across the Taiwan Strait.

China and Taiwan split in 1949 after a civil war; but Beijing considers Taiwan a renegade province. China's official position is that it seeks peaceful reunification with the island--while maintaining a military option against it.

The Anti-Secession Law, which China adopted last year, authorizes use of force to prevent Taiwan from achieving statehood.

It's no empty threat, as Taiwan well knows. With nearly 800 missiles aimed at the island--and dozens added annually--China has the ability to pulverize Taiwan's cities and military bases with waves of bombardment.

The US, which is obliged to protect Taiwan, wants the island to do everything possible to avoid a military confrontation. Chen's pro-independence moves--including an emotional speech before a huge anti-China rally that his governing Democratic Progressive Party (DPP) held in Taipei last Saturday on the occasion of the first anniversary of the Anti-Secession Law--are viewed by Washington as dangerously provocative gestures.

In sharp contrast with Chen and the DPP, Tapiei mayor Ma Yng-jeou, who heads the opposition Koumintang party, and is favored to win Taiwan's 2008 presidential race, basically supports Beijing's sacrosanct "One China" principle, subject to certain terms and conditions.

Ma, who is visiiting the US this week, yesterday warned that escalating cross-Strait tensions could lead to a military confrontation with Beijing. He made his comments in a speech at the Council on Foreign Relations, America's most influential foreign policy advisory group and think-tank.

Though Washington clearly prefers Ma's tone and approach, his party has complicated matters for the Bush administration by opposing a proposed US arms sale to Taiwan, which administration officials say Taiwan needs to modernize its defenses. The $11 billion deal has been delayed since 2001.

Putin Update: No Oil Pipeline Breakthrough

Today's meeting between Russian President Vladimir Putin and his Chinese counterpart, Hu Jintao, failed to produce news about a key energy project--construction of a 2,500 oil pipeline from Siberia to the Pacific coast.

China, which has been eyeing Russia's vast oil and gas reserves as Chinese dependence on oil imports has ballooned in recent years, wants the pipeline to include a southern branch that would bring it 600,000 barrels of oil a day.

Another Russian oil customer--Japan--has also lobbied hard for a favorable routing.

So far, neither China nor Japan has been able to pin Moscow down.

But China, with whom Russia is developing close political and economic ties, appears to have the inside track.

Both countries announced plans Tuesday to step up energy supplies to China with a gas pipeline opening within five years; and a Russian minister said Moscow would finance a feasibility study for the oil pipeline that would lead to a timetable.

Putin told reporters the gas pipeline, also yet to be routed, will deliver up to 2.8 trillion cubic feet of gas annually.

The announcements followed Putin's meeting with Hu--their fifth meeting in less than a year. In a joint statement, the two leaders pledged to promote energy, telecom, transportation and other industrial ties.

China is Russia's top customer for oil--presently delivered by railway tank car--and weapons. Trade between the two countries reached more than $29 billion last year and is growing. Some experts predict it may double during the next four years.

China has been frustrated by Russia's refusal to open up its energy sector to Chinese investment. Chinese state-owned companies have been scouring the planet--from the Congo to Canada--in search of stable and secure supplies of oil and gas.

For decades, the two neighbors were bitter rivals, competing for leadership of the communist world. Nowadays, they assert a shared commitment to a "multipolar world"--a diplomatic way of saying they oppose attempts by the United States, acting on its own or through the United Nations, to dominate world politics and interfere in other nations' internal affairs.

On that score, Putin's two-day visit also is expected to focus on efforts by Moscow and Beijing to resolve the Iranian nuclear standoff. Talks among Russia, China, the United States, Britain, France and Germany failed to reach an agreement Monday on a UN Security Council statement on Iran's nuclear programs.

Whereas, the US and other countries fear Iran is trying to build nuclear weapons, in violation of the Non-Proliferation Treaty, China and Russia want the Security Council to proceed slowly.

China and Russia, says Czeslaw Tubilewicz, a China studies professor at the University of Hong Kong, want to prevent the UN from becoming "too deeply involved in a crisis that, in their view, does not require the international community's involvement."

Russia has tried to prevent Security Council action against Tehran by proposing a plan for Iran to enrich uranium on Russian soil where it can be more closely monitored. China supported the plan, which Iran has rejected.

On Tuesday, Putin also endorsed China's claim to Taiwan, the self-ruled island that Beijing regards as a renegade province and with which it seeks eventual reunification, by force if necessary.

Monday, March 20, 2006

Putin State Visit to Focus on Energy, Trade

Russian President Vladimir Putin (seen here on the left) arrived in Beijing Tuesday to begin a two-day state visit likely to focus on China's energy needs and bilateral investments.

Putin landed at Beijing International Airport, accompanied by a large delegation of senior officials and executives, including Energy Minister Viktor Khristenko; Resources Minister Yuri Trutnev; and Sergei Bogdanchikov and Alexei Miller, heads of the state oil firm Rosneft and gas giant Gazprom, respectively.

Putin was scheduled to meet with Chinese President Hu Jintao later in the day.

The two leaders were also scheduled to attend the opening event of a Year of Russia in China. In all, more than 200 events are planned. The Year of China in Russia is scheduled for 2007.

Trade between China and Russia was valued at about $30 billion last year. The two countries intend to increase trade value to between $60 billion and $80 billion by 2010.

In addition to energy and other industrial issues, Hu and Putin are expected to discuss disputes over the Iranian and North Korean nuclear programs.

As permanent members of the United Nations Security Council, Russia and China are playing key roles in diplomatic efforts to resolve the dispute over Tehran's nuclear ambitions.

The two countries also participate in six-nation disarmament talks on North Korea's nuclear program, along with the United States, the two Koreas and Japan.

Before he left Moscow, Putin said that he expected his two-day visit to Beijing to produce new agreements "that will help considerably to strengthen the Russian-Chinese strategic partnership."

Chinese officials were hopeful that the agreements would include a feasibility study for building a branch to China of Russia's planned trans-Siberian oil pipeline.

KMT Leader Warns War with China Possible

Taiwan's opposition leader Ma Ying-jeou (pictured on the left) warned Monday that cross-Strait tensions could spin dangerously out of control.

Ma, who is visiting the United States this week, called for multilateral talks with China to avoid confrontation.

"Without negotiations, I think the current state across the Taiwan Strait could move from stagnation to confrontation," he said.

The 55-year-old chairman of the Koumintang (KMT) and mayor of Taipei, who is favored to win Taiwan's 2008 presidential elections, issued the dire warning in a talk before America's most important and influential foreign policy think-tank, the New York-based Council on Foreign Relations.

Relations between Taiwan and China have been strained since February, when pro-independence President Chen Shui-bian scrapped the National Unification Council, a defunct but symbolically important body tasked with eventually reuniting China and Taiwan.

Ma called abolition of the council "unnecessary and unwise."

He said he would reopen talks and aim to sign a peace agreement with China if his party regained power in the next presidential election.

In comments to reporters after his speech, Ma called for immediate talks including Taiwan's ruling and opposition parties, as well as "governments".

Beijing refuses to deal with Chen, whose Democratic Progressive Party (DPP) stands for Taiwan statehood.

China, which has nearly 800 missiles aimed at Taiwan, and views the island as a renegade province, has threatened to attack if it pushes for formal statehood. Analysts say China can launch waves of missiles--reaching all Taiwanese cities and military bases--in an effort to overwhelm the island.

"Mainland China is not particularly noted for its rule of law," Ma told reporters following his speech. "They don't need a piece of law in order to invade Taiwan."

Ma made no mention of another irritant in the US-Taiwan relationship--a weapons package Washington wants to sell to Taipei, which the KMT opposes. The $11 billion deal has been delayed since 2001, largely because the opposition party says the weapons are too expensive and do not meet the island's defense needs.

US Secretary of State Condoleezza Rice, testifying in a Congressional hearing last month, lamented Taipei's apparent lack of cooperation with Washington in modernizing the island's military.

On Saturday, Taiwan President Chen took his policy of confronting China to the streets, when he told an estimated 100,000 anti-China demonstrators that only Taiwan's 23 million people would decide the island's sovereignty, not the people of the mainland.

The KMT, which once ruled all of China, fled to Taiwan after losing the Chinese civil war in 1949. The party established a brutal dictatorship and enjoyed uninterrupted rule of the island until 2000, when, following democratic reforms, it lost to Chen's DPP.

For decades, the KMT claimed sovereignty over all of China, including the mainland, Today, the party promotes its own interpretation of Beijing's "One China" principle, saying it would reunite with a democratic mainland. In reality, the GMT would probably settle for autonomy--a variation of the "One China, Two Systems" policy that was applied to the return of Chinese sovereignty over former British colony Hong Kong.

US Jewish Delegation Visits Harbin

China's state owned Xunhua news agency reported today that representatives of the Anti-Defamation League (ADL), a Jewish organization based in the United States, visited Harbin City, in northeast China's Heilongjiang Province, on Sunday.

Xinhua said the delegation exchanged views with Chinese researchers on Jewish history and people, watched an exhibition on the history and culture of Jews in Harbin and visited a Jewish memorial park.

In the 1920s, Harbin was the largest Jewish community in the Far East, with a thriving economic and cultural life.

Numerous Jewish relics of those days, including assembly halls, schools, banks and memorial parks, have been preserved.

The ADL is the largest and most powerful of the so-called defense organizations that exert enormous influence over America's organized Jewish community. The others include the American Jewish Committee and the American Jewish Congress.

Like the other defense groups, ADL maintains a branch operation in Israel and vigorously supports the Jewish State. ADL's international activities are generally in tune with official Israeli policy and thinking.

China is Israel's largest trading partner in Asia--bilateral trade almost reached $3 billion last year--and an important supplier of arms and military technology for Beijing. Over 1,000 Chinese students are studying in Israel and many Chinese technical experts regularly visit Israel.

Abraham Foxman (pictured above), head of the ADL delegation, described China as a country that has historically welcomed and respected Jews.

Considered one of the most influential figures in organized Jewry, Foxman praised Harbin as a model of respect and understanding between nations and thanked the Chinese government for "great efforts" in protecting Jewish relics.

Jewish settlement in China dates to the 8th Century. The first Jews in China are believed to have arrived from Persia along the Silk Road. In 1163, the Emperor ordered the Jews to live in Kaifeng, where they built the first Chinese synagogue.

Westerners lost touch with Kaifeng Jews (some of whom can be seen in the antique photo on the left) in the mid-1700s. It was not until 1900 that an effort was made to re-establish contact. But by that time, the Kaifeng community had virtually disappeared. A letter from a member of the community, sent to a US Jewish charity, pleaded for help in religious matters--urging the Americans to send a rabbi or Hebrew teacher--noting that assimilation and intermarriage had taken its toll.

The Jewish community in Harbin began in the late 19th Century as a result of a Russian railway project that was centered there. The anti-Semitic Czarist government provided incentives to minorities, including Jews and Karaites, to settle in Harbin; and in the early art of the 20th century, Jews fleeing Russian pogroms joined them, raising the Jewish population of Harbin to approximately 8,000 by 1908. The Russian Revolution of 1917 practically doubled the size of the community.

In contrast with Kaifeng and Harbin, the development of Shanghai's Jewish community paralleled that of Hong Kong. Wealthy Jewish families from Baghdad, Bombay and Cairo established a communal structure in Shanghai in the 19th century. By 1903, there were three synagogues in the city, and the number of Jews totaled to 30,000. However, most of them fled when the Communists took over in 1959.

Today, Judaism is not an officially recognized religion in China. But last December, the staff of Israel's embassy and some 200 members of the Beijing Jewish community, comprised of Israeli and Jewish expats, were allowed to celebrate the holiday of Hanukkah with the first-ever lighting of a traditional menorah on top of the Great Wall of China.

The ceremony, which was presided over by a rabbi from the internationally active Chabad (Lubavitch Hassidic) movement, took place at Mutianyu, in Huairou County, 70 kilometers northeast of Beijing.

Sunday, March 19, 2006

China, India Strengthening Commercial Cooperation

Asia's ascending economic giants--China and India--are seeking to strengthen commercial cooperation.

After a meeting in New Delhi last week, China's Commerce Minister Bo Xilai (seen here on the left) and his Indian counterpart Kamal Nath (pictured below) have set an ambitious new target--trebling bilateral trade to at least $50 billion by 2010.

The two countries say they will lower barriers to cross border investment, and develop uniform manufacturing standards to fuel further growth.

Nath says these measures will help the two fast-growing economies, which together account for more than one-third of the world's population.

"If China and India are going to be the largest consumers, are going to be the largest manufacturers, it is important for us to harmonize our standards," Nath says.

If the targets are met, China could overtake the United States as India's largest trading partner. China has already become India's second largest trading partner with two-way trade galloping from $2 billion in 2000 to more than $15 billion last year.

But although bilateral trade is booming, it is still restricted to a narrow range of goods. The bulk of Indian exports to China consist of primary commodities such as minerals and iron ore. China sends electronic goods, such as computer hardware, manufactured goods and silk fabric to India.

Analysts fear that India's exports of primary commodities to China may dry up as its own growing economy guzzles more of its raw materials.

As a result, businesses on both sides are exploring ways in which the Asian giants can capitalize on each other's economic strengths--namely, manufacturing and computer hardware in China, and services and software in India.

Madhu Bhalla, an expert in East Asian Studies at Delhi University, says the two countries need to look at new ways to cooperate if they want to sustain the growth in trade.

"They have to change the nature of the relationship from merely trading to joint ventures, joint investments overseas," Bhallah says. "I think in areas where we have the skills, where we have the knowledge base, where we have people with good management techniques which the Chinese lack, I think we can get together with the Chinese who have entrepreneurial skills which are beyond us, and of course the capital to invest, which is also beyond us. I think we can go across the world together. But with each other I am not sure how far we can sustain the present level of trading."

Signs of cooperation are not hard to spot. In the energy sector, for example, China and India are exploring joint bids for overseas oil and gas fields, which both countries want to feed their energy-hungry economies. The strategy paid off last December, when the oil companies of the two countries jointly won a bid to acquire Petro-Canada's stake in Syrian oil fields.

KMT Rally Protests Pro-Statehood Moves

Protest, counter-protest--today, it was the Koumintang's turn to take to the streets.

More than 20,000 demonstrators waved flags and chanted slogans in Taipei Sunday to protest pro-independence moves by Taiwan President Chen Shui-bian.

China's opposition Kuomintang (KMT) organized the rally, a day after a much bigger rally in Taipei (see Saturday's story) to support Chen's ruling Democratic Progressive Party and protest China's military threats against the island.

KMT chairman Ma Ying-jeou told supporters there were many problems Taiwan needs to address, including corruption and the economy. He said if Taiwan gets its priorities wrong there will be a huge price to pay.

Ma, who is mayor of Taipei and considered a presidential favorite in Taiwan's 2008 elections, is scheduled to visit the United States this week.

In the last several months, Chen has escalated tensions across the Taiwan Strait by formally suspending a defunct but symbolically important commission responsible for reunification with China. He also scrapped reunification guidelines and proposed amending Taiwan's constitution to change the island's name from "Republic of China" to "Taiwan."

China's ruling Communist Party interprets these actions as moving dangerously close to a formal declaration of statehood by the breakaway island, which Beijing regards as a renegade province.

Yesterday's rally marked the first anniversary of China's Anti-Secession Law, which authorizes war if Taiwan formally declares independence.

With nearly 800 short-range ballistic missiles targeting Taiwan's cities and military bases, China has the weaponry to back up its words. Analysts say Beijing has the ability to launch multiple barrages of missiles without warning.

The US, which has pledged to protect Taiwan, is clearly unhappy with the cross-Strait situation. Washington has urged Chen to avoid provoking China.

Saturday, March 18, 2006

Taiwanese Rally Against Threats by Beijing

Tensions across the Taiwan Strait are escalating.

Taiwan President Chen Shui-bian (pictured here) and Vice President Annette Lu joined a rally by the ruling Democratic Progressive Party (DPP) today after a march through downtown Taipei to protest China's military threats against the breakaway island.

The rally marked the first anniversary of China's passage of the Anti-Secession Law that authorizes war if Taiwan formally declares statehood, or--maybe more ominously--if efforts to reunite with the mainland ultimately fail.

"Taiwan is an independent sovereign state and Taiwan's future should be determined by its 23 million people,'' Chen said in an emotional speech. "The great Taiwanese people oppose annexation and invasion.''

China has nearly 800 short-range ballistic missiles targeting Taiwan and is believed to be adding as many as 45 missiles a year to its anti-Taiwan arsenal as part of a massive military buildup that has alarmed the United States, which, while urging Taiwan to avoid provoking Beijing, has pledged to protect the island.

Just eight years ago, Taiwan analysts say, China had no more than 150 missiles aimed at the island. They say the buildup means that Beijing now has the ability to fire barrages of missiles at Taiwan--reaching all its cities and military bases--with no warning.

In line with its sacrosanct "One China" principle, China's ruling Communist Party regards Taiwan as a renegade province.

China's leaders earlier this month criticized Chen for formally ending a defunct forum on unification with the mainland; and the annual meeting of the National People's Congress ended with veiled threats of force. Chinese Premier Wen Jiabao scolded Taiwan's government for "highly risky and dangerous'' actions, said his government was monitoring developmentss closely, and threatened to respond to any steps toward independence. China, Wen said, was "preparing for all eventualities."

The DPP said it organized today's rally, which was held in front of Taiwan's presidential office building, to raise awareness of the threats and mobilize public opinion. The DPP estimated a turnout of 100,000; but police put the number at 45,000.

Ridiculing China's recent offer of two pandas to Taiwan while aiming missiles at the island, some marchers dressed as giant pandas and waved toy rockets and red balloons symbolizing the dreaded weapons.

Taiwan's opposition Nationalist Party or Kuomintang (KMT), which last week held an anti-independence rally, strongly opposed today's event. The KMT urged Chen not to escalate tension with China, which is Taiwan's biggest trade partner and the recipient of an estimated $100 billion in investment from Taiwanese companies and individuals.

China and Taiwan have been ruled separately since a civil war ended in 1949, when the Communist Party came to power on the mainland. The KMT fled to Taiwan--along with two million refugees and a horde of treasure--and established a rightwing, authoritarian regime that ruled over the local inhabitants with an iron fist.

For decades, the KMT upheld its own interpretation of the One China principle by claiming sovereignty over the mainland and dreaming of reunification as a result of an eventual overthrow or collapse of the Communist government. In recent years, a modernized, pro-democratic KMT has repurposed and reinterpreted the principle to signify peaceful reunification coupled with mainland democratization and, though it officially denies this, probably also autonomy for Taiwan--essentially a more acceptable version of the "One China, Two Systems" policy that Beijing applied to Hong Kong and which the KMT criticizes as inappropriate for Taiwan.

Most Taiwanese seem to prefer keeping things the way they are--though fewer Chinese missiles would no doubt be a welcome change. Opinion polls consistently show 80 percent in support of the status quo.

Friday, March 17, 2006

US Panel Pushes Export Control Issue

Dual-use technology.

This rather esoteric term, referring to items--from rockets to railroads--which can be used for both peaceful and military purposes, is about to make news. In fact, dual-use technology--more precisely, the controls the United States places on the export of this kind of technology--is certain to be on the agenda when US President Bush meets with Chinese President Hu Jintao in Washington next month.

As in the case of the politically potent currency manipulation/trade issue (China's alleged manipulation of the yuan to keep it artificially low relative to the dollar in order to boost exports), the pressure to raise the dual-use issue is coming from the US Congress.

So it goes in a democracy.

Members of the US-China Economic and Security Review Commission are turning up the heat on the dual-use issue. Established six years ago to monitor and investigate the national security implications of the US-China trade and economic relationship, the bipartisan panel--chosen by Republican and Democratic leaders of the Senate and House of Representatives--is concerned that the Bush administration, in its desire to boost trade with the world's most populous nation, could be turning a blind eye to security concerns when it approves exports to China of dual-use technology.

In hearings on Friday that examined China's military modernization, former Senator Fred Thompson, a Tennessee Republican and commission member, whose photo appears above, took aim at the Export Administration Act, which establishes dual-use export guidelines.

"The last iteration I saw of it still gives more and more power to commerce at a time when national security aspects of things and defense aspects of things, I think, are becoming more and more important," Thompson said.

Commission members said the issue is particularly important given China's rapid military build-up and heightened tensions in the Taiwan Strait.

But Beth McCormick, acting deputy undersecretary of defense for technology security policy, defended administration policy, saying national security considerations are weighed heavily.

She said her agency has received about 1,000 dual-use export license applications from China annually for the past four years, and of those about 70 percent have been approved. The remainder were denied or returned without action.

McCormick said most of the applications have been for chemical manufacturing equipment, toxic gas monitoring systems, equipment used in handling biological materials and technology and electronic and semiconductor equipment.

She said her agency has approved only a few of the more sensitive munitions export license applications for China in the last two years.

"The approvals include an explosive ordnance disposal containment vessel for Chinese security training in preparation for the Beijing Summer Olympics, an inertial reference system for use in railway track curvature measurements, and several commercial satellite licenses," McCormick said.

Commission chairman Larry Wortzel questioned why the administration approved technology to support China's railway, which he says will play a key role in the country's military modernization.

"As China moves to mobile, strategic intercontinental ballistic missile systems that can put warheads [aimed] on the United States, it is going to transport a lot of that stuff by rail," Wortzel said. "As China increases that military buildup against Taiwan and threatens Taiwan with shorter-range missiles by the second artillery, the principle way that the second artillery moves those missiles from plants to storage and moves its conventional and nuclear warheads is by rail."

Another US official said his agency is working to tighten controls on dual-use technology exports to China. Darryl Jackson, assistant secretary of commerce for export enforcement in the Bureau of Industry and Security (BIS), said: "BIS is currently working with its interagency partners on a new regulation that would require a license to export otherwise uncontrolled items to China when the exporter knows at the time that the export will be destined for military use in China. The regulation will be designed to control exports that can make a significant contribution to China's military modernization in a way that will minimize the compliance burden on US industry."

Jackson said his bureau has investigated a number of export control violations involving dual-use items to China. He said the probes led to 14 criminal convictions last year.

Jackson said agency personnel visit China regularly to determine whether licensed items are actually being used as authorized, a process known as post-shipment verification.

But panel member Thompson sounded skeptical.

"The post-shipment verification process is pretty much of a sham," he said. "We really do not have any effective way of knowing what happens to these goods once they get there."

Thompson suggested that Washington ban munitions exports to China until the verification process is improved.

Thursday, March 16, 2006

China-Russia Relationship Worries Washington

As it hardens its line against China (scroll down for stories), the United States is clearly concerned about Beijing's increasingly close relationship with Moscow.

After decades of bitter rivalry--dating to Stalin's siding with the Nationalist Koumintang and historic betrayal of the 1927 Chinese Communist uprising--China and Russia have developed what they call a strategic partnership. The two powers, who once competed for leadership of the Communist world, have pledged their adherence to a "multipolar world," a euphemism for opposition to US domination.

The Irony is stunning: more than 30 years after the Nixon administration's historic China opening further divided Moscow and Beijing, the Bush administration is driving them closer together.

Diplomatically, China and Russia appear to be working in concert to resolve the dispute over Iran's nuclear programs; and Iran is expected to be high on the agenda when Russian President Vladimir Putin (pictured above) visits China next week.

Both nations have veto power on the United Nations Security Council, which is mulling possible sanctions against Iran.

The US and other Western nations want Tehran to suspend all nuclear activities, accusing the Islamist regime of trying to build nuclear weapons. Russia has posed a compromise solution, offering to enrich uranium for Iran to be used in nuclear energy reactors. But that proposal has yet to be accepted.

The Chinese-Russian relationship has a crucial military dimension, too. Since the 1991 Soviet collapse, China has purchased billions of dollars worth of Russian fighters, missiles, submarines and destroyers, becoming the main customer for Moscow's struggling defense industries.

US defense officials believe China acquires much of its high-end military equipment from Russia, while shopping for dual-use military technology in other European countries. And the US was disappointed that it was not allowed to observe last year's joint Chinese-Russian military exercises.

On the economic front, Russia and China aim to more than double bilateral trade--which last year reached nearly $30 billion--by 2010. Up by more than a third from the previous year, much of the trade increase is due to soaring world oil prices. Russia plans to ship 15 million tons of crude oil to China through railways in 2006 and is studying the possibility of exporting natural gas.

China Rejects Joint US, Australian Criticism

Beijing today brushed off calls from the United States and Australia for China to behave more responsibly in world affairs.

At a regular news briefing, Foreign Ministry spokesman Qin Gang rejected the criticism. Qin, pictured here, said China is a responsible country that is devoted to world peace and promoting mutual development among all nations.

But Washington and Canberra are apparently not so sure. In Australia Thursday, US Secretary of State Condoleezza Rice and Australian Foreign Minister Alexander Downer expressed concern that China as an emerging power needed to understand its responsibilities. They urged Beijing to be more open in its economy and its dealings with other countries.

Rice also said that Beijing is not being transparent about its military spending and purpose, essentially repeating a criticism made in the past by US Secretary of Defense Donald Rumsfeld.

The White House weighed in with additional criticism. It issued a policy statement on Thursday that said China could not maintain a peaceful path to development if political reforms do not come soon. The document, titled "National Security Strategy," also criticizes China for trying to "lock up" energy supplies around the world and trying to control its markets instead of opening them up.

The linkage--joining China's economic expansion and energy quest with its authoritarian political system--is somewhat unusual and appears to reflect growing frustration and concern on the part of the Bush administration over the real intentions and ambitions of an emerging superpower rival.

As one analyst put it: "For all the past US rhetoric about competition and cooperation, there is a growing realization among many in Washington, including administration officials and lawmakers from both parties, that China's rise may not be in the US national interest."

China's military buildup--and Washington's willingness to address the issue publicly--reinforces a view held by many analysts in Asia of increasing rivalry between two imperial powers, each in its own way seeking to change the status quo: China, which is striving for regional dominance with respect to Japan--and at least global parity with respect to the US--and the US, which, while seeking to preserve the status quo in some areas, openly admits to seeking the political and economic transformation of whole regions of the world.

"It's classic," said a Hong Kong-based analyst. " Classic competition between established and ascending powers. One can only hope the competition does not turn into a clash."

The military issue is a major source of concern. China this year again increased its military spending by double digits, but few serious observes believe the official figures. Some experts say China's real military spending could be three times higher than published figures.

Foreign Ministry spokesman Qin dismisses the assertions. During his briefing, he rejected accusations the government is hiding military spending and said China regularly publishes white papers on defense.

Qin said China's military spending is completely transparent, and that his government hopes all countries look at the issue objectively.

China says the increased spending is needed to modernize its large military and to improve the lives of soldiers.

As the analyst said ... one can only hope.

Wednesday, March 15, 2006

US Senators Urge Beijing to Revalue Yuan

Three United States Senators will travel to Beijing next week to urge Chinese officials to revalue their country's currency. The trip comes ahead of a Senate vote on legislation that would impose high tariffs on Chinese goods if Beijing does not take action.

Senator Charles Schumer (pictured above), a New York Democrat, will join Senator Lindsey Graham, a South Carolina Republican, and Senator Tom Coburn, an Oklahoma Republican, on the week-long trip beginning Sunday.

Schumer said he and his fellow senators will express their concerns to Chinese officials that the value of China's currency, the yuan, is being held artificially low to give Chinese products an unfair advantage in US markets.

Said Schumer: "When they keep their currency artificially low, Chinese exports get an unfair advantage, American exporters get an unfair disadvantage. The playing field is not level. That must change. We plan to take that message face to face to the highest levels of government and business in China."

Graham echoed Schumer's comments.

"The Chinese government needs to understand that from all corners of this country, the frustration with our trading practices is at a boiling point," he said. "The only way to relieve the pressure is to have an honest discussion and real dialogue about relieving the pressure. The burden in my opinion falls on the Chinese more than it does us."

Graham and Schumer will also travel to Shanghai for meetings with Chinese business leaders and to Hong Kong to discuss port security issues with officials there.

The trip comes ahead of a March 31 deadline for a Senate vote on legislation sponsored by Schumer and Graham that would impose high tariffs on imported Chinese products unless Beijing agrees to allow its currency to rise in value.

The measure is one of several that reflect concern over what many lawmakers call China's unfair trade practices. One bill calls for revoking normal trade relations with China.

Support for the measures will rise if the US Treasury Department's semi-annual assessment of the currency issue accuses China of currency manipulation. The report is due in April.

Also in April, US and Chinese officials are scheduled to meet to try to resolve a number of trade disputes, including one relating to China's piracy of US intellectual property. That meeting is scheduled just days before a summit between President Bush and Chinese President Hu Jintao at the White House.

Chinese officials have been striking a tough tone on the currency reform issue. Zhou Xiaochuan, governor of the People's Bank of China, told reporters on the sidelines of the annual National People's Congress meeting in Beijing that China will determine the reform path of the yuan according to its own needs and not bow to foreign pressure. China's growing trade surplus with the US will not influence China's monetary policies and decision making, he stressed.