China Today

THE RICHEST VILLAGE IN CHINA?

2007-07-15T17:47:00.001-07:00

Long before it morphed into a city of 10m and became China's largest municipal exporter, Shenzhen – as the cliché has it – was a "sleepy fishing village" on Hong Kong's northern border.

In 1980 Shenzhen comprised two towns – the largest of which had a population of 20,000 people – and 15 former communes. The "village" so many people remember is Fishermen's Village, or Yumin Cun, a small rural hamlet situated on the banks of the Shenzhen river just a few hundred yards west of the Lo Wu border station.

Like Shenzhen, Yumin Cun has changed beyond recognition.

From a collection of huts it has gone upscale. Yumin Cun is now a gated community in downtown Shenzhen, occupying some of the most expensive land in China. Its transformation captures in microcosm Shenzhen's own shift from agricultural backwater to industrial powerhouse whose emergence made possible Hong Kong's reinvention from a manufacturing hub to global financial services centre.

Initially, the village's proximity to Hong Kong was a liability. In the 1950s a one-metre high fence was constructed, separating villagers from the river they fished to supplement meagre agricultural incomes.

As the Cultural Revolution's lunatic excesses fuelled a new wave of emigration to Hong Kong, the fence was fortified. "They made it two metres high," says Huang Xingyan, who grew up in the village. "I remember watching thousands of people running across the border." Among them were residents of Yumin Cun. Mr Huang estimates that half of all villagers aged 40 or above now live in Hong Kong.

The villagers' luck changed on August 26 1980, when the central government formally designated Shenzhen one of four new special economic zones. Their village was in the right place at the right time, occupying a prime piece of land around which downtown Shenzhen would develop.

They also benefited from a distinction between rural land, which is owned collectively by villagers, and state-owned urban land.

When seven Hong Kong factories opened in the village in 1979, their rents flowed back to the residents of Yumin Cun. By 1981 it was reckoned to be China's richest village – a distinction that led to a visit from Deng Xiaoping, the architect of China's reform and opening, in 1984.

That occasion is memorialised in a series of bronze panels depicting different stages of the village's development over the past 50 years.

In the early years of the 21st century, the people of Yumin Cun discovered a more lucrative sideline – high-end property development. Single-family homes were torn down and replaced with apartment blocks.

Like Hong Kong tycoons who occupy penthouses at the top of their developments, village families live in upper floor units and rent out lower ones. Even simple dormitory buildings, used by the villagers as temporary accommodation during construction of their new homes, have been let to poor migrants who have flocked to Shenzhen.

In total, 191 villagers collect rents from 3,800 outsiders who have taken up residence. Each village family can collect as much as Rmb25,000 ($3,245) a month from their communally-owned property company, Shenzhen Yu Feng Property Management.

In addition, about 100 villagers own shares in the community's main holding company, Shenzhen Yu Feng Industrial Development Co, which manages factories in neighbouring Dongguan. According to Mr Huang, deputy general manager of Yu Feng Industrial, the company had revenues of Rmb7m last year and paid a dividend of Rmb1.5m.

ShangHai by Day

2007-07-14T21:02:00.000-07:00

China Takes Credit for Sudan Allowing UN Peacekeepers

2007-07-05T18:09:00.001-07:00

China's special representative on Darfur says the Chinese government's dialogue with Sudan was key to Khartoum agreeing to allow United Nations peacekeepers into the conflict-ridden Darfur region. As Daniel Schearf reports from Beijing, China has become more active in trying to resolve the Darfur conflict after facing criticism for putting economic concerns above human rights.

Liu Guijin

China's special envoy on Darfur Liu Guijin said Thursday that Sudan's agreement last month to allow U.N. peacekeepers into Darfur "could not be separated" from the Chinese government's efforts on the issue.

"From the highest leader in China to relevant foreign ministry officials, we have always used our method of using our words and made use of every opportunity and channel in every aspect of work, especially with the Sudanese government," said Liu.

Khartoum for months dragged its feet on a U.N. plan to allow thousands of peacekeepers into Darfur to relieve overwhelmed African Union forces. Last month it finally signed approval for a hybrid force of AU and U.N. troops.

Liu visited Sudan and other African nations last month. He says the deployment will begin, at the earliest, at the end of this year, pending Khartoum's agreement on a date.

China has resisted sanctions against the African nation despite accusations Khartoum has supported militias responsible for mass killings and rape in Darfur that Washington has called "genocide."

President Bush has taken a "wait and see" attitude to Sudan's agreement to the U.N. deployment.

Liu says western nations should stop doubting Sudan's intentions and be more welcoming of the steps forward.

He compares Khartoum to a naughty child who needs to be rewarded for good behavior.

"It's just like a child. If you judge him to be a bad child, when he does something good you should give him a little encouragement and say some nice things," said Liu.

Human rights organizations say China, which buys two-thirds of Sudan's oil exports and sells arms to Khartoum, is more interested in money than in human rights, an accusation Beijing denies.

Liu says China was doing its best to ensure weapons sold to Khartoum did not end up in the wrong hands.

He says attempts to politicize Beijing's hosting of the 2008 Olympics by linking it to the Darfur situation could only be due to ignorance of China's efforts to resolve the conflict or from people maintaining a "Cold War" ideology.

More than 200,000 people have been killed and two million made homeless since 2003 when rebels and government forces began fighting in Darfur.

Hong Kong Celebrates 10th Anniversary of Return to China

2007-07-01T20:11:00.001-07:00

Chinese leader Hu Jintao, center, sings with other performers during the variety show in Hong Kong, 30 Jun 2007

Chinese President Hu Jintao is leading celebrations in Hong Kong to mark the 10th anniversary of its reunification with China. The Chinese leader says democracy is growing in the territory but did not specify when the city would have universal suffrage. VOA's Heda Bayron reports from Hong Kong.

The territory kicked off July 1 with a flag-raising ceremony at the site of the historic change of sovereignty 10 years ago.

Hong Kong is celebrating with colorful parades, variety shows, and fireworks.

But alongside the grand government-organized celebrations, tens of thousands of Hong Kong residents are expected to march for democracy Sunday. As in the last four years, the protesters demand the right to directly elect their leaders.

In his speech Sunday morning, Chinese President Hu Jintao says democracy in Hong Kong is growing in an orderly way.

But he did not mention any timetable for universal suffrage.

Mr. Hu says the central government will remain committed to the principle of "one country, two systems" and a high degree of autonomy for Hong Kong.

The "one country, two systems" arrangement lets Hong Kong keep its capitalist economy and Western-style courts and civil liberties. China's ruling Communist Party has say over the city's political structure.

The city's top leader, the chief executive, is selected by about 800 voters approved by Beijing, and half the city's legislature is directly elected by the public.

A new Hong Kong cabinet was also sworn in Sunday.

Hong Kong Chief Executive Donald Tsang says his government will be "more open" and more democratic". Tsang, who originally took office two years ago after his predecessor resigned, promised to introduce proposals on a democracy roadmap during his term.

He also promised to do more to address concerns of a growing income gap, worsening pollution and heritage preservation.

Until the handover to China in 1997, Britain ruled Hong Kong for 156 years.

Hong Kong Bird Market Closed After Discovery of Avian Flu

2007-06-30T10:20:00.001-07:00

Hong Kong's government has temporarily closed the city's famous pet bird market after a bird for sale there was found to be carrying the H5N1 avian flu virus. Authorities say they will step up measures to combat bird flu, including a crackdown on the smuggling of birds into Hong Kong. Claudia Blume reports.

Hong Kong's famous Bird Garden in the city's busy Mongkok district usually bustles with residents bargaining for exotic birds as pets and with tourists who love the market's lively, colorful atmosphere. Now, a grim-looking guard at the entrance of the market makes sure no one enters.

The shutters of most of the 70 shops are down. A few, mostly elderly, vendors sit around with nothing to do.

They have put up a banner that sums up their feelings.

One of the vendors reads aloud, "This tourist spot has been turned into a ruin."

This woman says that her life is very hard right now. She says she does not have any customers and cannot earn any money.

Hong Kong's health officials closed the bird market about two weeks ago after a starling there was found to be carrying the H5N1 avian flu virus. All birds in that shop were removed and the market vendors were asked to thoroughly clean and disinfect their stalls. Hong Kong's agriculture and fisheries department has been collecting and testing samples from bird stalls to test for avian flu viruses.

Eric Tai, a veterinarian working for the department, said "Our last batch of samples for this exercise was collected earlier this week and if things go well, when everything is negative, showing there is no virus around, when that result comes out, then we will be opening the market again."

When the market opens, the department will introduce stricter regulations to ensure that all birds on sale are from approved sources, have valid health certificates and have been legally imported into Hong Kong. Tai says the agricultural department will step up its cooperation with customs officials.

"With these few methods we hope that the origin of the bird will be safe, and that we will be able to trace the source and that there will be no birds from unknown sources entering our licensed premises," he added.

Chinese children handle ducks at a market in Loudi, central China's Hunan province, 10 June 2007 file photo

The starling carrying the bird flu virus had no health certificate, raising suspicion it might have been smuggled into Hong Kong.

Hong Kong aggressively tests for bird flu after an outbreak in 1997 jumped to humans and killed six people, the first human cases ever recorded from the virus. More than 12 wild birds have died from avian flu in the territory this year.

The H5N1 virus has spread throughout Asia and into Africa and Europe. More than 150 people have died from the disease; most caught the virus after handling sick birds. While human infections are rare, many scientists fear the virus could mutate so it can spread easily among humans, causing a pandemic

THE UTTER FOLLY OF CHINA-BASHING

2007-06-25T18:55:00.001-07:00

Except in the administration, opinion in Washington is hardening on China's currency. Earlier this month, as the Treasury declined to name China a "currency manipulator" in its twice-yearly report on the matter to Congress, a new China-bashing law was put before the Senate. This measure, introduced by Democrats Max Baucus and Charles Schumer and Republicans Charles Grassley and Lindsey Graham, proposes to treat China's currency undervaluation as an illicit subsidy and seek redress through anti-dumping duties and other sanctions.

The bill has wide support on Capitol Hill – enough, the sponsors hope, to overcome a presidential veto. More surprising, perhaps, are the many calls for confrontation from disinterested economic experts.

The normally consensus-seeking Peterson Institute, for instance, is seething with impatience. In congressional testimony last month its director, Fred Bergsten, called for a new US strategy and recommended that this include a complaint at the World Trade Organisation "against China's currency intervention as an export subsidy". Mr Bergsten reminded the committee that Ben Bernanke, chairman of the Federal Reserve, had characterised China's currency policy that way in Beijing last December. (Mr Bernanke's prepared text did use the term "export subsidy", but in the speech as delivered it was cut. Back home, the excision served to underline the point rather than erase it.)

Sure enough, the new China-bashing law follows Mr Bergsten's advice. China, it says, is an economic outlaw and must be brought to book.

So much is wrong with this approach that it is hard to know where to start. To begin with, an aggressive posture is unlikely to force China to change. The best argument for a moderate appreciation of the renminbi is that it would serve China's interests. If China's leaders are not persuaded of that, intemperate foreign demands are unlikely to change their minds.

Put that aside, though, and suppose that China did capitulate and let the renminbi appreciate briskly. What would that do to America's current account deficit? The answer is: not much. Morris Goldstein, another Peterson Institute hawk on China, acknowledges in a recent working paper* that the US economy is running at full employment, so if China's manipulated currency is exporting unemployment, those particular exports must be going somewhere else. Moreover, as Mr Goldstein points out, the renminbi's weight in the trade-weighted dollar index is just 15 per cent. A 20 per cent, appreciation would provide a meagre 3 per cent devaluation of the trade-weighted dollar. That would improve the US current account deficit, which was $850bn last year, by maybe $50bn.

Mr Goldstein says an appreciation of the renminbi might pull some other Asian exchange rates with it. That would help. A 25 per cent real appreciation against the dollar in China, Japan and the rest of emerging Asia "would probably improve the US current account position by roughly $130bn to $180bn". Suppose, then, that all this happened. Even under all Mr Goldstein's favourable assumptions America's current account deficit would be trimmed to between $670bn and $720bn. The problem is not exactly solved.

Mr Bergsten, Mr Goldstein and every other competent analyst note that a meaningful improvement in the US current account deficit will require higher private saving and a smaller budget deficit at home – variables that, unlike China's currency policy, are under the control of the US Congress. Why then give so much greater emphasis to what China needs to do? Perhaps the China-bashers think that Beijing is more susceptible to US threats than Congress is to elementary economics. Come to think of it, that might be a close call.

A quite different argument is often advanced for increasing pressure on China: that the US public will turn protectionist otherwise. Unless China is perceived to be playing fair in international trade, it is said, public opinion will demand new import barriers. For the sake of liberal trade, in other words, it is necessary to threaten China with antidumping duties and quite possibly to impose them.

At the very least, this is a paradoxical point of view – like advocating gin to curb one's appetite for alcohol. In fact it is even more absurd than it seems. Protectionist sentiment in the US is driven, in part, by the current account deficit, so it is true that measures that reduce the deficit, including an appreciation of the renminbi, would lessen the demand for import barriers. However, protectionist sentiment is also fuelled, in a far more direct way, by the account of the economy that the political class feeds to voters. What this bill tells the US public is that the flood of imports, the external deficit and the resulting downward pressure on wages in some industries (no need to dwell on the downward pressure on prices and the improvement in overall living standards that those imports also provide) are mainly China's fault.

One reason to contradict this account is that it is wrong. Another reason, for those who need another, is that leaving it unchallenged – let alone affirming it – will indeed make a turn towards protectionism more likely.

* A (Lack of) Progress Report on China's Exchange Rate Policies. www.petersoninstitute.org

Darfur Activists Prepare For Possible Beijing Olympics Boycott

2007-06-25T08:45:00.001-07:00

Human rights activists are asking China to become more involved in Darfur peace efforts ahead of next year's Beijing Olympics

China is taking steps to avoid the possibility of an international boycott of the 2008 Olympic Games in Beijing by becoming increasingly involved in efforts to gain peace in Darfur. Human rights activists accuse China of fomenting the violence in the region, by selling weapons and ammunition to the Sudanese government, and buying oil produced by Khartoum. Peace advocates say the government of Sudan is committing genocide in Darfur, in a calculated campaign to "exterminate" the black ethnic groups that live in the region. Activists say they'll call for a global boycott of China's Olympics, if the Far Eastern giant does not put more pressure on Sudan to stop the killings. In the fourth part of a series on China's role in Darfur, VOA's Darren Taylor examines the potential for the calls for a Games boycott to become a separate campaign around the Darfur issue.

Although analysts and activists are divided as to the possibility of calls for an international boycott meeting with success, most agree that the moves towards punitive action against China have added an important element of pressure on Beijing to achieve a durable peace in Darfur.

"I don't think there's going to be much success in getting a boycott, but I also think that the specter of protests and calls for a boycott has gotten Chinese attention in the last couple of months in a very significant way. The threat of a boycott or a disruption of the Olympics has contributed to some of the steps that China has taken (recently)," says Stephen Morrison, the head of the Africa Program at the Center for Strategic and International Studies, a Washington D.C.-based think tank.

Amongst other efforts that have indicated a change in Beijing's policies with regard to Sudan, President Hu Jintao recently dispatched his senior Africa policy maker to Darfur – a move Morrison describes as "fairly bold."

China is also participating in high-level crisis talks about the issue in Paris this week.

But this isn't enough for activists. They want China to do more to stop the violence in Darfur, where people continue to die every day. And the peace advocates want quick results – something that Morrison feels isn't feasible.

"It's a very fragile international peacekeeping operation, and clearly there'll be a very slow political settlement and in getting a peace operation to function in Darfur. And that (slow movement towards peace) will provide impetus to calls for either protests around the Olympics, or a boycott."

According to Morrison, while a full-scale, official campaign to boycott the Chinese Olympics is unlikely, calls for it to happen will indeed grow in the months ahead, and they'll be concentrated in the United States, and, maybe, in parts of Europe.

"Most of those calls…. are not going to be echoed in Asia or Africa. They may be echoed in places like France, where newly-elected President (Nicolas) Sarkozy has called for a boycott of the Olympics if there's no progress, and now he's been joined by his foreign minister, Bernard Kouchner."

But Joey Cheek, American Olympic Gold Medalist speed skater, says he intends to "travel the world" ahead of the 2008 Games to "recruit athletes from all over, including Africa, to try to stop the genocide in Darfur."

He hopes that peace is secured in Darfur, and that China and other powers live up to their pledges in this regard, so that a Games boycott will be avoided. But, Cheek says, if the politicians don't deliver, then the "athletes of the world will have to take a lead in that respect."

The major advocacy groups around the Darfur issue are already recruiting high-profile Africans to mobilize ahead of a possible official call on the international community – including athletes and sponsors – for a full-scale global boycott.

Kenyan Olympian and marathon world-record holder, Tegla Lourope, recently testified before a special US Congress hearing called to debate the possibility of a boycott. She says Africans must support all measures designed to stop the human rights violations in Darfur. Lourope's is a powerful voice on the issue, given her painful past.

"I want to inform you that I come from a conflict place, close to Uganda. I have witnessed when people are dying," she told the US lawmakers. "We used to run away from school, and when I compare what's going on with Sudan, I know what it means…. The Darfur crisis is a very painful issue for the people of the continent of Africa…. There are so many children, many boys and girls – many Olympians – are losing their lives."

Anita Sharma, spokesperson for the Enough Campaign, is convinced that the potential for an international anti-Olympics campaign is "very real."

"If three months, six months, eight months go by and still nothing has changed (in Darfur), I can imagine that you would see the activist community saying, Okay; enough is enough; the time has come to really put the pressure on the Chinese government, and then maybe stepping up the calls for the boycott. And that boycott could potentially be with (the cooperation of) athletes or with sponsors – such as Coca Cola, for example, who is going to be investing heavily in the games."

Morrison, though, says his guess will be that there will be "hesitation" from most quarters to support a major international boycott.

"This is unlike the issue of the Soviet Union invading Afghanistan just prior to the Moscow Olympics in 1980. Here (with regard to Darfur) you're talking about using a boycott as a means of pressure."

In 1980, the US led a boycott by 64 countries of the Moscow Olympics in protest against the 1979 Soviet invasion of Afghanistan.

"The 1980 boycott was a reaction to a very dramatic, intimate and immediate action that Moscow took, and it had resonance around the world – not just in the US and some parts of Europe, which is where the activism around the Darfur issue is largely confined," Morrison explains.

But Larry Rossin, a former US ambassador and presently a senior official with the Save Darfur Coalition, says "in some senses" the calls to boycott the Beijing Games have already become a separate campaign.

"Our organization is supportive of the campaign to link the Olympics and Darfur in a way to try to change Chinese government positions and behavior. But that movement is not controlled by our organization and is being pushed by other individuals. So I think it's very likely that you're going to see self-standing organizations on this theme, but they'll continue to have a close relationship with ourselves and other elements of the global Darfur movement - because it really is one component of an effort on all fronts to try and bring relief to the people of Darfur and an end to their agony," says Rossin.

Sudan's ambassador to the US, Salah Elguneid, says the rally to boycott the Olympics because of Darfur is "mischievous," and will not succeed.

"Boycotts, sanctions and all these things are not conducive to any dialogue or positive engagement with which we could reach agreements and concrete results. Dialogue…. is the only way that people can come to reach agreements. But boycotts and sanctions and all these things are not conducive to anything. And this is the (international) experience, that sanctions (or boycotts) have never solved any problem."

The Chinese Embassy in Washington D.C. did not respond to requests for a response to the possibility of a boycott of the Beijing Games.

Hong Kong Marks Decade Under 'One Country, Two Systems'

2007-06-25T08:44:00.001-07:00

Hong Kong this week prepares to celebrate the 10th anniversary of its return to Chinese sovereignty, July 1. Ten years ago, many feared Beijing would renege on its pledge to allow Hong Kong to retain its capitalist system and its autonomy. But those fears did not materialize. VOA's Heda Bayron in Hong Kong looks back at the first decade under the "one country, two systems" arrangement and the challenges ahead.

China's People's Liberation Army (PLA) soldiers line up during rehearsal on eve of parade to be staged in run-up to 10th anniversary of the city's return to Chinese rule, 25 Jun 2007

When the British flag was lowered in Hong Kong on July 1, 1997, the former colony was anxious about its future under communist China.

Yet for most people, little has changed. Under China's "one country, two systems" policy, Hong Kong remains a capitalist economy. It retains its political autonomy and its people continue to enjoy wide-ranging freedoms not found in the rest of China.

But Hong Kong's fortunes did change after its return to China. The Asian financial crisis, which began in July 1997, sent the city into a long recession.

Then in December 1997, Hong Kong recorded the world's first human deaths from bird flu, leading the government to slaughter all poultry in the territory. Six years later, the outbreak of Severe Acute Respiratory Syndrome (SARS) killed almost 300 people in the city and further crippled the economy.

Ming Chan, a Hong Kong expert at the Hoover Institution at Stanford University, says the problems did not arise from Chinese control.

Ming Chan

"Hong Kong's worst fears did not materialize," Chan says." Hong Kong survived the initial shock of a shift to a different system. But then Hong Kong's challenge did not come from the functional area, did not come from the political attack but rather from the economic downturn."

Those events proved daunting for the government of Tung Chee-hwa, the city's chief executive, handpicked by Beijing. Many considered Mr. Tung, an industrialist with no political experience, an indecisive leader out of touch with ordinary citizens.

Political analysts say Beijing took a loose approach on Hong Kong in the first few years after the handover. They say Beijing was afraid too much control would kill its "one country, two systems" policy, which is meant to be a model for Taiwan's eventual peaceful reunification with China.

But some analysts say giving Mr. Tung too much of a free hand led to headaches for Beijing.

On July 1, 2003, half a million Hong Kong residents, already angry over Mr. Tung's handling of the SARS outbreak and the economy, rallied to protest a proposed law that could have curtailed civil liberties. The demonstrators demanded the right to directly elect their leader.

Only a group of 800 largely pro-Beijing business and political leaders are allowed to vote for Hong Kong's chief executive. Only half the legislature is directly elected.

Ma Ngok, a politics professor at the Chinese University of Hong Kong, says the protest was a turning point in Beijing's administration.

"After the July 1 march, they (Beijing) adopted a more proactive attitude both economically and politically to handle the affairs of Hong Kong," Ma notes.

China tried to boost the economy by adopting a free trade pact with Hong Kong, allowing Hong Kong banks to do Chinese currency transactions, and allowing more Chinese tourists to visit.

But the pressure on Mr. Tung continued and he stepped down in 2005. Donald Tsang, the city's well-regarded top civil servant, took over.

Since then, Hong Kong has snapped out of its slump. The economy has recovered and this year, the government posted a budget surplus, enabling it to cut taxes.

But prosperity has not eased public demands for a greater say in their government. This man says economic health is not enough for the city.

"I'm a little bit disappointed about political reform. I think we need more democracy, universal suffrage," he says.

But China has ruled out direct elections for the next several years, even though the concept is enshrined in Hong Kong's Basic Law.

On July 1, while local and mainland officials celebrate the unification anniversary, activists are expected to march again to demand universal suffrage.

Albert Ho

Albert Ho, chairman of the opposition Democratic Party, says the prospect of achieving democracy is "very, very difficult". But he says without democracy, Hong Kong people could easily lose the freedoms and rights they are enjoying now.

"The rule of law tradition as well as the system of independence of judiciary can be very fragile," says Ho. " The high degree of autonomy and rule of law in Hong Kong can be eroded very quickly and can even be taken away overnight."

Democracy advocates say a greater public voice in the city's government will only help Hong Kong face any new challenges that may come in the next decade.

Car Industry Booming in China

2007-06-16T08:02:00.001-07:00

Automakers are ramping up their operations in China to take advantage of record-breaking growth in vehicle sales. China replaced Japan last year as the world's second-biggest auto market, and industry experts predict the growth will continue as the country's booming economy encourages greater consumption of luxury goods. VOA's Mil Arcega reports.

Buying a new car in China

For automakers, China is the new frontier: the world's fastest growing market with millions of new consumers. Even more attractive to foreign retailers is the emerging class of young successful Chinese.

"This new group, which they define as 'Tweens' - it's a combination of the words teens and in-between," says Charlotte Rylme, general manager at the Swedish Trade Council. "They have a new job, they earn a lot of money, and they live and stay at home with their parents, some of them, and they are very attracted to buy foreign brands, so they are very attractive for foreign retail companies. And they buy more than 300 billion RMB ($40 billion) annually."

Charlotte Rylme

They are also buying a lot of cars. More than 7 million new cars were sold in China last year. This year the number is expected to surpass 8.5 million.

Swedish carmaker Volvo expects to double its sales in China this year. Company Vice President Lex Kerssemakers says in China, having a good brand is the key to success. "You see people walking around here with all sorts of branded stuff, from sunglasses to jeans to trousers," he says. "So they are very brand focused. Volvo has a good reputation here from the past, and what we need to do is, we need to continue to build on that reputation and strengthen our premium in a market which will be very premium oriented."

Lex Kerssemakers

Although the competition is fierce, car dealer Eddie Lai says Chinese consumers like to buy cars that show how worldly and how successful they are. "The economy is growing, the society is growing, and young people are getting more on an uptrend scale," he says, "and they are going to fit into the lifestyle as in the European countries and American country, and it's the status symbol in China. It is a status symbol for the young generation to demonstrate that they are successful, that they are intelligent, that they are up on society's expectations."

Carmakers are capitalizing on those expectations by increasing production quotas. While factories are closing in North America and Europe, new plants go up almost daily in China. Industry executives project the Chinese market could grow to 20 million vehicles per year by 2020.

China Trying to Upgrade Its 'Made in China' Image

2007-06-16T06:20:00.001-07:00

Those who control the image strings for government and business interests in China, the world's largest single market, are trying hard to bury the country's well-embedded "Made in China" image and embrace a new one: "Created in China."

The huge Far Eastern country, which ran up a staggering $232.5 billion trade surplus with the United States in 2006, is reinvesting some of that capital back into America through several large purchasing agreements with software companies, as well as by helping to establish new IT research facilities here in the states.

China is also attempting to change its image from a cost-effective, product-producing nation to one that is more inventive and research-oriented.

At a splashy media event May 9 at the Mark Hopkins Hotel in San Francisco, representatives of several corporations and trade associations from both China and the United States gathered to sign long-term purchasing and marketing agreements that will bring some $4.3 billion into the American economy.

The event was staged on the eve of the second strategic economic dialogue between the two superpowers. Chinese and U.S. trade representatives are to meet May 23-24 in Washington for talks on Beijing's surpluses, currency controls, product piracy and other issues that have been nagging U.S. businesses and the government for years.

The Chinese representatives signed 27 contracts and an investment deal with their American counterparts. Many of the signings were simply a formality; most of the business deals have been in process for various periods of time.

A dozen Chinese companies—including computer maker Lenovo, China Netcom and Semiconductor Manufacturing International—concluded deals with 23 U.S. companies in the software, semiconductor and telecommunications sectors. Microsoft, Oracle, Cisco Systems and Hewlett-Packard were among the U.S. companies involved in the agreements.

Microsoft lands biggest software deal

Microsoft, the world's largest software maker, landed the largest piece of the $4.3 billion pie when Lenovo committed to purchasing $1.3 billion this fiscal year in Windows XP, Windows Vista, Microsoft Office and other software to run its desktops and laptops.

Lenovo, which acquired IBM's personal computer line in 2005, is currently ranked fourth behind HP, Dell and Acer in worldwide market share. According to a recent Gartner market report, Lenovo holds 6.3 percent of the market.

"Microsoft ... believes that respect for intellectual property rights is critical to the sustained development of the software industry. Efforts like this to promote the use of genuine software help to support the protection of intellectual property in China," a company spokesperson told eWEEK.

"We further applaud the Chinese government for taking significant steps toward ensuring the use of genuine software in China, and for promoting a healthy intellectual property environment, which we believe is vital for China to realize its full potential as an innovation leader."

China says U.S. piracy case will harm trade ties. Click here to read more.

In April 2006, Lenovo and Microsoft sealed a similar deal for $1.2 billion in an effort to get legitimate copies of Windows back on Chinese PCs.

For years, China has been criticized for not doing enough policing and law enforcement in trying to slow down the rampant black- and gray-market counterfeit software and hardware trade in that country.

$95 million for research facility

Hong Yuan Machinery, from East China's Jiangxi Province, agreed to invest about $95 million to establish a research center in San Francisco. Details about the center were not available at press time.

"As China continues its path of economic development, one of the things that their government policy has advocated going forward is to move from 'Made in China' to 'Created in China,'" said Daryl Hatano, vice president of public policy for the Software Industry Association in San Jose, Calif., one of the organizers of the May 9 event.

"And that means many things. At its core, it means they don't want to stay 'low-value' manufacturing. So, 'Created in China' means really moving up the value chain. And I think, over time, it is to develop world class companies that have recognizable brands, and that are operating outside of China, as well as in China," Hatano said.

Over time, China would like to have manufacturing here in the U.S., Hatano added.

"This event underscores China's resolution to explore more U.S. investment and strengthen the understanding and mutual development between the two sides," said Ma Xiuhong, vice minister of China's Ministry of Commerce and head of the delegation, which is composed of 369 Chinese business leaders.

California Lt. Gov. John Garamendi told the gathering: "These agreements are an important step in furthering the deep relationship between this state, this country and China."

China Prepares for First Strike in Electronic War

2007-06-16T06:19:00.001-07:00

China's military is preparing for electronic warfare by setting up information warfare units that are developing viruses to attack enemy computers and networks, according to the Department of Defense's annual report to Congress.

According to the DoD, the PLA (People's Liberation Army) has also established tactics to protect its own computer systems and networks and those of friendly states. Since 2005, the PLA has been including offensive network attacks into its exercises, "primarily in first strikes against enemy networks," according to the report.

China's military is looking to establish what it calls "electromagnetic dominance" early in a conflict, specifically by launching electronic warfare against an enemy's information systems on the battlefield, the DoD said.

Beyond computer viruses, the PLA is investing in other electronic countermeasures, including electronic and infrared decoys, angle reflectors and false target generators.

China's foreign ministry spokesperson Jiang Yu denounced the DoD's report, saying that it exaggerates China's military strength and expenses "out of ulterior motives."

"As a peace-loving country, China steadfastly follows a road of peaceful development, adopting a national defense policy that is defensive in nature," she said.

"Each sovereign state has the right and obligation to develop necessary national defense strength to safeguard its national security and territorial integrity. It is totally erroneous and invalid for the U.S. Report to play up the so-called 'China Threat.'"

The DoD views Taiwan and the Taiwan Strait as being the likeliest arena for military confrontation and credits China's focus on that country for its recent efforts to modernize its military planning.

"China's near-term focus on preparing for military contingencies in the Taiwan Strait, including the possibility of U.S. intervention, appears to be an important driver of its modernization plans," the report states.

In response to that particular view, Yu called Taiwan an "inalienable part of the Chinese territory."

"China resolutely opposes interference in China's internal affairs by any country with whatever manifestation," she said. "… We will never tolerate the 'Taiwan Independence' or any attempt by anyone to separate Taiwan from China by whatever means."

At any rate, China's cyber-espionage is nothing new. Ira Winkler—author of "Zen and the Art of Information Security," former NSA (National Security Agency) analyst, former director of technology with the National Computer Security Association and current president of the Internet Security Advisors Group—said in an interview with eWEEK that Russia has had cyber-security squads for decades and that China has been at it for at least a decade. North Korea has had this type of behavior attributed to it as well.

"As far as a potential military adversary goes, China is clearly ranked second behind Russia with regards to capability," he said. "We have lots of little adversaries all over the place, but nobody offers more of a strategic threat than [Russia]."

What China has, Winkler said, is sheer resources to lavish on the effort, both in terms of gathering intelligence against the United States as a whole, as well as in military preparation.

China slaps anti-dumping duty on antibiotic from India

2007-06-16T06:12:00.001-07:00

China has imposed anti-dumping duty of up to 37.7 per cent on sulfamethoxazole, an antibiotic from India, following a final ruling made by China 's ministry of commerce which said sulfamethoxazole exports from India have inflicted losses to local manufacturers.

The anti-dumping duty rates were increased from 10.7 per cent to 37.7 per cent to offset damages caused by cheap imports to the local producers, and the tax would be in effect for five years.

Sulfamethoxazole is a sulfonamide bacteriostatic antibiotic is commonly used to treat urinary tract infections. It is also an important material for producing other sulfonamides.

China started its anti-dumping investigation on imported sulfamethoxazole from India last June, and imposed temporary anti-dumping measures in February this year on the basis of its preliminary investigations.

Copper keeps rising as China uses more

2007-06-16T06:10:00.001-07:00

Copper rose for a third consecutive session Thursday after industrial production unexpectedly accelerated in China, the world's largest user of the metal, and on speculation that strikes in Chile would disrupt supplies.

Nickel slipped while aluminum and zinc gained.

China's output increased 18.1 percent in May from a year earlier, the National Bureau of Statistics said Wednesday, after gaining 17.4 percent in April.

That beat the 17 percent median estimate of 19 economists surveyed by Bloomberg News.

Contract workers at the Codelco mine in Chile, the world's largest copper producer, plan to strike June 20, a labor leader said.

"This kind of production growth is positive for metals," David Thurtell, a London-based analyst at BNP Paribas, said. "Possible strikes in Chile are also helping."

Copper for delivery in three months on the London Metal Exchange gained $123 to $7,321 a metric ton.

The metal used in power cables and wiring has dropped 10 percent since trading at an 11-month high of $8,335 a ton on May 4.

Inventories tracked by the LME fell for a 19th consecutive session, slipping 0.7 percent to 119,075 tons, the exchange said. That is the lowest since Oct. 23.

China is increasing domestic production to meet rising demand. China, the world's most populous nation, increased copper output 17 percent in May from a year earlier, to 278,000 metric tons. That beat the previous record of 274,000 tons in April.

The planned walkout by contract workers at state-owned Codelco would hamper company output, said Cristián Cuevas, president of the Confederation of Copper Workers, a group representing contract employees. The workers are demanding more pay.

At Doña Inés de Collahuasi, one of the largest copper mines in Chile, workers will not return to talks unless the owners, Xstrata and Anglo American, submit a new wage offer, said Pedro Díaz, the treasurer of a union.

Nickel fell $200, to $40,025 a ton.

Nickel's 14-day relative strength index, used by some investors to gauge price direction, fell to 29.7 on Wednesday. A reading below 30 typically signals prices may advance.

That was the first time the index had fallen below 30 since November 2005. The index jumped to 38.5 on Thursday.

Nickel has lost 18 percent since trading at a record $51,800 a ton on May 9.

Crude oil rose above $67 a barrel in New York and gasoline jumped after a government report showed that U.S. refineries had unexpectedly cut operating rates and Iran said that it was not willing to suspend its nuclear program.

Refineries operated at 89.2 percent of capacity last week, the lowest level since May 4 and the lowest in 15 years for the second week in June, an Energy Department report showed Wednesday.

Iran said its nuclear research was advancing. The United States has accused Iran of developing nuclear weapons.

Concern that the dispute over Iran's nuclear program might disrupt shipments from the country and the curtailment of supplies from Nigeria has bolstered prices since January 2006.

Crude oil for July delivery rose $1.39 to $67.65 a barrel on the New York Mercantile Exchange, the highest since June 7. Prices are down 2.8 percent from a year ago.

"Refineries should be operating at 95 percent of capacity right now as we approach July 4 and peak demand," said Michael Fitzpatrick, vice president for energy risk management at Man Financial in New York. "We aren't building a gasoline supply cushion against disruptions and glitches."

Gasoline for July delivery in New York rose 6.94 cents to $2.2247 a gallon.

"It looks like we built in too bearish an expectation in advance of the report," said Tom Bentz, an oil broker with BNP Paribas in New York. "It's questionable we'll break out of this range. There will have to be a strong close today to confirm that there's been a reversal."

Gasoline inventories rose 3,000 barrels to 201.5 million in the week that ended June 8, the report Wednesday showed. A gain of 1.5 million barrels was expected, according to the median of 16 responses in a Bloomberg News survey.

U.S. energy prices jumped 4.1 percent last month, the biggest increase since November.

Foreign Ministry: China objects to U.S. playing up ''China threat''

2007-06-16T06:09:00.001-07:00

BEIJING, June 14 (Xinhua) -- China objects to a senior U.S. Defense Department official's remarks playing up a "China threat", said a Chinese Foreign Ministry spokesman on Thursday.

Richard Lawless, U.S. deputy undersecretary of defense for Asian and Pacific affairs, said on Wednesday China's growing military strength is breaking the balance between Chinese mainland and Taiwan and has influenced regional and even the world's balance of power, according to Chinese Foreign Ministry spokesman Qin Gang.

Testifying before the U.S. Congress, Lawless said the United States hopes to hold a strategic dialogue with China.

Qin said China has explained many times its policy of peaceful development, it defense policy which is defensive in nature and its stance on the Taiwan issue.

He said China is open and transparent on its military spending.

"We hope the U.S. side will strictly abides by its commitment to the one-China policy, which it reiterated on many occasions, observe the three Sino-U.S. communiques, oppose 'Taiwan independence' and do not send wrong signals to Taiwan secessionists by selling weapons to Taiwan," said Qin.

Qin added that China is willing to strengthen dialogue and exchanges with the United States on defense matters, in a bid to promote mutual understanding and trust.

"China hopes through these exchanges, the U.S side can have correct understanding of China's national defense policy and stance on the Taiwan issue," he said.

China’s urban fixed asset investment up 25.9%

2007-06-16T06:07:00.003-07:00

China's urban fixed asset investment picked up to 25.9 percent in the first five months of 2007, official data showed Friday, amid expectations the government will act soon to slow its juggernaut economy.

That outcome compared with a 25.5-percent increase in fixed asset investment — a key measure of mostly government spending on infrastructure projects — during the first four months of the year, the National Bureau of Statistics said.

The data points to the continued strong pace of growth in the Chinese economy, especially in the real estate sector where the statistics bureau said investement grew by 27.5 percent to 721.4 billion yuan ($94.3 billion).

Overall investment for the period was 3.20 trillion yuan while investment in new projects grew 6.1 percent to 2.79 trillion yuan, it said.

A monthly figure for fixed asset investment in May alone was not provided. "The reason behind the rise in investment is (corporations') high profits," said Zhu Jianfang, an economist with CITIC securities based in Beijing.

The data came after China's government warned this week it was preparing for a new round of measures to cool an economy that roared ahead at 11.1 percent in the first quarter after recording 10.7 percent growth in 2006.

The growth levels well exceed the government's official target of around eight percent.

After other figures released this week showed exports booming, production rising and inflation ticking higher, Premier Wen Jiabao said the economy had to be cooled.

Monetary policy will be "moderately tightened" to ensure stable growth, Wen told a Wednesday cabinet meeting, with his comments widely expected to translate into a fresh round of interest hikes among other measures.

"The government is worried now about the continued uptrend of the growth, so there is possibility that the economy could become overheated again," said Shen Minggao, an economist for Citigroup in Beijing.

The central bank has already hiked interest rates twice this year and five times required commercial banks to place more money in reserve in an effort to cool inflation, fixed-asset investment and stock market speculation.

Goldman Sachs economist Liang Hong said aside from increasing interest rates, Beijing could enact a spate of other options, such as tightening land controls and stricter environmental standards.

An increase in export taxes on high-energy consumption products, as well as a cancellation of tax on interest income to slow money being taken out of bank deposits, could also be on the cards, according to Liang.

She said China's currency would also be allowed to appreciate faster while an increased issuance of central bank bills was likely to mop the excess liquidity in the financial system.

China's attractiveness to investors and huge profits from factories shipping everything from textiles to electronics means the nation is flooded with cash, which in turn leads to looser credit and acceleration in investment.

"The main problem is related to the excess liquidity, which is largely driven by capital inflows from the trade surplus," said Citigroup's Shen.

On Thursday, the government said industrial output, a key indicator of the temperature of the world's fourth-largest economy, rose 18.1 percent in May, picking up from 17.4 percent in April and lifting the five-monthly figure to 18.1 percent.

The government also reported earlier in the week that China's trade surplus had surged 73 percent and its inflation rate hit a worryingly high 3.4 percent in May — above the central bank's target rate of three percent for the year.

9 missing after bridge collapse in southern China

2007-06-16T06:07:00.001-07:00

BEIJING (AP): Rescuers searched Saturday for nine people missing since a bridge over a river in southern China collapsed after a boat rammed into it, state media reported.

Surveillance videos showed seven people riding in cars and two workers on the bridge over the Xijiang River at the time of the collapse early Friday, the official Xinhua News Agency said, citing Deng Genwei, vice mayor of Foshan city in Guangdong province.

Divers and 10 boats were searching for the missing people, Deng said.

An initial investigation showed that a boat overloaded with sand deviated from its original route and struck one of the bridge's support pillars, China Central Television reported.

About 200 meters (yards) of the 1,600-meter-(yard)-long bridge collapsed, and part of the structure fell onto the bow of the boat that struck it. All 10 crew members were rescued, and two were slightly injured.

The bridge was built in 1988 and runs over the Xijiang River, a major tributary of the Pearl River.

EU says China surplus is 'unsustainable'

2007-06-16T06:04:00.001-07:00

China's ballooning trade surplus was yesterday described as "unsustainable" by the European Union's trade chief after figures showed it had risen by almost 75 per cent, year on year, in May.

Peter Mandelson, the trade commissioner, said he would demand action from Bo Xilai, China's commerce minister, when they met after Beijing said the surplus had grown strongly in May to $22.45 billion, a 73 per cent increase on the same period last year.

Echoing US officials, he said the figures would add weight to mounting protectionist pressures in the west.

The US Congress is considering legislation to force a speedier revaluation of China's currency, while there are calls for new curbs on textiles and steel imports in Europe.

The Chinese Customs Bureau said exports rose in May by 28.7 per cent year on year, while imports were up by 19.1 per cent over the same period. In the five months to May, China's trade surplus reached $85.76 billion, 84 per cent higher than in the same period in 2006.

Growth

China's business with the developed world is growing fastest with Europe, where bilateral trade grew by 29 per cent year on year in the five months to May. Mandelson said it was increasing by 15 million euros a second and would hit 170 billion euros by the end of the year, with skewed government policies responsible for much of that growth.

Unnecessary customs regulations and protection of China's domestic services market were unacceptable, he said. Only six of 20,000 telecommunications licences had gone to foreigners, for example.

Beijing has said for more than a year that it wants "more balanced" trade, but none of the numerous measures it has taken gradually over the past 12 months to discourage exports has had any substantial impact.

Beijing has cut a host of small incentives for overseas sales, such as tax rebates and, in a number of product categories, including some steel products, it has even imposed export taxes.

The measures have been unable to tame an export machine driven by a powerful combination of low cost of capital, lax environmental and regulatory controls and a burgeoning entrepreneurial class, with greater freedom to do business offshore than ever before.

Mandelson said Beijing had not done enough and relations were "at a crossroads". While he favoured co-operation and dialogue, patience among EU governments and businesses was running out, he said.

Cheap labour was only part of the reason for booming exports, he said. "The rest of the explanation is that it is due to unnecessary barriers and restrictions.

"If China wants to keep our trade relationship on an even keel then it is going to have to recognise the misgivings that exist in Europe about those policies, which in our view restrict European companies entering its market," he said.

He added that China had made no progress in tackling piracy despite an agreement to tackle infringement of intellectual property rights.

Alternatives

Mandelson said there were no easy alternatives but the EU would take China to the World Trade Organisation if necessary or impose anti-dumping tariffs. He accused it of overproducing steel and dumping it on the world market.

Export growth is unlikely to slow as China has invested heavily in ports and transport, especially in Shanghai and Guangzhou in the south, an important factor in making it a reliable supplier to export markets.

"We expect export growth to remain robust, supported by firm global demand and the undervalued currency, while the trade surplus continues to widen," investment bank Goldman Sachs said in a recent research note.

China, U.S. to Step Up Anti-Piracy Work

2007-06-16T06:03:00.001-07:00

Beijing Cultural Law Enforcement Agency officers destroy pirated DVDs and CDs video and music material in the outskirts of Beijing, China Saturday April 14, 2007. China has promised to pursue product pirates identified by American authorities in a new effort to stamp out its thriving counterfeit industry, the head of the U.S. customs agency said Friday June 15, 2007. (AP Photo/Elizabeth Dalziel, FILE)

(AP) -- China has promised to pursue product pirates identified by U.S. authorities in a new effort to stamp out its thriving counterfeit industry, the head of the U.S. customs agency said Friday. The agreement comes amid mounting concern that Chinese pirates are endangering public safety in the United States and elsewhere by selling fake medicine, auto parts and other goods.

China accounted for about 80 percent of the 14,775 shipments of counterfeit goods seized at U.S. ports last year, said W. Ralph Basham, commissioner of U.S. Customs and Border Protection.

Under a memorandum of cooperation signed this week, U.S. Customs will provide China with information on the source of seized goods, and Beijing will report back within 90 days on the status of efforts to track down the counterfeiters, Basham told reporters.

"We've got to start dealing with the source of the problem. We can't expect to rely upon interdiction to be our tool in order to stop these products," Basham said.

China has long been the world's leading source of illegally copied goods ranging from designer clothes to movies and music. But concern about possible danger to the public has risen following the discovery of a toxic chemical in Chinese-made toothpaste.

Basham said his talks with Chinese officials did not touch on tainted products, which he said was the responsibility of the U.S. Food and Drug Administration. He said the FDA was in touch with Chinese officials.

Under foreign pressure, China has increased penalties for piracy and launched repeated crackdowns. But business groups including the U.S. Chamber of Commerce and the Motion Picture Association of America say the scale of piracy is growing faster than enforcement.

Basham met with his Chinese counterpart, Mu Xinsheng, and other officials this week.

Basham said American officials offered China help with security for the 2008 Beijing Olympics. He said that might include support from a U.S. program used at several foreign airports to identify travelers who might be barred from the United States.

U.S. tightens controls on exports to China

2007-06-16T06:02:00.001-07:00

Over the objections of major companies, the Commerce Department adds to a list of products requiring licensing for security reasons.

Despite protests from major U.S. corporations, the Bush administration on Friday tightened regulations governing the export to China of aircraft engines, high-performance computers and other technologies that have possible military uses.

The Commerce Department added 31 products to a list that requires special export licenses in hopes of keeping them out of the hands of China's military. The licenses, which companies complain are complicated to obtain, are meant to ensure that technology sold to civilian firms doesn't end up being used to improve Chinese missiles and other weapons.

Administration officials say they are trying to balance economic needs with growing concerns about the communist nation's rapid military modernization and access to advanced Western technology. But U.S. businesses say the new rules, proposed last summer and sharply criticized ever since, won't be effective because many of the so-called dual-use products are easily available from other countries.

All the regulations will do, companies fear, is drive away Chinese business when the U.S. trade deficit with the world's most populous nation is soaring. It reached a record high of $233 billion last year.

The rules change "puts American companies at a disadvantage," said William A. Reinsch, president of the National Foreign Trade Council, which represents companies doing business abroad. "The long-term impact will be people dropping out of the Chinese market and less trade."

Because of the rapid growth of its economy and military, China is one of the largest foreign markets for exports that require licenses. In 2006, nearly 10% of all U.S. export licenses were for sales to China, worth about $2.4 billion. U.S. companies exported $55 billion in licensed and unlicensed goods, which include products as varied as iPods and soybeans, to China last year.

Federal officials listened to some of the criticism and trimmed the number of new products on the list by about a third. For example, Commerce Department officials said they had originally planned to require licenses for some general-purpose telecommunications equipment but decided to require them only for gear that operated in extreme temperatures and could be used in space.

The U.S. government categorizes countries by their potential security threat, then limits the export of products that can be used for purposes such as waging terrorism, building missiles and developing nuclear weapons. Dozens of products are restricted for sale to China. In many cases, those items also have harmless civilian uses — high-powered computers, for example, are used in advanced weather forecasting — and U.S. officials allow the exports if firms can prove that the technology won't end up in the wrong hands.

In July the Commerce Department's Bureau of Industry and Security proposed requiring licenses for the sale of 47 additional products to China. Among them were types of computers, aircraft, semiconductor equipment, navigation systems and telecommunications components.

To offset the effect, the bureau proposed a program that would exempt sales to Chinese firms that undergo special clearance reviews to certify that they do not deal with the military.

"We seek to actively encourage legitimate civilian trade between the United States and China, even as we prudently hedge against the rapid growth in China's military capabilities," Christopher A. Padilla, assistant Commerce secretary for export administration, said in a speech in China in January.

Businesses balked, complaining that other countries were not joining the United States in the new export controls and that the "validated end user" program wouldn't work because Chinese officials were unlikely to allow the required on-site inspections of companies by U.S. officials.

A spokesman for China's Commerce Ministry strongly criticized the proposal after it was announced, urging the U.S. to drop its "Cold War mind-set."

Industry groups and affected companies such as Boeing Co., Sun Microsystems Inc. and Applied Materials Inc. urged the Commerce Department to scrap the plan or make major changes.

"Most of the stuff we build is competitively available from world market sources," said Gerald T. Young, vice president of e-business systems for Bourns Inc., a Riverside company that makes electronic switches and sensors.

"Whether a customer in China would buy it from us or a Korean source or some other source, they're going to get the product."

Companies submitted evidence about products on the new list that were easily available from other countries or even in China.

William Morin, director of government affairs for Santa Clara, Calif.-based Applied Materials, praised Commerce Department officials for removing semiconductor manufacturing equipment — its primary product line — from the proposed additions. But he said the controls on other products would work only if other countries also restricted them.

Commerce Department officials said they had pressured allies, but none agreed to go along.

"They're essentially unilateral controls," Morin said. "By their nature, they're ineffective."

Chinese Police Rescue Hundreds From Slave Labor

2007-06-15T07:45:00.001-07:00

Chinese media report that thousands of police officers have rescued more than 450 peasant workers from forced labor conditions, including children as young as eight years old. The reports say workers were abducted or tricked into working at brick kilns and small iron and coal mines, forced to work long hours with no pay and little food, and beaten if they tried to escape. Daniel Schearf reports from Beijing.

Video grab from local television CCTV in Beijing shows workers freed from a brick factory in the city of Hongtong in Shanxi province, 15 Jun 2007

Chinese media reported Friday that police freed the victims of forced labor over the course of the last month after mounting a massive inspection of thousands of brick kilns in China's northern Shanxi and central Henan provinces.

Chinese television showed workers crammed into filthy, small huts, where they slept on a brick floor and were locked in and guarded by fierce dogs to prevent them from escaping.

Workers were starved, given no pay, and forced to work over 14 hours a day touching hot bricks that burnt their skin. Those who tried to escape were beaten.

This freed peasant worker says there was no chance to escape. He says the moment workers tried to get away, their captors would coordinate over mobile phones to get them back.

The official Xinhua news agency says dozens of children were among those freed in Henan from the slave-like conditions. Many of them were kidnapped and sold to the kiln owners.

This kiln owner says he paid about $40 to $50 for a boy, but says he has no idea where he came from.

Another captive says laborers were lured by the promise of a high salary.

"When I asked them how much money each month, they said 1,000 yuan," he said.

Chinese media say overseers at one of the prison-like brickworks beat a man to death with a shovel for not working hard enough. A dozen other workers were reported to have died from mistreatment.

Police have arrested 120 suspects during a four-day crackdown but are still looking for three who escaped.

The slave labor case gained widespread attention after a group of 400 fathers in Henan posted a letter on the Internet saying their children had been kidnapped to work in illegal Shanxi brick kilns.

The men accused Shanxi police of turning a blind eye to forced labor in the province. One kiln owner was the son of a local Communist Party official, furthering cries of official neglect.

The police operation is still under way and Chinese media say there may be more than one thousand children still enslaved.

China Says G8 Climate Change Agreement Not Specific Enough

2007-06-14T12:29:00.001-07:00

China says the agreement reached by the G8 countries to slow climate change is positive, but officials say the agreement was not specific enough in spelling out the responsibilities of individual countries. Although China is now one of the biggest producers of greenhouse gases, Beijing says the more developed countries bear the biggest responsibility for repairing damage to the climate. Daniel Schearf reports from the Chinese capital.

Wan Gang

China's Minister for Science and Technology, Wan Gang, told reporters Thursday the G8 agreement was right to bring attention to the seriousness of climate change, but did not spell out which actions should be taken by specific countries.

"Who is to bear what responsibility? How much responsibility will developed countries assume? From now on this needs to be continuously specified," said Wan.

The Group of Eight industrialized nations last week agreed to try to halve greenhouse gas emissions by 2050. But the agreement was vague, and did not set specific reduction targets for individual countries.

China is expected to overtake the United States as early as this year as the largest emitter of carbon dioxide, one of the major greenhouse gases that are thought to be affecting the climate. While the economy grows by leaps and bounds, Beijing has struggled and failed to reduce energy consumption and pollution.

The government has said it will not take steps that hinder economic expansion. It argues that since developed countries are responsible for most greenhouse gas emissions, they should bear the most responsibility for repairing the damage.

But Wan says China will still do its part to fight global warming. He says developing and developed nations need to negotiate on reducing emissions.

The government says it has already allocated about $600 million to a five-year budget on climate change research and technology, and Wan says it will increase this spending by several times. But he did not specify what total spending would be and he made no predictions on emission reductions.

Liu Yanhua

Science And Technology Vice Minister Liu Yanhua says China does not want to make any promises it cannot keep.

"As a developing and responsible country China will do its best," said Liu. "We will not be like some western countries that make a lot of promises, but do not realize them."

Wan says China needs developed nations to help, by speeding up the transfer of cheaper, high-technology products that can help produce cleaner energy.

But China's habit of ignoring patents and copyrights has made many countries wary of handing over their technologies.

Wan acknowledged that the problem with intellectual property rights had to be discussed, but indicated China's biggest concern is the cost.

Massive New Dinosaur Fossil Unearthed in China

2007-06-14T12:28:00.001-07:00

Chinese paleontologists have unearthed a massive dinosaur fossil in Mongolia. They say the giant dinosaur belonged to a family of bird-like dinosaurs that were a tiny fraction of its size. VOA's Jessica Berman reports.

Artist's drawing courtesy Institute of Vertibrate Paleontology and Paleoanthrology, Chinese Academy of Sciences

Paleontologists in China estimate the dinosaur, which lived some 70 million years ago, was eight meters long, five meters tall and weighed 1,400 kilograms.

The scientists say it had many of the same characteristics as the feathered dinosaurs known as oviraptors, which weighed only about 40 kilograms. But the enormous fossil belonged to a creature that was 300 times the size of an oviraptor. So, scientists are putting the giant dinosaur, which they are calling Gigantoraptor, in the same family.

The paleontologists say Gigantoraptor challenges theories of evolution that say as meat eating dinosaurs like tyrannosaurus got smaller, they became more bird-like.

David Burnham, a paleontologist at the University of Kansas, says the finding shows that diversity among dinosaurs is much greater than scientists had previously believed.

"We can't even imagine what evolution can provide at certain levels," he said. "And this is a really neat discovery to kind of show us, give us a window [into] what was going on during a critical time when birds were still primitive and you had multiple lineages of dinosaur-like birds developing at the same time."

Drawing courtesy Institute of Vertibrate Paleontology and Paleoanthrology, Chinese Academy of Sciences

The fossil was discovered in 2005. At first, researchers say they thought they had found the bones of a tyrannosaurus because they were so huge.

But as they studied the fossil, the Chinese researchers saw that the fossil had a beak instead of teeth.

"It's very difficult these days to sort of find a dinosaur that really surprises me, because there's just so much that we're still learning about these groups," said Hans Sues, associate director of research and collections at the National Museum of Natural History in Washington D.C.

He says the fossil of Gigantoraptor's beak and lack of teeth are physical features that made oviraptors excellent survivors.

"These animals may have eaten some really unusual things like maybe seeds or eggs - people have proposed all kinds of ideas," he added. "There was some idea that some of the Mongolian ones were feeding on clams. Some very unusual diet that didn't require teeth but did require this very odd jaw mechanism."

The Chinese researchers say the enormous dinosaur also had sharp claws, possibly for tearing meat.

There is no evidence that Gigantoraptor had feathers, another characteristic that sets it apart from its oviraptor cousin.

The discovery of the gigantic fossil published this week in the journal Nature.

China Blasts Taiwan President's Support for UN Referendum

2007-06-13T09:55:00.002-07:00

China has lashed out at Taiwan's independence-leaning President Chen Shui-bian for supporting a referendum on whether the island should seek membership in the United Nations. From Beijing, Daniel Schearf reports China's Taiwan Affairs Office says any such move would not only harm China-Taiwan relations, but also jeopardize peace and stability in the region.

Chen Shui-bian (file)

The spokesman for China's Taiwan Affairs Office, Yang Yi, told reporters Taiwan's president is using the referendum for political gain and to move Taiwan towards what he called independence from China. He says the proposed referendum will create tensions between the two sides.

"The purpose of the move is to incite conflict between the two sides and cheat Taiwan people ... so Chen Shui-bian can trick votes from Taiwan people and reach de jure independence," Yang said.

Yang Yi (file)

Yang says supporters of independence have already made the situation in the Taiwan Strait dangerous, but, he says, if Taiwan applies for recognition at the U.N. as a country, things will get worse.

"If the situation continues, it will severely impact cross-Strait relations, harm compatriots on both sides, and seriously put in danger peace and stability in the Taiwan Strait and Asia-Pacific region," Yang said.

China and Taiwan split in 1949 at the end of a civil war, but Beijing still claims the island as part of its territory. It has threatened to take Taiwan by force if the island declares formal independence.

Yang says China has made preparations to deter what he called any "separatist" activity, but he did not elaborate on what kind of preparations Beijing has made.

China has been adding missiles to its arsenal of several hundred aimed at Taiwan. In March, Beijing announced a 17.8 percent boost in military spending, the highest increase in more than a decade.

Chinese officials maintain the boost is to increase salaries for underpaid soldiers and upgrade equipment.

But the United States and other countries are suspicious of China's reasons for the military build-up. The United States also says China's real military spending may be three times higher than reported.

The United States has vowed to defend Taiwan if China attacks the island, and is therefore concerned about moves on either side of the strait that would upset peace in the region.

Taiwan has applied numerous times for U.N. recognition since it lost its seat to Beijing in 1971, but China's influence in the organization has prevented Taiwan from succeeding.

Taiwan's Presidential Candidates Seek Better Mainland Relations

2007-06-13T09:55:00.001-07:00

Taiwan's 2008 presidential elections may still be a little more than 11 months away, but the campaign is well underway, with both candidates pledging to improve relations with the island's biggest security threat and largest trading partner: China. VOA's William Ide has this report from Taipei.

As in many places around the world, economic ties with China are playing an ever-increasing role in politics in Taiwan.

The mainland is potentially a military threat to the island of Taiwan, but it is also an increasingly significant economic partner. As of last June, Taiwan had invested more than $50 billion in businesses on the mainland, and it is estimated that a million Taiwanese live and work there.

Beijing's history with Taipei is complex.

After the defeat of the Japanese in World War Two, Mao Zedong's Communist army fought Chiang Kai-shek's Nationalist troops for control of China. Mao won in 1949, and Chiang and his Nationalist government fled to Taiwan.

China claims the self-ruled island is part of its own territory, and threatens to take it back by force if it seeks formal independence. To back up that threat, it has deployed hundreds of missiles along its southeastern shore facing Taiwan.

Taiwan's opposition Nationalist Party 2008 presidential candidate Ma Ying-jeou speaks with foreign media at the party headquarters, 11 June 2007, in Taipei, Taiwan

Ma Ying-jeou, a former Nationalist Party chairman and mayor of Taipei City, is the opposition's candidate in the elections. He believes that to improve ties with China, Taiwan needs to find a way to put its disputes over sovereignty aside, and focus instead on peace negotiations with the mainland.

"The Taiwan Strait should not be a flash point in East Asia, it should be a builder-up for peace and prosperity," he said.

Speaking with foreign correspondents in Taipei this week, Ma outlined a sweeping range of changes he plans to implement if elected, including moves to lift restrictions on trade with China, allowing companies from Taiwan to invest more on the mainland. He also supports measures to allow more mainlanders to visit as tourists, as a way of boosting the island's economy.

Ma believes that Beijing wants peace and not conflict with Taiwan. He argues that as China prospers, it is becoming more sophisticated in the way it handles its relations with Taiwan and the rest of the world.

"Obviously they [China] have a big stake to lose if war really breaks out between Taiwan and the mainland," he said. "Each side will probably suffer a setback of economic development for decades."

Ma may have a better chance of reopening negotiations with Beijing, because his party supports eventual reunification with China.

His opponent, Frank Hsieh, is a member of the independence-leaning Democratic Progressive Party of President Chen Shui-bian. Since Mr. Chen stepped into office, China has refused to talk to his administration. Hsieh admits this is an obstacle, but believes it can be overcome.

Speaking with foreign reporters through an interpreter, Hsieh said that when Mr. Chen was elected in 2000, and even when he was re-elected in 2004, China refused to talk with the DPP administration.

Taiwan's ruling Democratic Progressive Party 2008 presidential candidate Frank Hsieh speaks with foreign media, 11 June 2007, in Taipei, Taiwan

"I think that for China to accept the reality that the people have chosen a DPP president, I need to win by a larger margin this time for China to come to terms with the reality that this is actually the choice of the people," he said. "Of course though, we are assuming that China's behavior is rational, that in good reason, that they should accept the reality and engage in a dialogue with the DPP leadership."

Hsieh says he, too, will pursue policies to expand trade links with China, but also stressed the need for Beijing to give Taiwan the respect it deserves - and more room in the international arena.

Hsieh says that more than policy, attitude is the key: how Taiwan treats China, and how China treats Taiwan. He cast doubt on Ma's expectation that China is willing to co-exist with Taiwan: Beijing says there will eventually be re-unification, whether peacefully or by force of arms.

Hog Disease Spreads in China

2007-06-11T16:12:00.001-07:00

A contagious hog disease in China that last year killed up to a million pigs, and contributed to rising pork prices, has been blamed on the "Blue Ear" virus. Daniel Schearf reports from Beijing.

Jia Youling (2006 file photo)

China's top veterinarian Jia Youling told reporters the highly pathogenic disease, "Blue Ear," is to blame for most of the pig deaths last year. The high fever disease is formally known as Porcine Reproductive and Respiratory Syndrome.

Up to a million pigs died last year from the disease.

Jia says the Blue Ear virus was discovered in the United States in 1987 and has since spread worldwide, posing no threat to humans. But it had mutated in China, making it hard to identify and becoming more deadly to pigs.

"This variation of Blue Ear disease is a completely new variation," said Jia. "It is the first time our country and the world has experienced this kind of the disease."

Chinese health officials are now working on a vaccine to prevent the virus from spreading further.

Jia said their biggest fear is that farmers with sick pigs will try to sell them quickly rather than report the illness. This could cause the disease to spread faster.

Pork prices have already risen dramatically, although Jia said he was not convinced of a direct link between rising prices and the disease.

China's Ministry of Agriculture last week said Blue Ear had already infected nearly 46,000 pigs in the first five months of this year and killed more than 18,000, while spreading to 22 provinces and regions.

The failure to spot and treat the Blue Ear disease outbreak earlier raises new fears about the safety of China's food and drug supply.

The country has had a series of such scandals, including the reported sale of tainted wheat gluten to the United States.

In the past few days, Chinese and foreign media have reported the government has found unsafe dried food, and evidence that some hospitals have used fake blood proteins in intravenous drips to treat patients.

China rejects U.S. products

2007-06-11T15:54:00.001-07:00

BEIJING–Turning the tables on the United States amid growing worries over dangerous Chinese products, Beijing said Friday some health supplements and raisins imported from the U.S. failed to meet China's safety standards and have been returned or destroyed.

In Washington, a top U.S. food safety official said the Food and Drug Administration was seeking more information from its Chinese counterparts, including whether they are "bona fide, science-based findings" or in retaliation for U.S. actions.

U.S. inspectors recently have banned or turned away a growing number of Chinese exports, including monkfish containing life-threatening levels of puffer fish toxins, drug-laced frozen eel and juice made with unsafe colour additives. The U.S. FDA has also stopped all imports of Chinese toothpaste to test for a potentially deadly chemical reportedly found in tubes sold in Australia, the Dominican Republic and Panama.

Friday's announcement said Chinese inspectors in the ports of Ningbo and Shenzen found bacteria and sulfur dioxide in products shipped by three American companies.

"The products failed to meet the sanitary standards of China,'' the General Administration of Quality Supervision, Inspection and Quarantine said in a notice posted on its website.

No details were given on when or how the inspections were conducted and telephones at the administration's office were not answered Friday.

The companies were identified as K-Max Health Products Co., CMO Distribution Center of America, Inc., and Supervalu International Division.

The agency said K-Max and CMO exported health capsules, including bee pollen and bacteria-fighting supplements. Supervalu exported Sun-Maid Golden Raisins, it said. The shipments from K-Max and Supervalu have been destroyed and CMO's capsules were returned, the notice said.

The FDA's assistant commissioner for food protection, Dr. David Acheson, said U.S. officials were seeking more information.

"Whatever the motives are for this, if it's real, we want to know about it," Acheson said.

"Is it tit-for-tat? We don't know and probably won't ever know. If they found a legitimate problem with a product exported from the United States, we would want to know about it so we can look into it and fix it."

Depending on what the FDA learns, it could follow up with inspections of the companies and its own sampling and testing, Acheson said. Previously, the agency hasn't known of any problems with the companies' products flagged by the Chinese, he added.

Neil Langerman, an officer of the division of chemical health and safety of the American Chemical Society, questioned whether China's seizure was in retaliation for recent U.S. actions against Chinese products.

"There's more to this story than meets the eye. This is political," said Langerman, an officer of the division of chemical health and safety of the American Chemical Society. "I'd see what China is doing as a retaliation to what the U.S. has done.''

The Chinese announcement did not specify which contaminants were found in which products, saying only that they were found in amounts above acceptable levels, without providing details.

"Local quality officials should step up the inspection and quarantine on imported food products from the U.S.," the Chinese notice said. "Chinese importers should also clarify food safety demands in contracts when importing U.S. food products, so as to lower the trade risk.''

Langerman said only a very small percentage of U.S. food shipments have bacterial problems.

"Without seeing data, the claims, while they may in fact be valid, don't have merit," he said. "I as a scientist say, show me your data, not only your data, but how you sampled it. Did you use sterile collection techniques?"

Langerman said sulfur dioxide can be present in raisins, but said companies would not use it at high levels because it adds an eggy odour. "It's also easy to get rid of because it's a gas, so you let it dissipate," he said.

Marion Nestle, a nutrition professor at New York University, said she didn't know why sulfur dioxide would pose a problem, since it's often used to preserve raisins and other dried fruit. She said raisins would be an unlikely host to bacteria because they are dry.

"This looks like retaliation," she said, noting that the Chinese have complained that American authorities are holding their exports to food-safety standards that were never detailed.

As for the herbal supplements, Nestle said the notice was too vague to know what might be in them, though she noted the Chinese are significant exporters of herbal supplements.

Friday's announcement was the second mention in recent days of China rejecting foreign food imports. Late last month, France's Groupe Danone SA said China seized five containers of Evian water in February because of concern over high bacteria levels.

Those came after concerns spiked over the safety of Chinese food exports following the deaths of cats and dogs in the United States and Canada blamed on tainted pet food ingredients from China.

K-Max president Liei Ye did not immediately respond to a message left with the company Friday seeking comment. K-Max is a subsidiary of Kang Long Group Corp., whose website said the company began by selling Wisconsin-grown ginseng to U.S. health food stores under its K-Max brand, before expanding into China, Russia, Japan, Korea, Hong Kong, Taiwan and other markets. Kang Long has four mainland China offices and a Hong Kong branch in addition to its Pomona, Calif., headquarters, according to the site.

Supervalu International is part of Supervalu Inc., headquartered in Eden Prairie, Minn. The FDA said in 2000 that CMO Distribution Center of America was based in Sarasota, Fla. However, state records showed it was dissolved as a company in Florida in 2003.

China rejects U.S. imports, citing sanitary code

2007-06-11T15:52:00.001-07:00

BEIJING - China said Saturday it had rejected a shipment of pistachios from the United States because it contained ants, the latest indication the government may be retaliating as Chinese products are turned back from overseas because of safety concerns.

The state television report, which showed inspectors wearing face masks and sealing the shipping container that held the pistachios, indicated an increasing push to show that other countries also have food safety issues. On Friday, Chinese food safety watchdog announced that shipments of health supplements and raisins from the U.S. had been returned or destroyed because they did not meet quality control standards.

China's food- and drug-safety record has come under scrutiny in recent months following the deaths of cats and dogs in the United States and Canada blamed on tainted Chinese pet food ingredients. Since then, U.S. inspectors have banned or turned away a growing number of Chinese exports — from monkfish to juice to toothpaste — because they contained life-threatening levels of toxins or unsafe chemicals.

Ecological danger cited
In the report Saturday, China Central Television said the ants found in the pistachio shipment could "cause a serious threat to trees and to the ecological environment." Part of the batch, which arrived by ship to the port of Zhongshan, will be destroyed and the rest will be returned, CCTV said, without giving any other details.

The report also showed U.S. safety certificates issued to Cal-Pure Pistachios Inc., based near Bakersfield, Calif. Messages left for the company were not immediately returned Saturday.

Telephone calls to Guangdong quarantine officials rang unanswered on Saturday.

The Web site of the General Administration of Quality Supervision, Inspection and Quarantine, China's food safety agency, showed lists of products from 2006 and 2007 that had been turned away from countries including the United States, Canada, Japan, Singapore and Italy because they did not meet Chinese standards.

France's Groupe Danone SA says China seized five containers of Evian water in February because of concern over high bacteria levels.

'Is it tit-for-tat?'
A U.S. Food and Drug Administration official said Friday that the U.S. is seeking more information on the latest cases of American products being turned away.

"Whatever the motives are for this, if it's real, we want to know about it," said David Acheson, assistant commissioner for food protection at the FDA.

An international outcry about has China's safety record has the government worried that its goods could be banned from overseas markets. The country's dismal drug safety record was underscored this week by a Chinese court's decision to sentence to death the country's former top drug regulator.

"Is it tit-for-tat? We don't know and probably won't ever know," Acheson said. "If they found a legitimate problem with a product exported from the United States, we would want to know about it so we can look into it and fix it."

Chinese regulators have urged local authorities to step up inspections of imported food products and said Chinese importers should "clarify food safety demands in contracts when importing U.S. food products, so as to lower the trade risk."

The 14th Dalai Lama of Tibet

2007-06-11T02:07:00.000-07:00

For Tibetan issue, China government's sayings:

<1> Deng Xiaoping
In 1979 Comrade Deng Xiaoping told the private representative of the 14th Dalai Lama in explicit terms: "The fundamental issue lies in the fact that Tibet is part of China. Whether this is correct or wrong may be judged with standards."

<2> Li Peng
On May 19, 1991, when Chinese Premier Li Peng met with China's Xinhua News Agency reporters, he answered their questions on the Tibetan issue and reaffirmed the policy followed by the Central Government. Premier Li pointed out: "We have only one fundamental principle, which is that Tibet is an inalienable part of China. There is no room for bargaining at this issue. The Central Government consistently expressed willingness to contact the 14th Dalai Lama. But the 14th Dalai Lama must stop his activities geared to split the motherland, and give up his stand for `Tibetan independence.' All issues may be discussed except for `Tibetan independence'.''

<3> Li Ruihuan
CPPCC Chairman Li Ruihuan said at the third meeting of the Leading Group for Locating the reincarnated Soul Boy of the Panchen Erdeni no November 10, 1995: "The Central Government has exercised great restraint and done its very best to point out the right path for the Dalai Lama. It has, on many occasions, reiterated that so long as he recognizes Tibet as an integral part of China, completely renounces the claim for `independence of Tibet' and stops activities aimed at splitting the motherland, we shall negotiate with him and welcome him back to the motherland so that he can do something in the interest of the Tibetan people in his remaining years. This policy still holds good today."

<4> Jiang Zemin
In meeting with correspondents with the No.2 German TV Station and the Frankfurt Daily respectively on July 13 and 14, 1996, Chinese President Jiang Zemin answered questions on the Tibetan issue. President Jiang said: "So long as the 14th Dalai Lama can recognize Tibet is an inalienable part of China, thoroughly give up his stand for `Tibetan independence,' and stop his activities to split the motherland, we will welcome him to return to the motherland to do things beneficial for the unification of the motherland and national unity and prosperity."

To know more about it, you should know the history of Dalai Lama of Tibet:
>>>The 14th Dalai Lama of Tibet

Hong Kong's Democrats Meet to Review Progress Before Handover Anniversary

2007-06-09T09:25:00.001-07:00

The leaders of Hong Kong's democratic movement have met to take stock of their progress and assess their relationship with China's Communist government, ahead of the 10th anniversary of the handover of Hong Kong from British to Chinese sovereignty. Joseph Popiolkowski reports from Hong Kong that the pro-democracy activists put out a call to action.

Cardinal Joseph Zen

The call from Cardinal Joseph Zen was loud and clear: Hong Kong's leaders must promote social justice and individual rights to achieve a peaceful society.

Zen was one of several leading advocates for multi-party politics and universal suffrage who attended a seminar Saturday led by Hong Kong's Democratic Party. They met three weeks ahead of the 10th anniversary of Hong Kong's handover from British to Chinese rule.

Martin Lee, founder of Hong Kong's Democratic Party, stressed the importance of the "one country, two systems" concept in guaranteeing Hong Kong's autonomy as a Special Administrative Region (SAR). He said this structure is in danger of collapsing if Beijing continues to reinterpret it.

Martin Lee, founder of Hong Kong's Democratic Party

"What I'm afraid of is they will redefine 'one country, two systems,'" he said. "They will move the goalposts. But if that were to happen, if that were to happen, it's an admission to the whole world and to our compatriots in Taiwan that 'one country, two systems' has failed."

The speakers took issue with remarks made this week by Wu Bangguo, head of the National People's Congress, China's parliament. He appeared to place limits on Hong Kong's autonomy by saying the only freedoms Hong Kong had were those granted by Beijing.

In response, the Democratic Party circulated a statement by Graham Watson, leader of the European Parliament's Alliance of Liberals and Democrats, in which he warned China against making such "unhelpful and divisive" claims.

He said China should not upset the applecart of international opinion - a point taken up by Gloria Fung, vice president of Canada-Hong Kong Link, a community organization in Canada, where many Hong Kong people have settled.

"Instead of remaining silent about the adverse changes taking place in Hong Kong SAR, we have chosen to take a proactive approach to express our concerns and make our voices heard both within Canada as well as to the governments of Hong Kong and China," she said.

Hong Kong's democratic movement hopes to mark the July 1 anniversary of the change in sovereignty with a march to rival that of July 1, 2003. Then, half a million people protested against proposed security legislation, and for more democracy. Since then, Hong Kong has received a new chief executive, but no further progress on democratic reforms.

Chinese president calls on developing nations to jointly meet challenges

2007-06-09T08:26:00.001-07:00

Chinese President Hu Jintao (2nd R) poses for a group photo with Brazilian President Luiz Inacio Lula da Silva (2nd L), Indian Prime Minister Manmohan Singh (1st L), Mexican President Felipe Calderon (C) and South African President Thabo Mbeki ahead of their meeting in Berlin, capital of Germany, June 7, 2007. (Xinhua/Liu Jiansheng)

Chinese President Hu Jintao says developing countries should do more to meet the challenges that come with economic globalization. He made the call in a speech on the sidelines of the G8 where he also met leaders from Brazil, India, Mexico and South Africa.

Earlier on Thursday, President Hu also held meetings with his Nigerian counterpart, Umaru Yar'Adua and Indian Prime Minister, Manmohan Singh.

Hu Jintao says the world economy has seen a new round of growth and that developing countries are looking for ways to expand that also match their national conditions. He also noted that developing countries have become an important force in maintaining world peace and promoting common development.

But President Hu also pointed out that such countries are often disadvantaged in the course of world development and that economic globalization is presenting new challenges.

Hu Jintao says the populations of China, India, Brazil, South Africa and Mexico account for just over 40 percent of the world's total adding that the five major developing countries have an increasingly important place in global economy and trade.

President Hu put forward a three-point proposal to safeguard common interests, create favorable development conditions and boost coordinated development.

The first point is to enhance coordination and expand space for development. He says developing countries should urge the United Nations to boost input for development and strive to increase their say in the global economy. Hu Jintao has also stressed that developed countries should meet their commitments and provide more assistance for developing countries. He's suggested that developed countries write off or reduce debts, and increase investment in, and technology transfer to, their less developed counterparts.

Hu Jintao's second point is to step up cooperation, especially in such areas as trade, investment, personnel training, infrastructure, culture, education and health. He said new platforms, such as the Summit of South American-Arab Countries, the Forum on China-Africa Cooperation and the India-Brazil-South Africa Dialogue Forum, have also boosted South-South cooperation.

The last point he proposed was to maintain and improve meeting mechanisms. President Hu says the five countries should prepare well for meetings among their leaders and within the UN framework. He says they should also take follow-up steps afterwards, maintain close consultations, share experiences and expand common ground to achieve concrete progress.

Hu Jintao emphasized that China supports continued dialogue between developing and developed countries. He said it is necessary to increase the say of developing countries, and work to establish a new global partnership for development based on equality and mutual benefit.

In the meeting, the leaders from the five nations also pledged to abide by the principle of "common but differentiated responsibilities" while tackling climate change. They urged developed nations to take the lead in reducing greenhouse gas emission.

On the Doha round of WTO trade talks, the leaders said efforts should be made to conclude negotiations at an early date, and that results should reflect the interests and concerns of developing countries. They also urged developed nations to reduce subsidies for agricultural products and lower import tariffs.

Relief work continues in quake ravaged areas of Yunnan

2007-06-09T08:24:00.001-07:00

3 killed, 300 injured as quake rocks Yunnan

A local resident clears the debris of his house following a strong earthquake in Ning'er, Southwest China's Yunnan Province, June 3, 2007.[Xinhua]

Three people have been confirmed dead after a strong earthquake hit Southwest China's Yunnan Province. The quake measured 6.4 on the Richter scale, and has also injured more than 300 people.

Early on Sunday morning, an earthquake shook Hani and Yi Autonomous County of Ning'er, in Pu'er City. It caused significant damages to houses and infrastructure. Nearly all the shops in the city were forced to close. Many residents were evacuated.

More than 300 aftershocks were registered on Sunday, the strongest with a magnitude of 5.1. The local government has set up emergency shelters, and the wounded were rushed to hospital.

The quake is drawing the central government's attention. President Hu Jintao, Premier Wen Jiabao, and Vice Premier Hui Liangyu have ordered the State Council and the local governments to help with recovery efforts.

The local government of Pu'er City has already allocated one million yuan for emergency relief. The provincial civil affairs department is sending tents, quilts, and clothes to the stricken area. And the Ministry of Civil Affairs has dispatched an emergency team as well.

Residents in neighboring cities like Lincang also felt the tremor, but damage and casualty reports are not yet available.

So far, 120 thousand residents have been evacuated. The repairing of infrastructure is underway.

Each step into the Pingxin Village shows traces of Sunday's nightmare. The earthquake destroyed this decade's old home and took the lives of those living in it.

Lu Fengjin is among those who suffered misfortune. She lost her grandson--a four and half year old, buried beneath fallen bricks. Her son and daughter-in-law were also injured.

Lu Fengjin said, "I miss my grandson. He was lovely and smart. He often said to me,I want to be a pilot. The child always drew planes on this board. And this is the only thing of his that's left. Our house is destroyed. We can do nothing ourselves but to wait for the government's help. They've already come to visit us. "

Pingxin village is one of the four worst hit areas. The locals have been evacuated to safe places. But many still try to return to what is left of their homes to retrieve those things they hold dear. But they know they must also move on and, rebuild their homes. They cannot cling to only memories.

From the mountainous villages, we traveled to the county square. Three to four families share one of these tents. Away from the shabby houses, people here are safe. And their hopes for a new start are encouraged by the visit of some special guests.

This working group from the State Council is in the county to help, as well as supervise the relief work. They are here to make sure the subsidies and relief materials will be put into place immediately.

Li Liguo, director, Yunnan earthquake working group, said, "We've been meeting all of the basic needs from the affected locals who have been left homeless by the earthquake. The people are quite stable right now. Relief materials from the central government will be put in place shortly. Local authorities are doing this for the time being. "

With another shipment of relief materials on the way, more locals will be able to get tents for temporary housing. But it will still take more time for all of these people to rebuild their lives, and return to new homes.

China again expresses strong displeasure to Japan on Lee Teng-hui´s visit

2007-06-09T08:21:00.001-07:00

China and Costa Rica have established diplomatic ties. Here in Beijing, the Foreign Ministry says it marks a brand-new stage in the development of bilateral relations.

But, in other news, officals have voiced China's dissatisfaction with Japan for allowing former Taiwan leader Lee Teng-hui to visit the Yasukuni Shrine.

China and Costa Rica have announced they will establish diplomatic ties, after the Latin American country agreed to break official relations with Taiwan. A foreign ministry spokeswoman says the move is in the interests of peoples of both countries. She also stressed the importance of the One-China policy.

Jiang Yu, spokeswoman Chinese Foreign Ministry, said, "China has established diplomatic ties with 169 countries. The One-China policy has been widely accepted worldwide."

Some Central and Latin American nations haven't established diplomatic ties with China. Jiang says China would like to set up and develop normal state relations with these countries, and hopes they will change their stance on the Taiwan issue.

Jiang has also expressed China's strong dissatisfaction with Japan for allowing former Taiwan leader Lee Teng-hui's visit to Tokyo's Yasukuni war shrine.

Jiang said, "We all know what Lee Teng-hui wants judging from what he has done in Japan. China expresses strong dissatisfaction, again, towards Japan giving permission to his visit."

Lee Teng-hui visited the Yasukuni Shrine Thursday, where his elder brother is enshrined with Japanese world war two criminals.

China plans cooperative healthcare for all rural residents by 2010

2007-06-09T08:20:00.001-07:00

China will establish a cooperative healthcare network covering all rural residents by the end of 2010, according to a five-year (2006-2010) government health plan released on Thursday.

Governments at various levels will increase financial investment in rural healthcare and help more farmers to join the program, said the plan, which was adopted last March by the State Council.

Under the cooperative scheme initiated in 2003, a participant pays 10 yuan (1.3 U.S. dollars) a year, while the state, provincial, municipal and county governments supply another 40 yuan (5.2 U.S. dollars) to the fund. Contributors are then entitled to discounts, provided by the fund, on their medical expenses.

Official figures show that 410 million farmers in 1,451 counties - around half of the country's rural population - had joined the scheme by the end of 2006.

The plan said that the government will spend more money on building and upgrading clinics in rural areas.

"The private sector is also encouraged to run non-profit health and medical institutions in counties and villages," the plan said.

The health authorities will dispatch more doctors from cities to the countryside to bridge the medical gap between the cities and countryside, according to the plan.

Statistics show that the Ministry of Health has moved to send roughly 5,500 doctors and nurses from Chinese cities to the rural areas this year to help treat rural patients, introduce new facilities and train local medical staff.

The rural healthcare system was once a core element of Chinese socialism. After the founding of the People's Republic of China in 1949, rural people had access to subsidized health clinics run by "barefoot doctors", who were basically middle-school students trained in first aid.

The primitive service, essentially free, played a role in doubling the country's average life expectancy from 35 years in 1949 to 68 years in 1978.

When China began its economic reforms in the early 1980s, the system was dismantled as the country attempted to switch to a market-oriented healthcare system.

The five-year plan said more efforts would be made to tighten drug supervision, increase investment in the public health sector and develop study of China's traditional medicine.

The government will also take measures to encourage individuals and non-government organizations to participate in health and medical services, the plan said.

China, India pledge to enhance co-op in climate change

2007-06-09T08:19:00.001-07:00

Chinese President Hu Jintao (R) meets with Indian Prime Minister Manmohan Singh in Berlin, capital of Germany, on June 7,2007. (Xinhua/Ju Peng)

BERLIN, June 7 (Xinhua) -- China and India on Thursday pledged to enhance cooperation in tackling climate change that could causes welling sea levels and climate change.

At a meeting between Chinese President Hu Jintao and Indian Prime Minister Manmohan Singh, the two leaders discussed issues including climate change and border talks between China and India.

Developed nations should first take the obligation to reduce greenhouse gas emission in line with the principle of "common but differentiated responsibilities," Hu said.

Meanwhile, developed nations should strengthen financial support and technology transfer for promoting sustained growth of the developing countries and improving the latter's capabilities in tackling climate change, he said.

China and India, the world's two most populous nations, were both influenced by the climate change while endeavoring to achieve sustained growth, he pointed out.

Singh said the stance of China and India on climate change was "close." As a global problem, addressing climate change requires "a global response," he stressed.

He said developing countries should not be asked to shoulder burden beyond their responsibilities and hoped to enhance coordination with China in this regard.

Hu and Singh were here to attend a so-called "outreach session" between five major developing countries -- China, India, Mexico, Brazil and South Africa -- and members of the Group of Eight (G8),a group comprising the world's most industrialized countries, in Heiligendamm, a Baltic resort in Germany. The meeting is usually called G8 plus 5 meeting.

During the annual G8 summit, climate change has become a hot topic sparking heated debate, in particular on the goal for greenhouse gas emission and replacement of Kyoto Protocol, which expires in 2012.

The two leaders also talked about border issue between the two countries.

"It is the common strategic goal for China and India to resolve the border issue, a problem left by history, at an early date," Hu said.

He hoped the two sides could step up work in line with the spirit of peace and friendship, equal consultation, and mutual respect and understanding.

Singh said that the two countries have reached consensus on the political principles for addressing the issue. The Indian side agreed to work hard in an effort to work out a practical solution at an early date.

Hu paid a visit to India last year and the two countries during Hu's visit reached "ten-item strategy" aiming at enriching the bilateral strategic and cooperative partnership.

Both Hu and Singh spoke highly the development of bilateral ties after the visit.

"The development of Sino-Indian ties is now on a fast track," Hu said, citing such facts as deepening political dialogue, steadily growing dual-track trade and close communication and coordination between the two countries in international and regional affairs.

The growth of Sino-Indian ties "will have significant and profound impact on the region and the world at large," Hu said.

Singh also commended bilateral cooperation within the framework of the United Nations, the World Trade Organization and the G8 plus 5 meeting.

The Indian side is willing to enhance cooperation with China in combating common challenges, he said.

Later Thursday, Hu, Singh and leaders from Mexico, Brazil and South Africa will hold a collective meeting, usually regarded as a preclude to the G8 plus 5 meeting.

The State Council approves a blue print for renewable energy

2007-06-09T08:18:00.001-07:00

The Chinese government says its dedicated towards saving energy and protecting the environment. The State Council has approved a plan requesting energy-generating companies to product a certain proportion of renewable energy.

Developing renewable energy is part of the government's master plan to achieve its environmental targets.

Under the plan, the country's big fossil-fuel power stations will have to convert at least five percent of its generators into non-fossil fuel generators by 2010. The proportion of non-fossil-fuel generators in these power stations would need to double to 10 percent by the year 2020. The government limit production on enterprises which can not meet the standard.

Shi Lishan, official of National Development & Reform Commission said:"The quota system will urge power and electricity-generating enterprises to produce and sell more renewable energy, expanding the country's renewable resources market."

Renewable energy mainly contains wind-energy, solar-energy and biofuels. It's estimated that currently China can produce renewable energy in the equivalent amount of over seven billion tons of standard coal each year, almost tripling the annual output of coal. At the country's first national plan on climate change, the country confirmed its commitment to increase its proportion of renewable energy from less than seven percent at the moment, to 10 percent by 2010, and 16 percent by 2020.

China: Factory 'slaves' rescued

2007-06-09T08:10:00.001-07:00

BEIJING, China (Reuters) -- Chinese people have rescued 31 people forced to work for a year as slaves -- given only bread and water and no pay -- at a brickworks run by the son of a local Communist Party official, state media reported on Friday.

Eight of the workers were so traumatized by the experience they were only able to remember their names, the Beijing News said, citing a report in the Shanxi Evening Post.

One laborer was beaten to death with a hammer for not working hard enough, before police swooped to set the others free, the newspaper added.

The survivors had bruises, wounds and burns all over their bodies, having been made to carry uncooled bricks and walk barefoot in the kiln, it said.

"The grime on their bodies was so thick it could be scraped off with a knife," the newspaper added.

They were guarded by dogs and "thugs" at the factory, near Linfen in the poor inland province of Shanxi, and the boss was only allowed to get away with it because of his political connections, the newspaper said.

"Local villagers said, had Wang Dongji not been Party Secretary, this brickworks which had no paperwork would have been discovered a long time ago," it said, referring to the father of boss Wang Binbin.

The foreman's son and one of the hired thugs had been detained by police, but four were on the run, the report said.

The workers are still living at the brickworks while the local government tries to get their wages.

"But the eight migrant workers who are not in their right mind have no idea where their homes are, and the local government is in the process of finding out," the newspaper said.

A similar incident was reported last year, also in Shanxi province, although the workers were only kept imprisoned for two months.

Millions of migrant workers from poor rural areas have flocked to urban areas to find work, hoping to enjoy some of the fruits of an economy clocking near double-digit growth.

Working often for as little as $2 a day or less, they have helped turn China into the workshop of the world and one of the world's biggest economies.

Many of these laborers work without formal contracts, and have little recourse to the law in case of disputes, which makes them more prone to exploitation.

Dangerous Algae Bloom Threatens Chinese Lake

2007-06-09T08:02:00.001-07:00

A second potentially dangerous algae bloom has been reported in an eastern Chinese lake. Joseph Popiolkowski reports from Hong Kong that the big worry is over the effect the algae will have on the safety of drinking water.

Chinese man uses a net to push aside blue-green algae on Taihu Lake in Wuxi, 01 Jun 2007

Last week, an algae bloom in eastern China's Lake Taihu spurred authorities to cut off drinking water to the city of Wuxi, forcing residents to drink and wash using bottled water.

China's state-run media reported that environmental authorities are monitoring another algae bloom in Lake Chao, China's fifth largest freshwater source.

Algae are simple aquatic organisms. When high levels of nitrogen, or other nutrients, are introduced into the water, algae grow rapidly, killing and feeding off other life forms. Some algae blooms can produce biotoxins harmful to humans that freely pass through water treatment systems.

One expert says pollution from industrial run-off is the major contributor to the algae blooms.

Wen Bo, China Program Director for the U.S.-based activist group Pacific Environment, says algae blooms are not uncommon in China's increasingly polluted lakes.

"This one has just become dramatic because it affects a large city - Wuxi city - and it has contaminated their drinking water," Wen explained.

An environmental activist in Wuxi, Wu Lihong, had warned officials for years about worsening pollution in Lake Taihu but was arrested in April on what friends and family say are trumped up extortion charges.

Wen says the activist pushed too far into investigating the links between local officials and companies that pollute China's lakes.

"He didn't conduct any serious crime. And that's so dramatic that just a few weeks after his arrest there was a serious crisis with drinking water in Wuxi city," Wen noted.

China's state-run media say the recently reported bloom in Lake Chao is not a threat to drinking water in nearby towns and has been diluted by rainwater.

Chinese media also say the water in Lake Taihu is again drinkable after environmental officials seeded rain clouds and flooded the lake with water from the Yangtze River.

US Rights Campaigner Says China's Poor Image Could Jeopardize 2008 Olympics

2007-06-07T19:10:00.001-07:00

John Kamm stands in his office in San Francisco (File Photo)

American human rights campaigner John Kamm says China needs to improve its poor international image if it wants the 2008 Olympics to be a success. Beijing has already started to deal with its image problem ahead of the games, as Claudia Blume reports from VOA's Asia News Center in Hong Kong.

John Kamm leads the Dui Hua foundation, a U.S.- based human rights groups focusing on China. Speaking at a luncheon in Hong Kong on Thursday, Kamm said Beijing has one major problem that could jeopardize the success of next year's Olympics: a poor international image that could lead to protests, low attendance and poor TV ratings during the games.

Kamm says there are a number of reasons for Beijing's image problem. One is international concern about China's human rights abuses. This includes the jailing of journalists and human rights defenders, the widespread use of capital punishment and the suppression of minorities in Tibet and Xinjiang.

In recent months, Beijing has also been criticized for its support of the government in Sudan. Western critics say China is not using its influence in the country to stop the violence in Sudan's Darfur region. Kamm says criticism from Hollywood stars in particular is shaping the public's opinion.

"Just in the last few days George Clooney has come out with a big anti-China statement in favor of intervening in Darfur," he said. "Meryl Streep has just joined the campaign, so Hollywood is now making this a major issue."

Kamm says Beijing is paying attention to world opinion and has already taken steps to deal with its image since it was awarded the Olympic Games. China has recently appointed a special envoy for Darfur and has temporarily eased rules for journalists working in China. The number of executions in the country dropped by 40 percent since China won the bid for the Olympics.

Kamm expects Beijing to implement more reforms before next year. He says a bill to reform China's re-education system, for example, is scheduled to be considered by the legislature in October.

"We haven't seen the draft, it doesn't seem to be satisfactory," added Kamm. "We will still see people put away without trials but there will be some improvements, and it is our responsibility as people who care about China to make sure that the bill is the best bill possible."

Kamm says there are a number of constraints preventing Beijing from introducing more reforms. One is the 17th Communist Party congress, which is scheduled later this year. Kamm says China's leaders do not want to appear to be bowing to Western critics ahead of the congress.

(BRAND) FACED WITH A STEEP LEARNING CURVE

2007-06-07T18:43:00.001-07:00

At 7ft 1in and 325 pounds, Shaquille O'Neal is one of the most recognised figures in world sport, a 13-time choice for basketball's All-Star game. For the past six months, the American athlete has also been promoting Li-Ning, the Chinese footwear retailer.

Li Ning is locked in a battle with Nike and Adidas for the fast-growing Chinese footwear market and the Chinese group is determined to keep up with the heavy-spending multinationals.

Since Yao Ming, the 7ft 6in Houston Rockets player and the best-known Chinese athlete in the world, uses Reebok (part of Adidas) and Nike has signed gold-medal hurdler Liu Xiang, Li-Ning has taken an imaginative approach – a five-deal deal with Mr O'Neal to sell his Dunkman brand of shoes in China.

Li-Ning, founded by the former Chinese gymnast who won three golds at the 1984 Olympics, started out selling cheap running shoes in smaller Chinese cities, while Adidas and Nike were moving into Shanghai and Beijing.

The company realises that to compete with big international groups – and charge the prices they do – it must develop a coherent brand that appeals to aspirational young Chinese.

Only a couple of years ago, China was associated solely with low-cost manufacturing. But now the listing includes three Chinese brands in the Top 100, with China Mobile ranked number 5.

Li-Ning's ambitious advertising – it has also signed the Cleveland Cavaliers' Damon Jones – demonstrates the rapid strides some Chinese companies are making to build up their own brands.

A frontrunner in efforts to move beyond cheap manufacturing is Lenovo, the computer maker that two years ago bought IBM's personal computer business. The deal was part of a grand plan to turn Lenovo into a global brand, which also involves the group sponsoring of the Turin Winter Olympics and Beijing Olympics. It has to move quickly: in four years, it will not be allowed to use the IBM name.

A new generation of Chinese entrepreneurs is full of confidence about the international potential of their businesses. "A quarter of the world's population is in China, so any brand that wins loyalty here is likely to become a global brand," says Zhou Chengjian, founder of the MetersBonwe shops, one of the biggest fashion chains in mainland China with 1,800 stores. "We need to remain strong in China but we will definitely try to take our brand overseas."

Some Chinese entrepreneurs have tried to resurrect traditional brands and build modern companies round them – such as the Quanjude, the Beijing roast duck restaurant that has expanded to Shanghai and Hong Kong, or YongJiu (Forever) bicycles, which has launched its own scooters.

Yet, while companies realise the need to invest in developing their brands, a number of factors still hold them back.

Despite China's manufacturing prowess, quality can be a problem. In some sectors, consumers in China will buy products that might not be considered acceptable in the US or Europe. The car industry, in particular, is facing this issue at the moment.

Two years ago, several Chinese manufacturers announced plans to export vehicles to the US and Europe from 2008, hoping to reproduce the success that some have had in their home market.

However, in recent months some of those companies have delayed their export plans as they strive to achieve the reliability levels that US consumers demand.

"We have to get it right at home before we go outside of China," says Phil Murtaugh, the former GM executive brought in by Shanghai Auto to lead its international operations. "I do not know when we will start exporting."

Finding the right executives who can lead international marketing initiatives is also a huge challenge. In a much-cited 2005 report about the looming "war for talent" in China, McKinsey found that only 10 per cent of Chinese engineering graduates had the English language and team-working skills necessary to work in a multinational.

And for local companies seeking to tap the relatively small pool of Chinese executives with international experience, they are competing against a growing array of multinationals wanting to hire the very same people.

Chinese companies are also only just beginning to think about the social issues that go with launching international brands – the sorts of topics that are sometimes referred to as "corporate social responsibility".

Multinationals that manufacture in China and other developing countries have become used to regular inspections of working conditions at their factories, investigations into whether their supply chains use child labour and constant media and NGO scrutiny. The new Chinese consumer brands will have to learn to cope with these demands.

Politics could also play a role. The more Chinese brands try to go abroad, the more they will face questions about where their funding really comes from or what their connections are with the Chinese government.

Such questions helped kill CNOOC's bid in 2005 for Unocal, the US oil and gas group. And Lenovo faced these problems when members of the US Congress queried the State Department's purchase of Lenovo PCs.

Whether such questioning has any basis, or whether it is an opportunistic strategy by anxious rivals, Chinese brands will need to develop ways of responding. They face a steep learning curve.

MARTIN CLUB - CHARLES WYPLOSZ

2007-06-07T18:40:00.001-07:00

Charles Wyplosz: Martin makes two important points: China's current surplus is driven by very high savings and the US cannot give orders (and, he does not say so, slap import duties as it will). He does not go the next steps, so I will oblige and do it.

If savings is the problem, and it is, what good would a renminbi appreciation do? There are some theories that exchange rate appreciation can reduce saving, but the magnitude of the effect is, at best, minute. The inescapable conclusion is that we should stop pestering the Chinese with calls for appreciation and threats of designating them as currency manipulators, as many in Washington plot to do. There is no doubt that the renminbi is not a free floating currency, but there is no international obligation to let all currencies float. Maybe the renminbi is somewhat undervalued, but that cannot be the ground for aggressive diplomacy. If it is undervalued and China sticks to its exchange rate policy, all that will happen is real revaluation through inflation. Not a great idea, I agree, but that is China's problem. Let them make that choice as an independent nation.

Much of this huge saving is invested locally, which largely explains one of the most spectacular growth performances mankind ever witnessed, with the added bonus that it benefits about one-fifth of humanity that was extremely poor when it all started. Not all of it can be invested. As Martin notes, a very low interest rate may already encourages excessive investment. So calling for Chinese firms to invest their savings is a bit disingenuous. Sure, the government could spend more, especially on infrastructure, health and social programmes. It is good to pass this sound advice to the Chinese authorities, but then it is for them to decide.

In the meantime, what can they do with this mass of savings that cannot be absorbed domestically? Invest abroad. Not in US Treasuries, but in profitable corporations. This is what they just set out to do with the creation of the State Investment Company. The first big move has been to buy a small stake, with no voting right, in the Blackstone Group. Why so timid a move? Because the Chinese know that they are not welcome in the US, they remember the groundswell of xenophobia when they wanted to buy Unocal, immediately branded a key strategic unit. Would Martin agree that we ought to welcome into the world economy the Chinese savers as well as the Chinese workers?

It is time to acknowledge that there are no rights and wrongs, but mistakes and counter-mistakes and, more importantly, huge common interests beyond healthy competition. This means sitting down and talking. Martin is absolutely right to call for dismissing the G8 as a misguided transformation of the out-of-breath G7 and setting up a G4. This is what Peter Kenen, Jeffrey Shafer Nigel Wicks and I proposed three years ago, only to fall on deaf ears. Thanks, Martin!

(Charles Wyplosz is Professor of International Economics at the Graduate Institute of International Studies in Geneva where he is Director of the International Centre for Money and Banking Studies.)

THE GAMBLING CULTURE THAT IS FUELLING CHINA'S HOT MARKET

2007-06-06T20:54:00.001-07:00

China is an emerging economy – and history tells us all emerging economies experience hot and speculative stock markets as they develop. Excitement and volatility are nothing new to an emerging market in the Far East.

Of course, China is bigger. But it is reminiscent of Taiwan's boom and bust stock market of the late 1980s. Both countries share a gambling culture – on sporting events, card games, dice or, as it now turns out, stocks.

Having taken 25 years to reach 1,000 in late 1986, the Taiwan Stock Exchange rocketed to 12,495 by February 1990. At the peak, some 10 per cent of its population were trading daily. People stayed away from work so they could spend time investing. On some days, market volume exceeded activity on the New York and Tokyo bourses combined.

Eventually, Taiwanese regulators took action and the market collapsed to 2,560 in September 1990. The fall was painful, but the economy emerged in better shape. Since relatively few companies were listed, the impact of the fall on overall investment and production was not great. The economy was also protected by large foreign currency reserves. Local investors were stoical, looking back at the good times and regarding the experience as a lost bet.

Beijing has so far not been as bold and successful as Taipei in cooling its stock market. Last week's increase in stamp duty from 0.1 per cent to 0.3 per cent seems merely tinkering at the margin, even if it has caused shares to fall.

In terms of economic controls, the obvious thing to do would be to raise the cost of borrowing, but this would have ramifications across the economy, attracting further speculative inflows and putting more upward pressure on the currency. The suspicion is that Beijing doesn't want to see its retail investors shouldering large losses if its actions caused the market to plunge.

Perhaps the Chinese government should look to increase supply by having more initial public offerings of state businesses. One option is to accelerate the listing of H shares (Hong Kong Stock Exchange) on the A share (Shanghai stock exchange) market, which would mop up some liquidity (and improve the standard of listed companies on the mainland). But right now the government is more interested in encouraging flows the other way. It has reduced barriers to domestic investors investing overseas, which is sensible, but investors are disinclined to diversify when they think returns will be better in their own market.

Whether the government takes radical action and succeeds in cooling the stock market, or whether it ends in tears for local investors, the impact on the wider economy, as with Taiwan, may be limited. There has been a flurry of IPOs but many businesses and industries are still state-owned, somewhat immune from fluctuations in bourses. Furthermore the government has the saving reserves to invest if capital from the stock market dries up. Depending on the degree of the fall, economic growth may slow – no bad thing, as it would ease the inflationary pressures in some parts of the economy.

We would welcome a slowdown in China's stock market and economic growth as we have been concerned for some time about the rate of its rapid expansion. However, it is unlikely to prompt us to change our strategy on capitalising on China's undoubted potential. As long-time (and long-term) investors in China, we've always been more comfortable investing via Hong Kong, including H shares. In general, companies there are of better quality and better regulated than on the mainland. (That said, at least we are now seeing profit margin improvement on the mainland and real earnings growth.) So they provide a more prudent way of gaining exposure to China's growth.

It's worth highlighting that the mainland exchanges are in effect off limits. (China is still largely a closed economy for investment purposes.) We are disinterested observers, because we do not have any holdings there. That will change in time as market access and company fundamentals improve. But there's no screaming urgency for us to plunge into the mainland while we see better quality at its edges

BEIJING EASES LAW ON FOREIGN EQUITY

2007-06-06T20:53:00.001-07:00

China yesterday signalled it was prepared to accept foreign private equity groups, following last week's introduction of a law to encourage its fledgeling domestic private equity industry.

"China needs to develop more Rmb-denominated investment funds," said Wu Xiaoling, deputy governor of China's central bank, adding that lack of a thriving domestic private equity industry was a "soft rib" in the country's capital market development.

"We hope foreign private equity can make more use of the Rmb market and develop more Rmb-denominated funds," she told a seminar in Tianjin.

Global giants such as Texas Pacific Group, Carlyle Group and KKR have faced stiff political opposition to their investments in China as Beijing has tried to develop domestic private equity and venture capital players.

Total private equity investment in mainland Chinese companies so far this year has slowed to only $2.44bn, compared with $7.3bn during 2006, after Beijing introduced new legislation last September to block the use of an offshore corporate structure used by most homegrown and international private equity groups.

But Ms Wu's comments indicate Beijing has resigned itself to allowing foreigners into the market and is trying to get them to localise operations and sell more investments through the mainland capital markets, instead of listing companies abroad.

A new law that came into effect last Friday establishes a legal framework for private equity and venture capital funds in China, by recognising their unique structure and simplifying the taxes they have to pay.

"The new law really throws the door wide open for onshore private equity and venture capital Rmb-denominated funds," says Lester Ross, managing partner at WilmerHale law firm in Beijing.

The law allows large investors in investment funds to enjoy limited liability and removes a rule that imposed taxes both on partnerships and their individual partners, encouraging both domestic and foreign private equity groups to use a Cayman Islands-registered offshore structure.

Ms Wu's remarks follow China's May announcement that it would spend $3bn on a 10 per cent pre-IPO stake in Blackstone, the US private equity group.

CHINA REVEALS FIVE-YEAR PUSH TO BOOST FOOD AND DRUG SAFETY

2007-06-06T20:50:00.001-07:00

International concern over exports of contaminated Chinese ingredients used in pet food and toothpaste has spurred Beijing to publish its first five-year plan for improving food and drug safety.

The state council's framework for regulation of food and pharmaceuticals is part of longstanding efforts to address what officials acknowledge are "severe" safety problems.

However, Beijing officials have in recent days also highlighted the international implications of incomplete inspection systems, lagging regulation and undisciplined food producers.

"Food safety is not just an issue of law enforcement, it is also related to the health and safety of the people, to the nation's image and to bilateral and even multilateral political relationships," said Li Changjiang, head of China's General Administration of Quality Supervision, Inspection and Quarantine.

Singapore this week banned the sale of three brands of Chinese-made toothpaste that contained a poisonous chemical, diethylene glycol. The move followed similar action by Latin American countries and a warning from US regulators that toothpaste containing the chemical could be harmful.

In April, pet food that included additives from China apparently contaminated with the industrial chemical melamine was blamed for poisoning thousands of US cats and dogs.

Worries about dangerous food and drug products have been widespread in China for years, and Wen Jiabao, the premier, has made pledges of tougher action a regular feature in his annual "work report".

The release by the state council, or cabinet, of the first "five-year plan" specifically addressing food and drug safety is intended to focus bureaucratic efforts on improving and more strictly implementing supervision of the two industries.

The plan, approved in April but not made public then, does not mark a dramatic shift in emphasis.

But it does call for the creation of systems to monitor food exports that might transmit disease and for residues of drugs in agricultural products and livestock shipments, as well for the "electronic monitoring" of food processing companies.

Paulson stands up for strategic talks with China

2007-06-06T20:49:00.001-07:00

Hank Paulson, US Treasury secretary, on Tuesday defended his strategic economic dialogue with China against charges it has achieved little.

Mr Paulson won support from James Baker, a former Treasury chief and secretary of state, who called for intensive engagement to minimise the risk of confrontation with China.

Mr Paulson told the Heritage Foundation the "task of the SED is long-term, and that is difficult in a town where short-termism is the order of the day".

Challenging reports that highlighted limited progress at last month's summit in Washington, he said: "This . . . misses the point." To get results "we must build relationships and take smaller, deliberate steps forward to create momentum for greater change".

The third meeting of the dialogue will be held in December.

Mr Paulson said the growth of China's foreign exchange reserves and trade surplus made a change to China's exchange rate more urgent than ever. The US trade deficit with China widened 15 per cent to a record $232.5bn in 2006.

"While currency reform is not going to eliminate our trade deficit, a market-determined exchange rate that reflects the underlying fundamentals of the Chinese economy is one component of the actions needed to address imbalances.''

Anger at China's currency policies has prompted members of Congress to introduce about six pieces of legislation aimed at China.

Mr Paulson said China could help him head off protectionist legislation in Congress.

"The more progress they make to open up their markets, the easier it is for me to fight the battles I have to fight to keep our markets open,'' he said.

"I'm going to be more effective in the administration if we have more progress in China.''

In a speech to the US-China Business Council, Mr Baker called for intensive engagement.

The "fundamental truth" was that "China can no more displace the US than the US can contain China".

CHINA IS SHOULDERING ITS CLIMATE CHANGE BURDEN

2007-06-04T20:03:00.000-07:00

Climate change is, first and foremost, an environmental issue, with an impact on the entire global community. But it is also a development issue. Climate change was caused by human development and must be resolved by development.

China has worked hard to adjust its economic structure to improve energy saving and cut emissions. From 1991 to 2005, with national energy consumption rising each year by 5.6 per cent, China sustained an annual economic growth rate of 10 per cent and lowered its energy consumption per unit of gross domestic product by 47 per cent, saving 800m tons of coal and cutting 1.8bn tonnes of CO2 emissions.

China remains committed to further improvements in both the way it uses existing energy sources and also the development of cleaner energy. By April 2007, the central government had approved 383 projects in wind, hydro and biofuel power generation, and the use of methane gas from coal beds. In total, they will cut emissions by 1bn tonnes. From 1980 to 2005, another 5.1bn tonnes was absorbed through extensive reforestation and better forest management.

Without China's strict family planning policies, the country's population would have increased by 138m people since 1979, resulting in an extra 330m tonnes in emissions. The policy has contributed significantly to easing the world's population expansion and curbing greenhouse gas emissions. In line with various United Nations frameworks and the Kyoto protocol, China has formulated an "action plan" for addressing the issue. The first of its kind for a developing country, the plan will be put into action this year. China has a comprehensive set of policies to take further action, which can be summed up in three steps: lower emissions, more absorption and more recycling.

Per-capita GDP energy intensity will fall by 20 per cent between 2005 and 2010, with CO2 emissions reduced accordingly. We will also act vigorously in developing cleaner energy sources such as wind and solar power, geothermal, tidal, biomass and other renewable technologies, and promote nuclear power with a view to increasing the ratio of renewable energy in the supply of primary energy to 10 per cent by 2010.

China will also address its water problems in light of global warming. The government will properly develop water resources and improve their distribution, including irrigation and conservation, and strengthen the capacity of the water system to resist climate change. China will continue to carry out its family planning policy to control population growth. We will also implement key projects in forestation, including returning farmland to forests and grasslands, and preserving natural forests, with the aim of increasing forestry coverage to 20 per cent of the country by 2010.

On other fronts, China will encourage and support scientific and technological innovation in curbing and adapting to climate change and do more in researching and developing key technologies.

Economic policy will also play a role. China is committed to improving its policies in industry, taxation, credit and investment and to using pricing to make the most of environmentally friendly policies. Such measures will also be backed by a solid legal foundation, with the adoption of the energy conservation law and the law on renewable energy as soon as possible.

The cumulative and per-capita emissions of developing countries so far have been modest compared with those of developed nations. With that in mind, any debate must take into full consideration the right of developing countries to develop and provide space for them to do so.

Take China as an example. From 1950 to 2002, China's CO2 emissions from burning fossil fuels accounted for only 9.33 per cent of the global total in the same period. In 2004, its per-capita emission of CO2 caused by the burning of fossil fuel was 3.65 tonnes – 87 per cent of the world average and 33 per cent of that of Organisation for Economic Co-operation and Development countries.

China is committed to addressing climate change in the context of sustainable development, but it should be on the principle of common but differentiated responsibilities.

China stands for active participation in international forums and multilateral co-operation. We have shouldered our obligation and responsibilities in the past, pushed forward the "post-Kyoto protocol" negotiations, and made strenuous efforts in all negotiations. China has also created an environment that has facilitated the progress of many projects under the clean development mechanism.

China also hopes that the developed countries can take the lead in reducing their greenhouse gas emissions, and provide financial and technological support to developing countries to better meet their needs for technology transfer and co-operation, particularly in climate change observation and monitoring, reduction of greenhouse gas emissions and adaptation to climate change.

We believe that as long as different countries can co-operate with each other on the issue of climate change, their collective efforts can make a greater contribution to the sustainable development of the global economy and humankind.

The writer is the minister in charge of the National Development and Reform Commission, China's chief economic policymaking and planning agency

China vows to release climate change plan

2007-06-03T21:11:00.001-07:00

China will release a long-awaited "action plan" on climate change ahead of next week's G8 meeting in Germany as it seeks to mount a more aggressive international defence of its environmental policies.

China's rapidly growing economy and a surge in heavy industry in the past five years has catapulted it uncomfortably into the centre of the global climate change debate and Beijing wants to pre-empt criticism at the meeting.

The Paris-based International Energy Agency estimates that China will overtake the US this year as the world's largest annual emitter of greenhouse gases, even though its economy is less than one-fifth the size of America's. China disputes the IEA calculation, and prefers to use the measure of per capita emissions, where its large population ensures its emissions are one-fifth those of the US.

The new plan is to contain promises to increase use of renewable energy and biofuels, as well as measures to capture methane gas emissions via methods such as carbon sequestration.

China will also re-emphasise its commitment to meet a target to cut the energy use per unit of GDP by 20 per cent between 2006 and 2010.

Last year it cut energy use per unit of GDP by 1.23 per cent, below the target for that year of 4 per cent.

China's plan is also expected to expound on its existing defence of its position, as a signatory to the Kyoto accord with developing country status, which does not require it to agree to binding cuts in emissions.

Beijing argues that developed countries are responsible for most of the accumulated greenhouse gases in the atmosphere and should take the lead in reducing emissions. "Climate change caused by developed countries has already made China one of its main victims," an official from the National Development and Reform commission, the economic planning agency, said yesterday.

CHINA AIMS TO BUY UP MORE OVERSEAS COMPANIES - FT.com

2007-06-03T20:55:00.001-07:00

Record numbers of Chinese companies are looking for overseas acquisitions, according to results of a survey published yesterday which foreshadows a global buying spree with potential political repercussions.

China Inc has to date been a reluctant player on the world stage, apart from in the state-controlled energy sector, with most companies either unprepared or fearful of managing assets overseas.

By contrast, Indian companies have recently embarked on a global acquisitions binge, highlighted by Tata Steel's $11bn takeover this year of Corus, the Anglo-Dutch steelmaker.

However, more than 90 per cent of Chinese respondents to the new survey conducted by the Economist Intelligence Unit and Norton Rose, the law firm, said they were looking to conduct a merger or acquisition over the next 12 months.

The executives of Chinese companies said they were looking in Asia, Europe and North America.

Richard Crosby, a Hong Kong-based partner of Norton Rose, said: "The findings show an increasing willingness among Chinese companies to consider deals outside Asia."

The findings suggest Chinese executives are seeking to build global scale, two years after US lawmakers famously prevented CNOOC, the state oil company, from acquiring Unocal for "strategic" reasons.

Bankers who advise mainland companies predict that China's leading telecommunications and financial services companies will lead the acquisitions charge. Rodney Ward, UBS Asia chairman, said: "Corporate China will continue to seek overseas acquisitions to exploit economies of scale."

The findings form part of a survey on cross-border corporate deals based on responses from 258 executives across Asia, excluding Japan and Australia.

The EIU found that intra-Asian M&A climbed over the past five years from 1,102 cross-border acquisitions valued at $30bn to 2,073 deals valued at $52bn. Buy-outs by Asian companies in Europe and North America rose from $2.6bn in 2002 to $15bn in 2006.

The survey found that while China is expected to lead the region's M&A boom this year, respondents believe that the mainland remained the most challenging terrain in Asia to conduct business from a regulatory perspective.

Asian executives voted the US and France as the most difficult western countries in which to operate because of the higher likelihood of M&A deals being blocked on political grounds.

Western investors are seeking acquisitions in Asia to take advantage of fast growth rates. But respondents said western companies' focus on compliance-related issues "makes it difficult to negotiate deals with them".

JUST RELAX ABOUT CHINA'S STOCK MARKETS - FT.com

2007-06-03T20:15:00.001-07:00

Two mornings every week, a friend of mine goes to a park in central Shanghai to practise T'ai-chi, the Chinese exercise regime sometimes known as meditation in motion. The group of mostly retired Chinese is led by an elderly gentleman who mixes strict punctuality with a certain eastern mysticism.

My friend was there on a cold February morning the day after the local stock exchange had fallen 9 per cent, spooking the rest of the world's markets. The group was halfway through their hour-long sequence of movements when the leader cut them abruptly short. "I have to leave early to get to my stockbrokers before the market opens," he announced. "Because today is a buying opportunity."

Everyone who lives in a Chinese city at the moment has a story to tell about the stock market craze and most have a similar theme: fascination with the sheer dynamism of the boom and fear at the occasional recklessness.

Having watched share prices quadruple in two years, more than 100,000 Chinese have been opening trading accounts every day in recent weeks as a new generation of middle-class Chinese has gained a taste for playing the market.

But in a nation where the urge to gamble is never far below the surface, the stock market has sometimes come to resemble a casino. People have taken out loans to speculate, while a few individuals have even pawned their houses to buy shares. The education ministry last week warned university students not to be distracted by investing. Eccentric investment theories abound: some are looking for shares with a price less than the cost of a kilo of pork, on the grounds that such a company must be a very good bargain indeed.

The 6.5 per cent drop in the market yesterday is a grim reminder of how this story could end: a collapse in the Shanghai market with the people who came in at the end of the party picking up the tab. So irrational is the exuberance in China that even Alan Greenspan, former chairman of the US Federal Reserve, is worried.

But will the damage stop there? In the early stages of the market boom, gung-ho Chinese speculators were considered a mild curiosity. Yet as the rally has gathered pace over the past month or so, some international investors have begun to fear the potential global fallout from Shanghai's excesses. They have started to ask what would be the impact from a crash not just on the Chinese economy but also on global iron ore consumption, Latin American trade surpluses and Treasury bill purchases.

The answer is, well, pretty much nothing at all. If the mainland market were to drop by a further 20-30 per cent, the Chinese economy would barely miss a beat.

For a start, there would be no domino effect of forced selling in one market pulling down others. Given the wall of capital controls that Beijing maintains for its currency, the mainland stock market is a parallel universe, detached in any real sense from other markets, with little money coming in to the country to invest in shares and little going out. Foreign investors have only a very modest exposure to mainland equities. Indeed, capital controls explain why share prices in Shanghai are so high: people have few other places to put their money.

Despite the recent boom, the stock market is still a relatively small part of the economy, even by the standards of emerging Asia. The massive investment surge in China has been financed largely from corporate profits, not from the capital markets, and would carry on at a relentless pace.

It is possible that consumption growth might be modestly held back, but retail spending was already surging before the market rally began. Most of the new funds have come from savings, not credit, and the Chinese still have $2,000bn in bank accounts to fall back on. Consumers can withstand a large correction.

The Shanghai market still has the power to scare the world – we saw that in February. In markets, if enough people think something is important then it is important, whatever the underlying logic. If global equities are overvalued and due a correction, investors do not need a good reason to start selling, just a popular one.

But for investors comfortable that strong global growth underpins the rise in share prices around the world, a collapse in Shanghai is an occasion to hold one's nerve and remain calm. Maybe even try some T'ai-chi.

The writer is the FT's Shanghai correspondent

China Rejects US Health Warning on Toothpaste

2007-06-03T17:04:00.001-07:00

China is rejecting a U.S. government warning about Chinese-made toothpaste that contains a potentially poisonous chemical commonly used in antifreeze.

China's General Administration of Quality Supervision, Inspection and Quarantine says the advisory from the U.S. Food and Drug Administration is unscientific and irresponsible.

China says low-levels of the chemical, diethylene glycol, have been approved for consumption. It also says the U.S. food regulator has approved all Chinese-made toothpaste exported to the United States.

On Friday, the U.S. government warned consumers to avoid using toothpaste made in China after the FDA found diethylene glycol, or DEG, in a shipment seized at the border and in two U.S. retail stores.

The FDA said it is not aware of any reports of poisoning from the toothpaste, but that it is concerned about sick people and children being exposed to the chemical.

The FDA has been scrutinizing toothpaste imported from China after similar products containing the chemical killed or sickened users in Latin America.

US Defense Secretary Sounds Softer Note on China's Military Build-up

2007-06-02T11:27:00.001-07:00

U.S. Defense Secretary Robert Gates has softened his county's rhetoric about China's military buildup, telling a regional security conference in Singapore that he sees "reason to be optimistic" about the U.S.-China relationship. Trish Anderton filed this report from Jakarta.

Robert Gates (file photo)

Gates told the Asian security conference that the United States is still concerned about what he called the "opaqueness" of Beijing's military spending.

But Gates's tone Saturday was softer than that of his blunt-talking predecessor, Donald Rumsfeld, who expressed concern over China's military buildup. Gates emphasized the common ties between the world's only superpower and the rising Asian giant, and expressed hope for better mutual understanding.

"We have increased military-to-military contacts between all levels of our militaries … As we gain experience in dealing with each other, relationships can be forged that will build trust over time," he said.

China has said its defense spending will grow by nearly 18 percent in 2007. A Pentagon report, however, concluded last month that Beijing spends two or three times more on defense than it has publicly acknowledged.

Speaking after Gates, Chinese Lieutenant General Zhang Qinsheng told the conference that Beijing is telling the truth about its budget. He said the increased spending is for items such as uniforms, training, and higher salaries and pensions.

But Zhang, too, appeared to reach out in cooperation, saying the two countries would set up a hotline to improve communication between their militaries.

Singaporean Prime Minister Lee Hsien Loong, the host of the conference, said most Asian countries do not see China's spending as a threat to regional security.

Nevertheless, Singapore and other Asian nations want a continued U.S. military presence in the region as a guarantee of stability and a counterweight to rising Chinese influence.

Secretary Gates sought to reassure the audience that the U.S. would not be distracted from its responsibilities in Asia by the military actions in Iraq and Afghanistan.

"We are an Asian power with significant and long-term political, economic and security interests. Our commitments elsewhere notwithstanding, we will fulfill our commitments in Asia," he said.

He called on Asian nations to increase their aid to Afghanistan and the former Soviet states of Central Asia, arguing that if those countries were allowed to flounder, they could become breeding grounds for terrorism.

Statistical Communiqué on China 2006 National Economic and Social Development

2007-05-30T19:45:00.001-07:00

In 2006, under the leadership of the CPC Central Committee and the State Council, the people of all nationalities of China, taking as the guidance of Deng Xiaoping Theory and the important thought of "Three Represents", adhered to the scientific approach to the economic and social development, endeavored to build a socialist harmonious society, carefully carried out various measures set by the central government aiming at enhancing and improving macro-control and made remarkable achievements in the national economic and social development. The major problems existing in the economic and social development are the extensive mode of economic growth and outstanding relationship within the economic structure.

Detailed in the Article: http://www.stats.gov.cn/

U.N.'s Brief Assessment of China's Development Challenges

2007-05-30T19:32:00.001-07:00

In China, in which the population is increasing by ten million people a year, it is inevitable that demands on the infrastructure and the environment are intense. At the same time the form of governance is changing from a central planning system to a socialist market economy. In the process, disparities arise in the equity of development, for example, discrepancies arise between the coastal regions and the poorer interior provinces, between males and females, between the demands to sustain a still increasing population and the capacity of the environment and natural resources to accommodate an estimated 1.5 billion people by 2030.

Overall access and coverage of a range of basic social services has improved during the last two decades with notable progress towards, for example, reduction of infant and under-five mortality. There is almost equal enrolment of boys and girls in primary school; a rapid increase in housing stock and living space for families; and increase in access to potable water resources, to name but a few impressive achievements. Some important initiatives are also underway with respect to fuller realisation of the rights of children and women and the prevention of desertification and land degradation.

On the whole, there is more that is similar than dissimilar with other developing countries in the kinds of strategic challenges China faces in achieving various goals and implementing provisions of conventions. Some of these challenges include:

How to accelerate achievement of more regional equity and reduce inequities;

How to maintain economic growth and avoid destruction and pollution of the natural resource base;

How to expand the progress made in increasing access to basic services into higher quality and more widespread coverage;

How to bring about the consistent implementation of existing laws and filling gaps in present legislation;

How to better match gains in development of technical expertise with greater progress in managerial and regulatory competencies.

At the same time, however, there are some more systemic and probably deeper challenges associated with the overall stresses incurred in China's social and economic transition from a centrally planned economy to a socialist market economy. There are a number of instances in which national policy changes are underway or could benefit from major improvements, for example national health and nutrition; prevention and control of HIV/AIDS; environment and energy and social protection.

China is wedded to an overall purpose of increasing the well being of its people. Changing economic and social conditions over the next decade, partly spurred by leaps in technological applications, will open many possibilities for improvement in both societal and personal well being. However, there remain a host of important national goals, partly inspired by global initiatives, the sustainable achievement of which would bolster both national and international development efforts.

Poverty of China (Current situation of Poor)

2007-05-30T19:16:00.001-07:00

10% of Chinese live in poverty

Around 48 million Chinese live below China's domestic poverty line, accounting for 3.7 % of the total population. Based on international standards, 135 million Chinese live below the general poverty line, or 10% of the population.

The numbers come from the "Report of the Development of an Overall Well-off Society (2006)," China's first blue book to be published on building an overall well off society, Beijing Evening News reports.

The report reveals there are 26 million needy people in China's countryside. Another 22 million living in cities subsist below minimum subsistence levels , or the poverty line. These 48 million people account for 3.7% of the total population in China.

According to international standards, however, the needy refer to those whose personal daily expenses average below $1.

The World Bank estimates about 135 million of Chinese live below the international poverty line. These people are the key group China should show concern for in building an overall well-off society.

Migrant workers earn monthly income of 120 dollars

Migrant laborers in Chinese cities earn an average of 966 yuan (US$120.75) per month, much more than the average farmer, but still very low compared to urban residents.

The per capita monthly income for half of the migrant laborers is less than 800 yuan, with 19.67 percent below 500 yuan, according to a latest survey conducted by the National Bureau of Statistics (NBS).

Ten percent of the 29,425 migrant workers surveyed have a monthly income of 1,500 yuan.

Migrant workers are mostly poor farmers who leave the countryside to find jobs in cities. There are more than 100 million migrant workers in China.

The average income of Chinese farmers is about one fourth that of the urban residents earn.

The shrinking of farmlands are producing a bigger army of migrant workers in the country and has caused many social troubles.

The survey shows that jobs in east China are the most lucrative for migrant workers, who earn an average of 1090 yuan per month there, compared with 880 yuan and 835 yuan in the central and western regions.

Migrant laborers spend an average of 463 yuan per month; 72 yuan on accommodation, 235 yuan on food and 47 yuan on recreation.

To improve their professional skills, half of the respondents received vocational training , while 24.1 percent were self-taught.

Of the 5,065 respondents who brought children with them to the cities, only 1.05 percent had seen their children drop out of school, and 49.2 percent had to pay an average registration fee of 1,226 yuan in addition to regular tuition fees.

CHINA, INDIA IN THEIR OWN ‘RACE TO THE MOON'

2007-05-30T18:30:00.001-07:00

China and India are both planning to launch moon shots within a year in the latest sign of the two Asian powerhouses' intensifying rivalry and growing technological prowess.

Although both countries deny they are engaged in a 21st century re-run of the 1960s race to the moon between the cold war superpowers, their haste to launch suggests more than casual interest in the other's progress.

China said this month that it expected to launch its first unmanned lunar orbiter, the Chang'e-1 (named after China's mythological "lady in the moon") before the end of this year, while India this week announced that it could send up a similar space probe as early as April 2008.

The two lunar programmes should be scientifically complementary, with Chinese scientists stressing Chang'e's goal of improving understanding of the geochemistry of the moon's surface and India focusing on three- dimensional mapping.

Chinese lunar programme scientist Ouyang Ziyuan told the Financial Times in 2005 that he was excited about the possibility that the moon might be a rich source of helium-3, a potential fuel for nuclear fusion reactors that is scarce on earth.

S Krishnamurthy, a spokesman for the Indian Space Research Organisation, said yesterday that the spin-offs for India's nuclear programme from potential lunar sources of helium-3 could be "considerable".

Non-governmental groups have put the Indian space agency on the defensive about the programme, arguing it is hard for a country that is home to a quarter of the world's poor to justify costly space missions.

Manmohan Singh, India's prime minister, has defended it, saying the country must deal with the fundamental problems of development and at the same time aspire to operate on the frontiers of science.

"In the increasingly globalised world we live in, a base of scientific and technical knowledge has emerged as a critical determinant of the wealth and status of nations and it is that which drives us to programmes of this type," he said last year.

China's satellite navigation has a promising future

2007-05-30T10:17:00.000-07:00

China's Global Satellite Navigation Plan has emerged since Xichang Satellites Lunch Center successfully lunched a "Beidou" navigation satellite on April 14 this year.

The satellite navigation positioning is a newly emerging technology, which positions, navigates and monitors all kinds of targets by using the location, speed and time information provided by global satellite navigation and positioning system. Satellite navigation system plays an important strategic role in national security and economic construction.

As a global satellite navigation system with China's independent intellectual property rights, Beidou Navigation Satellite consists of 5 geostationary orbit satellites and 30 non-geostationary orbit satellites; the construction of the whole system will be completed before 2010. The system is expected to satisfy the demands for satellite navigation system of users in China and neighboring countries at that time, and it will be gradually developed into global satellite navigation system. The Beidou navigation satellite launched a month ago, namely COMPASS-M1, is one of the "5+30" system.

Huge potential for navigation industry

Part of industrial users in China are benefiting from "Beidou-1" satellite navigation test system, which has been put into operation. Since 2000, which represented the beginning of the prophase trial of Beidou Navigation Satellite System, China has successfully launched two "Beidou-1" operation satellites and one backup satellite successively, and has built "Beidou-1" Satellite Navigation Test System. Up until now, China has become the third country in the world that owns satellite navigation system following Russia and the USA.

Compared with satellite navigation and positioning systems of other countries, except for equivalent accuracy to GPS in fast positioning and accurate timing, "Beidou-1" also has an advanced and unique short message communication function. Now the System is offering highly efficient navigation and positioning services to national economic construction such as communication and transportation, meteorology, petroleum, ocean, forest, telecommunications, public security and other special industries.

In spite of the own technology characteristics of "Beidou-1", GPS is still monopolizing satellite navigation service market, especially over 95 percent of public service market, because China's independent satellite navigation system started relatively late. This is also the reason why the development of relevant industries in China is lagged far behind than the rapid development of satellite navigation technology. As reference shows, the market size of China's satellite navigation and positioning market had been expanded from nearly RMB1 billion yuan in 2000 to RMB12 billion yuan in 2005. Some experts predict that 5 years later, China will probably become the biggest satellite navigation application market in the world along with the completion of Beidou Navigation Satellite System. In 2010, the scale of satellite navigation and positioning industry of China will reach RMB10 billion yuan

Build the industrial giant of application and development

China's Beidou Navigation Satellite System is also the great white hope of a famous enterprise- Beijing BDStar Navigation Tech. Co., Ltd, which is an operation and service provider specially established for "Beidou-1" satellite navigation test system. Since BDStar obtained the first operating license of "Beidou" civil navigation system at the end of 2004, BDStar has completed technology accumulation from 5 aspects successively in just two more years. What is to say, BDStar has built network operation and service technology, information service technology of ocean fishing, ship-borne terminal technology of ocean fishing, mobile technology and navigation receiving technology basing on Beidou.

Last year, "Beidou Satellite Ocean Fishing Comprehensive Information Service" project, a subject of National 863 Plan undertaken by BDStar, won the bid of "Nansha Fishing Boats Position Monitoring and Commanding System" of Ministry of Agriculture. The project integrated the comprehensive technological methods such as satellite navigation and positioning system, geographical information system, satellite communication system, mobile communication network and database, etc, and easily realized the dynamic control and management of fishing boat position under jurisdiction through building a unified information management platform for Nansha fishing safety management. The project could also give alarm and provide rescue for emergency situations, and provide technical support for the command of fishing boats in avoiding and escaping from dangers.

The circle has reached the consensus that the application of Global Satellite Navigation Technology is limited only by people's imagination. Beidou Navigation Satellite, which was successfully launched by China, not only offers wider space for imagination of China's satellite navigation and positioning industry, but will also become the new opportunity of industrial development. Just like what Zhou Ruxin, President of BDStar, said, "within 3 years in the future, satellite navigation industry will bring about a lot of big enterprises and backbone enterprises. It might give birth to an enterprise that is like Lenovo in computer industry. BDStar hopes to be a leader among them."

China's auto sector sees rapid growth

2007-05-30T10:15:00.001-07:00

The auto consumption of China is turning on high-speed development, and sales of new vehicles are growing increasingly. Relative analysis shows that, in the first quarter, the gross margin of listed auto companies was basically the same as that in previous year. Passenger car companies have been in the peak of industrial prosperity during the same period of last year and they had achieved performance at a rather high level. In comparison with passenger car companies, commercial vehicle companies grew much more rapidly. At present, the passenger car industry mainly relies on private consumption and new vehicle purchase, and has entered a fast growing period. Insiders reckon that in the foreseeable 5 years, the growth rate of passenger car sales will probably maintain at a level of not less than 25 percent.

SAIC Motor, being one of the three biggest vehicle-manufacturing groups in China, is keeping its steady growth. In 2006, SAIC Motor achieved an aggregated sales volume of 1.25 million and a market share of 15 percent. The company's market share in passenger vehicle field is 21 percent. Octavia series of Shanghai Volkswagen will launched in batch in the market; Buick Park Avenue of Shanghai GM will go to the market too; Roewe, a self-owned brand of SAIC Motor, will also begin mass production, indicating the company's strong capability of sustainable profit earning. SAIC Group has completed the overall listing of the group, for which insiders analyzed that listed automobile companies may obtain more quality assets through asset injection and profits repatriation, as well as more impetus for future development.

FAW Car Co., Ltd., being the first leading car manufacturer that has gone public, owns certain scale advantage. The main products include Red Flag, Mazda and Besturn, which was newly launched in last year. Mazda 6 is one of the leading models of car market in recent years. The brand value of FAW "Red Flag" has reached RMB5.828 billion. FAW Xiali sees bright future due to its dominant position in economy car sales. After taking control of distribution tache by acquiring all the shares of sales company, FAW Xiali figured out the problem of default in large amount of payment, and therefore the financial status was improved remarkably. However, the competition in economy car market is intense and the strength of rivals is increasing every day. As reference shows, FAW Toyota, of which 30 percent share was held by FAW Car Co., Ltd., is the main profit source of the company.

Changan Auto is a leading company in mini car industry of China, and is ranking No. 1 in Mini car industry throughout the country. It was introduced that Changan Auto plans to input RMB3 billion yuan in a few years in the R&D of high-tech small-displacement vehicles, and will launch a series of mini cars with completely independent IPRs. Moreover, the company has exported 7,050 vehicles in the first quarter of this year, far beyond the industry average of the country.

Golden Dragon Automobile has got a satisfactory business increase in 2006.

According to the annual report, the major business income was RMB9.6 billion yuan, up by 25 percent; the net profits were RMB150 million yuan, increasing by 53 percent. In 2006, the company sold 41 thousand passenger vehicles, increasing by 24 percent, in which large and medium sized passenger vehicles accounted for 27 thousand and increased by 18 percent, light passenger vehicles accounted for 13.8 thousand and grew by 36 percent. The company industrial position got raised. This year, the sales volume keeps growing, in the first quarter, sales volume of passenger vehicles increased by 23 percent, in which large sized passenger vehicle and medium passenger vehicle increased by 49 percent and 37 percent respectively.

In 2006, China National Heavy Duty Truck Group Co., Ltd. obtained a marked increase in income. The year's income was RMB9, 469.53 million yuan, increased by 45.54 percent year on year; the net profit was RMB 224.4 million yuan, increased by 48.97 percent year on year. The sale of heavy-duty trucks reached 44,447 units in 2006, up by 43.09 percent year on year. Analysts said that the prosperity of heavy duty truck of the company, especially those advanced heavy duty trucks with load of 15 tons and above and relevant parts, is improving increasingly, and thus the profit margin of vehicles will maintain constant.

Jiangling Motors Corp's (JMC) major business revenue in 2006 was RMB7.368 billion yuan. The growth areas for sales volume include the industrial growth and the launch of new models. The aggregate sales volumes for complete vehicles were 85,214 units, increased by 16 percent year-on-year. The company will launch the fifth generation of Quanshun series, namely V348, in the second half of this year; with advanced engine performance and improved comfort, the positioning of V348 will be extended to commercial vehicle filed and light passenger vehicles used for middle and short term trips in cities. It is predicted that V348 might become the future growth point of the company's performance. Some analysts consider that the core advantage of JMC relies on better cost control than that of rivals, and this kind of advantage will go on; plus the launch of new models, the company will grow steadily in future.

Anhui Jianghuai Automobile Co., Ltd (JAC) has realized a major business revenue of RMB10.29 billion yuan in 2006, up 9.54 percent year-on-year; but net profits realized decreased by 17.3 percent year on year to RMB410 million yuan. The passenger car project of the company was officially approved in January this year. At the same time, JAC has built a passenger car manufacturing base in Hefei development zone, which was designed for an output of 200,000 units per year; the construction of R&D and product line of matching equipments has been basically completed. It is predicted that JAC will launch the first C-class vehicle in the third quarter of this year and A-class vehicle at the end of this year or at the beginning of next year. According to professional analysis, the transition of car business of JAC is worth expecting.

The performance of Kunming Yunei Power Co., Ltd. grew by 358.55 percent in the first quarter. The main reasons include: adjustment of product structure, bigger proportion of high-end products, effective control of expenses, as well as certain investment income. In early April, the company announced that it would offer not more than 80 million shares publicly; the capital raised should be used in production capacity expansion project of diesel passenger cars. After the project is put into production, the newly increased sales revenue per year will be RMB5.7 billion yuan, and newly increased profit will be RMB0.4 billion yuan. The company's performance in the first half of this year is forecasted to go up by 100 to 150 percent.

Shuguang Automotive's main business includes passenger vehicle, SUV and the production and sales of auto parts like vehicle-bridge and differentials. Shuguang Automotive ranks No. 3 in the production and sales of large and medium sized passenger vehicles, and No. 1 in the manufacturing of vehicle-bridge, especially light vehicle-bridge. In the first quarter of 2007, Shuguang Automotive, as a main manufacturer of light vehicle-bridge, obtained an increase in vehicle-bridge business thanks to the relatively strong growth of light vehicle. However, the average profitability of the company went down slightly on the contrary due to the characteristics of parts and accessories.

China to catch up with US economy - world poll

2007-05-30T10:12:00.001-07:00

China is on course to catch up with the United States and join the front ranks of world economic powers, but that is little cause for concern even among Americans, a global survey said Monday.

Most respondents in 13 countries agreed it was "likely that someday China's economy will grow to be as large as the US economy," according to the opinion poll by the Chicago Council on Global Affairs and WorldPublicOpinion.org.

"What is particularly striking is that despite the tectonic significance of China catching up with the US, overall the world public's response is low key -- almost philosophical," said Steven Kull, editor of WorldPublicOpinion.org.

But the poll showed there is also distrust of China to "act responsibly" in world affairs.

In no country was there a majority who felt that China's economic rise would be mostly negative, but that was not because China is particularly trusted, the pollsters said.

Majorities in 10 out of 15 countries said they did not trust China "to act responsibly in the world." But the same number also said they distrusted the United States.

"Though people are not threatened by the rise of China, they do not appear to be assuming that it will be a new benign world leader," Kull said.

"They seem to have a clear-eyed view that China is largely acting on its own interests."

The Chinese themselves are among the more skeptical populations, with only half saying that their economy will catch up with the United States'. Among Americans, the percentage was 60 percent.

Only in India and the Philippines did a plurality of respondents say the United States would always remain a bigger economy than China.

The highest level of concern about the implications of China's economic march was in the United States, where one in three is worried.

But 54 percent of Americans said that its rise would be "neither positive nor negative" while one in 10 said it would be mostly positive.

Only in Iran did a majority -- 60 percent -- say that it would be "mostly positive for China to catch up."

The survey included 18 countries: Australia, Argentina, Armenia, China, France, India, Iran, Israel, Mexico, Peru, the Philippines, Poland, Russia, South Korea, Thailand, Ukraine, and the United States, plus the Palestinian territories.

Not every question of the poll was asked in each country, so that the results for some questions covered less than 18 countries.

Beijing blasts Taiwan's DPP for 'independence' move

2007-05-30T10:09:00.001-07:00

China on Wednesday blasted the leaders of Taiwan's ruling Democratic Progressive Party (DPP) for considering a change to the island's "constitution" which would reflect an identity separate from the mainland.

The DPP has been drafting a "normal country resolution" to amend the "constitution" of the island which still styles itself as the "Republic of China" and claims "sovereignty" over the mainland.

"Its (the resolution's) purpose is to create conditions for "de jure independence" through "constitutional" changes and referendum," Li Weiyi, spokesman for Beijing's policy-making Taiwan Affairs office, said.

"We will never allow any attempts to separate Taiwan from China to succeed."

The DPP's resolution lacks specifics but should be approved by the party on June 30 and sent to "parliament", the party's mainland policy architect said earlier this month. If the party proposes provocative "constitutional" changes, the opposition-controlled legislature will likely reject the resolution.

In an apparent divide-and-conquer tactic, Li said drafting the resolution was a "dangerous act by diehard 'independence' elements to forcefully impose their will" on DPP members.

"We have always held that the broad membership of the DPP is different from a tiny minority of diehard Taiwan "independence" elements," Li said.

"We are willing to make positive responses and engage with DPP if it abandons the 'independence' platform and stops splittist activities."

China has fostered close ties with the KMT and two other opposition parties favouring eventual reunification, but has refused to deal with the DPP leadership and the "administration" of Chen Shui-bian.

Meanhile, Li told the conference, the Chinese mainland has come to the rescue of Taiwan fruit farmers by purchasing 78 million yuan (about US$10.2 million) worth of fruit from the island province.

At the request of Taiwan's Kuomintang Party, Li said, the mainland activated an emergency mechanism, arranging for mainland enterprises to buy 300 tons of bananas and 1200 tons of oranges.

"These measures have effectively helped Taiwan farmers solve the problem of fruit oversupply," Li said.

Li pointed out that the mainland had scrapped tariffs on 15 kinds of Taiwan fruit in August 2005.

Chinese Traditional Sichuan Opera

2007-05-30T10:04:00.001-07:00

A performer waits backstage for the start of a Sichuan Opera show at the Jingjiang Theatre in Chengdu, southwest China's Sichuan province May 25, 2007. Sichuan Opera, which is distinguished by the face-changing technique where performers change masks in quick succession with a wave of the hand or by turning around, is one of the oldest forms of Chinese opera.

A performer wears his costume before a Sichuan Opera show at the Jingjiang Theatre in Chengdu, southwest China's Sichuan province May 25, 2007. Sichuan Opera, which is distinguished by the face-changing technique where performers change masks in quick succession with a wave of the hand or by turning around, is one of the oldest forms of Chinese opera.

A performer puts on make-up prior to a Sichuan Opera show at the Jingjiang Theatre in Chengdu, southwest China's Sichuan province May 25, 2007. Sichuan Opera, which is distinguished by the face-changing technique where performers change masks in quick succession with a wave of the hand or by turning around, is one of the oldest forms of Chinese opera.

Actors perform during a Sichuan Opera show at the Jingjiang Theatre in Chengdu, southwest China's Sichuan province May 25, 2007. Sichuan Opera, which is distinguished by the face-changing technique where performers change masks in quick succession with a wave of the hand or by turning around, is one of the oldest forms of Chinese opera.

Beijing fines spitters for city's image

2007-05-30T10:02:00.001-07:00

More than 50 people in the Chinese capital have been fined for spitting  during the week-long Labor Day holidays, according to officials in charge of the  city's image.

Beijing's management department and civilization promotion office have  jointly sent five inspection teams to patrol the downtown Wangfujing pedestrian  mall, Tian'anmen Square, commercial centers and railway stations to stop people  from spitting, littering, posting of advertisements and writing on public  property.

As of Sunday, 56 people had been fined for spitting and refusing to correct  the bad habit, according to the teams.

The officials also handed out more than 10,000 bags to tourists, reminding  them not to litter.

Earlier reports said people spitting in the streets in Beijing will be fined  up to 50 yuan (about 6.5 U.S. dollars).

"Fifty yuan is a fairly hefty fine for spitters," said Zhang Huiguang,  director of the Beijing Civil Affairs Bureau.

In Beijing, 50 yuan is about daily income of a Chinese college graduate and  can buy 16 subway tickets or 100 packs of paper tissues.

The government is anxious to correct the embarrassing habits of Chinese  travelers ahead of next year's Olympics Games. The May Day holiday week is seen  as a good time to start as an estimated 150 million Chinese tourists will be on  the road.

The China National Tourism Administration has issued a circular, requiring  travel agencies and tour guides to be responsible for correcting the bad  behavior of tourists during the holidays.

Jumping a queue, spitting, littering and loudly clearing one's throat in  public are some of the frequently observed bad habits that are giving Chinese  travelers a bad reputation, according to the Spiritual Civilization Steering  Committee (SCSC) of the Chinese Communist Party, the official etiquette  watchdog.

"We are supposed to remind people constantly throughout the tour, and also  lead an etiquette discussion at the end of the tour," said Huang Xiaohui, a  travel guide with a Beijing-based travel agency.

"The Olympics are coming, and we don't want to be disgraced," Huang said  succinctly.

Beijing expects to receive 550,000 foreign tourists during the 2008 Olympics  and an estimated two million domestic tourists will also visit the capital city.

"Promoting civilized behaviors among Chinese travelers is a long-term task.  To harvest short-term results before the games, we need to focus our resources  on the main problems," said Zhai Weihua, SCSC deputy director.

"Tens of thousands of reporters will come to China to cover the Games next  year, which means both China's positive and negative sides will be amplified.  Once bad impressions are made, they last, " Zhai said.

"That's why we should grab the opportunity to change uncouth behavior," said  Wu Jianmin, President of China Foreign Affairs University, in a TV interview.

The Olympics are now only about 450 days away.

Military pumps up China's influence, Pentagon says

2007-05-30T09:36:00.001-07:00

China's modernizing military will make it a more muscular player in world events, a U.S. Defense Department report says.

China's developing capabilities "will increase Beijing's options for military coercion to press diplomatic advantage, advance interests or resolve disputes," the Pentagon says in its annual report to Congress on China.

The Pentagon says that Beijing remains preoccupied with military contingencies in the Taiwan Strait -- but adds that the Chinese military is also improving its ability to win possible conflicts over resources or territory.

To that end, the report says, the Chinese army is transforming itself from a force designed to fight wars of attrition on its own territory to one capable of winning short but intense campaigns against high-tech adversaries.

It says China's military expansion is in part designed to protect its access to raw materials around the world, especially coal and oil supplies. At present, the report says, "China can neither protect its foreign energy supplies, nor the routes on which they travel."

The report notes key developments such as China's testing of an antisatellite missile in January and the greater accuracy and range of its missile forces, including intercontinental ballistic missiles.

"New air- and ground-launched cruise missiles that could perform nuclear missions will similarly improve the survivability and flexibility of China's nuclear forces," it adds.

It also says that China continues to modernize its Navy with better air-defense systems and new submarines, while its offensive air power has been improved with the acquisition of Su-30 strike aircraft and F-10 fighters.

Military spending continues to grow more quickly than the expansion of the economy, with Beijing announcing an increase of nearly 18 percent in its defense budget in March.

Looking at the situation with Taiwan, the report says the balance of forces continues to shift in the mainland's favor, with military exercises and deployments contributing to an atmosphere of intimidation. The report adds that tension could also increase as Taiwan prepares for its next presidential election, planned for March 2008.

Despite the pace of modernization, the report says, the People's Liberation Army remains untested in modern warfare and most of China's leaders lack military experience.

That gives rise to a greater potential for miscalculations, according to the report, which "would be equally catastrophic whether based on advice from operationally inexperienced commanders or from 'scientific' combat models."

Asia hit by tumbling China

2007-05-30T09:32:00.001-07:00

Chinese stocks slumped more than 6 percent on Wednesday after China tripled a share-trading tax in a bid to cool its red-hot market, knocking Asian markets lower but failing to trigger the broad rout some had feared.

The yen held gains after rebounding from a record low against the euro as the Chinese move prompted investors to cut back risky positions in so-called carry trades financed by borrowing the Japanese currency.

Investors were anxiously awaiting the reaction of European and U.S. markets, with London spread betters forecasting Britain's FTSE 100, France's CAC 40 and Germany's DAX to open down around 0.5 percent.

China's Ministry of Finance raised stamp duty on share transactions to 0.3 percent from 0.1 percent in what was seen as the strongest attempt yet to curb speculation in a market that had risen more than 60 percent so far this year.

Tokyo's Nikkei closed down 0.5 percent, while MSCI's index of regional shares outside Japan was down 1 percent at 0615 GMT.

"The decline today is 100 percent influenced by China," said Soichiro Monji, chief strategist at the equity management department of Daiwa SB Investments in Tokyo.

"In theory it shouldn't matter if Chinese stocks plunge, but markets are at high levels and investors are very aware of the downside risk."

The benchmark Shanghai Composite Index was down 6.2 percent, having fallen as much as 7.4 percent earlier. Shares of brokerages were hardest hit on fears the tax rise would shrink market turnover, with CITIC Securities tumbling by the 10 percent daily limit.

Beijing's cooling measure prompted fears of a repeat of late February, when a steep slump in Chinese stocks triggered a global equities sell-off as risk aversion swept financial markets.

Regional stock markets fell almost across the board but the losses were not as dramatic. Australia's stocks benchmark lost 1.2 percent and Taiwan shares fell 0.4 percent.

Indexes in Hong Kong and Singapore were both down more than 1 percent at their midsession breaks, but South Korea's KOSPI crept into positive territory near the end of the trading day, ending up 0.1 percent at a record close.

"This is not like the China shock in February," said Kim Joong-hyun, an analyst at Goodmorning Shinah Securities in Seoul. "The markets are showing that the impact from China this time will not be long-lasting."

In the foreign exchange markets those jitters prompted some scaling back of carry trades, where investors borrow low yielding currencies such as the yen to buy assets offering higher returns.

Carry trades are vulnerable to reduced risk appetite, often prompting a sharp appreciation of the yen when investors reverse such positions.

The Japanese currency jumped against the dollar and euro as share trading opened in Shanghai, but quickly trimmed gains to trade a little firmer on the day.

"The foreign exchange market is swinging between hope and despair due to developments in Chinese shares," said Kosuke Hanao, head of forex sales at HSBC in Tokyo.

The euro eased to 163.45 yen after reaching a fresh record high of 164.29 yen the previous day as comments by European Central Bank officials suggesting more euro-zone rate increases prompted investors to buy the single currency.

The dollar bought around 121.60 yen at 0615 GMT, little changed from late U.S. trading. The dollar remains in sight of a three-month high of 121.89 yen hit last Friday.

China's midnight announcement, which came late in the U.S. trading day, limited Wall Street gains on Tuesday. The Dow Jones closed 0.1 percent higher, although the Nasdaq rose 0.6 percent on a wave of takeover news in the tech sector.

Benchmark Japanese government bond 10-year yields fell 2 basis points to 1.730 percent.

China announces new anti-porn Internet campaign

2007-05-30T09:29:00.000-07:00

China has launched its latest campaign against Internet pornography that will also take aim at fraud, illegal lotteries and "rumour-spreading", the official Xinhua news agency said.

"The boom of pornographic content on the Internet has contaminated cyberspace and perverted China's young minds," it quoted Zhang Xinfeng, vice-minister of public security, as saying in a late night report.

"The inflow of pornographic materials from abroad and lax domestic control are to blame for the existing problems in China's cyberspace," Zhang said.

The campaign will crack down on "distributing pornographic materials and organising cyber strip shows, and purge the Web of sexually explicit images, stories, and audio and video clips," it added.

Zhang said they will target "content that spreads rumours and is of a slanderous nature" as well, though he did not provide details.

"China has roughly 123 million Internet users, most of whom are young people. The Chinese government believes they need to be protected from negative online influences," Xinhua said.

Last November a Chinese court sentenced the founder of the country's largest pornography Web site to life imprisonment.

Pornography was among the vices nearly wiped out in China under the strict and puritanical rule of Mao Zedong. But since economic reforms began and social controls have loosened, it has become more readily available.

China has an army of cyber police who patrol the Internet for unfavourable content, but their targets are more often politically sensitive subjects than pornography.

China's Porn King Gets Life in Prison

China is cracking down on Internet pornography suppliers.

Chinese authorities made an example out of Chen Hui, the 28-year-old Internet porn king, and sentenced him to life in prison. Eight others who were connected to Mr. Chen's venture were given jail terms ranging from 13 months to 10 years.

The authorities would have made Chairman Mao proud. Pornography, along with prostitution, drugs and extramarital sex, was a vice he wanted erased from Chinese society. Yet he enjoyed the perks of being a dictator. In "The New Emperors," he is described also as a porn collector, a drug addict and a "sex maniac" who had women at the ready to pleasure him.

While the rich and the almighty party apparatchiki indulge in sex, drugs and rock and roll, the law applies differently to less important, ordinary Chinese.

Like opium that brought 19th Century China to its knees, the Internet should scare the Party, and not because of subversive contents. But how does Beijing monitor 111 million users?

China's Internet censorship scheme is 'sophisticated and effective.' It uses a combination of legal restrictions and highly efficient hardware and software filters. There are human monitors, too, to see who will get jailed next.

Mr. Chen's trial began in August after prosecutors charged him with running "Qingseliuyuetian," or Pornographic Summer. He had eluded the authorities by using overseas servers and shifting them regularly. Much of his assets are believed to be in foreign banks. That may or may not do much good for him now.

"China's Department of Public Security has sent officials to supervise the trial," Xinhua news agency wrote.

China now has an "anti-pornography and anti-piracy" office. The two go hand in hand when it comes to selling pirated pornographic DVD's. An unidentified man received 12 years last week for that crime. (Read more about piracy here.)

When it comes to Internet addiction, China's Civilization Office is leading the charge to protect teenagers. Other than promoting what the Chinese are calling "green" games, it is unclear what else they can do to confine teenagers to friendly content.

But the Internet is being used for sex education, a topic neither school teachers nor parents want to talk about openly.

South China Province to Ban Keeping Of Mistresses

2007-05-30T09:22:00.001-07:00

South China's booming province of Guangdong is drafting a law to ban the resurgent trend of keeping of mistresses, in a bid to preserve social harmony, local media reported on Wednesday.

Many Chinese businessmen keep mistresses in second homes, a tradition banished after the Communists swept to power in 1949 but which has made a comeback with nearly 30 years of market reforms.

The law, attached to legislation guaranteeing women's rights, would ban married people from setting up "love nests" to engage in extra-marital affairs, the Beijing News said.

"Adding this provision is aimed at preserving and enhancing marital stability," the paper quoted a Guangdong lawmaker, Cheng Jingchu, as saying.

China has repeatedly urged its officials to honor the sanctity of marriage after a string of high-profile corruption cases involving mistresses led to the sacking and punishment of senior cadres.

Last year prosecutors launched criminal proceedings against Beijing vice-mayor Liu Zhihua, who was denounced for taking millions of yuan in bribes and helping his mistress "seek profit" while he was in charge of Olympic venue construction.

China also sacked top naval officer Wang Shouye for graft last July after one of his mistresses blew the whistle on him for taking millions in bribes from military contractors.

Taiwan's Lee Visits Japan Despite Beijing Protest

2007-05-30T09:18:00.001-07:00

Former Taiwan president Lee Teng-hui, despised by China for asserting the self-ruled island's sovereignty, arrived in Japan on Wednesday for a trip that has already sparked protest from Beijing.

Japan said this week that the visit was for tourism only and should have no impact on its ties with China, but the 84-year-old Lee is scheduled to give speeches and a news conference in Tokyo during the 11-day stay.

Lee, who was the Taiwanese leader from 1988 to 2000, has been to Japan twice after stepping down, the last time in January 2005, but had stayed away from the capital and refrained from speaking in public.

"It'll be my first time in Tokyo in 22 years. I am looking forward to it a lot," Lee told reporters after arriving at an airport just outside of Tokyo, where he was greeted by supporters chanting "banzai" (long life).

Lee denied speculation that he may meet Japanese politicians, but did say he would visit Tokyo's Yasukuni war shrine, seen by many in Asia as a symbol of Japan's past militarism.

The shrine honors Japan's war dead -- among them soldiers from Taiwan and Korea who fought for Japan, their colonial ruler at the time -- but also some convicted war criminals including wartime prime minister Hideki Tojo.

Lee's older brother died fighting for the Japanese military.

"As for Yasukuni, I have not set a time yet, but I have to see my big brother."

The former president had planned another Japan trip for September 2006, but cancelled it citing health reasons after Beijing told Tokyo it would harm their relationship.

On Tuesday, Chinese Foreign Ministry spokeswoman Jiang Yu said Beijing had made a "solemn representation" to Japan over the latest visit.

"We strongly demand Japan attach importance to China's serious concern ... and not provide political stages to Taiwan independence elements or forces," Jiang told reporters.

Lee, who will be traveling with his wife, did not apply for a visa as Japan has waived visas for short-term tourists from Taiwan since 2005.

During his stay, Japan-educated Lee will also receive a prize in memory of Japanese colonial administrator Shinpei Goto, and tour a series of Japanese temples throughout the country.

Beijing has claimed sovereignty over Taiwan and demanded that it accept reunification ever since 1949 when the Nationalist forces fled to the island after losing power on the mainland to the Communists.

US, Chinese Officials Discuss Difficult North Korean Funds Issue

2007-05-30T08:47:00.001-07:00

The chief U.S. negotiator on North Korea's nuclear programs has been meeting with Chinese officials in Beijing to try to resolve problems in transferring money from a Macau bank to North Korea. Pyongyang has refused to resume six-nation talks on its nuclear weapons program until it has possession of the $25 million in the previously frozen accounts, and the U.S. official stays it still might take some time. Daniel Schearf reports from Beijing.

Christopher Hill talking to reporters in Beijing, 30 May 2007

Assistant Secretary of State Christopher Hill met Wednesday with his Chinese counterpart to six-nation talks, Wu Dawei, to see if they can find a way to transfer the money and resume negotiations to end North Korea's nuclear programs.

The six nations, which include also South Korea, Russia, and Japan, agreed in February to a preliminary timetable for North Korea's nuclear disarmament. The deal included North Korea shutting down its main nuclear reactor by mid-April, but that deadline passed with no action because the transfer was stalled. Pyongyang says it will not act until it has its money in hand.

The funds are in several North Korean accounts at Macau's Banco Delta Asia. They were frozen in 2005 on U.S. suspicions that the bank was aiding North Korean money laundering and counterfeiting.

After meeting Chinese officials Wednesday, Hill told reporters it has been difficult for any bank to move the money because of legal concerns and regulatory issues.

"I know that it's hard to believe that something technical can go on for a couple months," he said. "But it really is a technical matter, which cannot just be solved though political means, but rather needs a complex set of technical solutions which involves several agencies of government on our side. So, it's not easy."

The issue of the funds has bedeviled the disarmament process for almost two years now. After the accounts were frozen, Pyongyang boycotted the negotiations, and last October, it tested a nuclear explosive.

The North Koreans were persuaded to return to talks after the U.S. said it would work to free the Macau funds. It did so earlier this year, but still hasn't figured out how to transfer the money to North Korea.

Chinese Shares Slump After Stock Trading Tax Hike

2007-05-30T08:45:00.001-07:00

China increased its tax on share trades, leading to a 6.5 percent drop in its main stock index and jitters throughout Asian markets. Joseph Popiolkowski reports from Hong Kong.

A stock investor naps in front of the stock price monitor at a securities company in Shanghai, 30 May 2007

The benchmark Shanghai Composite Index fell 281 points Wednesday after China's decision to triple its tax on share trades.

Late Tuesday, China's Ministry of Finance announced the increase from 0.1 percent to 0.3 percent.

It is the government's latest effort to cool the market, which has more than doubled over the past 12 months.

The effect was felt region-wide as Hong Kong's Hang Seng share index closed down nearly one percent Wednesday. Markets in Japan and Singapore also declined.

Wednesday's drop comes after weeks of warnings by economists and market experts - including former U.S. Federal Reserve chairman Alan Greenspan - that Chinese stocks were due for a fall.

One expert called the market's decline a "healthy correction". However, Enzio von Pfeil, who heads the research firm Commercial Economics Asia in Hong Kong, says the increased tax is an attempt to stabilize the market before China's Communist Party Congress late this year.

"What we've seen today is a bump on the way up, in other words it's people going up an escalator not down an escalator for the very simple reason that the central government in Beijing wants to continue very, very strong growth. It wants to show its very best possible face that it can," he said.

Enzio von Pfeil downplayed its effect on regional markets and says after an initial downturn they will rebound.

"There will be a short, sharp move down Wednesday but in those economies where the economic time is still particularly good - for instance in Hong Kong and Korea, which is what we're telling our clients - that is where I think you will find a lot of buying coming back in. So the idea here is to buy on weakness and that's what I think will happen tomorrow," he said.

In recent weeks, China also increased its interest rates and bank reserve ratios, which, like Wednesday's stamp tax increase, von Pfeil says were part of a series of attempts to rein in the market. However, he says, Beijing is reluctant to pull the reins too hard and risk slowing the economy too far and causing a rise in unemployment.

China Sentences Former Food And Drug Safety Chief to Death

2007-05-30T03:45:00.001-07:00

China has delivered a death sentence to the former head of its food and drug administration, for taking bribes to approve untested medicines. The court case was heard as China faces growing complaints about unsafe drugs and food. Daniel Schearf reports from Beijing.

A Beijing court sentenced Zheng Xiaoyu to death for taking bribes worth over $830,000 while he served as chief of the State Food and Drug Administration.

China's official Xinhua news agency announced the verdict, saying Zheng allowed substandard medicines onto the market in return for cash and gifts. It said one antibiotic approved by the regulator caused at least ten deaths.

Xinhua said the punishment was appropriate given the "huge amount of bribes involved" and the "damage he inflicted on the country and the public."

Jiang Yu answers reporters' questions in Beijing, 29 May 2007

China's Foreign Ministry spokeswoman, Jiang Yu, says the sentence reflected the Chinese government's determination to fight corruption.

Jiang says the Chinese government has always attached great importance to the health and safety of consumer goods, especially food and drugs, and is willing to work with the international community to safeguard the quality and reputation of Chinese food products.

China's food safety came under intense scrutiny this past month, after tainted pet food from China killed animals in North America.

In the past week, the Dominican Republic, Panama, and Nicaragua have pulled thousands of tubes of Chinese-made toothpaste from store shelves for containing a potentially deadly chemical used in engine coolants.

Poor quality food sickens tens of thousands of people in China every year.

The official China Daily newspaper reported Tuesday that the country will introduce its first food safety recall system by the end of the year.

The newspaper gave no details on how the system would work, but said any companies that failed to follow the new rules would be blacklisted from the Chinese market.

China Society Issues (Part three):disadvantaged groups "So Much Work, So Little Time"

2007-05-29T06:50:00.000-07:00

About a mile from Tiananmen Square lies a pit from which a 28-story hotel will rise in a little more than a year. An army of construction workers lives and works at the open site, enduring plunging temperatures and freezing winds.

Some work the midnight hours, while the rest of the city sleeps.

Others rise at dawn. They work 15-hour days or longer, seven days a week. When they topple onto their bunk beds, it is 12 to a room. There is no heat.

One of them is Wei Zhongwen. He has more than two decades as a construction worker, and the injuries to prove it: a missing pinkie and a palm-size dent on his head under his neatly cropped hair. In the past decade, the 41-year-old has helped build skyscrapers, shopping malls and much else in Beijing and nearby provinces. He hasn't seen his wife or daughter in two years, and because of the press of work ahead of the Beijing Summer Olympics in 2008, he may not see them this year either.

'For me, one of the biggest problems of this job is loneliness,' says Mr. Wei, puffing on a cigarette.

In his rural hometown, the money Mr. Wei has sent back has built his extended family a five-room house with a thatch roof, a 21-inch color television set and rooms housing a horse and some pigs. The hardship of his work is worth it, Mr. Wei says, to educate his daughter and sustain his family on their farm.

Beijing is in the midst of an enormous building boom -- one of the most ambitious construction projects the world has ever seen. Cranes clutter its skyline. At more than 10,000 sites across the city, there is a total of 1.7 billion square feet of floor space under construction -- an area that, if laid out, would be nearly three times the size of Manhattan.

This colossal development is due to the efforts of a nearly invisible army, a group of almost two million migrant workers who drift from China's farmlands. Toting their bedrolls from work site to work site, they earn as little as 50 cents an hour. They work in a hazardous profession with practically no workplace protections and little or no medical coverage. Many of the workers live right in the heart of the city, yet few ordinary Beijing residents ever glimpse their crowded barracks, where privacy, cleanliness -- even meat -- are luxuries.

They often get paid late or not at all. A report this year by the research arm of the State Council, China's highest administrative body, found that in 2004, construction firms in Beijing owed roughly 700,000 of their workers more than $380 million in wages. Mr. Wei is fighting to collect about $400 he says he is owed -- half his earnings last year -- and he may never see it.

In such an uncertain environment, workers drift from job to job together. They rely on word of mouth to protect themselves against bad bosses. And, in bad times, they rely on each other.

These men -- there are few women in their crews -- are working against a deadline: December 2007. That is when the bulk of the Olympic construction work must be completed so that Beijing, one of the world's most polluted cities, has time for the air to clear of construction dust before the Games begin.

There is a lot to finish. The Olympics will attract a flood of foreign visitors and unprecedented media attention. Beijing's construction workers are aiming to have built a chunk of a subway system that, when completed, is projected to be the longest in the world, surpassing London's underground. They are erecting an airport terminal bigger than all five at London's Heathrow Airport and about 110 hotels. Including suburbs of Beijing, the building binge could cost more than $180 billion. Some call it China's most ambitious construction project since the Great Wall.

What happens to these workers after the boom already has become a topic of controversy. Beijing officials have made it clear they want to clear them out ahead of the Olympics. But authorities also fear political instability if so many workers are forced to leave because they may have trouble finding jobs back home.

As it is, the construction workers have a tenuous standing in the city. Lacking the papers to stay in Beijing legally, most work off the books, relying on oral promises instead of contracts. When they are sick, they visit illegal clinics, which are cheap but often dirty and run by unlicensed doctors.

Mr. Wei speaks proudly of his 18-year-old daughter Xiaowei, who lives with the rest of his family on a farm in Yushu county, in northeastern Jilin province. He says the girl is a good student and obedient. 'We're not that close. I don't know what she likes,' he says, awkwardly fingering a bunch of keys on his belt. A badge of prosperity among middle-age Chinese men, Mr. Wei's keys are a small vanity. He says he picked them up on the street. They are keys to things he doesn't have: a car, an apartment.

Like other construction workers, he lives frugally in the city. In his latest job he earns about $300 or so a month, but keeps only about $60 of it. The rest he sends home to the '3861 army' -- a term used to describe the women and children left behind in China's interior. (March 8 is China's Women's Day, June 1 Children's Day.)

NEXT TO COAL MINING, construction work has the highest number of casualties in China, with 2,607 reported fatalities in 2005. Steel-tipped boots are rare. China's workers clamber around in thin canvas shoes, often without safety harnesses, and buy their own work gloves. Many of their hard hats are just thin plastic shells, sold for a dollar apiece.

Wang Qishan, the mayor of Beijing, said in a recent interview that he personally reviews construction accident statistics daily. 'I can never be happy when I read such reports,' he said. 'Beijing can't do without these people.' The city tries to provide services such as health care for registered migrant workers, but its resources are overstretched, he said.

Like many other construction workers, Mr. Wei entered the trade because there was little else to do on his family's farm, a small plot where corn and soybeans grow. He left home at 17 for a province next to Beijing.

When he was in his 20s, Mr. Wei's left little finger was sliced off by an electric saw. In 1994, he was hit on the head by a steel rod, landing him in the hospital for more than a month. He counts himself lucky because his employer paid for his medical bills.

Last year, the owner of an art gallery in Tongzhou, a Beijing suburb, stiffed Mr. Wei and 76 crew mates, according to the men and a later court ruling. They had been paid halfway through the project and promised the rest of the pay upon completion. Instead, when they finished they say they were driven from the site by thugs armed with iron staffs and meat cleavers.

China's state-controlled banks have poured credit into real estate, where many companies are politically connected. The easy money often leads to ill-conceived projects that quickly go bust. When financing collapses, construction workers -- the ones at the bottom of the totem pole -- aren't paid. They find it difficult to claim restitution because they often are employed indirectly through subcontractors.

Mr. Wei and his friends say they had no success appealing to authorities in Tongzhou. About 20 of the workers drifted home, defeated. With no money, Mr. Wei and the remaining workers were forced to make camp in the neighboring province of Hebei, eking out a living with odd jobs. They say they lived on steamed buns, mostly, six for one yuan, or about 13 cents.

In November 2005, more than 50 of them rose at dawn. They marched for five hours to central Beijing to appeal to authorities there. They wound up at Beijing's Legal Aid office on Qianmen West Street.

Wang Xuefa, the center's director, remembers the sight of Mr. Wei and his friends kneeling en masse on the office floor. 'It was sad to see men brought so low,' he says.

The Intermediate People's Court in Tongzhou ruled in the group's favor on Jan. 6, ordering the Hong Kong developer Lian Ka Fu International to pay more than $30,000 in back wages to the workers. They haven't seen a cent. Lian Ka Fu's proprietor, Wang Xiaohu, told the court she doesn't have the money, says Chang Mingchuan, a lawyer at Beijing Legal Aid. Ms. Wang couldn't be reached for comment, and her Europe American Art Gallery -- a green low-rise with gold Corinthian columns -- is now shuttered.

Going home for Chinese New Year, China's most important holiday, is a ritual for construction workers. It is the only time in the year they see their families. Like returning heroes, they are feted and tell tales of car-choked streets and the towering skyscrapers they helped build. 'Some of my neighbors have not even taken a train,' Mr. Wei says.

Back home, Mr. Wei is a man of substance. Over the years, his wages, which are higher than average among construction workers because of his bricklaying expertise, have helped his family enjoy some comforts. 'We're very well respected in my home,' he says.

Last January, however, Mr. Wei stayed in a Hebei flophouse instead of returning home for the new year holiday. Penniless, he and his friends were too ashamed to go. To cheer up, they went to an airfield and watched planes taking off.

'Really, that's the only time I felt like suicide. I thought if a car hit me, at least I can get some compensation,' Mr. Wei says.

Reached by telephone, his wife, Ding Guiying, says it is a hard life taking care of Mr. Wei's aged parents, raising her daughter alone and tending the crops. Mr. Wei's wages nowadays go to pay for his daughter's secondary education -- which isn't free in China, even at public schools. Ms. Ding says the bill comes to around $1,300 a year.

Ms. Ding, 42, hopes her husband can come home when their daughter has finished school. 'We keep being separated for such a long time, and I can hardly count how many days we've been together in the past 19 years,' she says.

(MORE TO FOLLOW) Dow Jones Newswires

December 22, 2006 23:20 ET (04:20 GMT)

Copyright (c) 2006 Dow Jones & Company, Inc.

WSJ(12/23) So Much Work, So Little Time -2-

Mr. Wei spent most of this year in Hebei, the province surrounding Beijing. In May, he and his friends found a job at a residential site. Mr. Wei roomed in a wooden shack with 10 other workers. The floor was a brick-and-dirt mixture. The only running water was from a sink in the courtyard. The toilet was a shed with wooden planks over a hole. In the kitchen, flies clustered thickly.

In Hebei, as is common on such jobs, Mr. Wei paid his employer about 60 cents daily for three meals, mostly rice and tofu. Meat was rare, but he is a vegetarian. Growing up poor, he never got used to the taste of meat.

One of the crew, Yang Xinguo, 53, injured his leg in a traffic accident and had to stop working in September. After lingering for a while, hoping to get compensation from the art-gallery job, he decided to go home in mid-November. He had a few dollars earned before the accident and $50 or so that Mr. Wei and other friends gave him.

'We will send your pay to you, once we get it,' promised Mr. Wei, sitting on Mr. Yang's bed. He offered his departing friend a cigarette. Through the smoke, Mr. Yang's eyes shimmered. 'Men don't want to cry, but we have cried many times,' he said. By late November, Mr. Wei and his crew had moved back to Beijing. They found better work building the 28-story, four-star hotel. Conditions are cleaner. Mr. Wei now lives in barracks perched next to the yawning site. He has 10 roommates, including some new ones. There is no canteen, so they cook in the room, using a gas ring attached to a five-foot canister next to Mr. Wei's bed.

With no heating, they sleep in their jackets, and sometimes hats and gloves, too. Temperatures can drop below zero Fahrenheit in Beijing's winter. Some have electric blankets they bought for about $1.25 each.

They are creative with their limited space, rolling back their bedrolls and using the boards beneath as makeshift tables. The cook, Wen Fenglin, adroitly uses the space to chop cabbages and peel onions, ladling water from an old paint bucket to clean the food and utensils. The 55-year-old used to work on the crew but now is employed by the construction company to cook. 'Boss said I have to learn because I'm too old to do heavy work,' he says, browning onions for an omelet.

There are no washing facilities, so baths and clean clothes are treats. Mr. Wei remembers taking a bath well more than a month ago at a bathhouse, paying about 60 cents.

With no laundry, Mr. Wei buys secondhand clothes, wearing them until they get too dirty. Currently, his favorite is a gray cotton shirt he bought for a little more than a dollar, which looks as if it once might have belonged to a corporate executive. 'I normally throw away the clothes after wearing, but maybe I'll sell this. In about 10 days,' he says.

Around Beijing's small alleyways, an underground economy caters to construction workers. Vendors often do their business by barter because the workers don't have space to keep much and adopt a throwaway culture. One popular item is underwear with zippered pockets, to keep money and valuables close.

MR. WEI'S PACE OF WORK is now frenetic. The hotel still is just a big hole in the ground. Under city ordinances, concrete trucks from the hundreds of factories ringing the city are allowed in the city center only after 11 p.m. and on weekends, so he and his friends must work long past midnight curing concrete. Once the hotel's foundation is done, in about two months, Mr. Wei says the plan is to build a floor every five days.

On the next-to-last day of November, Mr. Wei and his comrades crowded into a small postal outlet, their grimy appearance setting them apart from other customers. The air smelled of unwashed clothes, and some people edged away.

It was exactly a year since they had made their long march to the Beijing Legal Aid office. Mr. Wei had given up hope of recovering his lost wages, but on this day the mood was celebratory. It was payday, and the men wanted to mail their money home. There was a flurry of bewilderment as they fumbled with forms. Mr. Wei, his eyes red-rimmed after a 24-hour shift, helped some of the workers who can't write well fill out the forms.

Zhang Tao, 20, in a paint-stained blue sweater and matted hair, slowly scrawled the amount he is sending home: 900 yuan, or about $115. He said he earns 1,000 yuan, or $128, a month.

On another night, Mr. Wei took a walk, wandering around the city's glittering towers and looming cranes. 'I have no regrets,' he said. 'I'm the migrant worker who stays out all year so home is better. I've seen things my neighbors have never imagined -- 50-story buildings, planes so big they can carry hundreds.'

He stopped in front of a European five-star hotel near his work site. 'I build these things, but I have never been inside,' he said.

Timidly, he pushed the swing door and went in.

Chinese warning over toy safetyChinese warning over toy safety

2007-05-29T06:44:00.001-07:00

Some Chinese-made toys have been banned in the EU

More than 20% of Chinese-made toys and baby clothes are below standard, the country's consumer watchdog has said.

An investigation by the General Administration of Quality Supervision, Inspection and Quarantine found some were even dangerous, Beijing News said.

Industrial waste, including dirty carpet fluff, paper and used instant noodle packaging, was found in some toys, the newspaper reported.

Some baby clothes contained harmful chemicals, the investigation found.

"These fluffy toys with bacteria or even viruses in them could cause children to itch if they touch them for a short time, or even cause disease over the long term," Beijing News said.

It said some toys had parts which could be broken off and swallowed.

Safety tests

China is the world's largest exporter of toys.

The US and the European Union - which have safety standards regulations - have complained about the quality of Chinese-made toys.

About half of all goods withdrawn from sale in the EU in 2006 were Chinese, according to figures from the European Commission.

China's state news agency, Xinhua, has reported that China will ban the sale of toys that fail to pass a national compulsory safety certification beginning from 1 June.

Toys that "could have a direct effect on the safety of babies and children" will have to bear the mark CCC (China Compulsory Certification) before they can be sold in China, according to a statement issued by the country's consumer watchdog.

China has been facing persistent consumer and food safety problems.

In 2004, China punished 97 government officials over the sale of fake milk powder with no nutritional value that caused the deaths of at least 13 babies in the eastern province of Anhui.

In recent months there have been complaints in the US about pet deaths from tainted wheat gluten and rice protein imported from China.

PORK CRISIS IN CHINA PROMPTS CONCERNS

2007-05-28T18:34:00.001-07:00

A disease killing millions of pigs in China has sharply lifted the price of pork, the country's staple meat, fuelling fears about inflation and prompting calls from Beijing's top leadership for increased production of the meat.

Wen Jiabao, the premier, provided confirmation of the seriousness of the crisis with a weekend visit to a market in Shaanxi, where he said farmers should help "resolve the problem" of providing meat for China's 1.3bn people.

Pork prices have risen by as much as 30 per cent in Chinese cities over the last week. According to the agriculture ministry, wholesale prices for pigs have gone up even more, rising 71.3 per cent since April.

China's 500m-odd pigs are the country's most important source of affordable meat, and any sustained interruption in supply would be a major political problem for the government.

While the price of feed, such as corn, has risen, the main culprit is an epidemic of a mysterious illness known as 'blue ear' disease, as well as the more common foot-and-mouth affliction.

"I have heard it has killed as many as 20m hogs," an industry executive said yesterday.

The government has not issued any estimate of how many pigs have been struck by disease and China's size and the number of small producers make it difficult quickly to obtain reliable figures.

But the impact of the shortage of pork is apparent in many areas, from sausage makers switching meats, to rising offal prices, and attempts by Hong Kong to import meat from South America.

China cannot easily find competitively priced pork to replace the shortfall at home, because of its own health-related restrictions on imports from South America, where prices are relatively low. US and European pork is relatively expensive.

China Concerned Over Pork Price Increase

China's leaders are trying to calm public concern over sharp price rises for pork, the country's staple meat, ordering local governments to ensure adequate supplies and help low-income families.

''Production and distribution of pork and its products relates to the lives of the masses and influences the overall situation,'' China's Cabinet, the General Office of the State Council, said in a statement carried on the front pages of official newspapers Wednesday.

High-level concern over the price rises was signaled by Premier Wen Jiabao's visits last weekend to pork producers and markets, when he pledged an official response would be forthcoming.

State media mentioned the possibility of using a strategic reserve of frozen pork and live pigs that the government maintains to guard against severe shortages, although the Cabinet's circular, issued after a meeting Tuesday, did not directly address such a move.

Urban Chinese eat more pork than any other meat, an average of 42 pounds per person in 2006, according to official statistics.

Prices of the meat rose by an average of 8.6 percent in April over the previous month, and were up 43.1 percent over April 2006, according to the Commerce Ministry.

Among measures ordered were subsidies for producers to encourage hog rearing and increase supply. Railways and other transport networks also are to give priority to deliveries of pork and live hogs, while governments are to increase food assistance to low-income families in line with the rise in pork prices, the circular said.

The document blamed the price increases on rising grain and feed costs, and an outbreak of blue ear disease, also called porcine reproductive and respiratory syndrome, which led to the slaughtering of herds and a sharp reduction in the numbers of piglets born.

''Appropriate increases in the price of live pigs and pork can be of benefit by boosting farming incomes,'' the circular said.

''However, if they rise too fast, that will cause increases in the price of other meat, poultry, eggs, and other foods and prices in the food and beverage industry, and affect the lives of low-income residents,'' it said.

Chinese Foreign Ministry Lashes Out at US Defense Report

2007-05-28T18:23:00.001-07:00

China's Foreign Ministry has reacted forcefully to a U.S. Defense Department report on the expansion of China's military.

China Foreign Ministry spokeswoman Jiang Yu

Ministry spokeswomen Jiang Yu said in a statement Monday that the Pentagon's annual report exaggerates China's defense spending in an effort to play up China's military threat. She said China is a peace-loving country pursuing its right to protect its national security.

Jiang also called on Washington to stop sending what she called "wrong signals" to pro-independence forces on the self-governing island of Taiwan.

Taiwan severed ties with mainland China following a a 1949 civil war, but Beijing considers the island a renegade province.

The U.S. Defense Department report issued Friday says, despite China's military buildup, it lacks the power for a successful attack against Taiwan.

The report says China is developing sophisticated missiles, aircraft and ships, and is increasing its capacity to launch pre-emptive strikes beyond East Asia. The Pentagon says China is developing weapons to protect the country's access to resources, such as oil.

China announced plans in March to increase military spending by nearly 18 percent this year to about $45 billion. Analysts believe the actual budget is much bigger.

FATIGUE FEARS OVER CHINA'S EXPORTS

2007-05-27T20:28:00.001-07:00

Could Chinese steel exports bring the industry's party to an end?

That is the question on the minds of steel executives as they consider the chances of a four-year boom in the sector juddering to a halt sometime during the next 12 months.

Since the middle of 2003, share prices of quoted steel stocks have trebled compared with the average price of all listed groups worldwide.

The spurs have been a surge in demand, particularly from China, and consolidation efforts in the industry that have produced bigger groups more capable of dictating prices.

But the trend worrying many has been a large rise in exports from China in the past 18 months, tipping the country from being a small net importer of the metal in 2005 to a net exporter last year of 35m tonnes.

This year, steel exports from China could be as high as 70m tonnes, based on the large trade flows in the first four months, according to some industry observers.

They are concerned that this amount of extra material coming on to world markets could depress steel prices, which have doubled in the past four years, and result in a reversal of the large profit rises that have made steel groups favourites among investors.

Another consequence could be to damp the climate for mergers and acquisitions that has been a feature of the sector.

John Tulloch, chief commercial officer of Ipsco, a Canadian maker of specialist steel plate and pipes, which is being bought by SSAB of Sweden for $7.7bn, said: "The flow of steel from China to the rest of the world is potentially destabilising.

"It's being driven by a rise in steel production capacity in China, which in my opinion dwarfs the capability of markets in Asia to absorb the extra material."

Ugur Dalbeler, chief executive of Colakoglu Metalurgi, a Turkish maker of steel rod for the construction industry – a sector that has seen hefty price rises in the past few years – said: "I feel the threat [of high Chinese steel exports] is getting closer."

Last year, China accounted for 34 per cent of world steel output of 1.2bn tonnes, and so far this year, steel being made by the country's mills is up by about one fifth compared with the same period in 2006.

The production surge worries Barry Solarz of the American Iron and Steel Institute, a trade body representing US steel makers.

Mr Solarz said much of the extra production – and exports – were being driven by subsidised loans and other help to Chinese steel producers, most of which are controlled by the state.

Wu Jingjing, of the China Iron and Steel Association, representing the Chinese steel industry, intensified the concerns of many non-Chinese steelmakers when he told a steel conference in Istanbul last week that progress towards consolidation in the sector was proceeding much more slowly than the official Beijing policy appears to require.

Many non-Chinese steel observers have tended to applaud the government's ideas to encourage Chinese steelmakers as a means of making the steel industry more globally competitive.

The reasoning in favour of efforts to consolidate is that having fewer steel producers in China would lead to companies cutting capacity to focus on the most profitable mills. That would push up Chinese steel prices, which are in general considerably lower than elsewhere.

But Mr Wu told the conference that last year, the biggest 10 Chinese steel companies accounted for 34.9 per cent of total Chinese steel output – little changed on 2004 and well short of the 50 per cent figure that Beijing would like to see. Much of China's extra output had been driven by "speculative" investment by smaller companies, he said.

Such data demonstrate that the "commitment by the Chinese government to encourage consolidation is hollow", according to Alan Price, a lawyer at the Washington legal firm Wiley Rein.

The firm specialises in steel trade and advises US steelmakers such as Nucor.

According to Mr Price, net steel exports from China could rise to up to 70m tonnes.

Concerns in the US about Chinese steel trade are shared in Europe, according to Karl Tachelet, director of trade at Eurofer, a Brussels-based body that represents European steel producers.

"It's not the absolute numbers that are disturbing but the scale of the change," said Mr Tachelet.

"In 2006, 5m tonnes of steel from China entered the European Union, and this year the figure could rise to 10-12m tonnes – in which case Chinese steel imports could account for a third of all steel coming into Europe."

Although Mr Tachelet and others are stepping back from saying a crisis is brewing, the trade data from China will be pored over in the steel industry with special intensity in the coming months.

US TRADE WITH CHINA

2007-05-27T20:17:00.001-07:00

Global imbalances" have been seen as a threat for so long that it's tempting to conclude that the world economy is, in fact, in harmony. That said, many things still look out of whack. From Spanish property to emerging market debt, asset prices and valuations are stretched. Consumer indebtedness, particularly in Anglo-Saxon countries, is at record levels. Other indicators, such as currency market volatility and risk premiums are well away from long-term trends. But the most commonly cited "imbalance" is the US trade deficit.

Many are blaming China and point to its ballooning surplus with the US, which now exceeds $200bn. In Washington, Congress in particular is gunning for sanctions. A simplified solution is for China to revalue its currency and, if vice-premier Wu Yi received a dollar each time this was requested at this week's bilateral talks, she could almost have returned home and solved the trade deficit single handedly.

If this is the biggest problem facing global stability, then worryingly, there appears to be no managed solution in sight. China is well aware of the negative effect that a strong renminbi would have on its export-fuelled growth and has given no ground. And it wouldn't just be Chinese companies that suffer – little is said about the hit to margins for foreign companies with significant manufacturing exposure to China. A sharp appreciation may also cause a shock to the rest of Asia, which, although receiving a step gain in competitiveness, has been grateful for cheap Chinese imports.

That means the deficit will probably have to unwind at the US end. Indeed, the US dollar has already fallen against most other currencies, particularly the euro. The most damaging "solution" would be if imports fall as a result of a contraction in consumption, possibly due to recession. And with Japan still weak, it is debatable whether Europe could support global growth alone. Best to hope these imbalances do not topple over any time soon.

TOXIC PET FOOD DOGS US-CHINA RELATIONS

2007-05-27T20:13:00.001-07:00

Memo to Chinese food exporters: don't mess with America's pets.

It was, after all, the apparent accidental poisoning of thousands of cats and dogs that first drew widespread US media attention to the failings of Chinese food safety controls last month.

Fuelled by revelations of other Chinese food problems and reports of exports of toxic toothpaste to Central America, the resultant furore is now threatening China's fast-growing agricultural export sector.

Washington has already demanded tighter regulation of Chinese exporters. Democratic senator Dick Durbin has declared that "Made in China" has become a "warning label" for food sold in the US. And, US news agency Dow Jones last week ran a story considering the practicality of calls for a ban on Chinese food imports.

Such a heated reaction has taken Chinese observers aback. Food safety has long been an issue of consumer concern in China's richer cities, but few expected the death of a reported 16 US pets to escalate into the newest source of friction in ever-prickly Sino-US ties.

Some observers have dismissed the food scare as an effort by US interest groups to push an anti-China agenda. The overseas edition of the Communist party's People's Daily blamed US media for "stirring up" the pet food problems.

"In a moment, the US has filled the air with a 'China Food Threat Theory', the newspaper said.

Zhao Min, a corporate consultant and blogger, saw the food scare as a US effort to win ground ahead of last week's Sino-US Strategic Economic Dialogue.

"When the US government has economic talks with a foreign government, it is just like a war," Mr Zhao wrote. "The media is the air force; conducting aerial bombing to set public opinion before the talks, seizing the high ground while attacking and destroying the opponent's self-confidence."

Others see the scare more as part of a US zeitgeist where China is already seen as a challenger to US economic security and military supremacy.

Some Chinese, however, not only sympathise with the US reaction to the pet deaths – they actually welcome the attention.

Restaurant Fire Kills 11 in Northeastern China

2007-05-27T17:28:00.001-07:00

Chinese state media say a fire in a popular restaurant in the northeastern province of Liaoning has killed 11 people and injured 16 others.

The official Xinhua news agency reports Sunday that the fire broke out in the kitchen and fully engulfed the Baixinglou restaurant in the city of Chaoyang Saturday evening. Firefighters put out the blaze after battling the flames for more than hour.

Xinhua says the victims included diners and waiters at the restaurant. They are hospitalized and are reported in stable condition.

The news agency says initial investigations show improper use of a stove sparked the fire.

China to crack down on scary stories

2007-05-26T19:48:00.001-07:00

China has launched a crackdown on scary children's stories including the popular Japanese "Death Note" comic book series, state media said Saturday.
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Authorities are ordered to seize "illegal terrifying publications" from vendors ahead of China's Children's Day on June 1, the Xinhua News Agency and China Daily newspaper reported.

Communist authorities regularly launch sweeps to seize publications deemed pornographic or socially harmful. They are especially concerned about the influence of foreign books, movies and other pop culture on Chinese children.

One target in the latest crackdown is "Death Note," a Japanese series of comic books about a notebook that can kill people whose names are written in it.

The story "misleads innocent children and distorts their mind and spirit," said Wang Song, an official of the National Anti-piracy and Anti-pornography Working Committee, quoted by the China Daily.

"Death Note" publications have been seized in Shanghai and areas across central and southern China, the newspaper said.

China presses U.S. on food regulations

2007-05-26T19:47:00.001-07:00

China appeared to go on the defensive Friday in response to rising concern about the safety of its food and drug exports, asking the United States to clarify its regulations on the use of antibiotics that turned up in Chinese catfish in three southern states.
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In a notice on its Web site, the General Administration of Quality Supervision, Inspection and Quarantine — China's main food safety regulator — said it had contacted its American counterpart about the use of fluoroquinolones.

In its statement, the quality inspection administration asked Washington to "deal with the problem in an objective, scientific and equitable way."

It also warned that the U.S. should not violate World Trade Organization's rules, which give countries the right to ensure food safety for consumers but not to manipulate health standards to protect domestic producers.

The Food and Drug Administration has not responded, the Chinese regulator said.

Mississippi, Alabama and Louisiana recently banned catfish from China after tests found traces of ciprofloxacin and enrofloxacin, both in the fluoroquinolone family. The antibiotics are used to treat tuberculosis, pneumonia and other illnesses in people and prevent infections in animals.

The Chinese regulator said the drugs are allowed in China, the EU and Japan — and said the FDA allows their use if below concentration levels of five parts per billion.

Officials from the Chinese agency refused to comment further on their statement, which mentioned only Mississippi and Alabama.

According to the FDA, fluoroquinolones have never been approved for use in aquaculture and any amount detected in fish tissue deems the product adulterated. Regulations against the antibiotics in food are intended to prevent bacteria from developing resistance to the drugs.

China is worried about the damage to consumer confidence in its products by a series of scandals involving tainted Chinese exports. Many of the tainted goods are produced by farmers and small factories, and a ban on their trade by importing nations would threaten jobs in a largely rural country with already high unemployment.

On Thursday, U.S. officials asked their Chinese counterparts to increase oversight of food and drug exports. The FDA also said it was stopping all imports of Chinese toothpaste to test for a deadly chemical reportedly found in tubes sold in Australia, the Dominican Republic and Panama.

The FDA also warned consumers not to buy or eat imported fish from China labeled as monkfish because it might actually be pufferfish, which contains a potentially deadly toxin called tetrodotoxin. Eating pufferfish that contains the potent toxin could result in serious illness or death, the FDA said.

Dozens of people have died in Panama after taking medicine contaminated with a chemical traced to a Chinese company. China also was the source of the toxic chemical in pet food that has killed an unknown number dogs and cats in the United States.

And China's former top drug regulator went on trial earlier this month accused of taking bribes to approve untested medicine, including an antibiotic that killed at least 10 patients last year before it was taken off the market.

The Chinese leadership has pledged to strengthen its safety controls.

"The Chinese government attaches great importance to food and drug safety. We are making efforts to improve the monitoring system of the safety of food and drug," Chinese Foreign Ministry spokeswoman Jiang Yu said at a regular briefing Thursday.

China Tries to Turn Down the Heat

2007-05-25T19:12:00.001-07:00

A move to widen the currency trading band and hike interest and reserve rates is designed to cool the raging economy

China's $2.6 trillion economy has been throwing off alarming heat flashes for months now. Ordinary Chinese have yanked some $9 billion in bank savings this year to join the merriment at the Shanghai Stock Exchange, where the composite index has shot up about 50% so far, following a 130% gain in 2006. The smaller Shenzhen bourse is up roughly 100%.

It's party time on the mainland as money supply and loan growth rollick along at double-digit rates. Meanwhile, the country's export sector is smoking, and China is likely to make economic history for a developing economy when it reports a current account surplus this year approaching $400 billion, a mind-blowing number. China's gross domestic product also blew by market estimates and grew at an 11.1% annual rate during the first quarter.

"Do something—anything—"to cool things off has been near universal advice from economists and policymakers abroad. China responded after the markets closed on May 18 with a three-pronged approach to wrestle this beast to the ground. Most important, it widened from 0.3% to 0.5% the trading band within which the yuan is allowed to fluctuate on a daily basis against the dollar.

Skeptical China Watchers

The People's Bank of China also, as expected, raised interest rates. A key one-year loan benchmark goes up to 6.57% (from 6.39%), and the one-year deposit will be nudged up to 3.06% from 2.79%.

This makes the fourth round of credit tightening the central bank has executed since the late spring of 2006. It has also repeatedly raised the reserve requirements of cash that mainland lenders must park with the central bank.

In a statement posted on its Web site, the central bank described the move as a natural progression in the country's long-term goal of liberalizing its foreign currency market. "People's Bank has enacted a series of policies to develop the foreign currency market," the statement said. "At the same time, the Chinese economy has been developing rapidly and stably, financial reform has also made improvements."

Well, that's one take. The timing of these moves will hardly go unnoticed to skeptical China watchers. After all, Chinese Vice-Premier Wu Yi is leading a trade diplomatic mission to Washington beginning May 22. She'll be meeting with U.S. Treasury Secretary Henry Paulson to discuss trade imbalances, currency policy, intellectual property rights protection, and other issues that have turned relations acrimonious on economic matters.

Fear of a Bubble

"The increase in the trading band is obviously directed at the U.S.," says Andy Rothman in Shanghai, the China macro strategist at CLSA Asia Pacific Markets. However, "the move is so small that it won't generate any goodwill in Washington." The goal, he says, is not so much to slow down the economy but prevent it from overheating.

Yet there is more to the move than pre-summit theatrics. Beijing officialdom is genuinely anxious about the social blowback from a stock market meltdown (there are 70 million traders in China) or worse, a boom-then-bust economic scenario. Premier Wen Jiabao and PBOC Governor Zhou Xiaochuan have both expressed public concern about a potential equity market bubble in recent days.

In fact, Standard Chartered Senior Economist Stephen Green thinks the primary intent of the moves is to defuse the stock markets. And in a research note circulated soon after the PBOC announcement, he told clients: "We expect the market to fall next week—and if it proves resistant, Beijing will continue with a thousand small cuts until it does."

Big Incentives Remain

So will these moves do much to cool off China's hyper-growth? They certainly show that Beijing is serious and willing to take action. However, China's interest rates are still awfully low if you factor in inflation running about 3%. That means real interest rates are a bit over 3% in an economy still setting land-speed records.

On top of that, there is so much excess cash in China from export earnings, speculative inflows into real estate, and foreign direct investment that banks will still have a big incentive to lend and companies to borrow. Individual stock investors will still be tempted to bet on stocks, given the obvious math that a 3% inflation rate and 3.06% return on bank deposits is not the way to get rich in a hurry.

The widening of the trading band—though a step in the right direction—isn't going to have much impact on China's exploding trade numbers. On May 11, Green forecast that China's trade surplus would rocket up to $370 billion this year, vs. $217 billion in 2006.

Meanwhile the current account surplus, the widest measure of trade and capital flows, would hit $400 billion. That would compare with $249 billion last year.

Starting Somewhere

The reality is that the rest of the world will have to tolerate some large trade numbers during the rest of this decade and at the same time persuade Chinese leaders to stay on a course of phased-in reform of currency policy, full interest rate liberalization, and the lifting of capital controls. Beijing also has to shore up its social welfare programs so ordinary Chinese can feel more secure about their retirement and health care and perhaps spend more.

In the great scheme of things, today's moves were baby steps in that direction. Think of them as a minor scene in a marathon multi-act play. This economic drama is by no means finished.

China Society Issues (Part two): Wasteful practices squander China's wealth

2007-05-25T11:05:00.001-07:00

China has been described as the largest poor country in the world, and at the same time, the most wasteful. This is true. The evidence is everywhere: people showing off their wealth, competing for material goods and wasting resources. Plates and plates of food are dumped without even being touched.

The country's expenditures are so out of balance that it has become a "super waster." In 2004, funds spent on vehicles for public officials surpassed 408 billion yuan (US$52.7 billion); 300 billion yuan (US$38.7 billion) was spent on eating and drinking; and another 300 billion yuan went for cadres' overseas travel expenses. These three categories alone consumed more than one-third of the national budget.

In Guangdong province, one official banquet reportedly cost 50,000 yuan ($6,400), not counting the free gifts which included Rolex watches for the guests. In the provincial capital of Guangzhou, the city government owns 172 vehicles for the use of 177 officials; the city's Science and Technology Bureau spends 158 million yuan ($20 million) per day; and its Industry and Commerce Bureau paid as much as 25,000 yuan ($3,200) for each of its desktop computers, according to a report in the New Express News.

The basic standard of cars provided for public officials include the Hyundai Sonata, Volkswagen Jetta, Honda Fit and even the Toyota Land Cruiser. Even well-to-do citizens cannot afford this type of car, which are paid for with public funds but treated as private property.

The fourth burden on the public purse is homes for officials. In Zhunger County, Inner Mongolia, a state-designated poverty-stricken area, the local government built nine villas for its leading cadres. In Puyang County of Henan province, both county government leaders and the heads of state-owned enterprises used public money to build mansions, the largest with an area of 600 square meters (6,400 square feet).

Even more serious is the wasteful approach to construction projects. There are huge numbers of needless "achievement projects" -- built to boost the prestige of local governments -- as well as projects that are suspended, postponed, or built according to the wrong specifications.

Chinese buildings last an average of only 30 years. By repeatedly building, tearing down and building again, China has become a world leader in construction waste. As an example of such folly, on February 12th, an 18-year-old stadium in Shenyang, Liaoning province was demolished to make way for a shopping mall. Neither the stadium's fame -- as the place where China won its first and only World Cup qualification, in 2001 -- nor the objections of football fans could save it.

There are innumerable examples of "black holes" in state investments. To mention just a few, the city of Xiang Fan in Hubei province invested 4 billion yuan ($500 million) in a chemical industry project without any outcome. The government of Heilongjiang province invested 560 million yuan ($72 million) in the Mudanjiang Gas Project, but due to irrational construction and chaotic management, the project had to be suspended. In Jilin province, the government invested several hundred million yuan in a chemical project, but after it was completed, its products could not be sold and 40,000 workers were laid off.

The Chinese people are among the world's most diligent. We are diligent, but not affluent. Waste has become the No.1 killer of China's wealth.

In order to curb this extreme wastefulness, I suggest revising the article on power abuse in the criminal law to make it applicable to heads of state-owned enterprises. Also, I suggest that an article prohibiting the waste of public funds be written into the criminal law. There should be detailed regulations proscribing the abuse of power and the wastage of public funds.

To curb waste, citizens must have avenues through which to report and expose it, including the media. The government needs laws and procedures protecting and encouraging ordinary people to report to the authorities concerning the misuse of public funds. Any citizen who has evidence of abuse of power, corruption, or misuse of public funds should be able to sue the guilty parties.

An accountability system should be established. Information concerning the expenditures of public bodies, including state-owned enterprises, should be made available to citizens through the Internet. Only the institution of procedures to ensure transparency and accountability can put a stop to this serious problem.

China Society Issues (Part one): the corrupted officials

2007-05-25T10:56:00.001-07:00

Why Are So Many Officials in China Corrupt?

A booming economy and rampant corruption is a spectacle mixed phenomenon stimulating curiosity of scholars and observers in nowadays China. Corruption is usually a terminology used to refer to the activities those working in public sectors abuse public power to develop their own private gains, the most visible and well-known forms of which is rent creation. Rent creation and rent seeking are a two sided-coin, implying some kinds of corporation, interaction and transaction between those who take public positions and have the opportunities to maneuver or abuse public power, and those who want to take advantages of the public power but have no positions in public sphere, thus have to develop passages leading to the use of public power through some exchanges and transactions with those holding public power. This understanding enables us to uncover corruption in several dimensions: First, corruption exists in public sectors but should be understood in a broader context. Corruption is usually a concord action both in public sectors and in business or private sectors. Second, to understand the situation of corruption and anti-corruption in a nation at certain development stages, a clarification of the corrupt activities in private sectors is needed. Therefore, thirdly, a comprehensive knowledge of corruption in a society should include the study of the relationships between corruption in public sectors and that in private sectors. Based on this understanding, in this paper, the analysis of the causes and events of corruption in private sectors will be discussed, while at the same time, the depending nature of corruption in private sectors on public power in present China will be targeted. And also, the anti-corruption efforts and achievements in China will be discussed in this paper.

Power being up for sale to the highest bidder has led to an irrational allocation of resources in China. Economists say that people have three basic needs: to satisfy their material needs/desires, the need to develop and the need to realize themselves. Why are so many officials in China corrupt? It isn't just money since while officials have low salaries they still have enough to live comfortably. Corrupt officials take the risk of being caught just as a businessperson risks capital in a business enterprise. A corrupt officials who gets caught suffers a permanent loss of status while a business person loses capital but still has the abilities and contacts to try again and perhaps succeed next time. In the West, people often become officials after having succeeded at something else that satisfied their basic materials needs. In China some call for increasing officials salaries in order to reduce corruption. This is a worthwhile strategy, but it is not the most important one.

More important is to reduce official power over business so that officials will have fewer opportunities to sell their power. Most important is to continue economic reform in which their are several different types of ownership (note: the author doesn't seem to want to say private property. end note) so that more and more of the high achievers will see that the way to make big bucks is not to be a corrupt officials but to be a businessperson. This will open up new avenues for people to realize their personal ambitions. And it will change the structure and flow of human talent in China. It will help end the situation in which the entire Chinese society believes that "top flight talent must go into government." China is changing. Many people are going into business. Many of the best graduates want to work not for the Chinese government but for multinational corporations or for private high tech companies. This is a very hopeful sign. As more and more of these people can find non-government means of satisfying their ambitions, corruption should become a less serious problem.

Why Chinese Corrupt Officials Always Fled to Canada?

Recently,there was a new Chinese corrupt officials in Vancouver, Canada,-- Ren Gaoshan former director of the He Song Street Branch of the Bank of China in Harbin. He arrested for stealing customer deposits more than one billion yuan, about 800 million yuan and suspected illegal transfers to Canada. Recently, the Canadian police a false entry in his career ground to arrest him.

According to the Canadian local Chinese, the Chinese community in Canada, can often be seen living in luxury houses, drive limousines, with a lot of money, but most are mother with her children and widows. Their fathers and husbands, some are already in the mianland "arrested", and some still serving, But wives and property had already transferred abroad, in preparation for future flight.

Canada as a country with the rule of law, why it has become a haven for Chinese corrupt officials? In an interview with professior Yang Cheng in February 2004,, the Canadian criminal justice system is a long-term study of the Macao University of Science and Technology, Faculty of Law, he has served as an expert witness hired by the Canadian government gave some suggestion to the leagal release of Lai Changxing.

China Youth Daily : Currently, the domestic media reports that have done a lot for alpine events. Why did so many chinese corrupt officials fled to Canada?
Yang Cheng : not entirely true. As far as I know, the United States is now the country with the highest number of Chinese corrupt officials.
China Youth Daily : Immigration Canada and the United States which is more easily? or the Canada's immigration system has loopholes ?

Decentralization, Marketization and Privatization: the Recreation of Private Sectors

The founding of P.R. China saw the emergence of a strong state power and a big government. Two cornerstones are vital for the creation of a totalitarian sate in China: One is the centralization of the state power and the integration of the society, the other is the formulation of planned economy and the monopoly of the production recourses. P.R.China fiercely underwent a process of social politicizing and economic collectivization at its early stages. Social politicizing placed a strict control over citizens and economic collectivization wiped out the influence of the market. The monopoly of production materials and even life materials of citizens in the hand of the state created a dependent society and shrank the private sphere.Before China launched its reform and open up policy, almost all the economic and business sectors were controlled by the state and the "collectives", only left two kinds of production units: the sate-owned enterprises and collective owned enterprises. It was hard to tell the existence of private sectors in such a situation. Thus, the reemergence and enlarging of private sectors actually means a kind of "recreation" after the state changed its basic social and economic policies in the name of reform and open up. This is a process in which the state decentralized and returned its power to the market and society gradually and reluctantly, also a process that the market regains its influence and the society revitalizes. Transitional economy and society are two exact names given to China by politicians and scholars. In such a transitional period, new social elements, private sphere and economic sectors are being created but highly dependent on the state policy of decentralization, marketization and privatization. The dependent nature of recreation of business sectors and private sphere by the will and policy of the state means almost the inevitability of corrupt activities both in public sectors and private sectors, which has been proved by the evidences provided in China. While corruption is engendered in all transitional economies, corruption in China is unique in character and forms. Unlike the implementation of a shock therapy policy in Russia and the former socialist nations in East Europe, the implementation of an incrementalist policy of economic reform caused changes in China through several stages. At each stage the reform deepened, the changing policy varied, and corruption was found different in features and forms.

Three policy adjustment stages have produced new economic growth, meanwhile have induced new tides of corruption. The first stage was when the government introduced the market mechanism to stimulate the economic activity. Policy adjustment was confined within the scope of the agricultural production and commodity circulation area, but it began to attach a nature of dual track that dogged China's economy until today. While the prices of some of the common commodities were made to be adjusted by the market, the prices of other more luxury commodities were still controlled by the government, which had to be purchased through special arrangements of certification and administrative supply. The big gap and profit produced by the market price and government price provided the opportunities of rent seeking. Bribing those who controlled providing plan of commodities was the primary choice of rent seekers, and those successful rent seekers became the first flock of people who have become rich in China.

The second stage was when the government introduced reform policy into cities and industrial area. At this stage, due to the production contract system initiated in rural areas and commodity circulation field, market revitalized in part of the nation's economy and the existed township owned enterprises and newly emerged household economy grew rapidly. But market in cities was still stiff and stagnate and did not conform the economic growth in rural areas. A new policy of reforming the state owned enterprises and collective owned enterprises by contract and renting out was initiated to further raise the productivity in the above two kinds of enterprises and activate the markets both in rural and urban areas. Production was promoted and the strength of the market was acknowledged, however, the default of productive materials soon became serious that deterred the growth of the economy. This is because the most important productive materials were still gripped in the hands of government and the monopoly departments of society, which meant the bigger opportunities of rent creation and seeking. Those individuals and enterprises who had the keys to the back door of gaining productive materials became another flock of stakeholders in China. In the meanwhile, albeit the policy of opening up, the economic door of the country was actually still half open and half closed to the outside world. Big gaps were found between the prices of products and productive materials in international market and domestic market. Foreign trade was still monopolized by some of the privileged departments and enterprises. But the enormous interests hidden behind stirred up smuggling activities though forbidden strictly by the law of the state. Also, during this stage, the mixed new policy and old one left great gauges between official interest rate and the market interest rate, foreign currency rate and domestic currency rate, official prices and market prices, international prices and domestic prices, which became the preys of whom were qualified to participate in the game of interest capture.

The third stage was when the basic market structure had been constructed and begun to play an increasingly important role in China's economy and when 90 per cent of the production materials were made to be allocated by market mechanism. However, the key production elements, such as capital, important services and land recourses, were not yet marketized, in which fields, corruption was most often committed. At this stage, another scarce chance for corrupt activities was produced by the reform of the large state owned enterprises, for which, the main strategies launched were to restructure the property rights of the state enterprises on the stock market, and to make the key persons of the sate owned enterprises become stakeholders in the restructuring.

In addition, at this stage, Chinese government initiated a new policy of tariff return for those foreign business related enterprises in order to encourage international trade after the 1997 financial crisis, which ascribed the power to relevant administrative departments to identify what enterprises were qualified for the new policy. This policy was misused and turned into a form for illegal activity of tax evasion through the collusion of those in government and those in business sectors, and caused heavy losses of the state. Rather different from the previous stage of policy adjustments, this stage was regarded as the last opportunity to gain. As known to all, the financial market and the market of key production elements in China were to a lowest level nourished, and were underdeveloped and immature. Taking the land recourses for example, the most land recourses, in the name, were collective owned, however, actually were controlled by local governments and their officials, and there lacked the second level market. But the need for land of construction and industrial use was increasingly enormous. This caused a great gauge of prices between the land in the market and the land controlled by local governments and their officials. To get the land at a lower price, bribery was thought as the only right strategy. Key production elements, such as land recourses, are judged as the most important state owned wealth, while the state owned enterprises are the backbones of political stability in China, but they are in great danger caused by the colluded corrupt activities of both public power and private strength in the process of economic reform and property rights restructuring. Great profits in these fields have fomented desperate and unbridled corrupt activities in China toward the end of 1990s and early 2000s.

The above statement helps us better understand the causes and facts of corruption and draw the following conclusion:

1) The reform policy in China was a process of incremental policy adjustments towards marketization and privatization, during which period, the state gradually decentralized power, changed the nature of planned economy and loosened the monopoly of economic sectors;

2) The recreation of private sectors or business sectors was the consequence of the state policy changes. The extent that the private sectors expanded and invaded heavily relied on the degree that the state stepped aside from the previous status quo of economic monopoly.

3)Each stage of the state policy adjustments yielded vacancy in economic sectors that could be filled out by the recreated private sectors. The retreat of the state power means the entrance of private strength. Now the non-state owned enterprises have occupied a proportion of more than 70 per cent of the nation's GNP.

4) The process seemed as a collusion between public power and private strength, but actually was a relation built between rent creators and seekers. New economic and social stakeholders were produced by corrupt actions mainly in the form of bribery to graft from the coffer of the state.

5) The further the economic reform progressed towards the core interest of the state, the more profits would be excavated for private sectors. The evidences were increasingly prominent as the economic reform policy touched upon from commodity circulation, production materials to the key production elements.

6) As long as the nature of dual-track economy lasts and a full market economy is completely systemized in China, rents will exist between the state monopoly and the need of private sectors, which will be desperately pursued. And no evidences provided have foreseen the immediate eradication of such a nature of dual-track economy.

7) Presently, corrupt gains are more than ever, thus corruption was even more difficult to be controlled, and the anti-corruption situation in China is extremely serious. The interwoven corrupt networks knitted both in public sectors and private sectors have dimmed the vision of anti-corruption.

The Serious Situation of Corruption in Private Sectors and its Relations with Public Power

Doubtlessly, corruption has dogged the reform process of China and has become even unconstrained nowadays. Corruption generated in the transitional period of the nation, and exacerbated by the uneven state developmental policy of making some people and regions prosperous first. Conservatively estimated at 13-16% of China's GDP, corruption is a huge economic loss and a "social pollution," contributing to problems such as environmental degradation, social and political instability, and decreased credibility of government officials. According to a survey, in 1998 and 1999, Chinese people viewed corruption as the number one factor contributing toward social instability. In 2000, fearful of the imminent pains of economic reform, Chinese people only named "unemployment and the fear of being laid off" ahead of corruption as the primary source of social instability. This despairing situation was to a much extent contributed by the corruption in private sectors.

The main types of corruption of private sectors in China are tax evasion; rent-seeking behavior; involvement in the underground economy, where the management of the goods is legal, but the income is illegal; involvement in the underground economy, where the management of the goods is illegal; and the fraudulent bidding in public investment and public expenditures.

Tax evasion is the largest economic loss to corruption in private sectors, accounting for 7.6-9.1% of GDP. Economic losses from lost tariff revenues are particularly large. In 1994, the official average tariff rate was 36%, while the effective tariff rate was only 2.73%. The loss of tariff revenue for the government was 7.1% of GDP. In 1998, the official tariff rate was 15%, while the effective tariff rate was 2.69%. The loss of revenue for the government was 1.7% of GDP. In 2000, the net economic loss from lost tariff revenue was 13.7% of GDP.

Illegal management through fraudulent bidding of public investments and public expenditures ranks the next of corruption in private sectors, which caused enormous economic loss of the state, accounting for 3.4-4.5% of GDP.

Third, rents from monopolies are the third largest economic loss to corruption in private sectors, accounting for 1.7-2.7% of GDP. Rent-seeking behavior leads to a loss in consumer surplus and in social welfare. The main sources of rent-seeking behavior are dual track Pricing; abuse of economic privilege and monopoly power; high import tariffs and quotas; and favorable government policies given to specific sectors or interest groups.

Income from the underground economy in illegal goods-smuggling, drugs, and trafficking is the fourth largest economic loss to corruption, accounting for 0.4-0.5% of GDP.

While it seemed that the heavy losses in China's economy were caused by corruption in private sectors, however, as aforementioned in this paper, each case of corruption in private sectors was inevitably involved governments or government officials in power. The smuggling case of Yuanhua Corporation clearly demonstrated this point. Hundreds of government officials were involved in the scandal. Cases ranged in scale from "special fees" to secure bank loans or business permits to the case of Lai Changxing – general manager of Yuanhua Corporation in XiamenCity, who reportedly smuggled $6 billion worth of goods, including cars and oil, into China during the 1990s and is now still hiding out in Canada trying to avoid extradition. Dozens of officials were jailed or sentenced to death for their role in the multi-billion dollar smuggling ring, including a deputy minister of public security, Li Jizhou, who was given a death sentence, suspended for two years.

Another notorious case of key administrative organs involved in corruption of trading money from private sectors with power was the one of Zhao Yucun, the former head of Shenzhen customs.Court investigations show that Zhao had close connections with Shenzhen Huiwei Industry and Trade Company Ltd and it is alleged that he once helped the company dodge taxes and smuggle automobiles. According to the court indictment, from 1995 to March 1997, Zhao help the company buy 201 confiscated automobiles from Shenzhen customhouse. During that time, the company also bought 13,000 tons of crude sugar from the Customhouse with Zhao's permission. The company obtained large profits from the two deals. In 1996, Zhao is accused of helping the company set up a public bonded warehouse which was used in smuggling more than 420,000 tons of vegetable oil and dodging 2.73 billion yuan of taxes. In return, Yang Gaiqing, general manager of the company, bribed Zhao a total of 30,000 US dollars and a Rolex watch, costing 68, 000 yuan. Zhao's daughters, Zhao Ying and Zhao Ping, received 5.14 million HK dollars, an apartment in Hong Kong worth three million HK dollars, an apartment in Shenzhen worth over 900,000 yuan and a Mercedes Benz car costing 390,000 yuan from Yang under Zhao's acquiescence.

While the above two cases are the typical examples of corruption committed by key administrative organs, economic regulation sectors, and sate-owned enterprises, such as customs, tax affairs bureaux, and banks with private economic entities, the day-to-day corruption activities are often found to be performed by local government officials to pursue money with their power. Every local cadre would experience to learn in the local normsfor taking bribes. He would get to know how often he could become ill and how often he could accept invitations to ribbon cuttings, both being occasions at which he couldaccept gifts, without, as long as he was politically loyaland doing a good job,worrying about being accused of corruption.As known, economic reform in China has been associated with anepidemic of corruption among local government officials. A largepart of the success of the Chinese economic reform is attributableto thetransformation of the typical local government official from being an unproductivepolitical entrepreneur to being a productive economic entrepreneur. It seems thattolerance ofcorruption, together with the threat of punishment for corruption and theselectiveenforcement of this threat, has been an effective way to induce local officials topromote economic reform and, equally importantly, has served the political objectivesof the Communist Party.Although the Chinese authorities have recognized the efficiency of markets,they have clung to a dual-track economy, that involves thecoexistence of newly instituted markets with pre-existing Guanxi arrangements, whereby the allocation of resources depends in part on personal connections amonggovernment officials and firm managers. Under Guanxi firm managers have to maintain good relations with relevant government officials and managers of other firms to ensure the provision of supporting resources (e.g. electricity, water, etc.) and the timely delivery of necessary raw materials and intermediate goods. In the dual-track economy the ability of local officials to continue to make Guanxi work effectively has been critical. This is because theincomes of local officials are nominally fixed and unrelated to their performance and the Chinese local officials are not allowed to moonlight as formal employees offirms. The main ways seem to bethe extraction of bribes or nepotistic favors and the appropriation ofpublic property or public funds for personal benefit. Those local officials who can most skillfully take advantages of Guanxi with firms are likely to be able to extract the largest bribes or nepotistic favors or to have the most valuable public property to appropriate. Local officials obtain through corruption, particularly in the form of bribery, is often paid directly by local firms, which have got preferential treatment from the former.

China has been following a strategy of developmental state, of which the role of local government in promoting economic growth and social stability are equally stressed. The performance assessment for local cadres is one called by some scholars the pressurized system based on the economic and political practices in their tenure. Under such a performance assessment standard and pressurized system, the daily administrative work has been increasingly entrepreneur-orientated. Though the separation of government from market, administration from enterprise, and state from society have been all along stressed, it is hard to be implemented so long as the developmental strategy continues. This left enough vacancy for local government officials to capture interests from local firms. In addition, the immature market system and the half way of the policy changes relevant to the vitally important economic sectors, such as land market, financial departments, and the largest state-monopoly enterprises still leaves ample opportunities for various corrupt activities of rent creation and seeking.

Corporate Ways to Combating Corruption in Private Sectors

Chinese government has been clearly aware of the disastrous effects of corruption in its governing system and economic structure. Too much government penetration and intervention in economic fields is recognized as one of the main factors causing corruption both in public sectors and private sectors. Therefore, to root off corruption from its fountainhead, e.g. to remodel the governance pattern of the state is regarded primarily important. Numerous measures have been taken to fight corruption. These measures include forbidding the government, police, and military to take part in business enterprises; implementing different accounting channels for revenues and for expenditures; and implementing a system of "accountant accreditation." Six anti-corruption policies have been developed in combating corruption: (1)increasing transparency of government affairs;(2)encouraging citizen participation in government affairs; (3) strengthening the role of the deputy of the People's Congress; (4) ensuring an independent judiciary; (5) holding major government officials responsible for mistakes made under their purview; and (6)broadening the freedoms of the media. In addition, governmental interference in the economy and the discretionary power of government officials is to be reduced.

As corruption is being proliferated, more anti-corruption strategies and methods have been initiated. These strategies and methods reflect the changes and continuities in the process of anti-corruption in China. First, the top leaders and political organs have become increasingly determined in struggling with corruption. An instance is that the Central Committee of the Communist Party of China (CPC) has recently issued an outline for the establishment of an anti-corruption work mechanism that serves to punish and prevent corrupt activities by CPC members. The mechanism will be established to educate and supervise party members, punish those who turn corrupt, and prevent corruption. According to a schedule set by the outline, a basic framework for the mechanism should be installed by 2010 and a long-term education system, power-operation supervision system and a mechanism-based anti-corruption system will be completed later. The construction of the mechanism is expected to be scientific, systematic, feasible and practicable. According to the outline, the construction of the anti-corruption mechanism is a pressing but lasting task given that the anti-corruption situation remains serious.

Second, more emphases are laid on the institutional ways and a sound legal system to curb the corruption. To rule of law has been repeatedly stated in official documents and the building of a law-based society is thought to be the way leading toward a clean government. In fighting with corruption, People's Procutorates and their affiliated Anti-corruption Bureaus have played the key role. According to the 1982 Chinese Constitution, the People's Procuratorates are the "legal supervisory organs of the state". The procuratorates, on behalf of citizens' concerns, can investigate 22 kinds of criminal offences, including "violation of citizens' rights by officials, corruption and economic crimes committed by officials". The functions of the People's Procuratorates, according to the constitution, are available to the Chinese population who wish to seek action against government officials who are accused or suspected of engaging in corrupt activities. According to official statistics, 900,000 suits were filed by the common people against government officials in 1997 alone. China's Supreme People's Procuratorate has established a hotline to handle people's concerns and the prosecutors were asked to take to the streets to provide legal counseling to the common people about how to report corruption to the authorities. In 1988, the first corruption reporting centre was opened in Shenzhen, Guangdong province, and since then, 3,600 others have been established. The public can provide information about government officials suspected of bribery, embezzlement or corruption. The prosecutors have also weighed a blacklist of bribers as part of prevention drive against corrupt government officials and businesses. Previously convicted officials and businessmen, and those known to have fled overseas with their illegal gains, have been hard to escape the naming and shaming.

Third, the reform of administrative system has been thought to be primarily important to eradicate corruption. At the Fourth National Anti-corruption Conference, in February 2002, the former Chinese Prime Minister Zhu Rongji proposed a multi-pronged strategy to deal with the problem, including: continued transformation of the role of the state, further development of the rule of law and an enhanced role for monitoring agencies such as the auditor bureau. He also called for tighter budgetary control over government agencies and further reduction in the number of permits they issue, an effort that started in 2000. By the end of 2001, most provincial and major metropolitan administrations had reduced the number of administrative permits by 30 to 50 per cent. The administrative procedure would be to a more extent simplified since new act of the Law of Administrative Examination and approval has been initiaed and practiced. The ongoing administrative reform, which aims to remove unnecessary government intervention in corporate behavior by simplifying the traditional application-and-approval procedures for businesses, is expected to be conducive to corruption prevention and control. Now in China, academies are exited to talk about the construction of a clean, responsible, transparent, democratic and law-oriented government to fight against corruption.

In addition to the strategies and actions of curbing corruption generated in public sectors described in the above part of this paper, special means have been introduced to combat corruption in private sectors. As aforementioned, tax evasion has become the main cause of state financial loss resulted from the corrupt activities committed by the corporation between public power and private strength. A new tax regulation system has been formed, and new measures of tax collection and handling have been taken to optimize the situation of taxation. Too many items of tax remitting and exemption, too big gauges between the nominal tariff rate and practical tariff rate, the backwardness of tax collection and management are judged as the main systematic reasons of prevailing tax evasion, for which, the government has tried hard to promote reform programs andintroduce new measures since the middle 1990s. First, taxation laws and regulations have been unified, tax payment has been equilibrated and taxation system has been optimized. In the meantime, various tax remitting and exemption policies that governments at different levels enacted have been clarified and reregulated. To legitimize the taxation law and maintain the nature of a unified taxation law system, the local practices of "collect, then remit" , and illegal tax remitting and exemption are strictly forbidden. Second, taxation work has been strengthened and the loopholes in taxation system have been detected and blocked. Tax collection, handling, and censoring have been clearly separated, a "golden taxation program", together with a "fraudulent taxation prevention system", and a "cross checking and accounting system" were established, which aimed at lifting the level of tax collection and management. Third is to lower the nominal tariff rate, reform the smuggling detecting system, and strengthen the work of tariff collection and management. Up until now, the tariff rate in China has decreased from 43 per cent in 1994 to 15 per cent. Smuggling detecting system has been reformed and a smuggling detection police was established to fight with the crimes of taxation evasion and smuggling. A project of "golden customs" was launched and the practices of the departments of customs, exit and access quarantine, foreign exchange, bank, international trade, taxation are linked and processed through the networks of computer. Those policies and measures have to a great degree optimized the taxation, prevented and curbed economic crimes and corruption activities.

Public spending and public projects in China have long been the prey of private sector corruption, in whichfield, the actors in private sectors would often try hard to develop close ties with public power. This is an open secrecy and easy to lead to social outcry. Chinese government has focused more on the problem and various systematic ways and measures have been worked out to tackle it, including the formulation of government procurement system, public project bidding system, and accountant appointment and general accountant system. The government procurement system is based on the successful experiences gained in Shanghai, and Shenzhen. From 2000, this system has been put into action in central government, provincial governments and provincial capital city governments. The legislation of the system has been optimized, the procurement practices have been regularized, by which, the scale of government procurement surmounted to 20 billion yuan, and public expenditure decreased at a rate of 10 per cent in 2000. In order to control the corruption situation in public projects, the government has also promoted a public bidding system, for which, a public bidding law was enacted by the National People's Congress Standing Committee, aimed at establishing a public program bidding framework based on the principle of openness, fairness and equality, and generating a visible and normalized construction market. Railway, highway, water conservancy, post, communication, electricity and other special construction projects have been all put into the open market for construction bidding, to a great extent prevented occurrence of corrupt activities. The development of accountant appointment system and general accountant system in public sectors was expected to strengthen the financial control and management, and to block the loopholes leading to corruption. This system has regularized in 275 cities or prefectures, and 1029 counties and to a much extent tightened the control over pubic finance.

While corruption is an epidemic rotting all social fields, corruption in private sectors are neither able to be wiped out in one night. Corporate ways of anti-corruption illustrated in the previous part of this paper have been initiated and practiced, however, the effect produced are not always encouraging. In this situation, perhaps a more optimistic attitude is needed to face the problem.

Party Orders Weeding out of Corrupt Officials

The disciplinary watchdog of the Communist Party of China (CPC) warned local authorities on Tuesday to rigorously observe rules on assessing work performance in the ongoing nationwide leadership reshuffle to prevent the promotion of corrupt officials.

"Concrete measures should be taken in line with the rules to ensure job performance assessments are real and to prevent already corrupt officials from being appointed or promoted to higher positions," said Xia Zanzhong, deputy-secretary of the CPC Central Commission of Discipline Inspection.

It is not unusual that some Party and government officials who have committed serious crimes of embezzlement and bribery continue to rise in their political careers before being caught.

One recent example was Hu Xing, former deputy director of the Yunnan Provincial Transport Department, who was arrested in February for taking more than 40 million yuan (5.2 million U.S. dollars) in bribes and keeping a mistress.

Prosecution documents said he began taking 50,000 yuan in bribes as far back as in 1995, when he was working for the city planning section of Kunming City, capital of southwestern Yunnan Province.

China has been undergoing nationwide leadership elections and reshuffles in both the Party and government at county, city and provincial levels since last year, which will be completed later this year ahead of the CPC National Congress.

Xia said in an exclusive interview with Xinhua that in order to ensure clean and honest administration of the Party and government, a series of new reform measures are in the pipeline:

-- Government departments will be relieved of some administrative authority, especially in granting business or other permits. More government affairs and operations are to come under public scrutiny, especially those concerning the interests of the public;
-- Government bodies will be requested to strictly separate expenditure from income to avoid conflicts of interests;
-- More people's jurors and supervisors from outside the judiciary should be installed at legal proceedings to ensure trials are open and fair.

So far, the causes, facts and countermeasures of corruption in private sectors of China have been analyzed, yet corruption and anti-corruption situation, even of private sectors, in the nation is hard to be completely uncovered. For a fluid, messy, complicated and transitional China, a more cautious and deeper reflection on its anti-corruption efforts is necessary. Rather different from other nations, the political structure, social system, and market state quo in China are always double-edged in fighting with corruption. On one hand, the authorities of CPC and the state seem to never lack the determination to eradicate corruption, however, on another hand, corruption in China rather seem to develop in its own way and follow another logic, often contradictory to the will of the party and state leaders. The bottleneck of China's anti-corruption seems rather apparent for many, e.g. the lack of fundamental changes in political structure toward democratization will eventually make the anti-corruption efforts abortive. This is even true in the anti-corruption campaign in China's private sectors. As illustrated in the above part, all corrupt activities in private sectors are closely involved in the practices of public power. With a one-party political system, and with an unrestricted state power over society, the success of anti-corruption either in public sectors or private sectors is beyond imagination. Perhaps, China could create another miracle in its anti-corruption pursuance as it has done in economic development, however, it needs time to prove.

China suggests US heed own human rights

2007-05-25T10:27:00.001-07:00

Chinese government said the latest US criticism of its human rights situation is "groundless and slanderous", and suggested US focus more on human rights problems within its own boundary.

US should stop its erroneous activities of interfering in other countries' domestic affairs with the excuse of human rights, a spokesman of China's Foreign Ministry said on Saturday.

Foreign Ministry spokesman Qin Gang said the China section of the US State Department's annual report on US efforts to support democracy worldwide "turned a blind eye to solid facts, attacking irresponsibly China's human rights."

"We repudiate the human righs report of the US Department of State, which ignores basic facts, slanders and attacks China's human rights situation," he said.

"We express our strong dissatisfaction and firm opposition," Qin said in a statement posted on the Ministry's Web site. "A lot of efforts have been made to expand democracy and reinforce the rule of law in China. Human rights in China have made new progress constantly."

The international community has spoken highly of China's human rights practice, the spokesman said.

The US report, released Thursday, alleged that China had continued to deny citizens basic election rights, and law enforcement authorities neglected and suppressed the legitimate rights of its citizens. It also alleged there were an increased number of cases in which officials harassed reporters, activists and defense lawyers seeking to exercise their lawful rights.

China said the US should pay more attention to its domestic human rights situation.

"It's the consensus of the international community that the U.S is not qualified to be the 'human rights guard' at all," Qin said. "We strongly advise it to focus more on human rights problems within its own boundary and stop its erroneous activities of interfering in other countries' domestic affairs with the excuse of human rights."

In March, China issued a report in response to US criticism of its human rights in which it accused Washington of trampling on Iraq's sovereignty. It also said the US used its campaign against terrorism as an excuse to torture people around the world and had seriously violated the rights of its own citizens.

Recognition of brain death will aid organ transplants

2007-05-25T10:25:00.001-07:00

The question of what constitutes death is at the center of a medico-legal debate in China with important implications for organ transplants, a senior health official said on Saturday.

In April, China issued its first regulation on human organ transplants, aimed at banning organ trade in any form and regulating the country's huge organ transplant market. It will go into effect on May 1.

The new organ transplant regulations are a milestone in China's health sector, but the legal framework remains incomplete, vice minister of health Huang Jiefu told a press briefing, pointing out that new legislation on "brain death" is needed.

He said the development of human organ transplants requires a wider medical definition of death besides the traditional notion of cessation of heartbeat.

"Fifteen minutes at most after the cessation of heartbeat and breathing, organs are irreparably damaged and can no longer be harvested for transplants," said Huang, a liver transplant specialist, who completed his postdoctoral research at the University of Sydney, Australia.

Most western countries stopped using cessation of heartbeat as a sign of death before organ removal in 1968. Instead they use the concept of "brain death", the criteria for which include absence of brain-stem reflexes, no evidence of breathing and total lack of consciousness.

Organs can be successfully harvested from a person who is brain dead but whose heart and lungs are kept functioning by machines.

However, the traditional Chinese view that "life goes on until the last breath and until the heart stops beating" has held back the introduction of legislation on brain death even though academics have been urging the promulgation of such a law since the 1980s.

Chinese medical experts say that if the law was amended to allow organs to be removed from people declared "brain-dead", organ supply would increase significantly.

China has been carrying out organ transplants for more than 20 years and is the world's second largest performer of transplants after the United States. But there is a terrible shortage of organs. Official statistics show that while 1.5 million patients need organ transplants each year, only 10,000 can find organs.

Most organs are donated by ordinary citizens at their death who have voluntarily signed a donation agreement.

As China's human organ transplant regulations do not recognize brain death, it is currently illegal to take organs from a brain-dead patient for transplant purposes, Huang previously said.

Huang, who has long advocated the recognition of brain death, said an academic seminar planned for the second half of the year will examine the concept of brain death, which is widely misunderstood by ordinary Chinese.

"China will seek to change people's traditional views and -- in a context of worldwide shortage of organs -- encourage a humanitarian spirit of helping each other," Huang said in an earlier interview in March.

"The country will probably establish a range of death criteria covering brain activity, breathing and cessation of heartbeat and allow people to choose the criteria that seem most appropriate to them," he said.

Huang gave no more details of the legislation but stressed that the drafters will ensure the doctors who pronounce "brain death" are not the ones responsible for organ transplants.

Recognition of brain death is part of a package of criterion the ministry of health is drawing up to implement the human organ transplant regulation, Huang said.

Most of the criterion will be completed in three to five years, he said, adding that a manual on liver transplant, the first of its kind, will be released in this August, followed by the manual on kidney transplant.

On Saturday, the health ministry also announced that the first batch of more than 160 medical institutes have been granted the licence to transplant human organs.

About 600 hospitals and clinics have applied, the ministry said.

China Calls for Sudanese 'Flexibility' on Darfur Peacekeepers

2007-05-24T22:21:00.000-07:00

The Chinese government says it is urging Sudan to be more flexible in allowing U.N. peacekeepers into Darfur. A spokeswoman in Beijing says China's new special envoy for Africa pressed the Khartoum government on the issue during his just-completed trip to the region. Daniel Schearf reports from Beijing.

China's special representative, Liu Guijin, has returned to China after a five-day visit to Sudan that included meetings with Sudanese leaders and stops at Darfur refugee camps.

Jiang Yu

China's Foreign Ministry Spokeswoman Jiang Yu said Liu commended Sudanese leaders for working to improve the situation in Darfur, but also pressed Khartoum to implement former U.N. Secretary-General Kofi Annan's plan to get U.N. peacekeepers into the region.

"(The Chinese side) also hopes the Sudan side can exert more flexibility in implementing the Annan plan, speed up and press ahead with Darfur's political progress and further improve the humanitarian and security situation in Darfur," Jiang said.

Khartoum has agreed in principle to the Annan plan, but has refused to allow U.N. peacekeepers into Darfur to aid overwhelmed African Union forces already in the region.

More than 200,000 people have been killed and two million made homeless during four years of conflict in Darfur, where government-backed militias have been accused of genocide and mass rapes.

China has been accused of using its veto in the U.N. Security Council to block international pressure on Sudan to allow a stronger U.N. peacekeeping force.

China is a major buyer of Sudanese oil and supplier of weapons to Khartoum. The Beijing government has come under international pressure to use its influence to press Sudan on Darfur.

China has become more vocal in publicly pressing Sudan to allow U.N. peacekeepers, but maintains a deployment must have the consent of Khartoum.

Economy fuels M&As in China

2007-05-24T06:37:00.001-07:00

China remains Asia's top market for financial services mergers and acquisitions (M&A ) because of underlying economic growth conditions, an annual survey by PricewaterhouseCoopers (PwC) suggests.

The opening of the financial sector late last year has also contributed to the faster pace of restructuring among domestic financial institutions and has prompted foreign banks to acquire stakes in domestic firms to gain a foothold in the Chinese market, PwC analysts said.

M&A activities are expected to expand from the banking and insurance sectors to stock broking and asset management, said the survey of 230 senior financial services executives across Asia.

At a press conference to introduce the report, PwC analysts warned that the fierce competition for assets in China requires discipline in pricing deals as China's financial services market becomes increasingly complex.

According to the survey, 47 percent of respondents said they will be involved in M&A activities in China either as principals or intermediaries in the next five years, down from 52 percent in 2005, said Matthew Phillips, PwC Transactions partner in Shanghai .

Ten percent of respondents said they would engage in M&A activity in Japan and 28 percent in Hong Kong .

In the commercial banking sector, corporate banking will continue to be the primary profit driver and opportunities include note financing, trade finance, treasury and cash management. Retail banking is possibly the most attractive banking segment in the medium term, the study said.

City commercial banks will be major targets of M&As, said Andrew Li, a transaction services partner of PwC in Shanghai. In the past few years, Huishang Bank and the Bank of Jiangsu have combined a number of city commercial banks with provincial banks, and foreign lenders are showing increased interest to own stakes in these smaller Chinese banks.

In a separate PwC poll of 40 overseas banks actively engaged in the Chinese banking market - including HSBC, Citibank and Standard Chartered Bank - respondents envision growing opportunities in China, and only a third said the market is overcrowded.

The 40 banks surveyed employ more than 16,700 people, and the number will surge 113 percent to about 35,700 by 2010, with 25 banks more than doubling in size.

China's retail sales of hotel, catering sectors up 18% in 1st 4 months

2007-05-24T06:13:00.001-07:00

China's retail sales in the hotel and catering sectors jumped 17.6 percent year-on-year in the first four months of 2007, the Ministry of Commerce (MOC) said on Wednesday.

Retail sales in these sectors rose to 388.01 billion yuan (50.7billion U.S. dollars) in the first four months, accounting for 13.9 percent of total retail sales in China in this period, a MOC report said.

Sales increases in the hotel and catering sector contributed to15.9 percent of the total retail sales growth over the past four months, the ministry stated.

Analysts said the high sales growth came as higher incomes in the world's fastest-growing major economy prompted more people to travel and eat at restaurants.

The average disposable income of urban Chinese rose 19.5 percent to 3,935 yuan in the first quarter, while the cash income of rural population jumped 15.2 percent to 1,260 yuan, the highest increase in a decade, according to the National Bureau of Statistics.

The Ministry of Commerce also said the number of newly-approved foreign-funded hotels and catering projects in the first four months of this year dropped 26 percent year-on-year to 248.

It added the contracted foreign investments dropped 28.2 percent year-on-year to 650 million U.S. dollars, while the actually used foreign funds climbed 5.6 percent to 240 million U.S. dollars.

Chinese top legislator meets Hungarian president

2007-05-24T06:02:00.001-07:00

Wu Bangguo (L), chairman of the Standing Committee of China's National People's Congress (NPC) meets with Hungarian President Laszlo Solyom in Budapest, capital of Hungary on May 23, 2007. (Xinhua/Li Xueren)

Chinese top legislator Wu Bangguo met with Hungarian President Laszlo Solyom Wednesday in Budapest. The two sides reaffirmed their commitment to further the friendly and cooperative partnership.

Wu, chairman of the Standing Committee of China's National People's Congress (NPC), highlighted the rapid growth of the bilateral relations, noting that the mutual respect and support the two countries provide for each other are the "valuable treasure" which needs to be very much cherished.

China will make joint efforts with the Hungarian side to step up the bilateral partnership to a higher level, Wu stressed.

The Chinese top legislator also acknowledged the important contribution that Hungary made for the development of human civilization, adding that the country already established advantages in fields such as scientific and technological innovation.

China and Hungary share prospects of the bilateral cooperation in these fields and China highly values the work on the technological innovation, energy saving and environmental protection, which is an inner need for China to continue to develop, as well as a demonstration of China's being responsible for the world, Wu noted.

Solyom, expressing his appreciation to the achievement made by China during its economic and social construction process, pledged that Hungary will continue to boost its ties with China in fields such as science and technology, education, environment and tourism.

Hungary welcomes more Chinese businessmen to expand investment in the country, the Hungarian president said, expressing the hope the two sides could consolidate exchange and cooperation through various approaches in an aim to increase mutual understanding.

As a guest of Hungary's House Speaker Szili Katalin, Wu arrived in Budapest on Tuesday afternoon. It is the first time for a Chinese top legislator to visit the East European nation.

Hungary is the second leg of Wu's three-nation tour to Africa and Europe, which will also take him to Poland. Prior to Hungary, Wu already paid a successful visit to Egypt.