THE RICHEST VILLAGE IN CHINA?

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

China Takes Credit for Sudan Allowing UN Peacekeepers

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

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

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

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

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'

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

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

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

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

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

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''

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%

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

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'

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.

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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

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

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

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

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

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

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

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

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

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.