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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.