Meet the P.R. China

[Armen]

Sorry Stormig, how much do you want for copyrights?

 

-------------------------------------------

 

The Washington Post

The China Riddle

 

By Robert J. Samuelson

 

Friday, January 30, 2004

 

China is the question, but what's the answer? Everyone recognizes that China's emergence as an economic superpower is a surpassing development, even if we don't know its full significance. A China of 1.3 billion mostly impoverished people will influence only its immediate neighbors. A China that is the world's sixth-largest economy and fourth-largest exporter, with stunning economic growth rates (9.1 percent in 2003) and ambitions to excel in almost every technology, is something else entirely.

 

No one much talks about this, because it's hard to know what to say. The situation is novel. Since World War II, the United States' biggest economic and trading partners have also been our closest political and military allies. China breaks the pattern. It is now, after Canada and Mexico, our largest trading partner and the source of our largest trade deficit: about $120 billion in 2003. But China is neither close ally nor confirmed adversary. People fumble for the right words. Is China a "threat" or an "opportunity"? Is it a "partner" or a "rival"?

 

Beyond that, we don't know China's effect on the world economy. Is it a giant low-wage magnet drawing jobs and investment from elsewhere? Or is it a powerful locomotive whose development needs will pull everyone else along? Until recently, it seemed a magnet. China has attracted about $500 billion of foreign investment -- mainly for new factories and mostly at the expense of other Asian nations. "Two years ago, [Asian countries] were trembling," says Nicholas R. Lardy of the Institute for International Economics in Washington.

 

But recently, China has turned locomotive. Its imports in 2003 rose 40 percent, or about $118 billion, says Lardy. Steel imports totaled 36 million metric tons, a record for any country and double the level of the late 1990s. "Most of that steel is coming from Korea and Japan -- even India is selling. . . . They're elated," says Lardy. In 2003 China accounted for 35 percent of the global growth in oil demand, he says. The Chinese appetite for metals raised copper prices 40 percent and lead prices 55 percent.

 

Some things are clear: for example, China's gigantic need to create jobs, which -- if unmet -- might stir unrest. Every year, the labor force grows about 10 million, an International Monetary Fund study estimates. In addition, China's modernization of inefficient state-run companies means factory closings and layoffs. Meanwhile, rural workers move to cities for better-paying jobs. That means 9 million more jobs are needed, says the IMF study. By contrast, the U.S. economy creates 3 million jobs in a good year.

 

China also wants to be more than the world's sweatshop. It didn't send a man into space for only prestige. "There's a growing problem of industrial policy," says Alan Wolff, a trade attorney for U.S. industries. "The Chinese have said, 'You can invest -- but we want your technology.' " Every foreign company must worry that it's arming future competitors.

 

Consider computer chips. China imposes a 17 percent value-added tax on chips. But for chips produced in China, as opposed to imports, manufacturers can get most of the tax (up to 14 percentage points) back as a rebate. The idea, says Wolff, is to force companies to locate chip factories in China. The Chinese have also mandated their own encryption standard for wireless computer devices; that could force foreign firms to share their wireless technologies with Chinese firms that have the encryption codes. (The United States says both measures may violate rules of the World Trade Organization.)

 

We have other interests with China -- North Korea's nuclear program, terrorism, Taiwan's status -- but our political relationship depends partly on our economic relationship. If the economic costs seem too great, they will poison the politics. The flash point is that huge bilateral trade deficit. In theory, it might not matter. Countries need not have evenly balanced trade with each other to benefit from trade. Suppose China sells to us and buys from Thailand; then Thailand buys from Brazil, which buys from us. Everyone can gain. But weak U.S. job growth and a big trade deficit with China -- suggesting unlimited "outsourcing" -- is a lethal political combination. If it continues, it could raise questions about standard economic theory.

 

One fear is that China's recent growth spurt reflects a "bubble" of easy credit that, once popped, will curb imports and cause China to emphasize export-led job growth even more. Another danger is that China merely represents the last stage of Asia's supply chain and that Asia -- as a whole -- sells much more abroad than it buys, parking surplus earnings in U.S. Treasury securities. For instance, two-thirds of China's imports from Taiwan are components that are assembled and reexported. This lopsided trade shifts jobs to Asia. It's one reason the Bush administration has pressed China and other Asian countries to revalue their currencies and make their exports more expensive.

 

In 1980, China traded little and most of its people lived on the edge of subsistence. Now it's already the largest market for cell phones (269 million in 2003) and the second-largest for Internet users (78 million). The changes, considering their magnitude, have gone remarkably smoothly. Everyone now wants a piece of the China market, but there are underlying fears that we may be abetting an uncontrollable colossus. Endless questions remain as to how China affects the global economy and whether China and the United States will cooperate or collide. We don't know the answers, and -- almost certainly -- neither do the Chinese.

Edited January 31, 2004 by ArmenSarg

[Dan]

China is trying so hard to "keep up" with other developed countries, but it can't, because of its cattle-like breeding population and the absence of nationally developed technologies. If they sent a human being to space 40 years after Gagarin, that is a clear pointer as to where China is right now. And it won't get better. Unless a mass epidemic solves China's population problem and labour/unemployment fears/worries, I'm afraid China is going down the path of destruction. And I'm not sure how massive the effects of such a destruction would be on the world, considering that a lot of countries depend on Chinese productions...

 

China's cooperation with USA will be a huge mistake on USA's part, and China's antagonism with USA will NOT result in a Chinese win. China might have a huge population, but when it comes down to a comparison between USA and China, a huge number of Chinese people are undernourished and if there is a need for infantry clash, I'm afraid they neither have the man "power" nor the weapons power. Unless, of course, Japan comes to their aid, which could prove disastrous for the USA.. and of course, the good ol' competition between Russia and USA.. it has the potential for another World War. And I think China holds the key to that world war. >< Scary, but IMO, true.

[Armen]

China's cooperation with USA will be a huge mistake on USA's part, and China's antagonism with USA will NOT result in a Chinese win. China might have a huge population, but when it comes down to a comparison between USA and China, a huge number of Chinese people are undernourished and if there is a need for infantry clash, I'm afraid they neither have the man "power" nor the weapons power. Unless, of course, Japan comes to their aid, which could prove disastrous for the USA.. and of course, the good ol' competition between Russia and USA.. it has the potential for another World War. And I think China holds the key to that world war. >< Scary, but IMO, true.

Dan, it's not that simple. A huge amount of jobs both in US and China depend on each others economy. And considering a war option, politicians nowadays think more about internal opinion than say 50 years ago. Though Chinese Communist Party may may seem a bunch of commies to you, they are not.

Their country is moving in opposite direction from communism-totoliarianism polar. The question however is, are they going to eventually come to strong nationalism, which will lead to a confontation with the US in Pacific, as it happened in US-Japan case in IIWW? Or China will find its niche in the region peacefully, by becoming a US proxy as UK is in Europe.

I also don't think that Japan is going to become A Chinese ally anytime soon. And Middle East - Central Asia region is more likely to serve as a reson for global confrontation, than US-Chinese counter-interests in Pacific and South China Sea.

However, the question about what China is going to do with its might say 15-20 years from now is very valid.

[Stormig]

he he, no problem, ArmenSarg, I got my idea from "Meet the Press" myself.

Someday I'll append a series of articles that ought to be "must-do's"...

[Armen]

http://www.atimes.com

 

China

 

China set to flood the world with chips

By Macabe Keliher

 

TAIPEI - Last September Morris Chang alarmed the semiconductor industry when he said there would be an industrywide recession in 2005 and that the Chinese chip makers would cause it. "I stand by that statement. China's capacity in 2005 will have a big impact," the chairman of the world's largest made-to-order integrated-circuit and computer-chip manufacturer, Taiwan Semiconductor Manufacturing Co (TSMC), has told Asia Times Online.

 

That's something of an understatement. In pursuit of a policy that will make China nearly self-reliant in semiconductor manufacturing, and enable the country to source its own chips domestically for everything from tape recorders to computers, Beijing is funding and bankrolling what is being called reckless expansion in semiconductor fabrication plants, or "fabs". Through low-interest loans, tax exemptions and even direct investment, the Beijing government has set China on pace to provide the world with 20 percent or more of its capacity next year in the made-to-order chip industry, or foundry.

 

This volume is enough, industrialists and analysts say, to cause a serious glut that will drive down prices, slash profit margins and suppress return on equity. From a robust 20-30 percent growth this year to more than US$200 billion, the global semiconductor industry will register only 10 percent or less in 2005, according to Chang, and some analysts are predicting negative growth. "Just as in any industry governed by supply and demand, an increase in capacity anywhere in the world will have effects," said Chang, interviewed at a TSMC investors' conference here last Thursday.

 

When Beijing designated the semiconductor industry as one of China's pillars of economic growth, the industry was sure to take off, and what has occurred is unprecedented on any scale. From virtually nothing a few years ago, Chinese fabs hold about 9 percent of the foundry market's capacity today, and they are expected to produce 15 percent of the industry's chips by the end of the year, and well over 20 percent in 2005.

 

China is sitting on a mountain of wafers

Take, for example, Semiconductor Manufacturing International Corp, China's largest manufacturer. It currently has three eight-inch-wafer fabs in Shanghai that will increase capacity by 70 percent this year. Add a recently purchased Tianjin eight-inch fab, a 12-inch fab in Beijing that is expected to go online in the fourth quarter, and two more 12-inch fabs scheduled for 2005 and 2006, and China is sitting on a mountain of wafers that the market is just not ready to absorb.

 

"The overcapacity will be massive. And taken with a modest fall in global chip sales, there will be a rough landing for the industry," said Rick Hsu, semiconductor analyst at Nomura Securities.

 

As part of the government's strategy, Chinese foundries aim to supply the local market. Currently almost 80 percent of China's chip demand, which totaled about $22 billion last year, is being met by foreign makers. The Chinese government hopes to raise the country's self-sufficiency above 50 percent in the coming years, and has invested heavily in a few of the companies. Advanced Semiconductor Manufacturing Corp, for instance, is 62 percent government-owned, and Grace Semiconductor Manufacturing Corp is partially held by the son of former Chinese president Jiang Zemin.

 

In addition to owning majority stakes in some of the semiconductor companies, China offers tax incentives to semiconductor investments. Chip makers pay no income tax in the first five years of investment and then pay half of the regular tax in the next five years. The standard income-tax rate is 15 percent, well below that of many developed countries, including Taiwan's 25 percent. These tax incentives, along with lower land and labor costs, give Chinese companies a cost advantage. They can manufacture about 10 percent more cheaply than their competitors elsewhere, according to Andrew Lu at Citigroup Smith Barney.

 

With these political and financial incentives, analysts estimate that Chinese companies will increase their wafer-manufacturing capacity by nearly 60 percent by the second half of this year. Such a trend is only expected to intensify until Chinese makers can fill more than 50 percent of the domestic demand, possibly regardless of whether there is new demand or not.

 

Analysts warn that the local market is expected to grow less than 20 percent this year and about 13 percent next year - a rate slower than that of the manufacturing capacity. "There is a demand shift, not the creation of demand," said Hsu, at Nomura. "Foundries are unlikely to see a return to the days of ROEs [returns on equity] in the 20 percent range."

 

China's mass chip production to hurt others

Although Chang said Taiwan Semiconductor Manufacturing's 2003 fourth-quarter return on equity was 19.9 percent, and that he expects more than 20 percent by this June 30, all of those high numbers may drop when Chinese companies begin mass production in their new fabs, probably some time next year. Nomura estimates that TSMC will recover to only 18 percent return on equity in 2005, the year in which the chip cycle is expected to peak. TSMC's ROE peak was in 1995, at 45 percent.

 

"The pricing power of Taiwan's foundries in this sector should just about disappear," said Hsu. He estimates that China foundries sell at about 20-30 percent lower than the industry as a whole, and 40-50 percent lower than TSMC.

 

The industry is in the midst of an upswing now, to be sure. Arizona-based Semico Research Corp forecasts 26.8 percent revenue growth for the global semiconductor industry this year, and 39.7 percent growth for the foundries. And last week TSMC announced record revenues for fourth-quarter sales in 2003, an increase of 5.3 percent over the third quarter, and Chang said he expects single-digit growth in the first quarter of 2004, monumental in an industry that peaks in December. Profits for TSMC in the fourth quarter rose sixfold over 2002.

 

The problem is, the industry overall is expanding. TSMC is raising its capital expenditure by 60 percent this year to $2 billion, and United Microelectronics Corp, the world's second-largest foundry, is expected to increase its capital expenditure fourfold, from $350 million to $1.5 billion. The Chinese companies are planning initial public offerings, either in Hong Kong or on the United States Nasdaq in the next year or so. China's largest manufacturer, Semiconductor Manufacturing International Corp, for instance, will float a $1 billion initial public offering (IPO) in the first half of this year. Grace is also scheduling a $3 billion IPO, probably next year.

 

"Enjoy it while it's great," said Dan Hutcheson, president of US-based VLSI Research Inc, "but expect a decline on the order of 30 percent to start in late 2005."

[Anonymouse]

There's this joke in Russian that if all the Chinese were to stand on the Great Wall and pee, all of Russia would be flooded.

[Armen]

In Chinese USA (Mei guo) means the Beautiful Land, France (Fa guo) means the Land of Law, Russia (E luo se) means the Hungry Land.

[Sasun]

There's this joke in Russian that if all the Chinese were to stand on the Great Wall and pee, all of Russia would be flooded.

Wouldn't it cause femine in China?

[Sasun]

In Chinese USA (Mei guo) means the Beautiful Land, France (Fa guo) means the Land of Law, Russia (E luo se) means the Hungry Land.

What about Armenia, the Land of Big Noses?

[Armen]

What about Armenia, the Land of Big Noses?

Armenia (Ya mei ni ya) could be translated from Chinese as the Beauty of Asia.

[Sasun]

Armenia (Ya mei ni ya) could be translated from Chinese as the Beauty of Asia.

Oh good

 

Armen are you fluent in Chinese? (mandarin I imagine?)

[Armen]

Oh good

 

Armen are you fluent in Chinese? (mandarin I imagine?)

I wouldn't say fluent, Sasun jan, but I can have an ordinary convesation in Mandarin.

[Sasun]

I wouldn't say fluent, Sasun jan, but I can have an ordinary convesation in Mandarin.

Did you study in China or work? I think you mentioned being there sometime.

[Armen]

Did you study in China or work? I think you mentioned being there sometime.

Yes I studied and travelled there for two years.

[Sasun]

My friend is from Shanghai. If I was Chinese I would hate the bastard... but he is a good guy

[Armen]

Sasun jan, this thread is gradually becoming "Sasun meets Armen" thread

[Stormig]

Sorry? Which one of you is the boy and which is the girl?

 

Armen, I take it you want the thread to be economic-oriented and not a crimes-against-humanity type of thing, right? Or could it be all-encompassing? Let me know, because I've got a whole lot of stuff stored somewhere.

[Armen]

Sorry? Which one of you is the boy and which is the girl?

 

Armen, I take it you want the thread to be economic-oriented and not a crimes-against-humanity type of thing, right? Or could it be all-encompassing? Let me know, because I've got a whole lot of stuff stored somewhere.

Stormig jan, it was said in "Miles Davis meets John Coltrane" format. I think you miss Dan

 

I want the thread to be Orient - oriented . Mostly economic and political information about China and international relations with Chinese involvement. Would be very grateful for help.

[Sasun]

Sasun jan, this thread is gradually becoming "Sasun meets Armen" thread

I don't see anything wrong with that

[Armen]

China props up US economy: Wall Street Journal

 

China's fast growing economy provides powerful support to the US economy, a front-page article of the Wall Street Journal said on Friday.

 

China is gradually emerging into the US-led global economic order, the article pointed out. As an important link in the whole economic ring, China has helped many foreign companies to earn money. Meanwhile, China also met the US huge demand for cheap goods and capital.

 

China has beyond doubt become a major economic force. Compared with the economic scale of 10.40 trillion dollars of the United States and the USD 4 trillion dollars output of Japan, China's present USD1.20 trillion dollars economic level is by no means high; but China will overtake Japan within a score of years. China's ceaseless growth of economic strength, including its large demand for crude oil, has made Beijing quite an influential city in geopolitics and a power center that must be faced squarely by the United States.

 

The average monthly income of Chinese workers stands only at around 80 US dollars, the article said, even less than the minimum income of two days for an American worker. This has incurred a drain of working posts in the US manufacturing industry. In the latest twelve months, cheap labors had earned China a trade surplus of 123 billion dollars to the United States, five times the figure as seen over ten years ago.

 

However, these figures covered up a fact, the mutual complementarity between the Chinese and American economies, the article pointed out. According to the World Bank estimation, China depends heavily on its industrial output, with 51 percent of its GDP coming from manufacturing, mining and other related industries. While in the US GDP, manufacturing only accounts for 14 percent while service industry almost takes up three fourths of it.

 

Chief economist of Morgan Stanley Stephen Roach believes that the United States could reduce imports from China by raising tariff or pressing RMB to revalue, but this can only help boost export to the United States by other countries.

 

The article cited the example of Logitech International to show how China has strengthened the US role in leading the global economy. The California-headquartered Company has a plant in Suzhou of southeast China, which exports to the United States 20 million mice every year. The Wanda wireless mouse is one of Logitech's knockout products. It is sold at around 40 dollars for each in the United States out from which Logitech takes away 8 dollars, wholesalers and retailers take 15 dollars, and Logitech's material providers, such as Motorola Inc. and Agilent Technologies Inc. take 15 dollars too. China only earned 3 dollars out of it, and the money must be used to cover workers' wages, energy, transportation and management costs. The total income of Logitech's 450 sales persons in California is much higher than that for the 4,000 Chinese workers in Suzhou plant.

 

Out from many cases the result is always the same: foreigners got the lion's share. They provide raw materials, got them assembled in their plants in China and sell them overseas. Over three fourth exporters of China's hi-tech products are foreign companies. Motorola Inc. and Seagate Technology, both being American companies, are listed by the Ministry of Commerce among the top ten of the export enterprises.

 

It is hard to estimate how much on earth American transnational Incorporations have earned in China, for many of them reported profits through their offshore companies located in Hong Kong or other low-tax regions. But statistics from the US National Bureau of Economic Research could only offer a general impression. In the 1980s, the US companies lost much in China; in 1990s they began to earn a little. By 1999 they reported a net income of their related enterprises in China up to 755 million dollars, while the figure doubled by the third quarter of 2003. Taking the income of the related enterprises in Hong Kong, the US companies earned an income of 5.16 billion dollars during the first three quarters of 2003 in the big China region, equivalent to the income gained from Japan during the same period.

 

As Professor Huang Yasheng from MIT put it, "Americans hit a very successful business and produced numerous low value-added products in China. But this is a miracle in terms of quantity, not value¡­while getting cheap goods from China, Americans also got loans at an extremely low interest rate from the country".

[Stormig]

National Security Archive Update, December 11, 2003

 

No Support for Taiwan Independence, Nixon Assured China in 1972;

New Documents Reveal Origins of Current U.S. Policy;

Nixon Trip to China Now Fully Declassified

 

For more information contact:

William Burr – 202 / 994-7032

 

http://www.nsarchive.org/NSAEBB/NSAEBB106/index.htm

 

Washington D.C. 11 December 2003 - Newly declassified documents posted today

on the web by the National Security Archive show that President Nixon assured

the People's Republic of China during his historic 1972 trip to Beijing that

the U.S. would not support, but could not suppress, the Taiwan independence

movement.

 

These assurances, made in secret and not repeated in public for 25 years, are

the basis for President Bush's current statements opposing independence for

Taiwan - a constant in U.S. policy ever since Nixon. The documents posted

today complete the delayed declassification of the Nixon trip materials, and

include discussions revealing China's anxiety over the possibility of

Taiwanese independence - contrary to Henry Kissinger's memoir account that

they "spent very little of our time" on Taiwan.

 

During Nixon's trip, Kissinger also gave the Chinese a top secret intelligence

briefing on Soviet forces arrayed against China. In their detailed memoir

accounts of the trip, neither Nixon or Kissinger mentioned this briefing, now

declassified in full and included in the posting today.

 

The documents include:

 

* Premier Zhou Enlai's claim that Washington had let pro-independence

politician Peng Meng-min escape from Taiwan, to which Nixon and Kissinger

denied that Washington had given any help and assured Zhou that they opposed

Taiwanese independence.

 

* Nixon's repeated assurances to Zhou that Washington would discourage any

Japanese "military intervention" in South Korea or a Japanese role in Taiwan.

 

* Kissinger's detailed run-down of Soviet forces along China's borders,

including ground forces, tactical aircraft and missiles, strategic air

defenses, and strategic missiles, with special attention to nuclear weapons.

 

Kissinger on Taiwanese independence:

 

"I told the Prime Minister that no American personnel ... will give any

encouragement or support in any way to the Taiwan Independence Movement ...

What we cannot do is use our forces to suppress the movement on Taiwan if it

develops without our support."

--Kissinger to Nixon and Zhou En-Lai, 24 February 1972

 

Kissinger on intelligence briefing:

 

"none of our colleagues know that we have given you this information and

nobody in our government except for the President and these people here know

that we have given you this information. The intelligence people do not know

that we have given you this information."

--Kissinger to Chinese, 23 February 1972

 

The documents and analysis are available on the National Security Archive

website at http://www.nsarchive.org/NSAEBB/NSAEBB106/index.htm

[Stormig]

China's new war on corruption

By Tian Jing

 

HONG KONG - Last year, when the Chinese government proudly unveiled a satellite telemetry scan to map the country as part of its new, much-heralded space program, the results stunned even the country's most seasoned leaders. The scan uncovered vast amounts of farmland being converted across the country for illegal uses.

 

That in turn has kicked off another of China's massive anti-corruption campaigns to find out who was profiting from misuse of the land. So far, three ministerial-level leaders have been arrested and investigations are being conducted throughout the country. These allegations have reached into the party leadership and the Bank of China as well as local and provincial governments all across the country.

 

"Ever since the late 1980s, the [illegal] land transfer has incurred a conservatively estimated annual loss of more than 10 billion yuan [uS$1.21 billion], a figure larger than the losses caused by smuggling," according to a government report about the issue.

 

On January 12, Premier Wen Jiabao issued a stern memo concerning the corruption of China's land market. An urgent teleconference was then held by Tian Fengshan, the then minister of Land and Resources, on February 20 demanding the cleanup of the land market. The ensuing anti-corruption campaign is the biggest since 2000, when, according to Wei Jianxing, a member of the Standing Committee of the Political Bureau of the Chinese Communist Party (CCP) Central Committee, 132,447 corrupt officials were punished. That included 17 ministerial-level officials and more than 4,400 petty bureaucrats.

 

Tian Fengshan, who was dismissed on allegations of corruption in October, is the third ministerial-rank official to be unseated this year, following the downfall of two provincial party secretaries: Liu Fangren of Guizhou and Cheng Weigao of Hebei, who were also accused of corruption.

 

It remains to be seen how far the anti-corruption campaign will go. However, the government publicly says it is ready to eliminate all black sheep, including those in high positions. For a senior official in charge of land resources such as Tian to be axed for land graft, in the Chinese political context, it seems to be an indication of the intensity of this round.

 

Premier actively pursuing the case

Certainly, Wen Jiabao appears to have put his prestige on the line to pursue the case. Before his removal, Wen ordered Tian to collect statistics on China's national land development status that show that, in 10 provinces, among the 3,837 development zones throughout the country, only 232 were authorized by the State Council and 1,019 by provincial authorities. Up to 68.7 percent of the gross 300,000 hectares of development zones proved to be unauthorized. Illegal approvals have even resulted in the occupation of and transaction of lands earmarked for development zones.

 

Wen issued two urgent orders in three days in July prohibiting further approval of land utilization and demanding the cleanup of illegal land use and transactions. He launched an investigation on July 31, titled, in the usual stilted Chinese government bureaucratese, the Conference Call on Further Restoring the Order of the Land Market.

 

Since August 8, 10 investigative panels appointed by the central government have taken joint superintendence over 31 agrarian markets. Although the probe is routed through a variety of government agencies, it is clear that Wen is pulling the strings, in what amounts to the first test of his premiership over corruption. His predecessor, Zhu Rongji, was famous for his outrage over corruption, flinging bureaucrats into jail or before the firing squad without fear or favor.

 

Illegal land enclosures are widely known across China. But metropolitan areas, especially Beijing and Shanghai, the nation's political and economical capitals respectively, have suffered most. According to a story in the March 11 Economic Observer, "Currently there is not much land left in Shanghai since land in the downtown areas has all been divided, and only Pudong, the district with the most astonishing development pace, still sees many scalpers speculating in land."

 

Details of illegal expropriation

The story also revealed the procedures for illegally enclosing land. First, it said, illegal developers would get their hands on city zoning plans from compliant officials in government departments. Then they would start to expropriate land now in farms on which the government intended to transfer ownership.

 

Speculators typically need permission from both local governments and city planning departments to obtain the land. But since land sales bring huge profits, local officials usually collude with scalpers. For example, a bidder typically needs only pay 1 million yuan to obtain a plot later auctioned for 10 million yuan.

 

Officials then delay the actual date of the land handover by putting off the issuance of necessary permissions such as those for land usage and construction until scalpers drive up the price through many rounds of circular reselling. The transferred land can thus avoid confiscation by the government, which in its effort to fight illegal occupation, has set a policy of confiscating land enclosed more than two years earlier but left idle and undeveloped.

 

Although central governments have rigid inspection procedures governing the usage of vast plots, local officials can always find loopholes. "Officials and land buyers will divide them into many small parts and report to the government for approval. Actually they are reunited as a whole," the article stated.

 

Of deeper concern, in August, the Beijing Youth Daily published an unnoticed article from Xinhua, the official Chinese news agency, which reported on an enclosure case in Hangzhou involving 2,400 hectares (36,000 mu, or Chinese acres) from 1999 to 2002. Hangzhou, as everyone in China knows, is a city that neighbors Shanghai, an area in which former president Jiang Zemin and his aides had the greatest political influence. The report therefore implied Jiang's cliques' involvement in the land enclosure.

 

All these lands were left undeveloped while "In the downtown, the land price for developing properties soared to the highest level - 18 million yuan per mu in an auction the year before last," the Beijing Youth Daily reported.

 

Property magnate runs into trouble

Another difficult case erupted in May after Shanghai residents accused the property mogul Zhou Zhengyi of profiteering on the purchase of their lands. There is a delicate interaction between Premier Wen's anti-land enclosure campaign and this case.

 

Complaints against Zhou were first lodged at the Shanghai Courthouse by local residents who claimed that Zhou defrayed only part of the contracted compensation for demolishing their abodes after purchasing the land beneath. The outraged plaintiffs staged a protest demonstration before the Shanghai Municipal Government, only to be detained and told to shut up.

 

They were not easily tamed. Some 200 protesters rallied again before the municipal government building, three of whom appealed to the Central Discipline Inspection Commission (CDIC) in Beijing, China's top anti-corruption authority. The story began to surface in international press reports as well.

 

The Shanghai government finally answered press questions on September 5 when a spokesman confirmed that Zhou was in jail and that the government would spare no effort to assist investigations from Beijing. Since then, there has been little progress, despite the CDIC's findings that unknown persons in the state banking system had endorsed huge dubious loans to Zhou's projects.

 

Allegations have been printed that Zhu's wife, Mau Yupin, who is also the chairwoman of Hong Kong-listed Shanghai Merchants Holdings Ltd, boasts an unusual connection with Jiang Zemin's son as well as the brother of a member of the CCP Central Committee, which is impeding investigations. Certainly, there are ties to Liu Jinbao, vice chairman and chief executive of the Bank of China in Hong Kong, who was suddenly removed from his post and recalled over allegations of irregularities in loans in Hong Kong and Shanghai given to Zhou. Liu before his arrest was also a high-ranking CCP official.

 

By confiscating two of the three plots of land under contention that were bought by Zhou, and by passing the former tycoon's case on to Beijing's jurisdiction, the entire Shanghai government is trying to de-link itself from the scandal. Within a month of the first press conference, a spokesman from the municipal authority told the press again that no government official had been involved in Zhou's case.

 

Reformers are arrested

Then, on June 22, ominously enough, the Shanghai government confirmed that Zheng Enchong, a renowned barrister who has represented up to 500 families involved in land-grab cases in Shanghai, and who was representing the plaintiffs in the Zhou case, had been imprisoned for "theft of state secrets".

 

Although some barristers have offered to defend Zheng, a source worried that some officials of the Shanghai government have declared in private that they are determined to prevent Zheng from ever "making trouble" again. Zheng, according to the source, is doomed to be convicted and placed under probation, in order to disbar him forever in accordance with China's constitution. A verdict in his case was scheduled to be handed down on October 28. However, no verdict has been announced.

 

In addition, Human Rights in China (HRIC) said it had learned that Hong Kong activist Shen Ting, who also was involved in protests by Shanghai residents displaced by redevelopment schemes, was seized by Beijing police, who took her money, airplane tickets and travel documents, making it impossible for her to return to Hong Kong. Nonetheless, some parts of the government continue to move forward. On September 1, Wang Guangtao, China's minister of construction, declared that "problems of non-standardized house relocation and property administration have infringed upon the legal interests of consumers and even incurred group protests and appealing, disturbing the market order. The State Council has therefore called for restructuring and regulating the property market, which has been listed as a particular task this year."

 

A September 4 report in the Guangdong-based Southern Weekend also commented that the practice of protesting directly to higher level authorities (ie, bypassing their immediate authority) should be protected. However, the Shanghai Morning Post said on October 22 that the government had arrested seven protestors, allegedly for intruding in governmental institutions and disturbing the peace, after they had gone to Beijing to petition in the case.

 

The growing controversy spurred a commentary in the October 24 Guangming Daily (web version) that citizens' rights of appeal to higher authorities should be guaranteed as constitutionally protected.

 

A whistle-blower's ordeal

The amount of trouble a whistle-blower can get into is considerable. The lawyer Zheng Enchong is one such case. Another involves Guo Guangyun, age 61. As a result of reporting illegal the activities of Cheng Weigao, the Hebei party secretary who has been dismissed, Guo and some 20 members of his family have suffered considerable persecution. Though already sacked, Cheng has not stood trial and his family members remain beyond justice. Guo and his family are still living in terror.

 

During eight years of attempts to expose Cheng and an associate, Li Shanlin, Guo was almost killed on two occasions. He was once beaten up and was the target of a traffic accident. A frequent visitor to Shijiazhuang Chinese Medicine Hospital, Guo complains that he suffers from chronic conditions including hypertension, diabetes and heart disease. He has told reporters he began to suffer from these conditions while in detention for attempting to bring Cheng to justice.

 

Fortunately, he said, most people undergoing re-education in the center and its staff knew for sure that Guo was treated unjustly and worked to protect him from harm.

 

Guo has been at it a long time. He entered Tongji University in 1961 and graduated in 1966 but was dispatched to a rural area for labor reform for nearly five years after he was labeled a counter-revolutionary figure during the Cultural Revolution, waged by Mao Zedong.

 

Given his background as a member of a poor family, a political advantage in this era, he was transferred later to the Jinzhou Planning and Construction Bureau of Hubei province, and then the Planning and Construction Committee of Shijiazhuang, the capital of Hebei province in 1973.

 

Fourteen years later, he was ultimately promoted to director of the Construction Department and head of the Construction Standardization Bureau, in charge of reviewing and approving all the design and construction schemes of the entire city.

 

Guo was uncomfortable with the alleged corruption of Li Shanlin, his immediate boss, who is currently behind bars. He sent an anonymous letter to Cheng Weigao, party secretary of Hebei in 1994. Instead of going after Li, Cheng harbored him. Guo found out later that Li was Cheng's loyal partisan.

 

On August, 1995, Guo sent materials titled, Cheng Weigao and Li Shanlin are the chief culprits of deteriorating the provincial construction market, to the Central Discipline Inspection Commission (CDIC) in Beijing and to the Hebei provincial Procuratorate - only have them relayed to Cheng, who identified Guo after handwriting analysis.

 

As a result, Guo's house was searched and he was sent to a re-education-through-labor center for two years. Through the efforts of his wife, Guo finished his re-education at end of 1996, one year earlier than scheduled. He continued to accuse Chen and his family members of wrongdoing, in 1997 beginning to sign his and his wife's names to the letters. During eight years of struggle, Guo wrote hundreds of letters, hoping the authorities would take action.

 

Guo's efforts eventually paid off. In 1999, the Central Inspection Working Group on Three Emphasis Education, a movement to stress theoretical study, political awareness and the good conduct of party members, visited Hebei. Yin Fatang, the person in charge of the group at that time, told South Weekend, an outspoken Guangzhou magazine, that an old cadre had mentioned Guo's case in a colloquium and suggested it was closely related to Cheng.

 

However, Cheng's responses were much faster. Answering questions from the group, he did not directly make explanations to those charges from Guo. Instead, he argued that such an issue simply should not be dealt with in that session of the movement.

 

Talking to the weekly, Yin sighed, "Cheng is simply too powerful. Ordinary people dare not touch him. Wei Jiangxing, secretary of CDIC, sent out two orders to inspect him, yet was still unheeded."

 

Guo's report finally began to be heard by the CDIC, which spent a week listening to him in April 2000. Guo was freed from the labor reform sentence and allowed to resume his Party membership with the warning that the punishment remained on his slate. Unsatisfied, he continued to protest.

 

Finally, at the beginning of 2003, Cheng attended a CCP preliminary meeting and was removed from his post. Participants say Cheng left the city by train the same night. But the CDIC had collected sufficient evidence against him.

 

On August 9, Guo was cited as a truth-teller who had faced punishment and was listed as instrumental in the CDIC's decision depriving Cheng of his party membership, an unprecedented move for the party's disciplinary apparat.

 

Although belated justice finally appeared, Guo says Cheng Muyang, the son of Cheng Weigao, is said to be offering a reward for his death and that of his family. Guo insists on the anonymity of his family members and receives press interviews alone.

 

Windows of South, another Guangzhou monthly, quoted an anonymous scholar from Peking University as saying, "Leaders [in China] have too much power, with no regulation or limit." A provincial party secretary has the ability to dismiss junior governmental officials, decline legal demands to have him testify or be investigated and to order the police to imprison a citizen and even appeal for a court conviction.

 

This is a screenshot of the bureaucratic arena in China. As many domestic media experts put it, the "opportunity cost" is too high to report corruption cases, an explanation for the difficulty of eradicating corruption in China.

 

(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

[Stormig]

Beijing tries to snuff out public suicide

By Li Yong Yan

 

BEIJING - Different reasons drive different people to suicide. To generalize, some people want to escape something they deem too much to bear - terminal illness, lost love, impossible debt, to name a few examples. They live in pain, physical or mental, and they want to end it, for good.

 

Others take this ultimate step to protest against something, most usually injustice. A Vietnamese monk immolating himself, a Korean worker stabbing a knife into his belly - these felt strongly against certain wrongs.

 

They all chose the wrong way out, from the perspective of their families at least. Fundamentally they are weak, selfish even, unable or unwilling to meet the difficulties in life and society, and leaving their loved ones to suffer the loss.

 

But now they are officially something else as well, according to the Beijing police. Attention those who despair of life: it is a criminal offense to end it in the Chinese capital's Tiananmen Square.

 

"So? Go ahead and slap my dead body with an arrest warrant," the determined suicide may sneer. Well, don't count on it. The bad news for you, but perhaps good news for your family, is that Tiananmen Square is swarming with probably the rapidest-deployment suicide-prevention police force in the world. And they are well trained for the job.

 

A few weeks ago, two would-be tragedies were successfully prevented by the elite police on the square. The save was so brilliantly executed that the head of Beijing's police felt it necessary to tell the world about it. Police chief Ma Zhenchuan announced his sterling record during the National Day holiday season and went on to warn that it was illegal to "vent personal anger" in a public place as sacred as Tiananmen. He arrested the two people his men had saved, for provocative disorderly conduct.

 

Who says China is a lawless country?

 

Law and order do not just happen to bind together. There is a symmetry to it: Break one and you disrupt the other. It can therefore be assumed that law is a means to ensure the end: order.

Law and order don't just happen. They are enforced, by competent authorities, in two important ways: prevention and punishment. Anybody who breaks the law and thus causes disorder will have to be punished to set an example for all to see. When it comes to suicides, an individual is indeed capable of harming public interest in extreme cases. For example, a man may try to destroy a commercial airliner when he sets about killing himself, for the insurance payout to his beneficiary. That is a criminal act, open and shut. But unless and until innocent people are endangered, there is simply no case, criminal or civic, against the poor fellow who is driven to this abyss. A public suicide is usually committed to make a public protest over the way the government treats the individual and/or general public.

 

The recent strings of public attempts in Tiananmen are proof enough. Without exception, they are hopeless victims of forced eviction from their homes. Developers, backed by local governments, never talk to the homeowners about a fair agreement. Instead, the developers talk through bulldozers. Powerless against the wrecker's ball, the owners turn to the courts, which turn them away. Then they go to the people's government, which never responds or, if it does, sends police to disperse the protesters. With nowhere else to turn to, they show up in Tiananmen Square, with a bottle of gasoline. Ever the law-abiding citizens, they douse themselves with fuel, and end up being charged with provocative, disorderly behavior, by the suddenly all-efficient law-enforcement authorities.

 

It is one thing to discourage suicide in any form and in any place, it is entirely another to cordon off one particular square as a no-suicide zone, as if everybody is welcome to use the rest of the country's 9.6 million square kilometers of land. Are we to assume that it is okay to set oneself on fire in a provincial capital? Or a town square? Apparently it is all right, to follow the logic of the police, to poison oneself in one's own bed. China has one of the world's highest rates of suicide: nearly 300,000 people take their lives each year. And we have yet to see the government lift a finger. So why this abrupt enactment and enforcement of an anti-suicide law for Tiananmen?

 

More diabolical is the fact that the Beijing city government is more concerned with the disruption of order caused by a commotion in the square than the personal tragedies and grave social injustice that cause these public suicides. Keep in mind it is precisely because governments, at various levels of provinces, cities and counties, failed to provide order and, in many cases, have actually disrupted the process of law that these angry, desperate people have been driven to the heart of Beijing.

 

Thanks to the negligence of public policymakers, these poor souls have been deprived of a place to live. Now, they have been deprived of a place to die.

 

(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

[Armen]

Thanks, Stormig. Actually I needed that National Security Archive material for my classes. Keep them coming

[Armen]

The hungry dragon

 

Feb 19th 2004 | BEIJING, LONDON, NEW YORK AND TOKYO

From The Economist print edition

 

Nowhere is the impact of China's growth clearer than in the world's commodity and raw materials industries. No industries will lose more if that growth slows

 

AFTER difficult times that had lasted nearly a decade, mineral and metals producers from around the world have seen their fortunes improve spectacularly during the past year. They largely have China's booming economy to thank for this. In 2003, China's GDP grew by a reported 9.1%, its fastest rate since 1997—driven by the material-intensive construction and automotive sectors. Ravenous China's oil imports rose by 30% last year, exceeding Japan's to become second only to America's. China accounted for half of the world's consumption of cement, 30% of its coal, and 36% of its steel (of which imports jumped by 50%), according to China's National Bureau for Statistics. Copper imports rose by 15%, and nickel imports more than doubled. This helped to lift The Economist metals-price index by around half from a year ago, and by 75% from its low after September 11th 2001.

 

This, in turn, has done wonders for the share prices of firms such as Rio Tinto, BHP Billiton, WMC Resources, and Alcoa—each of which are up on a year ago, by 20%-90%. Goldman Sachs recently raised its profit forecast for these and similar firms, predicting that “China will remain a powerful driver of global demand growth for many commodities in 2004 and beyond”.

 

True, not everyone is happy. Rising global commodity and material prices hurt consumers everywhere, not least in America—though the fall of the dollar, in which many commodities are priced, should ease the pain of the price rises in much of the world, especially in Europe.

 

Higher input prices are hurting some of the marginal steel producers and copper smelters. Japan's Sumitomo Metal Industries and Nisshin Steel are switching to lower quality inputs to hold down costs: in fiscal 2004, Nisshin expects to raise its use of low-iron material by half to 30% of its total iron-ore consumption, compared with fiscal 2000. Recently, due to higher ore prices, several Japanese copper smelters said that they will cut production.

 

For the most part, though, the commodity and materials firms are being energised by the growth opportunity presented by China. David Humphreys, chief economist of London-based Rio Tinto, says that China will become increasingly central to his firm's planning, despite accounting for less than 10% of its current business. That figure understates China's significance, because “the truly important thing is the growth segment, and that is where China is so dominant. What is now taking place there is on a scale that has no real precedent.” For some commodities, such as iron ore, China in effect accounts for all the world-wide growth, he adds.

 

Rio Tinto plans to form a joint venture with Mitsui, Nippon Steel and Sumitomo Metal Industries in western Australia to improve the efficiency of production and increase the speed with which output is shipped. Mitsui, which has an established partnership with China's mighty Shanghai Baosteel, plans to build ten more steel-processing plants in the country, raising capacity from 1.3m tonnes per year to 3m. Although BP last week said it has sold its 2.1% equity stake in China Petroleum and Chemical (Sinopec), the British oil giant still plans to invest a further $3 billion in China over the next five years, on top of the extensive activities it already has there.

 

China itself is doing its utmost to benefit from the strong demand it has created—and, it hopes, to reduce its exposure to supply bottlenecks, which have been a chronic headache. (In November, six Chinese copper smelters announced plans to cut back production because of inadequate supplies of copper concentrate.) One strategy is to acquire equity stakes in resource-based businesses around the world. This may be a good selling opportunity for overseas shareholders. Ren Haiping, of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences in Beijing, acknowledges that Chinese firms, with their state-owned, central-planning pedigrees, have much yet to learn about wheeling and dealing in the wider world. “They will, of course, make mistakes and bad deals, and there are lessons that will have to be learnt. But the government is prepared to tolerate this because it understands that this is the path China needs to take,” he says.

 

Spend, spend, spend

 

Notable examples of recently acquired Chinese stakes, which may or may not pay-off, include a planned joint-venture between Baosteel and Companhia Vale do Rio Doce, a Brazilian iron ore producer, whose sales to China grew by 33% a year in 1998-2002, to build one or two steel mills in Brazil, capable of producing 4m tonnes of steel a year. Worth perhaps $2 billion, it will be one of China's largest overseas investments so far. In January, Sinopec won a contract to develop natural gas in Saudi Arabia. China has also invested hundreds of millions of dollars in oil projects in Gabon and Algeria. And it is participating in aluminium, copper, nickel, and iron-ore projects in Jamaica, Zambia, Peru, Australia and Papua New Guinea.

 

The Aluminum Corporation of China recently announced plans to invest over $1 billion in a new aluminium project in Vietnam. It will not only provide most of the capital and technology, but also arrange the necessary railway construction. It plans at least ten other projects abroad to meet domestic demand for aluminium, which it expects to triple by 2020.

 

Though the future looks bright, there may be a few clouds on the horizon. The uncertain scale and effectiveness of Chinese activity in the raw materials markets ought to temper the optimism of foreign firms. So too should the risk that China's economy will go off the rails—though there have been encouraging signs of late that the government is applying some gentle pressure on the economic brakes to avoid unpleasantness later. It is also possible that today's high prices are giving misleadingly upbeat signals. Rick Holmes, a metals trader at Mitsui Australia, though generally bullish, says that a significant, but unknowable, portion of Chinese commodity buying is for arbitrage and speculation rather than physical demand.

 

Even so, dealing with China is far simpler for foreign commodity businesses than it is for other foreign direct investors, manufacturers or retailers. In China, as elsewhere, they need not worry about finicky or unfamiliar consumer tastes, trademark piracy or cut-rate copycat producers. As long as China needs more materials than it has, their businesses will thrive.