http://www.atimes.com/atimes/China_Business/GJ06Cb01.html



DNA chips bring personalized medicine to China
By Matt Young

Overcrowded hospitals and underserved patients are still part of Chinese healthcare-as-usual, but some researchers and businesses are introducing some of the most cutting-edge Western medical technology in an effort to personalize medicine in China. Known technically as pharmacogenetics (sometimes called pharmacogenomics), their research doesn't involve better bedside manners, but rapidly analyzing Chinese patients' individual genetic makeup, which can affect their response to drugs.

"If you look at the genetics of the Chinese population and Caucasians, you see a lot of differences," says Dr Michael Shi, director of biomarker development at Novartis Pharmaceuticals



Corp. But until recently, even in medical school, those differences were oversimplified. "Oh, those Westerners, they have big bodies," said Dr Shi, summarizing one maxim of old-school personalized medicine, along with the notion that Chinese generally have less body mass. As a result, Westerners used to typically get a higher drug dosage than Chinese, he said. But personalized treatment today has more to do with genetics than crude kilograms, and industry insiders are starting to see China as both a vast laboratory and potential market for this advanced health care technology.

The Chinese pharmaceutical market grew 28% from 2003 to 2004, to US$6.2 billion, according to a report by Accenture Ltd, which provides consulting services for multinationals expanding into China. The Chinese drug market is expected to be the world's fifth-largest by 2010, with $24 billion in annual sales, according to another report by Burrill & Company, which provides strategic Pharmacogenetics: Using DNA chips for medical diagnostics

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Hundreds of different DNA samples, called probes, are placed on the wells of a DNA chip, fabricated with the same methods used in the computer industry. The probes are selected to give medically interesting information; for example, one might be a version of a gene which is known to confer higher risk for colon cancer.

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The probes on the chip are coated with a patient's DNA sample. When the patient's DNA matches a probe, the spot will shine when fluorescent light is beamed on it, due to prior treatment with a fluorescent dye. This creates a distinctive pattern of spots which depends on the patient and the patient's condition.

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The treated chip is scanned by a machine, which converts the spots to data that can be examined by a physician.

Images courtesy Hoffman-LaRoche, Ltd. Used by permission.
analysis to life science companies interested in expanding into China. "Big Pharma" may soon help contribute custom genetic medical care to that marketplace. "[Pharmacogenetics] is the future of medicine, there's no two ways about it," said Dr Klaus Lindpaintner, head of the Roche Center for Medical Genomics.

Chips ahoy!
Dr Lindpaintner cited Hoffman-LaRoche Ltd's new AmpliChip CYP450 test as a way to screen certain genes to determine whether a person would react favorably or unfavorably to a drug. The chip has already penetrated into East Asia, hitting the Singapore market, although Dr Lindpaintner wasn't sure if it is available yet in China. "Some of the genetic variants that are being diagnosed with [AmpliChip] are more of an issue with Asian populations than they are in Western populations," Dr Lindpaintner said.

In the meantime, other gene chips are being developed in private biotech firms in the PRC, such as Beijing-based CapitalBio Corporation and Shenzhen-based Chipscreen Biosciences Ltd. Gene chips and other products appear to be fueling substantial growth at CapitalBio, where during a visit this year, Novartis' Dr Shi laughed with CapitalBio CEO Jing Cheng at not having taken a job offer there earlier. "Oh, it was so impressive," said Dr Shi, recalling hundreds of employees working on cutting-edge technology in a handsome business environment. He also remembered having been told that a Nobel laureate was working with the company.

CapitalBio celebrated its fifth-year anniversary in September with about 400 employees. Sales will likely grow 200% to 300% annually during the next few years, said David Sun, senior vice president of business development and marketing for CapitalBio. "As more and more pharma companies in the US and Europe are adopting outsourcing, some of these projects will transfer to China, spurring tremendous growth in the next few years," Mr. Sun said. "In CapitalBio, we are actively building our capabilities in pharmacogenetics to meet this growing demand."

Santa Clara, California-based Affymetrix, a market leader in DNA chips, partnered with CapitalBio in April, allowing the Beijing company to offer its full line of GeneChip products. CapitalBio isn't just a hanger-on, though; the company has enough unique capabilities to be a viable player in the gene industry, Mr Sun said. "We are the only company that is capable of providing personalized 4-D information [about a patient], at gene, protein, cell and tissue level, with its own products and services," Mr. Sun said.

But Dr Shi was once senior director of applied genomics for now-defunct Genometrix Inc, a gene chip company that ran out of capital and folded in 2001. Dr Shi is too bubbly a personality to have a chip on his shoulder from the affair, but his experience has taught him that CapitalBio's success is not going to be easy.

Meanwhile, Chipscreen has developed chips that screen for gene mutations known to be associated with diabetes in Asians, although the chips are currently undergoing testing. "We hope we will have the chance to identify the relationship between those mutations and the response or even adverse effects [to various treatments] among the population," said Dr Xian-Ping Lu, Chipscreen founder and CEO. "Eventually the conclusion will help to design a way of so-called personalized medicine as treatment."

But gene chips are more of a consequence of Chipscreen's core business: using chemical genomics to accelerate the discovery of new medicines. As a result, experiments with the chips are progressing slowly. "We have to go over 100 patients [to draw significant conclusions], and so far we haven't reached that number yet," Dr Lu said. "A major hurdle for this is financial." Chipscreen, a four-year-old company, doesn't have any income to spare, as it doesn't plan to log a profit for the next year or two.

Dr Hong-Hao Zhou, director of the Pharmacogenetics Research Institute at Central South University in China, sees a bright future in his country for gene screens because they help get the right dose of the right drug to patients, and because they're cheap. He has developed gene chips called "Personalized Pharmacotherapy Chips" to tailor therapy for hypertensive patients, although he doesn't expect them to be available in the market until perhaps next year. He performs gene screens at his clinic at a cost of $100, which, although costlier than a blood or urine test, only needs to be performed once in a patient's lifetime. "It's not so expensive, and it's exceptional for the patients," Dr Zhou said.

From diagnostics to drugs
So far, there have been limited and hard-won victories in developing customized drugs. Nitromed Inc received clearance from the US Food and Drug Administration in June to market BiDil as a treatment for heart failure in African-American patients. But Dr Lindpaintner said "it's one in a million" drug discovery that is "not going to happen that quickly again." He added that Roche would be uncomfortable with marketing drugs for specific ethnicities.

"Skin color or self-confessed ethnicity is nothing but a cheap surrogate for some underlying genetic variant that is more common in African-Americans than in Caucasians," Dr Lindpaintner said. As a result, Roche would likely never market a drug as Chinese-only unless it were lifesaving, worked exclusively for that ethnic group, and an underlying genetic cause could not be found, he said. However, Roche does internationally market Herceptin, which is a drug that has been shown to be effective in women with metastatic breast cancer who test positive for a specific version of a gene called HER2.

"[Herceptin] has become a major blockbuster," Dr Lindpaintner said. "If you have a medicine that may be applicable only to a smaller part of population but is uniquely well applicable ˇ¦­ then you tend to actually penetrate that market segment very completely." Sales of Herceptin totaled 851 million swiss francs (US$656.2 million) in the first half of 2005, up 24% from the drug's revenues in the first half of 2004. The drug also is effective in Chinese women, although it was not developed specifically for them.

"Bridging" studies, in which drugs are initially developed for Western populations and then are shown to be effective for Asian populations in clinical trials, are already common. But Dr Shi said some drug studies performed for Asian populations have had surprising results. For example, Iressa, a drug marketed by AstraZeneca PLC for lung cancer, has been limited in the United States to patients who are currently benefiting or have benefited from the drug. The US FDA doesn't consider the drug to be substantially effective. "But that drug has a higher clinical benefit in the Asian population compared with the Western population," said Dr Shi.

It's not a reach then to imagine that drugs specifically developed for Asians may not be far away, although China's lack of patent protection is still a turn-off for drug manufacturers. One thing researchers are keeping in mind, though: Asians aren't a homogeneous group. There are 56 official ethnic groups in China alone, which could make for a lot of bridging studies.

Fertile genetic ground
Similar to how the Galapagos Islands assisted Charles Darwin's discoveries about evolution with its array of endemic species, rural China may be able to spur modern-day genetic research with its unique gene pool, which could lead to further development of the biomedical industry.

"Immigration is not that intensive, in some areas of China", said Dr Zicai Liang, who currently is moving to Beijing from Sweden to work on genomics research at a Beijing University lab. "That means people have been living there for generations and if you have many members in the same family that have the same disease, then one can have a better chance to precisely position the gene responsible for the disease." This is the method that was used to, for example, isolate the Huntington's disease gene to the end of human chromosome 4 in 1983, by analyzing a large, extended family in the Lake Maracaibo region of Venezuela. In China, the Chinese National Human Genome Center at Shanghai identified a gene responsible for atrial fibrillation (AF), the most common chronic arrhythmia in humans, with the technique.

"Through analysis of a large family with inherited AF, we now have the first molecular explanation," said Dr Zhu Chen, the center's director, in the European Molecular Biology Organization's EMBO Reports journal. "At the same time, we identified a gene coding for an ion channel as a potential drug target. In China, we have to take advantage of our huge population, particularly in the western part, where we still have many isolated populations, representing a precious genetic resource."

But even rural Chinese could be worth as much as eventual customers to drug companies as guinea pigs. "In situations where patients themselves or their [families have] to directly pay [for healthcare], that is a situation where they can benefit from that [genetic] information to make better choices," said Howard McLeod, director of the Pharmacogenetics for Every Nation Initiative (PGENI), which seeks to assist public health decision making related to genetics in 20 countries. China will be among the eventual 104 countries that the initiative, funded primarily by the National Institutes of Health, plans to assist.

Roche, for one, is not flirting with the idea of gene research in China. The company is actively collaborating with prominent Chinese scientists at genome centers, and has been doing so for at least five years to see whether gene variants are associated with the presence or absence of certain illnesses, Dr Lindpaintner said. Eventually, such findings could lead to better diagnostic capabilities or better medicines, he said.

Specifically, Roche supported the Chinese National Human Genome Center in its work on diabetes and schizophrenia, according to the Burrill & Company report. Roche also recently established its fifth global research and development center in Shanghai. Meanwhile, AstraZeneca participated in a joint study with Shanghai Jiaotong University to identify the genes linked to schizophrenia, the report said.

Aside from psychiatry, the areas of cancer and autoimmune disease are ripe for genetic discoveries, Dr McLeod said. Even traditional Chinese medicine has a role in pharmacogenetics. Dr Zhou recently discovered that Yin Zhi Huang, an herbal compound used to treat jaundice in Asia, does not allow the heartburn medication Prilosec to be metabolized properly for people with certain genetic makeups.

But groundbreaking research doesn't always attract industry support, as Dr Lindpaintner admits. "We need to have some sort of inkling as we start a project that a medicine will come [out] of this, not just some very fundamental bit of knowledge that eventually may help bring new medicines on the market," Dr Lindpaintner said.

Indeed, The Royal Society, a British independent academy dedicated to promoting excellence in science, reported in September that it would be another 15 to 20 years before the use of tailored genetic medicine is widespread. But Dr Shi doesn't entirely agree, saying that the practice of tailored medicine in oncology isn't nearly that far away. "It's today," he said, referring to the availability of the drug Herceptin and Novartis' Glivec, which is indicated for all stages of Philadelphia chromosome-positive chronic myeloid leukemia. Sales of Glivec were up 33% in the second quarter of 2005 to $537 million. "We are at the start" of pharmacogenetic developments, PGENI's Dr McLeod said, but "not the very beginning."

Matt Young is a Washington, DC-based freelancer and a staff writer for EyeWorld Magazine and EyeWorld Asia-Pacific Magazine.

Copyright © 2005 Matt Young. Used by permission.

(Copyright 2005 Asia Times Online Ltd. All rights reserved. Please contact us for information on sales, syndication and republishing .)

http://www.atimes.com/atimes/China_Business/GJ06Cb02.html

Ericsson to invest $1 billion in China

BEIJING - Swedish telecommunications giant Ericsson will invest US$1 billion in China over the next five years to further engage the world's largest mobile communications market.

The money will be used to improve Ericsson's manufacturing, research and development (R&D), and service in China, according to Ericsson President and CEO Carl Henic Svanberg. "We not only see China as an interesting market, but [as] a main hub for supply and a growing market when it comes to R&D," he told the Ericsson Strategy & Technology Summit recently.

The investment will allow Ericsson to win a third of the market for advanced equipment that allows faster downloads of movies,



music and games on handsets, according to Svanberg. "Users are demanding more mobile content, operators are looking for new revenue sources and media companies need new distribution channels. This is in line with our vision of an all-communicating world and we are confident that the mobile content industry has wonderful potential," said Svanberg.

The 53-year-old CEO said he expects China to start issuing licenses for such third-generation (3G) networks in the next six months, after correcting technical glitches. "What we can see is that the world would expect the networks to be up and running ahead of the Olympics and I think we are getting very close, and it's probably good timing now, if it comes out in half a year or so," he said. He added that China is likely to spend $10 billion to $12 billion on 3G networks within three years of the issue of licenses.

Svanberg also announced that in a strategic move in R&D cooperation, Ericsson has signed its first agreement with the Shanghai Research Centre for Wireless Communications (SHRCWC). Under the agreement, Ericsson will collaborate with SHRCWC in undertaking research projects on future telecommunications technology, such as Super 3G and 4G.

Ericsson already has 10 R&D centers in the country employing 1,100 engineers, said Mats Olsson, Ericsson's president for business in China. The company has built a center in Guangzhou for after-sales servicing of networks and has a facility in Qingdao focusing on fixed-line broadband networks. "We're in close co-operation with China Telecom and China Netcom in preparing for 3G," Olsson said. "We're also in development of service networks for China Telecom."

The company signed a cooperation deal with major Chinese telecommunications equipment provider ZTE in May on developing a 3G technology called time division synchronous code division multiple access (TD-SCDMA), a system supported by China. It is now widely agreed that TD-SCDMA is almost certain to be deployed in China, the world's largest mobile communications market, with over 300 million subscribers. The home-grown TD-SCDMA standard has been tested in several rounds of trials organized by the Ministry of Information Industry, and is believed to meet the requirements necessary for a commercial launch.

Ericsson, which on July 21 reported an 18% profit increase to 5.8 billion kronor ($749 million) in the second quarter of this year, said its Asia Pacific sales rose 8% in the period mainly on the back of growth in China and India. The company expects the global mobile-phone market to reach 2 billion users this year, adding almost 1 million a day, said Svanberg.

Ericsson is a Swedish telecommunications equipment manufacturer, founded in 1876 as a telegraph equipment repair shop by Lars Magnus Ericsson. In the early 20th century, Ericsson dominated the world market for manual telephone exchanges; the world's largest-ever manual exchange, serving 60,000 lines, was installed by Ericsson in Moscow in 1916. In the 1990s, Ericsson held a 35-40% market share of installed cellular telephone systems. Headquartered in Stockholm, Ericsson is considered to be part of the so-called Wireless Valley.

Like most of the telecommunications equipment industry, Ericsson suffered heavy losses after the telecommunications crash in the 2000-01 period and had to lay off tens of thousands of staff worldwide in an attempt to staunch the losses. The company became profitable again in 2004. Recently, the loss-making handsets division was divested into a joint venture with Sony, called Sony Ericsson. Ericsson now concentrates on its core systems: supplying infrastructure for all major wireless technologies and modernizing existing copper lines for broadband services.

(Asia Pulse/XIC)

Hu sets out blueprint for China's future
The Chinese President has consolidated his power heading into a
four-day party plenum Saturday. By Robert Marquand
http://www.csmonitor.com/2005/1006/p06s02-woap.html?s=hns

China Aims To Operate 'Super-Efficient' Nuclear Reactor In 2010
http://www.spacewar.com/news/nuclear-civil-05zzz.html

Beijing (AFP) Oct 05, 2005 - Chinese scientists aim to have a "super-efficient" nuclear reactor in 2010 that will relieve China's uranium supply problems, as part of a national plan to boost power generation, state media said Wednesday.

http://www.spacewar.com/news/superpowers-05o.html


U.S. Experts Fear Russia-China Axis

Chief of the general staff of the People's Liberation Army Liang Guanglie (L) listens to his Russian counterpart Yuri Baluyevsky (2-nd R) in Vladivostok, 18 August 2005. Longtime adversaries Russia and China launched their first-ever joint wargames in a show of military might they insisted was not aimed at any other country after the United States expressed concern. AFP photo.
by Leigh Baldwin
Washington (UPI) Oct 04, 2005
Recent joint military exercises between Russia and China have prompted fears that a new axis is emerging in Asia.
There is a real possibility of a sharp deterioration in Sino-American relations, Igor Zevelev, Washington bureau chief for Russia's RIA-Novosti news agency told United Press International.

If the Bush administration misinterpreted Chinese signals of self-assertion as belligerent expansionism, then the prospect of a new hostility between the United States and China reminiscent of the Cold War was not far off, he said.

Zevelev was speaking after a panel last week at Washington's conservative Heritage Foundation. The panel looked at Russia and China's recent joint military maneuvers on China's Shandong peninsula.

The Russian and Chinese governments described the 'Peace Mission 2005' joint military maneuvers, the first large-scale omens the two nations have ever held together from Aug. 18-25, as an anti-terrorism exercise. Coming at the same time as Hurricane Katrina hit Louisiana and New Orleans, the maneuvers received relatively little attention in the U.S. media.

"The scale of the operation suggests something more than anti-terrorism, as was claimed," said Stephen Blank, professor at the Strategic Studies Institute of the U.S. Army War College, in a statement to the conference.

The war games involved nearly 10,000 troops including 1,800 Russian military personnel, scores of advanced aircraft including Russian TU-95 and TU-22 heavy bombers, which can carry cruise missiles, and army, navy, air force, marine, airborne, and logistics units from both countries.

The nature of the exercises, involving amphibious landings on a theoretically hostile coast and mass drops of more than a thousand paratroops, raised some concerns that they were a dress rehearsal for a possible future Chinese invasion of Taiwan.

However, Taiwan is not China's only concern and of no significance at all to Russia, said Heritage fellow Harvey Feldman. "Russia has scant interest in Taiwan and no interest in getting entangled with the United States," he said, echoing Blank, who suggested the operation had a number of strategic aims.

The maneuvers were a chance for Russia to showcase advanced weapons for sale to China, he said.

Most important, though, was North Korea, Feldman said. "Any account of these exercises must consider the Korean dimension," he said.

North Korea is currently locked in international negotiations, aimed at persuading its government to halt its nuclear weapons program.

"The missing factor that should not be overlooked is that if negotiations break down, the United States might intervene," said Blank, suggesting that 'Peace Mission 2005' was meant as a deterrent to American involvement in the region.

According to Balbina Hwang, Heritage's Korea analyst, China is also preparing for the prospect of the downfall of the North Korean regime. Although strengthening economic support from China ensures this is unlikely, the Chinese were sending a "very strong signal" to South Korea and the United States about the future of a unified Korean peninsula, she said: China would not allow the straightforward incorporation of the North into the pro-Western South.

But geopolitics was not the full story, said Igor Zevelev, Washington bureau chief for Russia's RIA-Novosti news agency. There was a clear message behind the maneuvers, he said. But the two countries were not addressing the United States; nor were they addressing each other: Each had a message for internal consumption.

"Foreign policy is the process of continually reinventing states," he said. According to Zevelev, China and Russia both see themselves as great powers. The military exercises were aimed at affirming this status in the minds of their governments.

But how the message is received in Washington depends greatly on how the United States government chooses to decode it, Zevelev said and he urged a cautious U.S. response.

"Both Russia and China are interested in good relations with the United States. They are geared much more toward the United States than each other," he said, citing China's huge volume of American trade compared to its limited trade with Russia.

The United States has a tendency to automatic nervousness because Russia and China represent different and more centralized models of development to that privileged in American political thinking, he said.

"The United States sees itself as the source of universal values. China and Russia feel a right to chose their own path of development," Zevelev said.

All rights reserved. © 2005 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International

http://www.washtimes.com/national/20050928-112003-8646r.htm


China a 'central' spying threat
By Bill Gertz
THE WASHINGTON TIMES
September 29, 2005


China's intelligence services are mounting wide-ranging efforts to acquire U.S. technology and are among the most active of nearly 100 nations whose spying has undermined U.S. military advantages, according to a senior U.S. counterintelligence official.
China's "national-level intelligence services employ a full range of collection methodologies, from the targeting of well-placed foreign government officials, senior scientists and businessmen to the exploitation of academic activities, student populations and private businesses," Michelle Van Cleave, the national counterintelligence executive, said at a recent congressional hearing on foreign spying.
Miss Van Cleave said spies from nearly 100 nations are working to obtain sensitive U.S. technology, and "two countries that always rank near the top of the list are, of course, Russia and China."
Although private-sector spies are a problem, "state-directed espionage remains the central threat to our most sensitive national security technology secrets," she said.
Chinese intelligence agents are "very aggressive" in business and at obtaining information through elicitation. Additionally, "they're adept at exploiting front companies, [and] they also have very capable intelligence services that target U.S. national security secrets," she said.
Chinese intelligence efforts "take advantage of our open economic system to advance China's technical modernization, reduce the U.S. military advantage and undermine our economic competitiveness," Miss Van Cleave told the House Judiciary subcommittee on immigration, border security and claims.
Chinese and other state-run and private spies use a variety of simple methods to acquire U.S. technology, including e-mail, facsimile and telephone solicitation or in-person requests, she said. Other methods include visits by spies to U.S. businesses, military bases, national laboratories and private defense contractors.
The public identification of China and Russia as spying threats by a senior official is a departure from past policy, when the identities of foreign spies were kept secret to avoid upsetting diplomatic ties.
Miss Van Cleave declined to identify other nations involved in technology spying but said they include some of America's closest allies.
China's government also has obtained sensitive technology through the access that Chinese students, scientists and other specialists have in the United States, she said.
"Beijing has established a number of outreach organizations in China, and it maintains close relations with a number of U.S.-based advocacy groups that facilitate its interaction with experts here and probably aid in efforts to acquire U.S. technology," Miss Van Cleave said.
She said U.S. efforts to identify and stop the activities of foreign intelligence services have "to be more effective."
Larry Wortzel, a former defense intelligence official, told the subcommittee that China is methodical in its intelligence-gathering efforts in the United States.
"The U.S. faces an organized program out of China that is designed to gather high technology information of military use," Mr. Wortzel said.

Are China and other Asian powers forming an alliance based on geo-stratgegic and geo-economic interests as well as anti-Western values aimed against the United States? That seems the conclusions by an Australian analyst published today in the FT. What's interesting in this commentary is the underlying assumptions that depicts the U.S. as an innocent victim of Chinese and Middle Eastern machinations. It doesn't raise the possibility that U.S. hegemonic policies in the Middle East plus the efforts to place obstacles on Chinese efforts to gain access to energy resources (Cnooc/Unocal affair, for example) could help create the formation of such an Asian-Middle-East combination. I'm also pasting here another piece from the FT by the wise Martin Wolf who makes exactly that point, that U.S. policies could ignite a Chinese anti-American response. Leon Hadar



Asia’s alliance with the Middle East threatens US
By Anthony Bubalo
Published: October 5 2005 19:42 | Last updated: October 5 2005 19:42

Anew global alignment is emerging that will have profound implications for the shape of the international system. Asia and the Middle East are often acknowledged as the main theatres within which the key themes of contemporary world politics are played out. But frequently overlooked is the growing web of ties between these two regions – ties that have as a common theme resistance to US political, economic, military and even cultural hegemony.

The most prominent strand of this affiliation is energy. While Asia has long depended on the Middle East for oil and gas, the nature of that relationship is changing. Asia has become an even more voracious consumer of oil and gas, while the Middle East’s ties to its traditional energy partner, the US, have become increasingly strained. Today Chinese, Indian, Malaysian and Japanese energy companies are winning exploration and co-production contracts in the region. There are undoubtedly sound economic reasons for this. But it no doubt helps that these companies are free of the political baggage – human rights or nuclear proliferation concerns, for example – that constrains their US counterparts.

A second strand of the Middle East-Asia relationship flows from the first: a growing political and, potentially, strategic affinity. Take China’s energy investments in Iran and Sudan. They are not meant to be a poke in Washington’s eye. Chinese oil companies do better in these countries because US sanctions mean there is less competition from American players. But, given the centrality of energy security to Chinese foreign policy, an economic imperative soon becomes a political one. Thus, China has opposed oil sanctions on Sudan and resisted efforts to take the Iranian nuclear issue to the United Nations Security Council.

China’s attractiveness is not, however, limited to the Middle East’s rogues. The Sino-Saudi relationship has developed dramatically since Beijing secretly sold medium-range missiles to Riyadh in the mid-1980s. More recently a Chinese company was one of the first foreigners to gain gas exploration rights in the Kingdom. The sole US bidder withdrew, ostensibly for commercial reasons.

Of course, China is not yet a viable strategic alternative to the US in the Middle East. But this will change. It already has the ability to supply states such as Iran with weapons to “deter” US military designs. China is also acutely conscious of the vulnerability of its long sea lines of communication to the Middle East. As it develops its ability to project naval power – it has already helped Pakistan build a deep-water port on its west coast – the potential for Sino-US strategic competition in the Middle East will grow.

Faith and ideology are other emerging axes of the relationship. Washington tends to view Islamic Asia’s growing interest in Islamic fundamentalism exported by countries such as Saudi Arabia through the prism of the war on terror. This is simplistic. Instead of being driven solely by an interest in extremism, this complex phenomenon is partly a response to what Asian Muslims see as the penetration of their societies by a decadent and highly commercialised American culture.

This is just one example of efforts in Asia and the Middle East to find alternatives to globalisation’s pervasive American themes. There are others. Malaysia has been promoting reform in the Islamic world and will soon host the inaugural World Islamic International Forum – a “Davos for Muslims”. Meanwhile, Middle East regimes talk about the “China model” of open economies and closed political systems.

It would, of course, be wrong to see examples of an emerging Asian-Middle Eastern affinity as a formal anti-American alliance. But in many respects it does not matter. Regardless of whether the web of ties becomes institutionalised or remains disparate, formed through government and non-government bodies, the result will be the gradual erosion of US hard and soft power in both the Middle and Far East.

In the Middle East, America’s capacity to reward and sanction will be undercut by regional countries turning eastward for everything from political support in the Security Council to alternative markets. In Asia, a tendency toward more independent foreign policy will be reinforced by a growing sense that Asian and US interests in the Middle East do not necessarily coincide. And globally, it could well be conflict in the Strait of Hormuz rather than the Strait of Taiwan that sparks a much-anticipated Sino-US rivalry, ultimately challenging the unipolarity that has defined the past 15 years of international politics.


The writer is a research fellow at the Lowy Institute for International Policy in Sydney


Martin Wolf: US must worry about its own actions
By Martin Wolf
Published: September 27 2005 20:21 | Last updated: September 27 2005 20:21

The spectre of a rising China has returned to haunt Washington. This is the principal lesson I have drawn from a week just spent in the US. The attention of US policymakers has turned once again towards China. Relations between the world’s incumbent superpower and Asia’s rising giant are, indeed, of great importance. But the correct conclusions will not be drawn from this debate if Washington insists that the onus of change is on China alone. The US, too, must reconsider its role in the world.

I learned at first hand about the sensitivity of Washington’s “China question” from participation in a conference marking the launch of the Brookings Institution’s imaginative new China Initiative. A laudable aim of this initiative is to combat the hostility to China now surfacing in Washington.

Listing the anxieties is, alas, all too easy. Yet the US could reasonably regard China’s resurgence as a triumph. Indeed, this is precisely what Robert Zoellick, the deputy secretary of state, said last week.*

As Mr Zoellick remarked, since 1978 the US has supported China’s opening to the world and to the world economy. Moreover, “our policy has succeeded remarkably well: the dragon emerged and joined the world”. Singapore’s Kishore Mahbubani makes the same point more broadly: “As the main architect of the world order today, the US should be among the first to celebrate China’s progress.”**

Yet celebratory is exactly what many Americans do not feel: they view China solely through what Mr Zoellick called “the lens of fear”. Thus, Mr Zoellick’s speech had two audiences: the obvious one was China; the more important one was the US itself.

Mr Zoellick told China that it needs to change neither what it is nor what it aspires to, but how it behaves. If China is to be a “responsible stakeholder”, he suggests it needs to take account of its responsibility for the global system. Among instances of China’s failure to do so, Mr Zoellick lists its mercantilist attempts to “lock up” energy supplies, its support for unsavoury oil producers (such as Sudan), its toleration of “rampant theft” of intellectual property, its burgeoning current account surplus, its need to contribute to completion of the Doha round of trade negotiations and its potential role in halting proliferation of weapons of mass destruction.

Mr Zoellick’s remarks on China’s role have force. But more important still is what he says – and does not say – about the proper response of the US. He insists that the US “welcomes a confident, peaceful and prosperous China”. Alas, many Americans disagree with this view. Some regard China as a new Soviet Union;
>others regard it as a 19th century Germany, reborn.

Yet China is no Soviet Union: it seeks neither to spread anti-American ideologies, nor to struggle against democracy across the globe, nor to oppose capitalism, nor to overturn the international system. Equally, the balance of power politics of late-19th century Europe make no sense. Then they led to disaster. Today, as Mr Zoellick says: “We are too interconnected to try to hold China at arm’s length, hoping to promote other powers in Asia at its expense”. Still worse would be to try to halt China’s development altogether. That would be both morally wicked and practically calamitous.

Yet avoiding such stupidities is not enough. The US has to reconsider the systemic consequences of its actions.

Many Americans would, after all, now accept the following propositions about the appropriate US role in the world: as sole superpower and a uniquely moral force, the US has both the capacity and the right to act as it sees fit on the world stage. The US is exceptional, they believe, not just in its size and power, but also as a moral agent. This point of view suffers from two sizeable defects: the first is that few outside the US believe it is true; the second is that it cannot underpin a co-operative global order.

Of the great powers of the past several centuries, the US is indeed the most benign. Even so it is not hard to produce a list of its follies – and worse. For this reason, few outside the US would concede to the US the carte blanche it desires.

Moreover, these claims are incompatible with the requirement that principles of action must apply equally to everybody in the same position. This is true within societies and must also be true between them. Thus, “I should do what I want and you should also do what I want” is not a morally legitimate basis of action.

Yet precisely such double standards were inherent in the question from Donald Rumsfeld, defence secretary, last June: “Since no nation threatens China, one must wonder: why this growing investment? Why these continuing large and expanding arms purchases?”

To this, the Chinese can justifiably react by asking why the US needs to spend as much on its military as the rest of the world put together. With Canada and Mexico as its neighbours, why does it feel so threatened? To this the US would respond that it has special responsibilities as guarantor of world peace and, in any case, threatens no other nation. China, in its turn, could then ask who elected the US global policeman and why, given the public debate in the US about whether and how to curb its rise, it should trust its security to the US.

China will, in short, take both US behaviour and the principles that underlie it as the moral norms of the international system. If the US acts on the assumption that it is entitled to remove remote threats by force, so surely will China. A unilateralist US can surely expect an equally unilateralist China. The biggest question for the US is therefore not how China can be a responsible stakeholder but how the US itself can be one.

In deciding on any of its actions, the US must ask itself whether this is how it wants China, too, to behave in the coming decades. That is the fundamental debate on the US role in the world that must lie ahead. The US needs to decide whether it stands for the power of universal principles or the principle of unilaterally exercised power. It should do so, moreover, in the expectation that the China it will ultimately have is one that is no better than its own example deserves.

* Whither China: from Membership to Responsibility?, September 21 2005, www.state.gov; ** Understanding China, Foreign Affairs, September/October 2005.

China Central Bank Chief Sees More Trade Friction Ahead As Surplus Grows
http://www.terradaily.com/news/china-05zzzzzzzzg.html

With Secretary of Defense Rumsfeld about to make a long-delayed first official visit China in a few days, the following has just been reprinted on the front page of the China Daily, the official English language newspaper in Beijing. Militarism, it seems, has consequences, not just in Iraq. In this case, the Chinese are using Michael Klare to warn, we are on the way to stimulating an arms race with a new enemy likely to prove far more formidable than the economically sickly and ideologically confounded USSR. And this time we propose to conduct our war without the benefit of a broad coalition of allies.

Why does US rev up China threat?
By Michael T. Klare (The Nation)
2005-10-08

Ever since taking office, the Bush Administration has struggled to define its stance on the most critical long-term strategic issue facing the United States: whether to view China as a future military adversary, and plan accordingly, or to see it as a rival player in the global capitalist system. Representatives of both perspectives are nestled in top Administration circles, and there have been periodic swings of the pendulum toward one side or the other. But after a four-year period in which neither outlook appeared dominant, the pendulum has now swung conspicuously toward the anti-Chinese, prepare-for-war position. Three events signal this altered stance.

The first, on February 19, was the adoption of an official declaration calling for enhanced security ties between the United States and Japan. Known officially as the "Joint Statement of the U.S.-Japan Security Consultative Committee," the declaration was announced at a meeting of top Japanese and U.S. officials, including Defense Secretary Rumsfeld and Secretary of State Rice. The very fact that U.S. and Japanese officials were discussing improved security links at this time was deeply troubling to the Chinese, given their painful exposure to Japanese militarism during World War II and their ongoing anxiety about U.S. plans to construct an anti-Chinese alliance in Asia. But what most angered Beijing was the declaration's call for linked U.S.-Japanese efforts to "encourage the peaceful resolution of issues concerning the Taiwan Strait through dialogue." While sounding relatively innocuous to American ears, this announcement was viewed in Beijing as highly provocative, representing illicit interference by Washington and Tokyo in China's internal affairs. The official New China News Agency described the joint declaration as "unprecedented" and quoted a senior foreign ministry official as saying that China "resolutely opposes the United States and Japan in issuing any bilateral document concerning China's Taiwan, which meddles in the internal affairs of China and hurts China's sovereignty."

The second key event was a speech Rumsfeld gave June 4 at a strategy conference in Singapore. After reviewing current security issues in Asia, especially the threat posed by a nuclear North Korea, Rumsfeld turned his attention to China. The Chinese can play a constructive role in addressing these issues, he observed. "A candid discussion of China...cannot neglect to mention areas of concern to the region." In particular, he suggested that China "appears to be expanding its missile forces, allowing them to reach targets in many areas of the world," and is otherwise "improving its ability to project power" in the region. Then, with consummate disingenuousness, he stated, "Since no nation threatens China, one must wonder: Why this growing investment? Why these continuing large and expanding arms purchases? Why these continuing robust deployments?"

To Beijing, these comments must have been astonishing. No one threatens China? What about the U.S. planes and warships that constantly hover off the Chinese coast, and the nuclear-armed U.S. missiles aimed at China? What about the delivery over the past ten years of ever more potent U.S. weapons to Taiwan? But disingenuousness aside, Rumsfeld's comments exhibited a greater degree of belligerence toward China than had been expressed in any official U.S. statements since 9/11, and were widely portrayed as such in the American and Asian press.

The third notable event was the release, in July, of the Pentagon's report on Chinese combat capabilities, The Military Power of the People's Republic of China. According to press reports, publication of this unclassified document was delayed for several weeks in order to remove or soften some of the more pointedly anti-Chinese comments, to avoid further provoking China before George W. Bush's November visit there. In many ways the published version is judicious in tone, stressing the weaknesses as well as the strengths of China's military establishment. Nevertheless, the main thrust of the report is that China is expanding its capacity to fight wars beyond its own territory and that this effort constitutes a dangerous challenge to global order. "The pace and scope of China's military build-up are, already, such as to put regional military balances at risk," the report states. "Current trends in China's military modernization could provide China with a force capable of prosecuting a range of military operations in Asia — well beyond Taiwan — potentially posing a credible threat to modern militaries operating in the region."

This annual report, mandated by Congress in 2000, is intended as a comprehensive analysis, not a policy document. However, the policy implications of the 2005 report are self-evident: If China is acquiring a greater capacity to threaten "modern militaries operating in the region" — presumably including those of the United States and Japan — then urgent action is needed to offset Chinese military initiatives. For this very reason the document triggered a firestorm of criticism in China. "This report ignores fact in order to do everything it can to disseminate the 'China threat theory,'" a senior foreign ministry official told the American ambassador at a hastily arranged meeting. "It crudely interferes in China's internal affairs and is a provocation against China's relations with other countries."

While much of this was going on, the American public and mass media were preoccupied with another source of tension between the United States and China: the attempted purchase of the California-based Unocal Corporation by the Chinese National Offshore Oil Corporation (CNOOC). This attempt received far greater attention in the media than did the events described above, yet it will have a far less significant impact on U.S.-Chinese relations than will the Pentagon's shift to a more belligerent, anti-Chinese stance — one that greatly increases the likelihood of a debilitating and dangerous military competition between the United States and China.

What lies behind this momentous shift? At its root is the continuing influence of conservative strategists who have long championed a policy of permanent U.S. military supremacy. This outlook was first expressed in 1992 in the Defense Planning Guidance (DPG) for fiscal years 1994-99, a master blueprint for U.S. dominance in the post-cold war era. Prepared under the supervision of then-Under Secretary of Defense Paul Wolfowitz and leaked to the press in early 1992, the DPG called for concerted efforts to prevent the rise of a future military competitor. "Our first objective is to prevent the re-emergence of a new rival...that poses a threat on the order of that posed formerly by the Soviet Union," the document stated. Accordingly, "we [must] endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power." This has remained the guiding principle for U.S. supremacists ever since.

In this new century the injunction to prevent the emergence of a new rival "that poses a threat on the order of that posed formerly by the Soviet Union" can apply only to China, as no other potential adversary possesses a credible capacity to "generate global power." Hence the preservation of American supremacy into "the far realm of the future," as then-Governor George W. Bush put it in a 1999 campaign speech, required the permanent containment of China — and this is what Rice, Rumsfeld and their associates set out to do when they assumed office in early 2001.

This project was well under way when the 9/11 attacks occurred. As noted by many analysts on the left, 9/11 gave the neoconservatives a green light to implement their ambitious plans to extend U.S. power around the world. Although the shift in emphasis from blocking future rivals to fighting terrorism seemed vital to a large majority of the American people, it troubled those in the permanent-supremacy crowd who felt that momentum was being lost in the grand campaign to constrain China. Moreover, antiterrorism places a premium on special forces and low-tech infantry, rather than on the costly sophisticated fighters and warships needed for combat against a major military power. For at least some U.S. strategists, not to mention giant military contractors, then, the "war on terror" was seen as a distraction that had to be endured until the time was ripe for a resumption of the anti-Chinese initiatives begun in February 2001. That moment seems to have arrived.

Why now? Several factors explain the timing of this shift. The first, no doubt, is public fatigue with the "war on terror" and a growing sense among the military that the war in Iraq has ground to a stalemate. So long as public attention is focused on the daily setbacks and loss of life in Iraq — and, since late August, on the devastation wrought by Hurricane Katrina — support for the President's military policies will decline. And this, it is feared, could translate into an allergy to costly military operations altogether, akin to the dreaded "Vietnam syndrome" of the 1970s and '80s. It is hardly surprising, then, that senior U.S. officers are talking of plans to reduce U.S. troop strength in Iraq over the coming year even though President Bush has explicitly ruled out such a reduction.

At the same time, China's vast economic expansion has finally begun to translate into improvements in its net military capacity. Although most Chinese weapons are hopelessly obsolete — derived, in many cases, from Soviet models of the 1950s and '60s — Beijing has used some of its newfound wealth to purchase relatively modern arms from Russia, including fighter planes, diesel-electric submarines and destroyers. China has also been expanding its arsenal of short-range ballistic missiles, many capable of striking Taiwan and Japan. None of these systems compare to the most advanced ones in the American arsenal, but their much-publicized acquisition has provided fresh ammunition to those in Washington who advocate stepped-up efforts to neutralize Chinese military capabilities.

Under these circumstances, the possibility of a revved-up military competition with China looks unusually promising to some in the military establishment. For one thing, no American lives are at risk in such a drive — any bloodletting, should it occur, lies safely in the future. For another, there has been a recent surge in anti-Chinese sentiment in this country, brought about in part by high gasoline prices (blamed, by many, on newly affluent car-crazy Chinese consumers), the steady loss of American jobs to low-wage Chinese industrial zones and the (seemingly) brazen effort by CNOOC to acquire Unocal. This appears, then, to be an opportune moment for renewing the drive to constrain China. But the brouhaha over Unocal also reveals something deeper at work: a growing recognition that the United States and China are now engaged in a high-stakes competition to gain control of the rest of the world's oil supplies.

Just a decade ago, in 1994, China accounted for less than 5 percent of the world's net petroleum consumption and produced virtually all of the oil it burned. At that time China was number four in the roster of the world's top oil consumers, after the United States, Japan and Russia, and its daily usage of 3 million barrels represented less than one-fifth of what the United States consumed on an average day. Since then, however, China has jumped to the number-two position among the leading consumers (supplanting Japan in 2003), and its current consumption of about 6 million barrels per day represents approximately one-third of America's usage. However, domestic oil output in China has remained relatively flat over this period, so it must now import half of its total supply. And with China's economy roaring ahead, its need for imported petroleum is expected to climb much higher in the years to come: According to the Department of Energy (DOE), Chinese oil consumption is projected to reach 12 million barrels per day in 2020, of which 9 million barrels will have to be obtained abroad. With the United States also needing more imports — as much as 16 million barrels per day in 2020 — the stage is being set for an intense struggle over access to the world's petroleum supplies.

This would not be such a worrisome prospect if global petroleum output can expand sufficiently between now and 2020 to satisfy increased demand from both China and the United States — and in fact, the DOE predicts that sufficient oil will be available at that time. But many energy experts believe world oil output, now hovering at about 84 million barrels per day, is nearing its maximum or "peak" sustainable level, and will never reach the 111 million barrels projected by the DOE for 2020. If this proves to be the case, or even if output continues to rise but still falls significantly short of the DOE projection, the competition between the United States and China for whatever oil remains in ever diminishing foreign reservoirs will become even more fierce and contentious.

The intensifying U.S.-Chinese struggle for oil is seen, for instance, in China's aggressive pursuit of supplies in such countries as Angola, Canada, Indonesia, Iran, Kazakhstan, Nigeria, Saudi Arabia, Sudan and Venezuela. Until recently China derived very little of its petroleum from these countries; now it has struck deals with all of them for new supplies. That China is competing so vigorously with the United States for access to foreign oil is worrisome enough to American business leaders and government officials, given the likelihood that this will result in higher energy costs and a slowing economy; the fact that it is seeking to siphon off oil from places like Canada, Nigeria, Saudi Arabia and Venezuela — which have long sent a large share of their supplies to America — is the source of even greater concern, particularly if it results in a permanent shift in the global flow of oil. From a strategic perspective, moreover, U.S. officials worry that China's efforts to acquire more oil from Iran and Sudan have been accompanied by deliveries of arms and military aid, thus altering the balance of power in areas considered vital to Washington's security interests.

Initially, discussion of China's intensifying quest for foreign oil was largely confined to the business press, but now, for the first time, it is being viewed as a national security matter — that is, as a key factor in shaping U.S. military policy. This outlook was first given official expression in the 2005 edition of the Pentagon's report on Chinese military power. "China became the second largest consumer and third largest importer of oil in 2003," the report notes. "As China's energy and resource needs grow, Beijing has concluded that access to these resources requires special economic or foreign policy relationships in the Middle East, Africa, and Latin America, bringing China closer to problem countries such as Iran, Sudan, and Venezuela." Again, the implications of this are obvious: China's growing ties to "problem states" constitute a threat to U.S. security and so must be met with countermoves of one sort or another.

Two trends have thus joined to propel this new swing of the pendulum: a drive to refocus attention on the long-term challenge posed by China and fresh concern over China's pursuit of oil supplies in strategic areas of the globe. So long as these two conditions prevail — and there is no repeat of 9/11 — the calls for increased U.S. military preparation for an eventual war with China will grow stronger. The fact that Bush has seen his job-approval rating plummet in the wake of Hurricane Katrina might also tempt the Administration to play up the China threat. While none of this is likely to produce a true rupture in U.S.-Chinese relations — the forces favoring economic cooperation are too strong to allow that — we can expect vigorous calls for an ambitious U.S. campaign to neutralize China's recent military initiatives.

This campaign will take two forms: first, a drive to offset any future gains in Chinese military strength through permanent U.S. military-technological superiority; and second, what can only be described as the encirclement of China through the further acquisition of military bases and the establishment of American-led, anti-Chinese alliances. None of these efforts are being described as part of an explicit, coherent strategy of containment, but there is no doubt from the testimony of US officials that such a strategy is being implemented.

Elements of this strategy can be detected, for example, in the March 8 testimony of Adm. William Fallon, Commander of the U.S. Pacific Command (PACOM), before the Senate Armed Services Committee. "It's certainly cause for concern to see this continuing buildup [by China]," he noted. "It seems to be more than might be required for their defense. We're certainly watching it very closely, [and] we're looking at how we match up against these capabilities."

To counter China's latest initiatives, Fallon called for improvements in U.S. antimissile and antisubmarine warfare (ASW) capabilities, along with a deepening of military ties with America's old and new allies in the region. With respect to missile defense, for example, he stated that "an effective, integrated and tiered system against ballistic missiles" should be "a top priority for development." Such a system, in all likelihood, would be aimed at China's short-range missiles. He also called for establishment of a "robust and integrated ASW architecture" to "counter the proliferation of submarines in the Pacific."

Note that Fallon is not talking about a conflict that might occur in the central or eastern Pacific, within reach of America's shores; rather, he is talking about defeating Chinese forces in their home waters, on the western rim of the Pacific. That U.S. strategy is aimed at containing China to its home territory is further evident from the plans he described for enhanced military cooperation with U.S. allies in the region. These plans, encapsulated in the Theater Security Cooperation Plan (TSCP), were described by Fallon as "one of the primary means through which we extend U.S. influence, develop access and promote competence among potential coalition partners."

Typically, the cooperation will include the delivery of arms and military assistance, joint military maneuvers, regular consultation among senior military officials and, in some cases, expansion (or establishment) of U.S. military bases. In Japan, for example, PACOM is cooperating in the joint development of a regional ballistic missile defense system; in the Philippines it is assisting in the reorganization and modernization of national forces; in Singapore — which already plays host to visiting U.S. aircraft carriers — "we are exploring opportunities for expanded access to Singaporean facilities." And this is not the full extent of U.S. efforts to establish an anti-Chinese coalition in the region. In his March testimony Fallon also described efforts to woo India into the American orbit. "Our relationship with the Indian Integrated Defense Staff and the Indian Armed Services continues to grow," he noted. "U.S. and Indian security interests continue to converge as our military cooperation leads to a stronger strategic partnership."

All this and much more is described as an essentially defensive reaction to China's pursuit of forces considered in excess of its legitimate self-defense requirements — "outsized," as Secretary Rice described the Chinese military in a recent interview. One can argue, of course, about what constitutes an appropriate defense capacity for the world's most populous nation, but that's not the point — what matters is that any rational observer in Beijing can interpret Fallon's testimony (and the other developments described above) only as part of a concerted U.S. campaign to contain China and neutralize its military capabilities.

Chinese leaders are no doubt fully aware of their glaring military inferiority vis-à-vis the United States, and so can be expected to avoid a risky confrontation with Washington. But any nation, when confronted with a major military buildup by a potential adversary off its shores, is bound to feel threatened and will respond accordingly. For a proud country like China, which has been repeatedly invaded and occupied by foreign powers over the past few centuries, the U.S. buildup on its doorstep must appear especially threatening. It is hardly surprising, then, that Beijing has sought modern weapons and capabilities to offset America's growing advantage. Nor is it surprising that China has sought to buttress its military ties with Russia — the two countries held joint military exercises in August, the first significant demonstration of military cooperation since the Korean War — and to discourage neighboring countries from harboring American bases. (Uzbekistan asked the United States to shut down its base at Karshi-Khanabad after a meeting of the Chinese-led Shanghai Cooperation Organization in July.) But even if defensive in nature, these moves will provide additional ammunition for those in Washington who see a Chinese drive for regional hegemony and so seek an even greater U.S. capacity to overpower Chinese forces.

This is all bound to add momentum to the pendulum's swing toward a more hostile U.S. stance on China. But that outcome is not foreordained: Future economic conditions — a sharp rise in U.S. interest rates, for example — could strengthen the hand of those in Washington who seek to prevent a breach in U.S.-Chinese relations. These figures argue, for example, that Beijing helps keep U.S. interest rates low by buying U.S. Treasury bonds and that China represents an expanding market for U.S. cars, aircraft and other manufactured goods. But the pursuit of ever more potent weapons on each side could prove to be a self-sustaining phenomenon, undermining efforts to improve relations.

The debate over China's military power and the purported need for a major U.S. buildup to counter China's recent arms acquisitions will become increasingly heated in the months and years to come. As always, it will be fueled by claims of this or that Chinese military advance, often employing pseudo-technical language intended to exaggerate Chinese capabilities and discourage close scrutiny by ordinary citizens. If this trend persists, we will become locked into an ever expanding arms race that can only have harmful consequences for both countries — even if it doesn't lead to war. Questioning inflated Pentagon claims of Chinese strength and resisting the trend toward a harsher anti-Chinese military stance are essential, therefore, if we want to avert a costly and dangerous cold war in Asia.

- Taiwan To Begin Mass Producing Armoured Vehicles: Jane's
http://www.spacewar.com/news/taiwan-05zd.html

Taipei (AFP) Oct 09, 2005 - Taiwan will begin mass producing a locally-designed armored troop carrier in a bid to boost it defenses against rival China, Jane's Defence Weekly said.

- Taiwan planning spy satellite: report
http://www.spacedaily.com/2005/051010050019.lqhy091p.html

Taiwan Planning Spy Satellite: Report
http://www.spacewar.com/news/spysat-05k.html

Taipei (AFP) Oct 10, 2005 - Taiwan plans to launch a spy satellite costing 300 million dollars as a result of China's continued hostility towards the island, a newspaper reported Monday.

China And North Korea Hail Relationship In 'New Era'
http://www.spacewar.com/news/korea-05zzzzp.html

Beijing (AFP) Oct 10, 2005 - Chinese President Hu Jintao Monday vowed to deepen ties with North Korea after the Stalinist state used a new Chinese-funded glass factory to hail its relationship with Beijing "in the new era".

http://www.thenation.com/docprint.mhtml?i=20051024&s=klare

Revving Up the China Threat
by MICHAEL T. KLARE

[from the October 24, 2005 issue]

Ever since taking office, the Bush Administration has struggled to define its stance on the most critical long-term strategic issue facing the United States: whether to view China as a future military adversary, and plan accordingly, or to see it as a rival player in the global capitalist system. Representatives of both perspectives are nestled in top Administration circles, and there have been periodic swings of the pendulum toward one side or the other. But after a four-year period in which neither outlook appeared dominant, the pendulum has now swung conspicuously toward the anti-Chinese, prepare-for-war position. Three events signal this altered stance.

The first, on February 19, was the adoption of an official declaration calling for enhanced security ties between the United States and Japan. Known officially as the "Joint Statement of the U.S.-Japan Security Consultative Committee," the declaration was announced at a meeting of top Japanese and US officials, including Defense Secretary Rumsfeld and Secretary of State Rice. The very fact that US and Japanese officials were discussing improved security links at this time was deeply troubling to the Chinese, given their painful exposure to Japanese militarism during World War II and their ongoing anxiety about US plans to construct an anti-Chinese alliance in Asia. But what most angered Beijing was the declaration's call for linked US-Japanese efforts to "encourage the peaceful resolution of issues concerning the Taiwan Strait through dialogue." While sounding relatively innocuous to American ears, this announcement was viewed in Beijing as highly provocative, representing illicit interference by Washington and Tokyo in China's internal affairs. The official New China News Agency described the joint declaration as "unprecedented" and quoted a senior foreign ministry official as saying that China "resolutely opposes the United States and Japan in issuing any bilateral document concerning China's Taiwan, which meddles in the internal affairs of China and hurts China's sovereignty."

The second key event was a speech Rumsfeld gave June 4 at a strategy conference in Singapore. After reviewing current security issues in Asia, especially the threat posed by a nuclear North Korea, Rumsfeld turned his attention to China. The Chinese can play a constructive role in addressing these issues, he observed. "A candid discussion of China...cannot neglect to mention areas of concern to the region." In particular, he suggested that China "appears to be expanding its missile forces, allowing them to reach targets in many areas of the world," and is otherwise "improving its ability to project power" in the region. Then, with consummate disingenuousness, he stated, "Since no nation threatens China, one must wonder: Why this growing investment? Why these continuing large and expanding arms purchases? Why these continuing robust deployments?"

To Beijing, these comments must have been astonishing. No one threatens China? What about the US planes and warships that constantly hover off the Chinese coast, and the nuclear-armed US missiles aimed at China? What about the delivery over the past ten years of ever more potent US weapons to Taiwan? But disingenuousness aside, Rumsfeld's comments exhibited a greater degree of belligerence toward China than had been expressed in any official US statements since 9/11, and were widely portrayed as such in the American and Asian press.

The third notable event was the release, in July, of the Pentagon's report on Chinese combat capabilities, The Military Power of the People's Republic of China. According to press reports, publication of this unclassified document was delayed for several weeks in order to remove or soften some of the more pointedly anti-Chinese comments, to avoid further provoking China before George W. Bush's November visit there. In many ways the published version is judicious in tone, stressing the weaknesses as well as the strengths of China's military establishment. Nevertheless, the main thrust of the report is that China is expanding its capacity to fight wars beyond its own territory and that this effort constitutes a dangerous challenge to global order. "The pace and scope of China's military build-up are, already, such as to put regional military balances at risk," the report states. "Current trends in China's military modernization could provide China with a force capable of prosecuting a range of military operations in Asia--well beyond Taiwan--potentially posing a credible threat to modern militaries operating in the region."

This annual report, mandated by Congress in 2000, is intended as a comprehensive analysis, not a policy document. However, the policy implications of the 2005 report are self-evident: If China is acquiring a greater capacity to threaten "modern militaries operating in the region"--presumably including those of the United States and Japan--then urgent action is needed to offset Chinese military initiatives. For this very reason the document triggered a firestorm of criticism in China. "This report ignores fact in order to do everything it can to disseminate the 'China threat theory,'" a senior foreign ministry official told the American ambassador at a hastily arranged meeting. "It crudely interferes in China's internal affairs and is a provocation against China's relations with other countries."

While much of this was going on, the American public and mass media were preoccupied with another source of tension between the United States and China: the attempted purchase of the California-based Unocal Corporation by the Chinese National Offshore Oil Corporation (CNOOC). This attempt received far greater attention in the media than did the events described above, yet it will have a far less significant impact on US-Chinese relations than will the Pentagon's shift to a more belligerent, anti-Chinese stance--one that greatly increases the likelihood of a debilitating and dangerous military competition between the United States and China.

What lies behind this momentous shift? At its root is the continuing influence of conservative strategists who have long championed a policy of permanent US military supremacy. This outlook was first expressed in 1992 in the Defense Planning Guidance (DPG) for fiscal years 1994-99, a master blueprint for US dominance in the post-cold war era. Prepared under the supervision of then-Under Secretary of Defense Paul Wolfowitz and leaked to the press in early 1992, the DPG called for concerted efforts to prevent the rise of a future military competitor. "Our first objective is to prevent the re-emergence of a new rival...that poses a threat on the order of that posed formerly by the Soviet Union," the document stated. Accordingly, "we [must] endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power." This has remained the guiding principle for US supremacists ever since.

In this new century the injunction to prevent the emergence of a new rival "that poses a threat on the order of that posed formerly by the Soviet Union" can apply only to China, as no other potential adversary possesses a credible capacity to "generate global power." Hence the preservation of American supremacy into "the far realm of the future," as then-Governor George W. Bush put it in a 1999 campaign speech, required the permanent containment of China--and this is what Rice, Rumsfeld and their associates set out to do when they assumed office in early 2001.

This project was well under way when the 9/11 attacks occurred. As noted by many analysts on the left, 9/11 gave the neoconservatives a green light to implement their ambitious plans to extend US power around the world. Although the shift in emphasis from blocking future rivals to fighting terrorism seemed vital to a large majority of the American people, it troubled those in the permanent-supremacy crowd who felt that momentum was being lost in the grand campaign to constrain China. Moreover, antiterrorism places a premium on special forces and low-tech infantry, rather than on the costly sophisticated fighters and warships needed for combat against a major military power. For at least some US strategists, not to mention giant military contractors, then, the "war on terror" was seen as a distraction that had to be endured until the time was ripe for a resumption of the anti-Chinese initiatives begun in February 2001. That moment seems to have arrived.

Why now? Several factors explain the timing of this shift. The first, no doubt, is public fatigue with the "war on terror" and a growing sense among the military that the war in Iraq has ground to a stalemate. So long as public attention is focused on the daily setbacks and loss of life in Iraq--and, since late August, on the devastation wrought by Hurricane Katrina--support for the President's military policies will decline. And this, it is feared, could translate into an allergy to costly military operations altogether, akin to the dreaded "Vietnam syndrome" of the 1970s and '80s. It is hardly surprising, then, that senior US officers are talking of plans to reduce US troop strength in Iraq over the coming year even though President Bush has explicitly ruled out such a reduction.

At the same time, China's vast economic expansion has finally begun to translate into improvements in its net military capacity. Although most Chinese weapons are hopelessly obsolete--derived, in many cases, from Soviet models of the 1950s and '60s--Beijing has used some of its newfound wealth to purchase relatively modern arms from Russia, including fighter planes, diesel-electric submarines and destroyers. China has also been expanding its arsenal of short-range ballistic missiles, many capable of striking Taiwan and Japan. None of these systems compare to the most advanced ones in the American arsenal, but their much-publicized acquisition has provided fresh ammunition to those in Washington who advocate stepped-up efforts to neutralize Chinese military capabilities.

Under these circumstances, the possibility of a revved-up military competition with China looks unusually promising to some in the military establishment. For one thing, no American lives are at risk in such a drive--any bloodletting, should it occur, lies safely in the future. For another, there has been a recent surge in anti-Chinese sentiment in this country, brought about in part by high gasoline prices (blamed, by many, on newly affluent car-crazy Chinese consumers), the steady loss of American jobs to low-wage Chinese industrial zones and the (seemingly) brazen effort by CNOOC to acquire Unocal. This appears, then, to be an opportune moment for renewing the drive to constrain China. But the brouhaha over Unocal also reveals something deeper at work: a growing recognition that the United States and China are now engaged in a high-stakes competition to gain control of the rest of the world's oil supplies.

Just a decade ago, in 1994, China accounted for less than 5 percent of the world's net petroleum consumption and produced virtually all of the oil it burned. At that time China was number four in the roster of the world's top oil consumers, after the United States, Japan and Russia, and its daily usage of 3 million barrels represented less than one-fifth of what the United States consumed on an average day. Since then, however, China has jumped to the number-two position among the leading consumers (supplanting Japan in 2003), and its current consumption of about 6 million barrels per day represents approximately one-third of America's usage. However, domestic oil output in China has remained relatively flat over this period, so it must now import half of its total supply. And with China's economy roaring ahead, its need for imported petroleum is expected to climb much higher in the years to come: According to the Department of Energy (DOE), Chinese oil consumption is projected to reach 12 million barrels per day in 2020, of which 9 million barrels will have to be obtained abroad. With the United States also needing more imports--as much as 16 million barrels per day in 2020--the stage is being set for an intense struggle over access to the world's petroleum supplies.

This would not be such a worrisome prospect if global petroleum output can expand sufficiently between now and 2020 to satisfy increased demand from both China and the United States--and in fact, the DOE predicts that sufficient oil will be available at that time. But many energy experts believe world oil output, now hovering at about 84 million barrels per day, is nearing its maximum or "peak" sustainable level, and will never reach the 111 million barrels projected by the DOE for 2020. If this proves to be the case, or even if output continues to rise but still falls significantly short of the DOE projection, the competition between the United States and China for whatever oil remains in ever diminishing foreign reservoirs will become even more fierce and contentious.

The intensifying US-Chinese struggle for oil is seen, for instance, in China's aggressive pursuit of supplies in such countries as Angola, Canada, Indonesia, Iran, Kazakhstan, Nigeria, Saudi Arabia, Sudan and Venezuela. Until recently China derived very little of its petroleum from these countries; now it has struck deals with all of them for new supplies. That China is competing so vigorously with the United States for access to foreign oil is worrisome enough to American business leaders and government officials, given the likelihood that this will result in higher energy costs and a slowing economy; the fact that it is seeking to siphon off oil from places like Canada, Nigeria, Saudi Arabia and Venezuela--which have long sent a large share of their supplies to America--is the source of even greater concern, particularly if it results in a permanent shift in the global flow of oil. From a strategic perspective, moreover, US officials worry that China's efforts to acquire more oil from Iran and Sudan have been accompanied by deliveries of arms and military aid, thus altering the balance of power in areas considered vital to Washington's security interests.

Initially, discussion of China's intensifying quest for foreign oil was largely confined to the business press, but now, for the first time, it is being viewed as a national security matter--that is, as a key factor in shaping US military policy. This outlook was first given official expression in the 2005 edition of the Pentagon's report on Chinese military power. "China became the second largest consumer and third largest importer of oil in 2003," the report notes. "As China's energy and resource needs grow, Beijing has concluded that access to these resources requires special economic or foreign policy relationships in the Middle East, Africa, and Latin America, bringing China closer to problem countries such as Iran, Sudan, and Venezuela." Again, the implications of this are obvious: China's growing ties to "problem states" constitute a threat to US security and so must be met with countermoves of one sort or another.

Two trends have thus joined to propel this new swing of the pendulum: a drive to refocus attention on the long-term challenge posed by China and fresh concern over China's pursuit of oil supplies in strategic areas of the globe. So long as these two conditions prevail--and there is no repeat of 9/11--the calls for increased US military preparation for an eventual war with China will grow stronger. The fact that Bush has seen his job-approval rating plummet in the wake of Hurricane Katrina might also tempt the Administration to play up the China threat. While none of this is likely to produce a true rupture in US-Chinese relations--the forces favoring economic cooperation are too strong to allow that--we can expect vigorous calls for an ambitious US campaign to neutralize China's recent military initiatives.

This campaign will take two forms: first, a drive to offset any future gains in Chinese military strength through permanent US military-technological superiority; and second, what can only be described as the encirclement of China through the further acquisition of military bases and the establishment of American-led, anti-Chinese alliances. None of these efforts are being described as part of an explicit, coherent strategy of containment, but there is no doubt from the testimony of US officials that such a strategy is being implemented.

Elements of this strategy can be detected, for example, in the March 8 testimony of Adm. William Fallon, Commander of the US Pacific Command (PACOM), before the Senate Armed Services Committee. "It's certainly cause for concern to see this continuing buildup [by China]," he noted. "It seems to be more than might be required for their defense. We're certainly watching it very closely, [and] we're looking at how we match up against these capabilities."

To counter China's latest initiatives, Fallon called for improvements in US antimissile and antisubmarine warfare (ASW) capabilities, along with a deepening of military ties with America's old and new allies in the region. With respect to missile defense, for example, he stated that "an effective, integrated and tiered system against ballistic missiles" should be "a top priority for development." Such a system, in all likelihood, would be aimed at China's short-range missiles. He also called for establishment of a "robust and integrated ASW architecture" to "counter the proliferation of submarines in the Pacific."

Note that Fallon is not talking about a conflict that might occur in the central or eastern Pacific, within reach of America's shores; rather, he is talking about defeating Chinese forces in their home waters, on the western rim of the Pacific. That US strategy is aimed at containing China to its home territory is further evident from the plans he described for enhanced military cooperation with US allies in the region. These plans, encapsulated in the Theater Security Cooperation Plan (TSCP), were described by Fallon as "one of the primary means through which we extend US influence, develop access and promote competence among potential coalition partners."

Typically, the cooperation will include the delivery of arms and military assistance, joint military maneuvers, regular consultation among senior military officials and, in some cases, expansion (or establishment) of US military bases. In Japan, for example, PACOM is cooperating in the joint development of a regional ballistic missile defense system; in the Philippines it is assisting in the reorganization and modernization of national forces; in Singapore--which already plays host to visiting US aircraft carriers--"we are exploring opportunities for expanded access to Singaporean facilities." And this is not the full extent of US efforts to establish an anti-Chinese coalition in the region. In his March testimony Fallon also described efforts to woo India into the American orbit. "Our relationship with the Indian Integrated Defense Staff and the Indian Armed Services continues to grow," he noted. "US and Indian security interests continue to converge as our military cooperation leads to a stronger strategic partnership."

All this and much more is described as an essentially defensive reaction to China's pursuit of forces considered in excess of its legitimate self-defense requirements--"outsized," as Secretary Rice described the Chinese military in a recent interview. One can argue, of course, about what constitutes an appropriate defense capacity for the world's most populous nation, but that's not the point--what matters is that any rational observer in Beijing can interpret Fallon's testimony (and the other developments described above) only as part of a concerted US campaign to contain China and neutralize its military capabilities.

Chinese leaders are no doubt fully aware of their glaring military inferiority vis-à-vis the United States, and so can be expected to avoid a risky confrontation with Washington. But any nation, when confronted with a major military buildup by a potential adversary off its shores, is bound to feel threatened and will respond accordingly. For a proud country like China, which has been repeatedly invaded and occupied by foreign powers over the past few centuries, the US buildup on its doorstep must appear especially threatening. It is hardly surprising, then, that Beijing has sought modern weapons and capabilities to offset America's growing advantage. Nor is it surprising that China has sought to buttress its military ties with Russia--the two countries held joint military exercises in August, the first significant demonstration of military cooperation since the Korean War--and to discourage neighboring countries from harboring American bases. (Uzbekistan asked the United States to shut down its base at Karshi-Khanabad after a meeting of the Chinese-led Shanghai Cooperation Organization in July.) But even if defensive in nature, these moves will provide additional ammunition for those in Washington who see a Chinese drive for regional hegemony and so seek an even greater US capacity to overpower Chinese forces.

This is all bound to add momentum to the pendulum's swing toward a more hostile US stance on China. But that outcome is not foreordained: Future economic conditions--a sharp rise in US interest rates, for example--could strengthen the hand of those in Washington who seek to prevent a breach in US-Chinese relations. These figures argue, for example, that Beijing helps keep US interest rates low by buying US Treasury bonds and that China represents an expanding market for US cars, aircraft and other manufactured goods. But the pursuit of ever more potent weapons on each side could prove to be a self-sustaining phenomenon, undermining efforts to improve relations.

The debate over China's military power and the purported need for a major US buildup to counter China's recent arms acquisitions will become increasingly heated in the months and years to come. As always, it will be fueled by claims of this or that Chinese military advance, often employing pseudo-technical language intended to exaggerate Chinese capabilities and discourage close scrutiny by ordinary citizens. If this trend persists, we will become locked into an ever expanding arms race that can only have harmful consequences for both countries--even if it doesn't lead to war. Questioning inflated Pentagon claims of Chinese strength and resisting the trend toward a harsher anti-Chinese military stance are essential, therefore, if we want to avert a costly and dangerous cold war in Asia.

China's Space Ambitions Potential Threat To US: Analysts
http://www.spacedaily.com/news/china-05zzzzzzzzr.html

Washington DC (AFP) Oct 11, 2005 - With China on the eve of launching its second manned spaceflight, Washington sees Beijing's space ambitions as an emerging security concern, with the potential for the Asian giant to boost its military capabilities and eventually challenge US dominance in space.

From abroad, challenges to US role as top innovator

Ramped-up R&D in China and India blunts economic edge of US.

By Mark Trumbull | Staff writer of The Christian Science Monitor

For decades, America was the preeminent destination for the world's innovators. Scientists of all kinds left their homelands to learn the ropes at top-flight US universities - and often stayed put to earn high salaries. Many countries struggled to stop this brain drain to the US.
But today, the giant sucking sound may be flowing in the other direction. Just this year, 325,000 Chinese earned engineering degrees. The US, by contrast, gave out just 60,000 - fewer than it did a decade ago. And international enrollment at US campuses has been falling.

These numbers symbolize an emerging risk that developing nations like India and China, fueled by high education and lower labor costs, could leapfrog US leadership in innovation.

But amid new calls to address a scientist "shortage," the need is not so much to match China and others numerically as to do something that may be even harder: to stay way ahead in the quality of research and the jobs it spawns.

"The jobs that exist are all going to go away," says Gerard Alphonse, who heads the US branch of the Institute of Electrical and Electronics Engineers. "What we need to do is create the new jobs that will not go away for the next 15 or 20 years."

Of course, not every American job is threatened. But innovation-intensive fields do face global competition, and success in those fields is widely seen as vital to a healthy economy with rising living standards.

If concern about a science gap sounds like a lament as old as the Russian Sputnik satellite, the backdrop today is quite different from the 1950s or even the 1980s, when Japan's economic rise caused American angst.

The reason lies in two factors: the growing number of nations with advanced skills, and a corresponding rise in the willingness of global corporations to locate research and production where profit opportunities are greatest.

"Companies are taking the latest tools and technologies to that foreign talent," says Ron Hira, an expert on outsourcing at the Rochester Institute of Technology.

The trick for nations like the US is to cultivate the kinds of research and related jobs that can't be easily done elsewhere.

Given the global strategies of today's corporations, some economists say there's no guarantee that the free marketplace will produce that result.

In a recent paper, Harvard University's Richard Freeman tackled the question, "Does globalization of the scientific/engineering workforce threaten US economic leadership?"

He outlines several trends that suggest the answer is yes.

• By 1999, China ranked behind only the US, Japan, and Germany in publications on four emerging technologies. By 2004, China was third and closing in on Japan in one of those fields, nano- technology.

• Companies are increasingly locating R&D facilities in China and India.

• The US share of the world's science and engineering graduates is declining rapidly.

On one level, this is simply a predictable reversal from an era of US hegemony as an economic superpower. In 1970, for example, American universities issued half the world's science and engineering doctorates. Now Europe alone outpaces the US in those doctorates, and China could be on pace to do so by 2010.

To be sure, the US remains the acknowledged world leader in technological innovation.

And in traditional economic theory, one nation's gain doesn't need to be another's loss. Economies can grow side by side, each specializing in the fields where they hold an advantage.

But the US and other industrialized nations face a new threat, Dr. Freeman says. If populous developing nations capitalize on their combination of technical advancement and lower costs, they could "do what the North-South trade models have assumed the South could not do: compete effectively in R&D intensive, high-tech industries."

Already, some signs appear troubling. Pay for electrical and electronics engineers fell in 2003 for the first time since surveys began in 1971. In that same year, their jobless rate hit 6.2 percent, well above the national average.

Few experts see easy solutions.

Some emphasize the "do-no-harm" approach, warning against government meddling in the private sector. Spur research along with the rest of the economy, they argue, by keeping a lid on taxes, healthcare costs, and litigation.

Others call for targeted policies to ensure America doesn't get left behind. Among the most common recommendations: Promote spending on research, recruit and retain talent from at home and abroad, and guard against provisions such as tax laws that help employers move jobs overseas.

The most basic need, some say, is for America to keep pioneering fields so cutting-edge that other nations, for the most part, can't do them.

"It could be interdisciplinary things, or it could be higher-level things," says Dr. Alphonse.

To do that, some say federally funded university research is crucial. That's because corporations tend to focus on applied science rather than basic science that lays the groundwork for new industries.

Federal spending on research in the physical sciences, when measured as a share of the national economy, has been falling for four decades, notes Don Giddens, dean of engineering at Georgia Institute of Technology, in Atlanta.

"There are some choices that we're making right now," he says, "that will hurt us."

China Opposes Taiwan's Representative To APEC Summit
http://www.spacewar.com/news/taiwan-05zf.html

Beijing (AFP) Oct 13, 2005 - China said Thursday it was firmly opposed to Taiwan President Chen Shui-bian appointing a parliament speaker instead of an economic minister to attend the Asia Pacific Economic Cooperation summit.

Former Leader Of Taiwan's Kuomintang To Visit China
http://www.spacewar.com/news/taiwan-05zg.html

Taipei (AFP) Oct 17, 2005 - Lien Chan, the former leader of Taiwan's main opposition Kuomintang (KMT), will make a private trip to China following his historic visit there earlier this year, his aide said Thursday.

http://news.independent.co.uk/world/asia/article320565.ece

China Crisis: threat to the global environment
Spectacular growth now biggest threat to environment
By Michael McCarthy, Environment Editor
Published: 19 October 2005
Western politicians queue up to sing its praises. Economists regard it with awe and delight. Other countries are desperate to imitate it. Yet there is another side to China's exploding, double-digit-growth miracle economy - it is turning into one of the greatest environmental threats the earth has ever faced.

An ominous sign of the danger is given in a groundbreaking report from Greenpeace, published today, which maintains that China is now by far the world's biggest driver of rainforest destruction. The report documents the vast deforestation driven by the soaring demands of China's enormous timber trade - the world's largest - as the country's headlong economic development sucks in ever-more amounts of the earth's natural resources.

Citing figures from the International Tropical Timber Organisation, the Greenpeace study says that nearly five out of every 10 tropical hardwood logs shipped from the world's threatened rainforests are now heading for China - more than to any other destination.

Yet deforestation is only one of the threats to the planet posed by an economy of 1.3 billion people that has now overtaken the United States as the world's leading consumer of four out of the five basic food, energy and industrial commodities - grain, meat, oil, coal and steel. China now lags behind the US only in consumption of oil - and it is rapidly catching up.

Because of their increasing reliance on coal-fired power stations to provide their energy, the Chinese are firmly on course to overtake the Americans as the world's biggest emitters of greenhouse gases, and thus become the biggest contributors to global warming and the destabilisation of the climate. If they remain uncontrolled, the growth of China's carbon dioxide emissions over the next 20 years will dwarf any cuts in CO2 that the rest of the world can make.

Even that, however, is not the ultimate threat from an economy which is growing at a rate the world has never seen before. According to Lester Brown of the Earth Policy Institute in Washington DC, the leading American environmental analyst, China's scarcely imaginable growth in the coming years means that the world's population will simply run up against the limits of the planet's natural resources sooner than anyone imagines.

If growth continues at 8 per cent a year, Mr Brown said, by 2031 China's population, likely to be 1.45 billion on current UN predictions, will have an income per person equivalent to that of the US today. He said: "China's grain consumption will then be two-thirds of the current grain consumption for the entire world. If it consumes oil at the same rate as the US today, the Chinese will be consuming 99 million barrels a day - and the whole world is currently producing 84 million barrels a day, and will probably not produce much more.

"If it consumes paper at the same rate we do, it will consume twice as much paper as the world is now producing. There go the world's forests. If the Chinese then have three cars for every four people - as the US does today - they would have a fleet of 1.1 billion cars, compared to the current world fleet of 800 million. They would have to pave over an area equivalent to the area they have planted with rice today, just to drive and park them."

Mr Brown, who has been tracking and documenting the world's major environmental trends for 30 years, went on: "The point of these conclusions is simply to demonstrate that the western economic model is not going to work for China. All they're doing is what we've already done, so you can't criticise them for that. But what you can say is, it's not going to work. And if it doesn't work for China, by 2031 it won't work for India, which by then will have an even larger population, nor for the other three billion people in the developing countries.

"And in some way it will not work for the industrialised countries either, because in the incredibly integrated global economy, we all depend on the same oil and the same grain.

"The bottom line of this analysis is that we're going to have to develop a new economic model. Instead of a fossil-fuel based, automobile-centred, throw-away economy we will have to have a renewable-energy based, diversified transport system, and comprehensive reuse and recycle economies. "If we want civilisation to survive, we will have to have that. Otherwise civilisation will collapse."

The Greenpeace report is one of the first major indictments of the catastrophic environmental effects the great Chinese industrial behemoth is starting to have on the rest of the world.

The ecological damage that China's breakneck industrialisation is having on the country itself has been widely recognised. In an interview earlier this year, China's deputy environment minister, Pan Yue, said five of the 10 most polluted cities worldwide are in China; acid rain is falling on one-third of the country; half of the water in its seven largest rivers is "completely useless"; a quarter of China's citizens lack access to clean drinking water; one-third of the urban population is breathing polluted air; and less than a fifth of the rubbish in cities is treated and processed in an environmentally sustainable way. But China's malign environmental "footprint" on other countries has been less widely reported.

John Sauven, forest campaigner for Greenpeace UK, said: "Western politicians, who think only in terms of gross domestic product, have seen China as some sort of economic wonderland. Tony Blair went to China with British businessmen in September and said how he wanted a slice of the cake. But the growth figures mask an environmental catastrophe. The Chinese are ripping the heart out of the world's irreplaceable rainforests to make cheap products like plywood for Western consumer markets."

The Greenpeace report details how, with incredible speed, China has become the world's largest plywood producer and exporter. Its export market has grown from less than one million cubic metres per annum in 1998 to nearly 11 million cubic metres in 2004.

China banned logging in large areas of its own natural forest in 1998 after catastrophic floods, themselves a direct result of deforestation, killed thousands of people. "This ban, coupled with massive growth in Chinese timber processing capacity and a liberalisation of trade barriers, led China to look overseas in its hunger for timber," says the Greenpeace report.

In one area of China investigated by the group, there were no fewer than 9,000 plywood mills taking in vast numbers of ancient hardwood trees from rainforests in countries such as Papua New Guinea, which are used merely to make plywood panels. Greenpeace contends that many of these trees, if not the majority, have been illegally logged.

The report, entitled Partners in Crime, does not blame only China - it accuses timber barons in rainforest countries of corruption in illegally supplying the wood, and builders' merchants and DIY outlets in Britain of culpable negligence in supplying plywood without establishing its origin. Chinese hardwood plywood imports to the UK have gone from 1 per cent of the total in 2001 to 30 per cent this year.

Greenpeace wants the EU, and failing that, Britain alone, to outlaw the import of timber which has not clearly been legally logged. At the moment there are no restrictions on illegally logged timber coming into Britain.

THE NUMBERS

Consumption

China - growing at nearly 10% a year - already consumes more grain, meat, coal and steel than the United States

Wealth

China's population will grow from 1.3 billion to 1.45 billion in 26 years - when per capita income will be equal to that of the US today

Oil

On current trends, China will by 2031 be consuming 99 million barrels of oil per day. Total world production today is only 84 million bpd

Forestry

China is already the biggest driver of rainforest destruction, says Greenpeace. Half of all rainforest logs head for China

Global warming

By 2025, China will overtake the US as the top emitter of the greenhouse gases causing global warming

Cars

By 2031, China would have 1.1 billion cars if it matches current US trends - bigger than the current world fleet of 800 million

Western politicians queue up to sing its praises. Economists regard it with awe and delight. Other countries are desperate to imitate it. Yet there is another side to China's exploding, double-digit-growth miracle economy - it is turning into one of the greatest environmental threats the earth has ever faced.

An ominous sign of the danger is given in a groundbreaking report from Greenpeace, published today, which maintains that China is now by far the world's biggest driver of rainforest destruction. The report documents the vast deforestation driven by the soaring demands of China's enormous timber trade - the world's largest - as the country's headlong economic development sucks in ever-more amounts of the earth's natural resources.

Citing figures from the International Tropical Timber Organisation, the Greenpeace study says that nearly five out of every 10 tropical hardwood logs shipped from the world's threatened rainforests are now heading for China - more than to any other destination.

Yet deforestation is only one of the threats to the planet posed by an economy of 1.3 billion people that has now overtaken the United States as the world's leading consumer of four out of the five basic food, energy and industrial commodities - grain, meat, oil, coal and steel. China now lags behind the US only in consumption of oil - and it is rapidly catching up.

Because of their increasing reliance on coal-fired power stations to provide their energy, the Chinese are firmly on course to overtake the Americans as the world's biggest emitters of greenhouse gases, and thus become the biggest contributors to global warming and the destabilisation of the climate. If they remain uncontrolled, the growth of China's carbon dioxide emissions over the next 20 years will dwarf any cuts in CO2 that the rest of the world can make.

Even that, however, is not the ultimate threat from an economy which is growing at a rate the world has never seen before. According to Lester Brown of the Earth Policy Institute in Washington DC, the leading American environmental analyst, China's scarcely imaginable growth in the coming years means that the world's population will simply run up against the limits of the planet's natural resources sooner than anyone imagines.

If growth continues at 8 per cent a year, Mr Brown said, by 2031 China's population, likely to be 1.45 billion on current UN predictions, will have an income per person equivalent to that of the US today. He said: "China's grain consumption will then be two-thirds of the current grain consumption for the entire world. If it consumes oil at the same rate as the US today, the Chinese will be consuming 99 million barrels a day - and the whole world is currently producing 84 million barrels a day, and will probably not produce much more.

"If it consumes paper at the same rate we do, it will consume twice as much paper as the world is now producing. There go the world's forests. If the Chinese then have three cars for every four people - as the US does today - they would have a fleet of 1.1 billion cars, compared to the current world fleet of 800 million. They would have to pave over an area equivalent to the area they have planted with rice today, just to drive and park them."

Mr Brown, who has been tracking and documenting the world's major environmental trends for 30 years, went on: "The point of these conclusions is simply to demonstrate that the western economic model is not going to work for China. All they're doing is what we've already done, so you can't criticise them for that. But what you can say is, it's not going to work. And if it doesn't work for China, by 2031 it won't work for India, which by then will have an even larger population, nor for the other three billion people in the developing countries.

"And in some way it will not work for the industrialised countries either, because in the incredibly integrated global economy, we all depend on the same oil and the same grain.

"The bottom line of this analysis is that we're going to have to develop a new economic model. Instead of a fossil-fuel based, automobile-centred, throw-away economy we will have to have a renewable-energy based, diversified transport system, and comprehensive reuse and recycle economies. "If we want civilisation to survive, we will have to have that. Otherwise civilisation will collapse."
The Greenpeace report is one of the first major indictments of the catastrophic environmental effects the great Chinese industrial behemoth is starting to have on the rest of the world.

The ecological damage that China's breakneck industrialisation is having on the country itself has been widely recognised. In an interview earlier this year, China's deputy environment minister, Pan Yue, said five of the 10 most polluted cities worldwide are in China; acid rain is falling on one-third of the country; half of the water in its seven largest rivers is "completely useless"; a quarter of China's citizens lack access to clean drinking water; one-third of the urban population is breathing polluted air; and less than a fifth of the rubbish in cities is treated and processed in an environmentally sustainable way. But China's malign environmental "footprint" on other countries has been less widely reported.

John Sauven, forest campaigner for Greenpeace UK, said: "Western politicians, who think only in terms of gross domestic product, have seen China as some sort of economic wonderland. Tony Blair went to China with British businessmen in September and said how he wanted a slice of the cake. But the growth figures mask an environmental catastrophe. The Chinese are ripping the heart out of the world's irreplaceable rainforests to make cheap products like plywood for Western consumer markets."

The Greenpeace report details how, with incredible speed, China has become the world's largest plywood producer and exporter. Its export market has grown from less than one million cubic metres per annum in 1998 to nearly 11 million cubic metres in 2004.

China banned logging in large areas of its own natural forest in 1998 after catastrophic floods, themselves a direct result of deforestation, killed thousands of people. "This ban, coupled with massive growth in Chinese timber processing capacity and a liberalisation of trade barriers, led China to look overseas in its hunger for timber," says the Greenpeace report.

In one area of China investigated by the group, there were no fewer than 9,000 plywood mills taking in vast numbers of ancient hardwood trees from rainforests in countries such as Papua New Guinea, which are used merely to make plywood panels. Greenpeace contends that many of these trees, if not the majority, have been illegally logged.

The report, entitled Partners in Crime, does not blame only China - it accuses timber barons in rainforest countries of corruption in illegally supplying the wood, and builders' merchants and DIY outlets in Britain of culpable negligence in supplying plywood without establishing its origin. Chinese hardwood plywood imports to the UK have gone from 1 per cent of the total in 2001 to 30 per cent this year.

Greenpeace wants the EU, and failing that, Britain alone, to outlaw the import of timber which has not clearly been legally logged. At the moment there are no restrictions on illegally logged timber coming into Britain.

Rumsfeld To China: World Watching If It Charts Path To Open Society
http://www.terradaily.com/news/china-05zzzzzzzzzs.html

Beijing (AFP) Oct 18, 2005 - The world is watching to see whether China will chart a path toward a more open society, and wondering why it is concealing the pace of its military spending, US Defense Secretary Donald Rumsfeld said Tuesday.


Analysis: Rumsfeld Arrives In Beijing
http://www.spacewar.com/news/china-05zzzzzzzzzr.html

http://www.wpherald.com/storyview.php?Stor...18-074738-2656r

Interview: The complexities of the US-China relationship
By Toshiyuki Hayakawa
Sekai Nippo
Published October 18, 2005


WASHINGTON -- As China grows in economic, political and military influence, it has a growing impact on neighboring Asian countries and Washington's policy toward the region. Sekai Nippo, a daily newspaper published in Tokyo, recently interviewed Peter Brookes, Senior Fellow of the Heritage Foundation and former Deputy Assistant Secretary of Defense for Asia and Pacific Affairs, on the US-China relationship.

Q: US-China summit was held in New York on September 13. What were the fruits of this?


A: Not much. I mean they hoped to have a meeting here in Washington, but then Hurricane Katrina came through, so they had a short meeting on the side of the summit in the world UN summit. But President Bush plans to visit China, so I think there will be additional, there will be more substantive meetings. I don't think they were able to really discuss much because it was a very short meeting. But I think in the future when President Bush goes to China and he will have much more substantive meetings.

Q: Was the Chinese military buildup included in the agenda?

A: Well, I don't know. I think the administration and many others are concerned about Chinese military buildup. Secretary Rumsfeld in Singapore asked a question why China is building up its military and reason is not quite clear. So I think our people are concerned about Chinese intentions and military buildup.

Q: I heard that China wanted the state visit here, but the White House refused the proposal. Is it true?

A: I don't know. I mean you have to ask the White House these questions. It had characteristics of a sub-state visit. A lot has to do with the schedule at the White House. But I understand Chinese did want a full state visit, but they did not quite get one. Chinese were pushing very much for a state visit. It wasn't quite a state visit. So I have to see what happens next time.

Q: How does Bush administration regard China now? A partner or a competitor?

A: I can not do speak for the Bush Administration. So you understand that this is my personal opinion. But there are a number of contentious, difficult issues in the US-China relationship today. I don't think there is one word to define the relationship other than the word "complex."

I think the relationship is very complex. I wouldn't say it's an enemy, a competitor, a friend, or an ally. But it's very complex relationship. We are trying to cooperate with one another on the issues such as North Korea. Other people have questioned about that. But then we had trade frictions with them. There are concerns about military buildup. There are also concerns about energy security. Some people are interested in China's economic policy. And human rights and proliferation are the areas where there is some friction in the relationship.

So I wouldn't say it's a competitor or I wouldn't say it's a friend or I wouldn't say it's an enemy. But I would say it's very complex relationship that we have with China right now.

Q: Secretary of Defense Rumsfeld criticized the Chinese military buildup in Singapore in June. Has the U.S. policy on China changed in the second term?

A: No, I don't think so. Four years ago the administration had the EP-3 incident, remember? There was that and there've been people who have been concerned about China. We are hoping for a constructive relationship with China. And I think there is still that hope. China is building military and exporting textiles. China is doing things US is concerned about. US maintains the same policy. It is China that is changing. So I think that a lot of things about the relationship depend on China, because they're a changing power. So I think there is more attention being paid to China, but we have these concerns toward China.

Q: What do you think about the present military balance of Taiwan Strait?

A: Well, as I said at my congressional testimony, I think the military balance has shifted and there are many people who are concerned about that. I think that Taiwanese are obviously concerned about it. I think also Japan must be concerned about it, because China is capable to take military action against Taiwan, and the conflict in the Taiwan Straight is in nobody's interest. It is not in the interest of Korea, not Japan, not Taiwan, not China, not US certainly, not even Russia. So I think it is raising eyebrows across Asia, as I said before and past. But I think China's military buildup is focused on Taiwan. I think it's also focused on US and Japan as well. It does not want to ever have to negotiate again for any purposes from position of military weakness. So China is going to be a rising military power besides being political, economical power.

Q: China is continuing to build up its military power. It gives high priority to the reinforcement of the navy and air force. What is the purpose?

A: China has always been a land power. It has had a large military with several million men. So it's always been a military land power, but it's never been an air power or sea power. And I think it realizes that even if it has 5 million men in its army, it still couldn't invade Taiwan with that army. It needs to project power offshore, not only to cope with Americans in Taiwan contingency, but to cope with Taiwan, and perhaps even Japan. So it is developing its military where it is weakest.

It's always been large military power, not very capable but large power. But now it is looking and developing power projection capability to protect its interests overseas, and allow it to deal militarily with Taiwan even if it involves US and Japan.

Q: Is China planning to prevent US Carrier Battle Group, especially the 7th Fleet, from intervening in a conflict at Taiwan Strait?

A: I think that will be its hope. It doesn't have a capability to do so now. But its naval capability and its air capability in the future have potential to do that.

One of the elements of great strength in the American military is its carrier battle groups. So if China wants to have a balance with US and be able to deter or delay or even deny American interventions in the Pacific, it needs air and naval power. But it's not going to build power like America's power. It's going to use submarines and cruise missiles. I don't believe at this points it can build aircraft careers. It is looking for things that asymmetrically can make it hard for American aircraft carrier to operate by something like Sovremennyy class destroyers with their SSN22 missiles. Maybe the Russians will sell strategic bombers, or diesel submarines. Right now it is looking for things that can attack American carriers. Because we know, we don't have bases on Taiwan Strait, so we have to use naval, air power to deal with Taiwan Strait contingency.

Q: DOD released the annual report about the Chinese military power in July. The report says, "Some of China's military planners are surveying the strategic landscape beyond Taiwan." What does this mean?

A: I think they want the ability to project power to the South China Sea -- especially should energy resources be found in the South China Sea. So China is very much looking beyond its periphery and looking to be able to project power into the region and has a desire to be a preeminent power in the region. So I think they're also looking at Japan and U.S.

Q: Japan is in a dispute with China over the sovereignty of Senkaku Islands. Will China take a hard-line attitude toward these issues in the future?

A: I don't know. I mean, those are difficult issues to deal with obviously and my understanding is that U.S. recognizes Japan's sovereignty over Senkaku. I think China will make it as its nationalism issue, but I think China will take a hard liner on it, if there are energy resources like oil or gas on the island. So I think that will make a big difference China is very much looking to gather as much energy supplies as it can around the world. So I think that will probably make a big difference. First of all there is the nationalism issue between Japan and China, but then there are energy resources, so that will become an economic issue as well that will harden the positions of both countries.

Q: China and Russia conducted joint military exercises on August. What was the purpose?

A: I think there were a couple of things. I think that Russians want to sell more arms to China. Chinese, I think, want to send a signal to Taiwan, US and Japan. About the issue of Taiwan, I think they also wanted to make people think that Russians might stand up behind China in the Taiwan contingency. I don't think that Russians are necessarily thinking that way, but that is only a possibility. And these exercises could also have consequences for central Asia too. But I think in this case China wants them to be directed at Taiwan and at the US and Japan.

Although Russia wants to sell arms, I don't think Russia really wants to take sides over the Taiwan issue. I think that they tend to lean to Beijing, but I don't think they really want to get involved in a sort of military conflict involving China. But it is something we have to watch very closely whether they continue to have exercises or Russians sell them strategic bombers such as TU-95 or TU22 that will be significant. So I think we are going to have to watch that very closely and see how it develops. Maybe nothing will develop. They have relationship before that haven't worked out.

Q: What do you think about the role of Japan in keeping peace and stability in Asia-Pacific region?

A: I would like to see Japan play a bigger role than it is doing now. But it also has its limitations now due to article 9 of the constitution. It is obviously a matter of interpretation that is something Japanese people and Japanese government have to figure out for themselves. As I was Deputy Assistant Secretary of Defense, I have been advocating that Japan play a bigger role in international security. There are Iraq and other things, but Japan is going to have to figure out for itself what role it wants to play. Many Americans are encouraging it, but that is still something for Japan to decide for itself based on its unique history.

Q: US and Japan established the Common Strategic Objectives at the 2 plus 2 conference in February. It mentioned Taiwan Strait. How do you evaluate this agreement? Can it be a deterrent against China?

A: There is no collective self-defense in Japan. I think it was good idea to express our concern about stability of the Strait, because it is important for Japan. In some ways it is more important for Japan than for US because of the amount of oil that passes through Taiwan Strait to Japan and shipping. So it's a very critical place for Japan. And you know Okinawa is close to Taiwan. I think Okinawa is closer to Taipei than to Tokyo. So they have interest in that part of the world. So I think it was very positive statement. I think it is important to remind China that people are watching and that we expect certain policy such as that the future of Taiwan should be resolved peacefully and in mutually agreeable manner between people in Taiwan and people in China. I think it's important to have Japan as a partner in helping determine that and exalt influence on China's behaviors. I welcome that statement.

Q: DOD is promoting the Global Posture Review of US forces around the world. What is the purpose to transform the U.S. forces in Japan? Does US assume the Chinese military buildup?

A: I think this is something they have to do in concert with Japanese friends and partners. There are issues that we have to deal with in Japan and they are very important. In some point US will no longer have a conventional carrier. They will need to replace the Kittyhawk. We also have the issue of Okinawa. Americans want to be good partners and good neighbors. We appreciate that Japanese people host US bases in Japan and I think it's for a mutual interest. I think we do have to be concerned about not only China, but North Korea. You know, fortunately we don't have the threat of the Soviet Union, but we have other threats now. So it's important that we work to find a way to overcome the challenges that we have with hosting and basing issues. So that's something we're going to have to look at creatively.

In the Global Posture Review, we are not only dealing with China but also with issues of terrorism and other potential instabilities. They include the Korean peninsula, Taiwan Strait, Islamic terrorism, Southeast Asia and instabilities around the world. But you know, all those have to be done in concert with the host countries, especially Japan and Korea, through close consultation and coordination.

When I worked at the Pentagon, we worked closely with Japanese colleagues in the cooperative spirit to carry out certain projects such as missile defense which is very successful project and very important part of our alliance. We also worked to bring Japanese forces to support Afghanistan operations. So that was very important as well, but the things will be done in concert with our partners and allies.

Q: What do you think about the Sino-Japanese relationship?

A: It seems increasingly bad. It seems to be getting worse. It seems that there is a great deal of rivalry. You know, if you talk to Chinese, they say "Look at the Japanese rearming". And off course I point out that the rearming is because of what's happening in China. There is potential for arms race there certainly. Chinese society and Japanese society are evolving. They are two very big powers in one small part of the world. And there are going to be some frictions. It seems to me that there is increasing rivalry between the two countries.

Q: When Japan is in opposition to China, Japan wants to strengthen the alliance with US. What do you think about this situation from the standpoint of US interest?

A: I have been a proponent of its strengthening the alliance ever since my days on Capitol Hill and in the administration. I think President Bush and Prime Minister Koizumi and people they brought in have done a terrific job in doing that. I think the relationship is perhaps stronger than it's ever been.

The relationship suffered terribly during Clinton administration. Clinton administration made China a centerpiece of its policy toward Asia. Many of us, particularly Republicans on Capitol Hill believe that allies are a strong foundation of our relationship in Asia. It was conscious of Bush Administration to improve our relationship significantly and we had right people such as Richard Armitage and others who are very strong Japan people to do that. So I think the relationship is very strong although there are still some frictions obviously, such as beef, and occasional differences. But I think from security standpoint the relationship between US and Japan is never been stronger. We all will have changes in government in democracy, but I think the relationship has come long way in just four or five years.

U.S. Works With China On Nuke Security
http://www.spacewar.com/news/nuclear-blackmarket-05zza.html

New Chinese Missile Could Hit Australia, New Zealand
http://www.spacewar.com/news/missiles-05zzzzo.html

Washington (UPI) Oct 25, 2005 - The Pentagon's latest assessment of China's military power said Beijing would deploy a new mobile nuclear missile, the DF-31, in 2005-2006 and the new missile was capable of hitting Australia in an arc from Brisbane to Perth, the Herald Sun newspaper reported Sunday.

China Calls On US To Stop Punishing Companies Accused On Proliferation
http://www.spacewar.com/news/china-05zzzzzzzzzzh.html

Beijing (AFP) Oct 25, 2005 - Just weeks before an expected visit by US President George W. Bush, China Tuesday urged the United States to stop punishing Chinese companies it suspects of proliferating sensitive weapons technology.

Chinese Build Up Armed Forces, Forge Ties With Russia - Report
http://www.spacewar.com/news/china-05zzzzzzzzzzi.html

China Steps Up Efforts Against Bird Flu After Week's Third Outbreak
http://www.terradaily.com/news/epidemics-05zzk.html

Review
The Chinese Shadow

By Robert Skidelsky

Three Billion New Capitalists: The Great Shift of Wealth and Power to the East
by Clyde Prestowitz
Basic Books, 321 pp., $26.95

China, Inc.: How the Rise of the Next Superpower Challenges America and the World
by Ted C. Fishman
Scribner, 342 pp., $26.00

1.
The "rise" of China has suddenly become the all-absorbing topic for those professionally concerned with the future of the planet. Will the twenty-first century be the Chinese century, and, if so, in what sense? Will China's rise be peaceful or violent? And how will this affect the United States, the current "hyperpower"? In fact, China has been "rising" for some time (after several hundred years of "fall"), but for many years its claim to notice was obscured by more exciting events. Attention in the 1990s concentrated on the fall of Soviet communism, "globalization," the spread of democracy, and the high-tech revolution. These developments, which left America as the world's sole economic and political superpower, seemed to belie Paul Kennedy's prediction in 1987 of relative US decline and "more of a multipolar system."[1]

The attack on the World Trade Center in 2001, together with the concurrent collapse of the high-tech bubble, exposed America's fragility, but this was masked by the hyperactivity of the Bush administration. The "war on terror" planted American armies in Afghanistan and Iraq; the Clinton surpluses were succeeded by the Bush deficits to shore up the economy and finance the military operations. However, as the Iraq escapade foundered and the deficits ballooned, the sense of relative decline reasserted itself. Unlike in 1987, there was now a clear candidate for the succession: China. This was especially so as the US economy became dependent on China's bankrolling its huge trade deficit. The dream of an "American century" receded, to be replaced by the nightmare of a "Chinese century."

Focus on China is overdue. For the last quarter of a century its economy has been growing by over 9 percent a year, increasing eightfold. However, it is not just this long-sustained hyper-growth rate that amazes and alarms the observer. It is the size of the economy which is growing. China's population is officially estimated at 1.3 billion, but is probably larger—one fifth of all the people in the world. This makes its rise much more important than that, say, of Japan in the 1960s. From the economic point of view its cheap labor is much more abundant, so its cost advantage will not quickly be eliminated. The size of an economy obviously matters, too, in measuring power. The Chinese economy, in terms of the purchasing power of the Chinese people, is about two thirds the size of the US economy.[2] If it continues to grow at 9 percent a year, it will overtake the US by 2041. Lee Kwan Yu of Singapore believes that the rise of China will shift the balance of power back to the East for the first time since Portuguese caravels arrived there in the sixteenth century.

China's growth, simply because of its size, is bound to create problems both for itself and others. From the Chinese leadership's point of view, the main problem is how to maintain social cohesion amid the vast socio-economic upheavals going on. Apart from the environmental degradation and rampant corruption, China's pell-mell, and largely uncontrolled, economic growth is disturbing its domestic stability in a profound way: there is a huge floating population without settled jobs or abodes, and a development and income gap between the coastal and inland areas which is as big as between the United States and North Africa. According to one estimate, 30 percent of China's urban workforce, or 200 million people, is currently unemployed or underemployed. The livelihood of another 100 million agricultural workers is threatened as World Trade Organization rules increase China's dependence on foreign food supplies. The specter of chaos frightens the rulers in Beijing.

In international relations, the issue is whether China's impact on the world will be peaceful or violent. The debate here follows disciplinary lines. "Those who focus on economics tend to see partnership, cooperation and reasons for optimism despite ten-sions, while security experts are more pessimistic and anticipate strategic conflict as the likely future for two political systems that are so different," writes one commentator.[3] Both views can claim some evidence in their favor. On the one hand, the concessions China made to foreign investors and corporations in order to gain entry to the WTO show a readiness to play by the established rules of the game. It has embarked on a "charm offensive" premised on its "peaceful rise." On the other hand, its voracious appetite for oil and raw materials opens up a familiar geopolitical struggle for control of their supply. Its bid for Unocal, the ninth-largest oil company in the United States, had to be withdrawn in the face of congressional opposition. As the only country likely to counterbalance the economic and political weight of the United States, China is being wooed by those who want insurance against American domination; in turn it plays host to such unsavory characters as Robert Mugabe, president of Zimbabwe, and Islam Karimov, the brutal president of Uzbekistan. The slogan of the "peaceful rise" is challenged by Chinese nationalists in the Foreign Office and military establishment and their affiliated scholars, who argue that it encourages Taiwan to bid for independence.

However, the theory that economic relations are the peaceful form of international relations, and geopolitics is the warlike form, is much too simple. The growth of China's exporting power—in ten years its exports to the US have risen from $35 billion to $200 billion a year—has already produced a "bra war" with Europe and tensions over currency with the US. (The recent 2.1 percent revaluation of the renminbi has not quelled American accusations that China is deliberately undervaluing its currency to gain export advantage.) Moreover, economics and politics cannot be so easily separated. China is both an engine of globalization and a rising military power, a "Wal-Mart with an army." The US worries that the expansion of China's economic presence will be accompanied by the expansion of its military presence. Changes in the international distribution of global wealth, even if peacefully achieved, are bound to have implications for the distribution of global power. If China rises economically, America falls politically. The historically minded recall the years of Anglo-German trade rivalry which preceded World War I.

Concern about China's impact on the world is heavily influenced by the nature of its regime. India, which has recently been growing as fast as China, and which will soon have even more people, hardly fills the West with the same foreboding, because it is a democracy, and, as we are continually told, democracies "never go to war with each other."

The success of the Chinese Communist Party in retaining political control over China has dimmed the sense of Western triumphalism induced by the collapse of the Soviet empire. Twentieth-century communism, unlike nineteenth-century Marxism, promised economic development at the price of political freedom— "electrification plus the Soviets" in Lenin's telling phrase. Wherever it triumphed, a single-party state was established, and the economy was collectivized and centrally planned. When the Communist economy failed, the Communist system was dismantled— completely in Russia and Eastern Europe. In China, the Communist Party's paramount leader Deng Xiaoping adopted a different strategy. He realized that in order to save the Communist dictatorship, he had to create an economic system that worked. From 1978 onward, he started decollectivizing the economy. In Russia, Mikhail Gorbachev destroyed Communist Party rule in a failed effort to create a "humane" communism; in China Deng saved Communist rule by embracing capitalism.

So far his formula has worked brilliantly. Not only have tens of millions enriched themselves, as Deng told them to do, but absolute poverty, defined as living on $1 a day or less, has fallen from 64 percent to 17 percent of the population. In politics, information is controlled, dissent is ruthlessly suppressed, and continuity with the takeover of 1949 is asserted. The motto is: "We will give you freedom to make money, but politics is off limits." Mao Zedong, exposed by Jung Chang and Jon Halliday in Mao: The Unknown Story as brutally and cynically responsible for the death of millions, remains China's leading icon. His giant portrait dominates Tiananmen Square; his face still appears on yuan notes. He has even been rebranded to serve business needs as a kind of Chinese Colonel Sanders, advertising food products outside the restaurants in Hunan, his home province. There has been no official repudiation of Mao's legacy, even one like the limited denunciation of Stalinism which Khrushchev undertook in 1956.

A Westerner will doubt that this duet of Party dictatorship and economic freedom can continue. Although Party monopoly over the public sphere is maintained, control over the budget has been largely decentralized to provincial and municipal levels. Optimists say that democracy will come incrementally, starting with provincial elections, as the middle class grows. Fiscal devolution could crack the monolith. Pessimists argue that the loss of control accompanying precipitous economic growth and the decline in state revenues could set off either a new bout of "warlordism" or force a paranoid regime into a new bout of political repression that will make Tiananmen Square seem like a vicar's tea party. Whatever choices may be allowed in provincial elections, no new party will be allowed to present its case. Had China's growth been slower, its political prospects might be more benign.

2.
For instant expertise on China all that is required is "a rush of statistics, an occasional nod to history, a Confucian aphorism or two and, hey presto, we can all grasp the vast meaning of the Middle Kingdom's re-emergence as a global power."[4] This is certainly the impression conveyed by Clyde Prestowitz, a former trade official in the Reagan administration. Though the title of his book, Three Billion New Capitalists: The Great Shift of Wealth and Power to the East , suggests a focus on Asia, it is really a "wake-up call" to America. His thesis, chattily if not wittily expressed, is that the virtually endless supply of labor in China and India, combined with the negation of time and distance by the Internet and global air delivery, portend the ruin of American manufacturing and a long-term decline in American living standards. Already America is living beyond its means.

In essence, Prestowitz tells the familiar tale of Western capital investing abroad to relieve squeezed margins at home. Outsourcing, contracting, and eventually offshoring were ways to reduce American corporate costs and increase sales in face of Japanese competition and the pressure of consumerism. Outsourcing begat offshore manufacturing. In the 1980s Motorola, Intel, and Texas Instruments began to transfer the labor-intensive side of their manufacturing to Malaysia, Singapore, and Taiwan. Sears Roebuck contracted with textile factories in Japan to get the best deals for their customers. East Asia became a buying center for US retailers and an assembly line for US manufacturers.

China, Prestowitz writes, was interesting for two reasons: "endless cheap labor to produce low-cost products for export, [and]...the potential to become the world's largest market." Retailers and manufacturers switched to China because its prices were cheaper. Building and equipping factories cost less, and low-cost labor can be substituted for machinery. Today China produces two thirds of the world's photocopiers, shoes, toys, and microwave ovens, half of its DVD players, digital cameras, cement, and textiles, 40 percent of its socks, one third of its DVD-ROM drives and desktop computers, a fourth of its mobile telephones, TV sets, steel, car stereos, and so on. It exports 30 percent of the world's electronic goods. In Prestowitz's fevered imagination the United States is the Dr. Frankenstein who raised the monster destined to devour it.

India started too late to challenge China in manufacturing, but software, IT services, and medicine were virgin territory. India's key asset was a huge pool of inexpensive but highly trained, talented, English-speaking workers, many of them educated to a high level abroad. In 1984, Rajiv Gandhi decided that India should develop a software export industry; coincidentally, Texas Instruments began satellite data link services from Bangalore, preparing the way for on-line access to global clients. With the development of the Internet, and later broadband, in the 1990s, the proportion of software work "offshored" to India increased dramatically. General Electric realized that the operations of its call centers and much office work could be transferred to India at a fraction of the cost elsewhere. Airlines could offset rising fuel costs by offshoring ticket bookings and repairs.

Prestowitz describes how in Wipo Spectramind, a twenty-four-hour call service outside Delhi, "accent neutralization" is taught to give callers the feeling that their calls are being answered in Kansas City. The collapse of the high-tech bubble in 2001 provided further cost-cutting incentives. "Medical tourism" flourishes as Indian private hospitals provide hip replacements and heart and eye surgery at a fraction of Western cost. (The Apollo Hospital in Chennai—Madras of old—does heart surgery for $4,000 as against $30,000 in the US.)
The US government helped Asia's rise by embracing a laissez-faire ideology and floating the dollar. As a White House economic adviser quipped: "Potato chips, computer chips, what's the difference? They're all chips." Prestowitz claims that, entranced by market fundamentalism, American policymakers misunderstood the sources of American innovation. US technological leadership was built not on market forces, but on an unnatural collaboration between defense and government in a "military industrial complex," the product of two world wars. For example, IBM grew on the basis of government grants for the B-52 guidance system. The shift to laissez-faire in the 1980s, followed by the end of the cold war, dissolved this "ecosystem of interrelated companies, universities, government institutions, bankers, and, yes, lawyers." After 1973 Americans stopped worrying about international trade, because they could print as many dollars as they wanted to pay for imports. "We handed China the money they are using to try to buy Unocal," said Prestowitz in a recent interview. Prestowitz's point is that "nobody is taking an interest in the health of the long-term economic structure of the country because America's ideology says it is wrong to do so."

So what is to be done? Prestowitz says that the United States must abandon laissez-faire. It must renounce its crazy ambition to flood the world with dollars and instead develop a more limited dollar sphere consisting of the North American Free Trade area plus its trade with Japan. "For the United States, this deal would marry Japan's surpluses with US deficits and create a dollar zone in trade balance with the rest of the world. It would also serve to keep Japan in the US orbit and prevent it from slipping into China's." Domestically, the US must restore fiscal discipline by cutting defense spending and raising taxes on consumption. It needs an energy policy which makes it independent of Middle East oil ("Just applying the mileage regulations to SUVs would significantly reduce US oil dependence"). It needs to upgrade its physical infrastructure, promote manufacturing "ecosystems" like Silicon Valley, reform Social Security to encourage labor flexibility, and boost educational performance by restoring classroom discipline and fully funding students studying science and engineering. In short, it needs an active "competition" policy. Prestowitz rejects the free trade model of globalization as harmful to US interests. He is a modern mercantilist: trade freely with your friends, and strategically with everyone else. In a world of sovereign states, this is not a bad rule.
Ted Fishman, a journalist and former commodities trader, covers much of the same ground in China, Inc.: How the Rise of the Next Superpower Challenges America and the World . There is the same touristic flavor: a trip down the Huangpu River in Shanghai reveals the garish skyscrapers and low nightlife of the new moneyed metropolis, where "nerdy Western engineers can find girls so hot their friends at home would laugh." The main difference is that Fishman emphasizes the indigenous sources of China's rise. Without Deng's decision to "open up" China, American CEOs could not have solved their problems by relocating production to it.

Readers will learn about the working of the hukou , or passbook, sys-tem, by which Mao Zedong kept rural labor on the land and out of the cities; about the origins of Deng Xiaoping's "Household Responsibility System" of 1980, which revolutionized agricultural productivity by replacing collective farms with a system of family plots; about how the "township and village enterprises" (TVEs) grew up to fill the ideologically gray area between public and private enterprise; about the extensive migration from countryside to towns, where the private economy was born "with a wink and a nod from the central government"; and about Shenzhen, China's first Special Economic Zone, grown from a marshy fishing village to a city of ten million in twenty-five years. China, writes Fishman, "is an infinite jumble of hybrid businesses" that "conflate the sectors, often in impossibly complex, opaque ways." Almost all business "is conducted by words, handshakes, and occasionally by written but extralegal contracts."

Fishman tells of the orgy of city-building; of the forced demolitions and evictions to make way for new buildings and hydroelectric projects; of female workers exploited in textile and electronic factories who dream of returning to their villages; of the encroaching deserts; of pollution so intense that the "Asian Brown Cloud" wafts over to the Pacific coast of the US; of China's great road- and railway-building program; of the spread of HIV, the abortion of unwanted girls, and much else. But his central theme is the same as Prestowitz's: countless US businesses are being hammered by the low "China price," which includes counterfeiting and piracy. Jobs for many more millions of US workers will disappear. Nothing, he believes, will stop the Chinese juggernaut, for China is already building "the critical masses of companies that catalyze the creative ferment that leads to rapid innovation." Fishman foresees US– Chinese rivalry growing: "it is a slow power game, but it is afoot."

Prestowitz's and Fishman's books are about the impact of China on the economy of the West. But what about the West's impact on China? To what extent are Chinese society and politics being transformed by China's integration into the global economy, and what might this tell us about the future of the relationship between West and East? These topics will be discussed in a second article.

—This is the first of two articles.

Notes
[1] Paul Kennedy, The Rise and Fall of the Great Powers (Random House, 1987), p. 534.
[2] Output data in national currencies must be converted to a common currency to compare the size of economies. If the conversion is done at market exchange rates (MERs), the Chinese economy is only the eighth largest in the world, one tenth the size of the US economy, and not likely to overtake it until between 2040 and 2050. However, data converted according to exchange rates are not good measures of the relative size of economies because they take into account only internationally traded goods and services and are distorted by short-term currency fluctuations. That is why economists are increasingly using purchasing power parity (PPP) converters, which measure the relative purchasing power of different countries' currencies with regard to the same "basket" of goods in each one. This can be a much higher GDP for a developing country. On a PPP basis China's GDP in 2006 will be $8,877 billion; on an MER basis $2,172 billion.
[3] Steve Lohr, "Who's Afraid of China Inc.?" The New York Times, July 24, 2005.
[4] Philip Stephens, Financial Times, July 1, 2005.

China reaches deeper into Taiwan politics
Beijing is speaking more directly to Taiwanese, reversing perceptions
of a mainland threat. By Robert Marquand
http://www.csmonitor.com/2005/1104/p01s03-woap.html?s=hns

http://www.wpherald.com/storyview.php?Stor...06-102526-9407r
Walker's World: China as the 'Wild East'
By Martin Walker
UPI Editor
Published November 6, 2005


WASHINGTON -- The Bush administration has quietly backed away from its earlier high-profile demands for China to revalue its currency and is instead stressing the need for China to observe Intellectual Property (IP) rights.

John Dundas, the U.S. undersecretary of commerce for IP, told reports in Beijing Friday that IP was on the agenda for the last meeting between President George W. Bush and his Chinese counterpart President Hu Jintao, and would also be raised at their next meeting, and at the broader Asia-Pacific economic summit in South Korea later this month.


Which means that the Bush administration, along with Henry Kissinger, U.S. Chamber of Commerce President Tom Donahue and other top U.S. businessmen must have been reading James McGregor's new book, 'One Billion Customers', published this week by Wall Street Journal books at $27.

Formerly the Wall Street Journal's bureau chief in China, then head of Dow Jones operations in China and a chairman of the American Chamber of Commerce in China, the Mandarin-speaking McGregor has written a how-to and how-not-to guide for Western businessmen trying to break into the world's fastest-growing market.

He warns of the perils of fraud and corruption, of banquets designed to get the unwary businessman drunk enough to sign a bad deal, and of levels of air pollution so bad in Beijing that he has moved his own children away to schools in the United States rather than subject their lungs to the damage.

"Fatigue, food and drink are negotiating tools," McGregor warns in one of a series of tips that pepper his book. "If your Chinese counterpart wants to finalize a deal after a mao-tai soaked banquet, it is better to throw up on the contract than sign it."

But above all, he has been ramming home the message that the Bush administration's former strategy for China to revalue, still being strongly urged in Congress, simply plays into China's hands. It will not solve the real problem of U.S.-China trade, which is the wholesale theft of intellectual property and the demands for 'technology transfer.'

"They will try to rob you blind," McGregor told United Press International. "You just have to try to work around it, for example by keeping crucial technology in parts that are not made in China. And businessmen, politicians, officials and everybody else who wants to make China's growth into a win-win process for everybody have to keep on stressing that it is China's own best interests to abide by the rules on IP."

McGregor, whose book contains a series of case histories of how Western companies have succeeded or lost their shirts in China, tells the story of his own battle. In alliance with Reuters, Dow Jones's main competitor in the news and financial information business, McGregor had to fight off new decrees from the Xinhua state news agency that would have taken over their business and their profits by inserting Xinhua controls between the Western agencies and their Chinese customers. He used every ounce of political leverage he could apply through the White House and on Capitol Hill and internationally, to get the message through to Beijing that Xinhua would destroy China's hopes of joining the World Trade Organization, and also cripple China's banks and currency traders by slowing their access to crucial trading information.

The striking feature of this story, which ended happily, was less the bullying tactics of Xinhua than the difficulty that China's progress-minded governing elite had in blocking Xinhua from doing something so fundamentally damaging to Chinese self-interest.

"The Chinese system today is almost incompatible with honesty," McGregor writes. "China has a system of checks but no balances. The Communist party wants to root out corruption at the same time that it allows the families of the ruling elite to accumulate assets so they can remain the ruling elite in a country dominated by commerce."

McGregor sees this is a transitional stage, and that China, under the right kind of Western pressure, will eventually settle down and realize that honesty is the best policy, and that a rule-based system, arbitrated by an honest judiciary, creates the most fruitful environment for stable prosperity. But in the meantime, the Wild East is like a turbo-charged Wild West on speed, in which everything happens at once.

"China is undergoing the raw capitalism of the Robber Baron era of the late 1800s; the speculative mania is the 1920s; the rural-to-urban migration of the 1930s; the emergence of the first-car, first-home, first fashionable clothes, first college education, first family vacation, middle class consumer of the 1950s, and even aspects of social upheaval similar to the 1960s," McGregor says.

Social and economic transformations that took the United States over a hundred years have all taken place in China within little more than a decade. The dislocations, therefore, are just as immense as the commercial and business opportunities that he describes -- if the Bush administration and other Western governments can continue to apply pressure on Beijing's rulers for the real priorities of IP rights, with an efficient and honest legal system to enforce them.

If they want to know how, McGregor offers a step-by-step account of the way the Clinton administration's top Trade official, Charlene Barshefsky, negotiated the WTO deal with Beijing. Along with a handful of Chinese, Barshefsky is the heroine of the this book.

McGregor does not really address that other side of the coin of China's breakneck growth, its military modernization program and the nervousness of its Asia-Pacific neighbors at China's likely rise to great power status. He dismisses the warning of "a powerful alliance of old Cold Warriors and younger neo-conservatives" about a Chinese threat as "stir-fried Kremlinology -- China today is not the Soviet union of yesterday."

The people of Tibet might disagree with this, but McGregor insists that "any serious effort to 'contain' China is a fool's mission. The China market is simply too voracious, the Chinese economy too powerful, and the political allegiances and alliances of the Cold War that could even attempt such a thing no longer exist."

He may be right, but just as China already buys 25 percent of the world's steel; and 30 percent of its cement and is already becoming one of the dominant players in the global economy, so the diplomatic and strategic implications of China's growth are going to dominate the geo-politics of the coming decades.

http://www.wpherald.com/storyview.php?Stor...05-064108-8275r
Four arrests linked to Chinese spy ring
By Bill Gertz
The Washington Times
Published November 5, 2005


WASHINGTON -- Four persons arrested in Los Angeles are part of a Chinese intelligence-gathering ring, federal investigators said, and the suspects caused serious compromises for 15 years to major U.S. weapons systems, including submarines and warships.

U.S. intelligence and security officials said the case remains under investigation but that it could prove to be among the most damaging spy cases since the 1985 one of John A. Walker Jr., who passed Navy communication codes to Moscow for 22 years.


The Los Angeles spy ring has operated since 1990 and has funneled technology and military secrets to China in the form of documents and computer disks, officials close to the case said.

The ring was led by Chi Mak and his wife, Rebecca Laiwah Chiu, along with Mr. Chi's brother, Tai Wang Mak, and his wife, Fuk Heung Li, officials said.

Key compromises uncovered so far include sensitive data on Aegis battle management systems that are the core of U.S. Navy destroyers and cruisers.

China covertly obtained the Aegis technology and earlier this year deployed its first Aegis warship, code-named Magic Shield, intelligence officials have said.

The Chinese also obtained sensitive data on U.S. submarines, including classified details related to the new Virginia-class attack submarines.

Officials said based on a preliminary assessment, China now will be able to track U.S. submarines, a compromise that potentially could be devastating if the United States enters a conflict with China in defending Taiwan.

Mr. Chi, an electrical engineer, also had access to details on U.S. aircraft carriers and once was aboard the USS Stennis. A Pentagon report made public earlier this year said China's military is building up capabilities to attack U.S. aircraft carriers.

China also is thought to have obtained information from the spy ring that will assist Chinese military development of electromagnetic pulse weapons -- weapons that simulate the electronic shock caused by a nuclear blast -- that disrupt electronics.

It also is thought to have obtained unmanned aerial vehicle technology from the spy ring.

All four persons were arrested yesterday and charged with theft of government property. Law-enforcement officials said that the charges are expected to be upgraded to espionage or espionage-related once the nature of the information involved is fully investigated.

Investigators seized hundreds of thousands of pages of documents and computer data from Mr. Chi's home in Downey, Calif., after the arrest.

Mr. Chi and his wife were born in China and are naturalized American citizens. Mr. Tai and his wife are resident aliens who came to the United States from China in May 2001.

The arrests were made after electronic surveillance revealed Mr. Tai and his wife planned to travel to Guangzhou, China, to pass to Chinese officials several CDs that contained Navy weapons data, specifically information on Quiet Electric Drive (QED) systems used in Navy warships, officials said. An FBI affidavit in the case described the QED technology as "extremely sensitive" and banned from export.

The affidavit stated that surveillance showed that Mr. Tai and his wife were "very nervous" and had discussed the risks of carrying the disks to China.

"They were funneling information to 2 PLA," one official said, referring to the military intelligence unit of the People's Liberation Army. "The Chinese now know more about our military than we know about their entire country."

Lawyers for the four arrested yesterday could not be reached for comment.

Investigators think Mr. Tai worked as either a courier or a spy handler with China's Ministry of State Security or the 2 PLA.

Intelligence officials said Mr. Chi held a secret-level security clearance and worked on more than 200 U.S. defense and military contracts as an electrical engineer with the defense contractor Power Paragon, a subsidiary of L3/SPD Technologies/Power Systems Group in Anaheim, Calif.

FBI Agent James E. Gaylord stated in an affidavit made public Monday that Mr. Chi had access to Navy technical records, schematics and other documents that, while unclassified, were "restricted" and barred from foreign distribution.

"Chi uses his workstation at Power Paragon to collect the information he has been tasked to provide to the PRC," Mr. Gaylord stated.

Mr. Chi obtained the information from his office and took it home, where it was copied on CDs and passed to Mr. Tai, who encrypted the data using a coding software program, the affidavit said. Mr. Tai had planned to take the encrypted disks to China on Oct. 28 to give them to an unidentified recipient.

Business Times - 08 Nov 2005


Politically deflated Bush faces a resistant world

Washington is discovering it has to rely on diplomatic assistance from China and the EU

By LEON HADAR
WASHINGTON CORRESPONDENT

IN CASE you haven't noticed, it's been awhile since a top US official has delivered one of those wordy sermons to China or Russia about their responsibility to fix their governments, fight political corruption and protect human rights.

With President George W Bush being forced to deal with rising domestic criticism of his administration's performance at home and abroad, it has become much more difficult for him and the leading officials in his administration to promote the notion that his values and policies should serve as the standard that other governments should follow.

Indeed, while the disastrous response to Hurricane Katrina tarnished the image of what once upon a time was supposed to be world's most powerful and competent government, the so-called Plamgate scandal that has already led to the indictment of one White House official has raised the spectre of Watergate-style political corruption, adding to a long list of cases of sleaze and fraud involving Republican figures with ties to Mr Bush.

And the Bushies could not serve in the role of the world's moral authority in the same week that the Washington Post reported that CIA was running secret camps in eastern Europe where it was interrogating terrorist suspects. These news, together with Abu Ghraib, only raised more questions about the credibility of the US in upholding human rights and the rule of law in its conduct in the war on terrorism.

And so the politically deflated Mr Bush, with his approval ratings at home reaching a historic low of below 40 per cent will meet Latin American heads of state this week and prepare for his trip to Asia, where he will take part in a summit with the region's leaders in South Korea, followed by a visit to China. He and his aides are probably discovering that they have to deal now with more than just the slow erosion in American 'soft power' and US ability to market its professed values worldwide.

The US reservoir of 'hard power' also seems to be depleting. The growing mess in Iraq, and the increasing signs that the administration has failed to achieve its goals there, challenges the axiom that has been accepted by many observers since the end of the Cold War - that the world's only remaining military power could continue to maintain its role as an undisputed political hegemony.

At the same time, the ballooning US budget and trade deficits that are financed by the central bankers of China, Japan and Korea are weakening the enormous leverage that the US held over the other major economies and which, in the past, allowed it to play a leading role in liberalising the global economy.

At a time when he is one of the least popular figures in the hemisphere, Mr Bush was bound to feel the combined impact of the expanding deficit in 'soft' and 'hard' power during the Summit of the Americas in the Argentine town of Mar de Plata.

The neo-liberal economic model of American-style free market has lost its appeal in Latin America, where left-of-centre governments are in control in Brazil and Argentina and another leftist figure could get elected as the next president of Mexico. Even more disturbing to Washington is the growing popularity of Venezuela's populist President Hugo Chavez, who has been using his country's rising oil profits to promote his anti-American and anti-globalisation message.

The US plan of forming a Free Trade of the Americas (FTAA) is regarded in Latin America today as nothing more than an illusion. And there are mounting anxieties in Washington that the possible elections of leftist governments in Bolivia and Nicaragua could help Mr Chavez and his ally, Cuba's Fidel Castro, in stirring up anti-Americanism in the hemisphere that could certainly be fuelled by the emergence of indigenous Indian political parties in the region. While Mr Bush's America is finding itself more isolated than ever on its own strategic and economic backyard, with China and the European Union (EU) increasing their trade and investment links to the region, Beijing is continuing to boost its economic and political leadership role in East Asia - a development which will be highlighted during the East Asia Summit in Malaysia, from which the US is being excluded.

At the same time, the Chinese and Russians have been strengthening the Shanghai Cooperation Organization (SCO) as part of a strategy to challenge American presence in Central Asia. While some American neoconservative strategists have been toying with the idea of 'using' India and 'unleashing' Japan as part of an effort to 'contain' China, it's becoming clear that while New Delhi and Tokyo are interested in enhancing their ties with Washington, they will resist being dragged into a US engineered confrontation with Beijing.

Moreover, the Bush administration has yet to come up with a coherent approach towards China and its inconsistent policies reflect the opposing pressures it faces from ideological and interest groups in Washington. Hence the China-bashing coalition of neoconservative hawks, economic nationalists and Christian Right activists is pressing Mr Bush to get tough with the Chinese while Corporate America and free-traders are calling on the administration to engage China. The result is a policy mess in Washington.

Ironically, it's China that has become the leading diplomatic player in the effort to help the Bushies resolve the North Korean nuclear crises. At the same time, the Bushies have been forced to lobby for cooperation from the Europeans in trying to manage the current confrontations with Iran and Syria.

That Washington is discovering it has no other choice but to rely on diplomatic assistance from China and the EU is a reflection of the constraints that seems to be operating now on American global power. As more and more Americans recognise that reality, it's possible that Washington could take steps to adjust to the new global balance of power. If that won't happen, American adjustment could prove to be more costly, as China, the EU and other more powerful and assertive global powers choose to challenge Washington instead of cooperating with it.

Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.

Hu Pushes Embargo Lifting On U.K. Trip
http://www.terradaily.com/news/china-05zzzzzzzzzzz.html

London (UPI) Nov 08, 2005 - Chinese President Hu Jintao arrived in Britain Tuesday amid all the pomp and grandiosity of a state visit, and was greeted at Buckingham Palace by leading royals, politicians and flag-waving supporters.

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Protests Greet China's Hu Jintao At Start Of European Tour
http://www.terradaily.com/news/china-05zzzzzzzzzzza.html

Bush Told To Seek Chinese Removal Of Missiles Aimed At Taiwan
http://www.spacewar.com/news/taiwan-05zl.html

Washington (AFP) Nov 19, 2005 - US President George W. Bush should ask Chinese President Hu Jintao during talks this weekend to remove the more than 700 missiles aimed at Taiwan, a group of Taiwanese-American groups said.

Bush and Hu wrestle over trade, rights
http://www.sinodaily.com/2005/051120121904.e3vw4p52.html

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Bush Skirts Rights Issue
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The president's visit to China ends amid doubts about how forcefully he pursued his foreign policy goal of advancing freedom overseas.

By Peter Wallsten and Mark Magnier
Times Staff Writers

November 21 2005

BEIJING — After a two-day visit to China billed as an opportunity to advance his second-term goal of spreading freedom, President Bush left the country today amid questions over how aggressively he had pressed the matter.

The complete article can be viewed at:
http://www.latimes.com/news/nationworld/na...0,5954910.story

http://news.yahoo.com/s/ap/20051124/ap_on_...na_iran_nuclear

China Opposes Bringing Iran Before U.N. By ALEXA OLESEN, Associated Press Writer
Thu Nov 24, 5:51 AM ET

China stuck to its long-held position Thursday that the dispute over Iran's nuclear program should be resolved through negotiations and not be brought before the U.N. Security Council.

The statement comes as diplomats gathered in Vienna for a 35-nation meeting of the International Atomic Energy Agency, with the European Union expected to warn Iran to change its ways or face the threat of referral to the U.N. Security Council.

"We have a consistent position on the Iranian nuclear issue," said Chinese Foreign Ministry spokesman Liu Jianchao at a briefing.

"For the current stage, we should seek a proper solution within the framework of the IAEA," Liu said. "We don't think it is appropriate now to refer this question to the U.N. Security Council."

At issue is Iran's refusal to give up uranium enrichment, which can be used to generate power but also to make weapons-grade material for nuclear warheads. Iran says it wants only to make fuel, but international concern is growing that the program could be misused.

For months, Iran has relied on Beijing and Moscow, two of the five permanent members of the Security Council, to fend off a U.S.-backed push to have it hauled before the Council.

Currently, Iran's enrichment program is frozen. But negotiations between Iran and France, Britain and Germany — the so-called EU-3 — broke off in August after Iran restarted the conversion of raw uranium into the gas that is used as the feed stock in enrichment.

Liu said China hoped to see "the early restoration of negotiations between Iran and the EU-3 so as to seek a long-term solution acceptable to all parties."




Copyright © 2005 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.


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http://www.tompaine.com/articles/20051128/...must_change.php

Why China Must Change
Thomas I. Palley
November 28, 2005


Dr. Thomas Palley was chief economist of the US–China Economic and Security Review Commission. Prior to joining the Commission, he was director of the Open Society Institute’s Globalization Reform Project. He has written for The Atlantic Monthly, American Prospect and The Nation magazines. He can be reached at www.thomaspalley.com.

For the past five years, the global economy has been flying on one engine. That engine is the U.S. consumer who has been on a consumption binge financed by borrowing—in turn backed by a housing price bubble. This situation poses the threat of a serious hard landing when that engine eventually stalls, as it must. Ever-inflating house prices and rising debt-to-income levels are not sustainable. And as the late Herbert Stein, chairman of President Nixon’s Council of Economic Advisers, wryly observed: “If something cannot go on forever, it will stop.”

This view, regarding the global economy’s excessive dependence on the United States and the financial fragility of the U.S. economy, is not just held by progressive economists. It is also shared by Wall Street. Thus, Stephen Roach, chief economist for Morgan Stanley, recently wrote in the Financial Times (Nov. 4, 2005): “there is now about a forty percent probability of a hard landing in the next twelve months.” And in a research brief, Roach singles out China as being particularly dependent on the U.S.: “China’s export prowess is balanced on the head of a pin—a pin made in America. Fully thirty-five percent of Chinese exports go to the United States.”

Roach’s Wall Street warnings are sobering. But they miss a more profound point, which is that the global economy has been heading in the wrong direction, hollowing out the middle class in America while failing to create a big enough middle class in the developing world. That hollowing-out process has long been visible in U.S. statistics on wages and family income distribution, and it has been rendered keenly concrete by Delphi Corp.’s recent bankruptcy filing. It is only because of successive stock market and housing price bubbles, combined with a massive increase in consumer access to credit, that the hollowing-out has not been worse.

The cause of these dangerous trends is the flawed structure of the global economy. Spurred by our own policy makers, the International Monetary Fund and the World Bank, developing countries have adopted an export-led approach to manufacturing growth and development. This approach has two critical features. First, countries rely on selling in foreign markets rather than their own domestic markets. Second, countries use undervalued exchange rates to subsidize their products, thereby making them hypercompetitive. China exemplifies this model, exporting more than half of its manufacturing output and having an exchange rate that is up to 40 percent undervalued.

The focus on export-led growth has distorted the global economy. First, it has created the global financial imbalances that Wall Street is so apprehensive about, as manifested in the record U.S. trade deficit. Second, U.S. manufacturing has been undermined by unfair competition subsidized by under-valued currencies. This, in turn, has accelerated the hollowing of America’s middle. Third, export-led growth promotes the global race-to-the-bottom since countries look for international competitive advantage however possible. Consequently, workplace standards, wages and the environment are all subject to persistent retrograde pressures, impeding the development of a middle class in developing countries.

The implication is that the global economy must shift from export-led development to domestic market-led development. In an export-led world, higher wages undermine employment. In a domestic market-led world, higher wages can promote employment. This is where labor standards and unions enter. The challenge is to establish a system that has wages rising with productivity so that workers can buy what they produce, rather than dumping it on world markets. Setting wages by government edict does not work, as evidenced by the former socialist economies. Instead, labor standards and unions are the way forward, since they provide a decentralized mechanism that links wages and productivity through bargaining. History supports this. Every country that has ever made the transition to developed industrialized status has traveled this route.

China is the poster child for export-led manufacturing growth. It has the most undervalued exchange rate, the worst labor repression, and is by far the largest developing country exporter. As such, China is the gravitational attractor for the race to the bottom. Other countries must change too, but they can only do so if China changes so that none lose relative competitive advantage. If China revalues its exchange rate, other East Asian countries can also do so. Likewise, if China raises wages, so too can others.

One area where China is showing leadership is its stated commitment to increase social spending. This will be good for China’s citizenry, and it will also contribute to incomes and domestic demand in China, which will be good for the global economy. However, there is also a problem that is unique to China. Labor standards and trade unions are key to domestic market-led development, but China’s political system prevents them. That creates an additional political roadblock that must be solved. Democratic reform in China is not a nicety. It is a necessity for the global economy to work.

US And China Hold New Strategic Talks
http://www.spacewar.com/news/superpowers-05zc.html

Washington (AFP) Dec 07, 2005 - Senior US and Chinese officials opened a new round of strategic talks here Wednesday amid concern among Washington and its allies over Beijing's growing military and economic clout.

Al Qaeda’s Passage to China

Exclusively from DEBKA-Net-Weekly 230

December 6, 2005, 10:26 PM (GMT+02:00)



In mid-September, Al Qaeda diverted a small but potent force from Iraq to a new mission: the opening of a new front in China. The unit was smuggled into the Chinese border town of Kushi in the Xinjiang Uygur province in November, after a meandering journey traced by DEBKA-Net-Weekly’s counter-terror sources. There, the terrorists were quickly absorbed by the al Qaeda infrastructure of local Uygur Muslim extremist cells.

(See DEBKA Exclusive Map attached to this article.)

Their plan of campaign in the first stage was to reach Beijing, Guangzhou and Shanghai for strikes against US embassies and consulates, American firms operating in China and American tourists.

To subscribe to DEBKA-Net-Weekly click HERE .


(This al Qaeda group was previously revealed by DEBKA-Net-Weekly 229 on Nov. 11 [A Jihadist Airlift] as having set out from Baghdad between mid-September and early October, stopping over in Qatar and proceeding to Konduz in northern Afghanistan for special training.)

DEBKA-Net-Weekly’s sources report the terrorists slipped north from Konduz into Tajikistan and onto the Kyrgyz section of the strategic Fergana Valley which straddles Central Asia. There, they rendezvoused at two places, Osh and Jalal-Abad close to the Kyrgyz-Uzbekistan border, establishing jumping-off points for both China and Central Asia.

The Islamist terrorists were guided from Konduz into Kyrgyzstan by armed men of al Qaeda’s operational arm in Uzbekistan, the MUI, which also has tentacles in Kyrgyzstan and Tajikistan, as well as training camps in the Fergana Valley. The commander of these cells is Tahir Yuldashev, an old comrade of Osama bin Laden who fought alongside him in Afghanistan. In 2004, Yuldashev returned to Tashkent from the badlands of Pakistan’s South Waziristan and was ordered to prepare facilities in Osh and Jalal-Abad for the incoming terrorist unit. His payment was a section of the force to boost his campaign against Uzbek president Karimov.

The unit from Konduz accordingly divided into two heads – the largest proceeding from Osh into China and fetching up in Kushi, while the second group assembled in Jalal-Abad, turned west and crossed into Uzbekistan to set up base in the Fergana town of Andijon.

American and British military and intelligence officials picked up the group’s arrival at the Konduz training facility, but decided after consultation that the large-scale forces needed to eradicate the facility would be hard to muster. They therefore resolved to await events and meanwhile find out where the mysterious al Qaeda force was heading.

According to DEBKA-Net-Weekly’s intelligence sources, Washington reported the arrival to Moscow, hoping the counter-terror-trained Russian Motorized Rifle Division 201 stationed in Uzbekistan would step in to wipe out the al Qaeda intruders. The Russians declined to take action, but said they would not object to Beijing sending Chinese troops over the border to tackle the incoming terrorists.

This was the first time Moscow had ever consented to the Chinese military stepping into Central Asian soil and joining the war on terror in that region.

Clearly, the Kremlin, which frowns on American military bases and movements in Central Asia, was not eager to pull American chestnuts out of the fire

The skirmishing between Washington, Moscow and Beijing over who should tackle the al Qaeda menace – if anyone – had the result of opening the door for al Qaeda to move a force across half the globe from Iraq to the Far East unhindered and plant it in western China and eastern Uzbekistan.

The Chinese government was caught totally unprepared and did its best to tune out the loud alarums sounded by Chinese military and security chiefs.

However, on November 9, the Chinese police alerted the US embassy in Beijing to a possible attack by Islamic rebels on luxury hotels throughout China. The US embassy accordingly advised American visitors to “review their plans” to stay at four- and five-star hotels in China over the coming week.

A sharper notice was issued in the southern Chinese town of Guangzhou relaying “credible information” that a terrorist threat may exist against official US government facilities in the city. American citizens in south China were advised to remain alert to possible threats.

China’s Ministry of Public Security responded to these warnings, which were obviously sourced in Chinese police circles, with anger. A statement accused an unnamed “foreign citizen” of fabricating the so-called attack on four- and five-star hotels in China. The Chinese foreign ministry chipped in with, “Chinese public security has never issued such a warning for foreigners on the hotel issue,” its spokesman told reporters. “Chinese hotels are safe!” he added.

US officials diplomatically withdrew their terror alert notice.

However, while Chinese officials are doing their utmost to calm fears that could affect the tourist industry, DEBKA-Net-Weekly’s counter-terror sources affirm that a terror alert is indeed in force in Chinese cities.

http://www.guardian.co.uk/comment/story/0,...1661596,00.html

China is well on its way to being the other superpower

The rapidity of the Asian giant's rise is overturning western received wisdom about politics and the shape of the global future

Martin Jacques
Thursday December 8, 2005
The Guardian


The past two or three years have marked a new moment in the global perception of China. There is suddenly a new awareness that encompasses both a recognition of China's economic transformation and an understanding that, because of its huge size and cohesive character, it will have a profound impact on the rest of the world, albeit in ways still only dimly understood. Until recently, China's economic rise always seemed to be qualified by the rider that something was likely to go amiss - a rider that is now rarely heard. China has arrived and will increasingly shape our future, not just its own.

A number of factors lie behind this new global perception of China: its continuing staggering growth; the recognition that China is a major factor in the rise in oil prices; the fact that Chinese oil majors have become players in countries such as Sudan and Iran; the (unsuccessful) attempt to take over the US oil company Unilocal; the recognition that Chinese companies will increasingly become global players (of which Chinese involvement in Rover is a foretaste); the almost universal dawning that Chinese production is driving down the prices of footwear and clothing, and western fears for domestic textile industries; and the Pentagon report earlier this year warning that Chinese military expenditure will grow significantly, and that it might be driven by energy concerns and expansionary desires.
Recognition of the new reality is provoking an intense debate among national policy elites, including China's. How should countries respond to China's new position and power - and how should China use it? These are questions that more or less everywhere - except perhaps Japan - are still in the melting pot, not least in the US. Over the next decade, perhaps rather less, positions will begin to be struck that will have huge consequences for the world. But we can already list the ways in which this new perception of China's rise has served to change the nature of the debate about China itself and about the shape of the global future.

In the 1990s, the process of globalisation was overwhelmingly seen as a process of westernisation. That hubris has receded in the wake of China's rise. There are few who believe that China's modernisation will simply result in a western-style state. On the contrary, there is an implicit recognition that China will be a very different kind of nation in almost every respect. Moreover, it would appear that China has been as much a beneficiary of globalisation as the US, perhaps more so.

A widespread belief that the 21st century would be an American century found even clearer expression in the aftermath of 9/11, with the pursuit of the neoconservative project. However, as doubts grow about America's enterprise in Iraq, and more widely in the Middle East, there is a recognition that China is now a serious candidate to assume the role of "the other superpower". It is projected that China will overtake the US in terms of GDP purchasing power parity before 2020. The American century could turn out to be more like a half-century.

There is a growing understanding that the future is unlikely to be dominated by the western world in the manner of the past two centuries. The major reason for this shift in perception is the rise of China and, to a lesser extent, India - which together account for well over a third of the world's population. The world is likely to look very different from the one with which we have become so familiar - and comfortable - since Britain's industrial revolution began in the 18th century.

From 1800 - some would argue much earlier - and until very recently, the centre of global developments was Europe. Admittedly, its hold became tenuous after 1945, but its bisection by the cold war faultline sustained its status - a status that was lost with the events of 1989. Now, without question, the most important region in the world is east Asia. It is economically the strongest, outdistancing both North America and Europe by some considerable margin. The main reason, of course, is China, together with Japan and, to a lesser extent, the Asian tigers. But east Asia's centrality is not just a question of economic strength, even if this underpins it - east Asia is also where the future will be played out, where the world will first see the wider meaning and implications of China's rise: not least in growing Sino-Japanese tensions, and in increasing pressure on the US's role in the region.

The rise of China contradicts the commonsense view in the west, particularly strong in Europe, that the nation-state is in decline and that the future belongs to unions of nation-states, along the lines of the European Union and Asean. On the contrary, the rise of China - and India - marks the ascendancy of a new kind of mega-nation-state, which, together with the US, the EU, Japan and Russia, will dominate the 21st century.

In the 90s, after Tiananmen Square, China was overwhelmingly seen through the prism of human rights and democracy. For a long time it was virtually impossible to start a discussion in the west about China except in these terms, or when this question was a central part of the agenda. This remains part of the western agenda, but a much less important one in the light of China's stunning transformation. The question of western-style democracy remains no closer now than it was in the wake of Tiananmen. On the contrary, the regime has not only survived but prospered to an extraordinary extent over the last quarter-century.

The final point is the least recognised and least discussed, but it is none the less a striking feature of China's rise. And it presents us with a profoundly paradoxical feature of the era in which we live. The events of 1989 represented the end of European communism. The Chinese Communist party was expected to go the same way - wasn't that supposed to be the import of Tiananmen? We couldn't have been more wrong. What everyone expected never happened. A communist party is presiding over arguably the most remarkable economic transformation in human history. It is true, of course, that the Chinese party is a very different creature to its European counterparts, not least in its ability, since 1978, to undertake the most extraordinary regeneration. This paradox presents us with one of the great enigmas of the early 21st century.

But these points, profound as they are, are merely the hors d'oeuvre to the kind of impact that China will have on the world over the next few decades.

· Martin Jacques is a visiting professor at Renmin University, in Beijing

Martinjacques1@aol.com

Taiwan Set For Delivery Of Two US-Built Kidd-Class Destroyers
http://www.spacewar.com/news/taiwan-05zn.html

Taipei (AFP) Dec 06, 2005 - The first two of four Kidd-class destroyers sold to Taiwan by the United States are due to arrive at the weekend, bolstering the navy's defense capabilities against rival China, a navy spokesman said Tuesday.

China Responds To UN Torture Report
http://www.spacewar.com/news/china-05zzzzzzzzzzzu.html

Beijing (UPI) Dec 06, 2005 - China Tuesday denied allegations made by the U.N.'s Special Rapporteur on Torture last week, who said the illegal practice remains ubiquitous in the country.

Chinese PM Eyes Nuclear Future In France
http://www.terradaily.com/news/nuclear-civil-05zzzw.html

Cadarache, France (AFP) Dec 06, 2005 - China's push to develop its nuclear technology to meet skyrocketing energy needs dominated the third day of a visit to France by Chinese Prime Minister Wen Jiabao's on Tuesday.

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China Says Hacking Illegal After US Computer Attacks
http://www.spacewar.com/news/cyberwar-05zzr.html

Beijing (AFP) Dec 13, 2005 - China reacted Tuesday to speculation that its military was trying to penetrate US computer networks, saying hacking was against Chinese law.

EU Arms Flow To China Despite Ban
http://www.spacewar.com/news/milplex-05m.html

Brussels (UPI) Dec 13, 2005 - Despite the European Union's arms embargo against China, EU weapons manufacturers bagged $405 million worth of licenses to sell military goods to the communist state and exported a further $86 million of hardware in 2004, official figures obtained by United Press International show.

- Taiwan Leader Urges Support For Controversial Arms Package
http://www.spacewar.com/news/taiwan-05zo.html

Taipei (AFP) Dec 17, 2005 - Taiwan's president renewed his call for the opposition to support a controversial arms deal with the United States on Saturday as the island's navy inaugurated two US-built Kidd-class destroyers.

Bush Authorizes Export Of Sensitive Equipment To China
http://www.spacewar.com/news/superpowers-05zj.html

Washington (AFP) Dec 16, 2005 - US President George W. Bush authorized Friday the export to China of certain sensitive equipment for a railroad project, saying it would not pose a threat to the US space industry.

China accuses Japan FM of irresponsible remarks
http://www.sinodaily.com/2005/051222073556.j61sw1zt.html

Japan says China "considerable threat"
http://www.sinodaily.com/2005/051222065829.u10yr2l5.html

China Punishes General for Talk of Strike at U.S.
(Reuters)

Thursday, December 22
A Chinese general has been punished for telling reporters that China could use nuclear weapons in the event of U.S. intervention in a conflict with Taiwan, military sources said Thursday.

Major General Zhu Chenghu received an "administrative demerit" recently from the National Defense University, which bars him from promotion for one year, said the sources, who requested anonymity.

" He misspoke," one source said. "But the punishment could not be too harsh or we would be seen as too weak toward the United States." An administrative demerit is the second lightest punishment on a scale of one to five, but still potentially damaging to an officer's career. The lightest is an administrative warning, while the heaviest is expulsion.