A SUCCESSFUL SUMMIT OPINION (PEOPLE'S DAILY, APRIL 25): One thing is certain, that is the positive impact on bilateral ties or even international relations generated by the direct dialogue between top leaders of the world's largest developing and developed countries.
http://english.people.com.cn/200604/26/eng...426_261402.html

HU US VISIT: WHICH PRESIDENT LOST FACE? ECCENTRIC STAR (APRIL 25): THE ANSWER, OF COURSE, IS BOTH.
Http://eccentricstar.typepad.com/ (SCROLL DOWN LINK FOR ITEM)

BUSH-HU MEETING A BLOWN OPPORTUNITY: US-CHINA SUMMIT LEAVES STRATEGIC RELATIONSHIP UNEXAMINED IVAN ELAND (ANTIWAR.COM, APRIL 25)
http://www.antiwar.com/eland/?articleid=8894

A LESS THAN SATISFYING VISIT EDITORIAL (JAPAN TIMES, APRIL 25): The U.S. ? Chinese relationship will only get more complex.
http://search.japantimes.co.jp/cgi-bin/ed20060425a1.html

THE US FORGETS ITS MANNERS - TODD CROWELL (ASIA TIMES, APRIL 25): Considering the detailed planning put into Hu's Washington visit, it's hard to understand how things could have fouled up so badly.
http://atimes.com/atimes/China/HD26Ad01.html
TEXT OF ENTRY FROM
http://atimes.com/atimes/Front_Page.html

GO WEST, OLD MEN - THOMAS L. FRIEDMAN (NEW YORK TIMES, APRIL 26): Washington, D.C., has nothing to talk to China about because it is unwilling to impose anything hard on itself and therefore cannot demand anything hard from China.
http://select.nytimes.com/2006/04/26/opinion/26friedman.html
PAID SUBSCRIPTION

- China To Build A Space Station After Shenzhou 7
http://www.spacedaily.com/reports/China_To...Shenzhou_7.html

Beijing (XNA) Apr 27, 2006 - China will launch Shenzhou VII with three astronauts in September 2008, after the Beijing Olympic Games, said Song Zhengyu, deputy director-designer of carrier rocket F of March II and research fellow of the first institute of the China Aerospace Science & Technology Corp (CASTC).

- US And China To Discuss Space Cooperation
http://www.spacedaily.com/reports/US_And_C...ooperation.html

- Thai Telecom Giant To Launch Broadband Internet Service In China
http://www.spacedaily.com/reports/Thai_Tel...e_In_China.html

Bangkok (AFP) Apr 25, 2006 - Thailand's Shin Satellite said Tuesday it has sealed a deal to provide broadband Internet services to China through the company's iPSTAR satellite.

http://www.atimes.com/atimes/China_Business/HD28Cb01.html
Hong Kong's latest bubble
By John Berthelsen

HONG KONG - On December 18, 2003, China Life Insurance, China's biggest life insurer, scored what should have been a huge triumph: a listing on the New York Stock Exchange for US$3.5 billion in American Depositary Receipts (ADRs). It was the biggest initial public offering (IPO) of the year, a symbol of what the new China, freed from its socialist shackles, was about to become.

The unintended consequences of that listing are still being felt: it inadvertently turned Hong Kong into the financial capital of Asia. But China Life's triumph turned to disaster when the country's National Audit Bureau forced the insurer to admit that its state-owned parent had committed "accounting irregularities" worth $650 million, spawning a massive shareholder suit by foreign investors and a probe by the US Securities and Exchange Commission into fraud and misstatements in China Life's prospectus prior to listing.

Since the China Life debacle, corporate China has conspicuously pulled back from the "Big Board" in New York. Since the start of 2004, only two major companies - the fixed-line telecommunications provider China Netcom Group and Semiconductor Manufacturing International Corp - have listed there. Last week, the Bank of China, the country's third-biggest bank, announced it was seeking regulatory approval for an US$8 billion listing - in Hong Kong, not the United States.

With the domestic Shanghai and Shenzhen markets remaining moribund, capital-hungry companies have flooded instead into the Hong Kong Special Administrative Region (SAR). But if the past is any prologue, that shift spells danger for investors. At some point, the confluence of Chinese companies with no semblance of rigorous corporate governance and the torrent of money pouring into Hong Kong is going to spell disaster.

But not yet - though in mid-April, foreign investors showed signs of backing away from Asian markets as they soared to a 16-year high, stretching valuations to their highest levels since the dot-com bust of 2000. Last year, Hong Kong edged out Japan to become the top-ranked market in Asia for capital raised, and was ranked fourth worldwide, at US$37.8 billion. In terms of market volume, Hong Kong ranked second in Asia and eighth in the world, with turnover at a record HK$4.5 trillion (US$580.3 billion) and market capitalization rising to US$1.05 trillion, up 20% over 2004.

Until last week, hot money, the funds that slosh from one side of the planet to the other as investors move from one investment arena to another for what they hope is high short-term gains, has moved into Hong Kong as if 1997, the year of the Asian financial meltdown, had never happened, nor the dot-com bubble that followed in 2000. On April 5, the Hang Seng Index rose by 331 points as institutional investors, many from the Persian Gulf oil states, poured into the market.

Since 2000, the Gulf countries have accumulated more than US$1 trillion in oil revenues. Arab-world outrage after public and political sentiment in the United States forced the United Arab Emirates-owned DP World to transfer its US ports operations to an as-yet-unformed US entity has reportedly resulted in the diversion of huge amounts of petrodollars from the United States into other markets. Hong Kong has been a particular beneficiary.

Some analysts question the wisdom of several of the investments. As an example, says the head of sales for a Dubai-based global investment fund, look no further than Hunan Nonferrous Metals Co, an obscure Changsha-based metals producer that listed in Hong Kong on March 21. Its 1.09 million shares were oversubscribed 701 times, with Hunan raising US$227.5 million in new funds.

The oversubscription "is indicative of the huge amounts of liquidity pouring into the market", the Dubai sales trader said. Nor, he said, is the phenomenon limited to Hong Kong. Markets across the world are at five-year highs as traders pour too much money into too few stocks.

The Chinese companies aren't choosing the Hong Kong market because of its geographical proximity. Most don't dare list in the US. Their bete noire is Sarbanes-Oxley, a US law named for its architects, Senator Paul Sarbanes and Congressman Michael Oxley. The reform legislation was passed by the Congress in 2002 in the wake of the massive Enron meltdown and other scandals that crashed the US markets.

Sarbanes-Oxley, now known as SOX, requires strengthening corporate governance by corporations seeking to trade on US exchanges. Regarded as draconian by financial markets, SOX is probably the most stringent law in the world governing major capital markets. Among other things, it requires company executives to accept personal responsibility for any material misstatements due to error or fraud. Boards of directors, once the cozy preserve of the chief executive officer's friends, must now be composed of a majority of independent directors.

This is not something that China Life's company officers, to their sorrow, apparently considered on their way to the market. But the officers of Chinese banks and other firms planning IPOs took serious notice. Fortunately for them, being blocked by generally accepted accounting practices from listing in the US turned out not to be much of a handicap. China's newly listing companies simply dropped their US plans and listed in Hong Kong, where a flood of foreign investors found them anyway.

Mind you, Hong Kong listings don't attract subscriptions as big as they do in the US. But for most of those going to market, getting there at all is fine. Given China's notoriously poor corporate governance, the cost of producing accounts that comply with US accounting standards is prohibitive. Companies must provide three years of year-end financial data and in some cases five. Many of China's banks simply don't have that information, and the ones that do are rife with fraud. Cleaning up the balance sheets of China's big four banks, presumably the best of the lot, has taken years and at least US$260 billion in recapitalization from the central government. In addition, the four asset-management companies set up to peddle dud assets are selling off many of them for pennies on the dollar.

As David Webb, a onetime investment banker turned independent Hong Kong financial gadfly, pointed out in an October newsletter prior to the listing of China Construction Bank, recapitalization efforts "have taken all the bad loans out of the bank, but what about the bad lenders? Do you really believe that thousands of semi-autonomous branches have suddenly discovered the art of credit analysis and that the local Communist Party cadres and bribe-waving wanna-be tycoons will leave them alone to make good lending decisions?"

Webb, a non-executive director of the Hong Kong Stock Exchange, said in an interview that "the banks are not going to go sour straight away. They will succeed in floating the Bank of China this year, but it takes a long time for banks to accumulate ... problems. They will make new loans and later [these] will start to be recognized as bad debts. You can expect an accumulation of bad debts and a banking crisis in about five years."

China Construction Bank, characterized by Webb and others as "China Corruption Bank" because of the jailing of former chairman Wang Xuebing for offenses committed when he was with the Bank of China, listed last October. It was the largest IPO in Hong Kong history, obtaining HK$71.5 billion, or 43% of all the money raised in the SAR in 2005.

There are other ominous portents besides the 1997 Asian financial meltdown and the bursting of the 2000 dot-com bubble. Last year, Chen Jiulin, the former head of China Aviation Oil (Singapore) Corp, pleaded guilty to six charges of fraud in a scandal that nearly sank China's biggest jet-fuel trader, acknowledging that he had failed to disclose a US$550 million trading loss and deceived the company's adviser, Deutsche Bank. It was Singapore's worst financial scandal since the bankruptcy of Barings Plc caused in 1995 by trader Nick Leeson, who cost Barings US$1.4 billion in trading losses.

Could the soaring Hang Seng be ripe for a fall? Webb pointed out that only about 20% of the companies listed in Hong Kong are actually domiciled here. "For the new ones," he said, "very few are [headquartered] in Hong Kong. They are in Bermuda or the Caymans or [mainland China]."

Of course, systemic problems can be addressed. But is there any reason to believe that Hong Kong's regulators would be better at doing this than those elsewhere? Enron went under in the US in 2001. It has taken five years to get Kenneth Lay, Enron's former chairman and CEO, and Jeffrey Skilling, his successor, in the dock, but they are finally there. Would corrupt company officials go into the dock in Hong Kong?

The SAR's regulators, never that strong in the first place, have always had a knack for placating the markets. On March 26, Webb pointed out, the exchange scrapped a requirement for listed companies to disclose large accounts receivable, which could have warned investors about impending disaster.

"Dressed up as a 'minor and housekeeping' rule amendment without consultation, the change is illustrative of the urgent need to increase investor representation on the Listing Committee, to produce pro-investor policy reform," Webb wrote.

So at some point, with 80% of the newly listed companies on the Hong Kong market domiciled overseas, the SAR's regulators are going to have an interesting time catching up with them if and when yet another bubble bursts.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing .)

- China Successfully Launches Remote Sensing Satellite
http://www.spacedaily.com/reports/China_Su..._Satellite.html

Taiyuan, China (XNA) Apr 28, 2006 - China successfully launched a remote sensing satellite and put it into preset orbit Thursday morning, the first of a series of space launches planned by China this year.

- China Denies It Ignores Human Rights Abuses In Pursuit Of Oil
http://www.terradaily.com/reports/China_De...uit_Of_Oil.html

Beijing (AFP) Apr 27, 2006 - China rejected accusations Thursday that it ignored human rights abuses in countries such as Sudan as it searched for oil and other natural resources to fuel its rapidly growing economy.

http://www.atimes.com/atimes/China_Business/HD29Cb02.html
RFID: New markets for an old technology
By Fred Stakelbeck

First used during World War II to identify aircraft as friend or foe, radio frequency identification (RFID) systems have become increasingly visible worldwide. They are used in the United States and Europe for physical access control, passport identification and records management.

Last May, Venture Development Corp, a technology and market research firm, noted, "The global market for RFID systems revenues will grow by approximately 36% annually through 2008, with long-term growth outpacing short-term growth - revenue will reach nearly US$5.9 billion by 2008." Much of the growth will come from China.

Generally, RFID systems consist of four distinct components: a transponder or "tag", a reader, a database and a software program. Tags can be either passive, with no independent power source and a limited read range, or active, containing an independent power source that transmits a continuous signal. RFID tags are normally attached to, or embedded in, an object requiring identification, such as a pallet or payment instrument.

Roughly the size of a grain of rice, RFID tags contain an integrated circuit that stores a unique serial number or other information based in the tag's memory. An antenna transmits information to a receiver, called a reader, that sends a signal to the tag and receives and stores the responses for transfer to a data-management system.

The benefits of RFID technology are improved handling efficiencies, traceability, and immediacy of data capture. The technology helps business because of its ability to maximize operating income by minimizing capital costs. Strategic business objectives are met by increasing revenue through reduced order-cycle times, eliminating manual inventory counts, and maximizing shipping and receiving efficiencies. The technology also optimizes assets by reducing inventory and improving forecast accuracy and enhancing safety and quality control by improving responsiveness to product recalls.

China offers an intriguing market for the future acceptance, development and implementation of RFID technology. Early indications are that the technology is already taking hold. In February, Beijing-based Analysys International, an information services provider, reported that China's RFID market grew 8.6% in the fourth quarter 2005, with most of that growth concentrated in the identification-card and public-transportation sectors.

"Once this market blows out, it will become a multibillion [dollar] business," said Tom Grant, chief executive officer at ThingMagic, a US-based manufacturer of readers, sensors and related equipment.

So far, the government has been the key driver in the early development of RFID technology in China. Under the "Golden Card" project, launched in 1993 to promote the use of credit cards, individual identification cards with embedded RFID chips were vigorously promoted. As a result, more than 900 million RFID-enabled identification cards are expected to be issued by the end of 2008. Moreover, the Ministry of Information Industry (MII) announced that China's 11th Five-Year Plan would include a comprehensive RFID plan as one of the country's six major information-technology initiatives.

At the fourth RFID Application Summit Forum held in Shenzhen recently, Dai Dingyi, deputy director of China's Logistics Network Alliance, noted that RFID adoption in China was growing "faster than expected" and that the technology had already been adopted in a wide variety of fields, such as anti-money-laundering systems, traffic monitoring, logistics and manufacturing.

The crowded ports of Hong Kong and Shenzhen currently use RFID systems to manage cargo shipments, and last month Beijing Capital International Airport announced plans for an RFID system for outbound luggage transport and security checks. In addition to government-related applications, RFID technology has been considered for use by the country's retail sector. Venture Development Corp, a technology market research firm, recently reported that RFID technology in the global retail sector reached $161 million in 2005 and is expected to reach $1.5 billion by 2010.

According to analysis by Research and Markets, an international market research firm, China is expected to use 5 trillion tags annually within the next several years. A large number of those tags are expected to be used in products supplied to Wal-Mart, the world's largest retailer and a key advocate for the use of RFID technology.

The most likely area for implementation will be in supply-chain management for the country's vast manufacturing sector, as costs associated with tags, equipment and services decrease making them more affordable for small businesses.

In an interview with ChinaTechNews.com last month, Edward Zeng, founder of SparkiceLab, a business-to-business global commerce provider, noted, "China is the world's manufacturing hub. It is 'ground zero' for innovations and applications in the development of manufacturing infrastructure and capabilities. China is a starting point for a huge chunk of the global supply-chain."

According to Zeng, almost half of all RFID tags will be sold in East Asia by 2010.

Obstacles to implementation
Although positive signs exist for the eventual acceptance of RFID technology in China, significant obstacles remain. Technical difficulties such as the placement of tags, transponder read-rate accuracy, and patent-infringement lawsuits, as well as market trends caused by "over-hyping" of the technology and the large number of trial applications, continue to plague early implementation efforts.

A much more controversial and problematic issue is China's continued effort to introduce its own RFID national standard. By rejecting the widely accepted Electronic Product Code (EPC) standard, a tag serial-numbering system promoted by EPCGlobal for international use, Chinese officials hope to avoid paying costly royalties. But this delivers a serious setback to global standardization.

In March, Chen Wei, a representative of the MII, said that China would press ahead with an national standard. According to Wei, the main obstacles to a national standard have been disagreements among concerned parties within China and the ability of the country's national standard to operate with the three other international standards - ISO/IEC 18000, EPCGlobal and Ubiquitous ID.

At present, several Chinese working groups are heavily involved with RFID-related issues. In 2004, the Standardization Administration of China established a National RFID Standards Working Group to draft and develop a national standard. The Leading Working Committee for RFID, a government-sponsored working group in Shenzhen, has worked diligently to promote RFID applications.

In addition, the Article Numbering Center of China's Electronic Product Code (EPC Global-China) Working Group and the China Electronic Standardization Institute's (CESI) RFID Working Group are all focused on RFID-related issues. Currently, the Ministry of Science and Technology and 13 other Chinese government departments are drafting a white paper on RFID in China, which will set the general direction of RFID development for the country.

The International Association of Countries and the International Electrotechnical Commission are actively involved in setting international RFID standards using a process whereby representatives from interested countries and business sectors undertake consensus-based decision making. The Auto-ID Center, the Electronic Article Numbering Association (EAN) and the Uniform Code Council (UCC) are also key groups working on the development of international standards.

If China does decide to adopt its own proprietary RFID national standard, it may be in conflict with the supply-chain mandates of important foreign companies such as Wal-Mart, Target and Tesco, raising significant interoperability issues. In particular, Wal-Mart, which purchased an estimated $20 billion of Chinese products in 2005, has already endorsed the existing EPC standard. For purposes of standardization, software data formats, transmission capacity and the frequency range of RFID tags are also important topics that will require further discussion.

In addition to standardization issues, RFID technology raises important legal, ethical and privacy questions that remain largely unanswered. For example, what legal rights do Chinese citizens have if they feel their privacy has been violated? Which government agency or agencies will ultimately be responsible for the collection and maintenance of RFID-related data?

Last month, researchers at Vrije University in Amsterdam released the results of a study that showed that tags may be vulnerable to viruses that could harm computer databases, raising questions regarding the technology's long-term viability.

But for China, it is no longer a question of "if" RFID technology will take off, but "when?" Claus Heinrich, a member of the executive board of SAP AG, a leading provider of business software solutions, noted in March, "With China's ever stronger role in the global economy, it is crucial for the country to leverage new technologies such as RFID. Its adoption in China will drive supply-chain efficiency, visibility and adaptability for companies of all sizes and industries worldwide."

China is at an important point in the early acceptance, development and implementation of RFID technology. Beijing, along with domestic and foreign RFID vendors, retailers, international standards organizations and the country's manufacturing sector, must work together to address the outstanding concerns expressed by both businesses and consumers. If cooperative and open dialogue occurs, the future should be bright for the spread of RFID technology in China.

Fred Stakelbeck is an expert on bilateral and trilateral alliances as they relate to China's foreign policy. His writings address the implications of China's emerging regional and global strategic influence and relationships with US national security. He can be reached at Frederick.stakelbeck@verizon.net

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing .)

_ http://www.businessday.co.za/PrintFriendly...x?ID=BD4A192561
Friday, 28 April 2006 close window

China signs oil exploration deal in Kenya
Reuters

Kenyan President Mwai Kibaki and his Chinese counterpart Hu Jintao walk after inspecting the guard of honour at Nairobi State House. Hu concluded an offshore exploration deal with Kenya. Picture: AP


NAIROBI - Chinese President Hu Jintao on Friday wrapped up a world shopping trip for oil supplies to fuel his booming economy by concluding an offshore exploration deal with Kenya.

The deal was one of a clutch of bilateral agreements signed at the end of the five-nation tour, which has cemented Beijing’s economic and political clout, especially in Africa where it seeks raw materials to feed its economy.

The pact allows China’s state-controlled CNOOC Ltd to explore in six blocks covering 115,343 sq km in the north and south of Kenya, which produces no oil but has attracted foreign companies sniffing after possible reserves.

"If they discover oil we will go into production sharing agreements," Kenya’s acting energy minister Henry Obwocha told Reuters, saying Chinese exploration would start soon.

The exploration agreement covers 20 years, he said, giving no financial value for the deal.

The other China-Kenya deals, which came two days after Beijing struck a $4bn deal for drilling licences in Nigeria, included grants for economic and technical cooperation, anti-malarial medicine and rice.

Hu’s delegation also agreed to maintain a Chinese-built sports stadium, help carry out a feasibility study into revamping Nairobi’s potholed roads and patchy street-lighting, as well as providing exchange programmes for Kenyan students.

For its part, Kenya, which backs Beijing’s sovereignty over all of China, said it would oppose the island of Taiwan if it declared independence from the mainland.

"The Kenyan government expressed its opposition to ’Taiwan independence’ in any form and expressed its support for China’s efforts to realise national reunification," Foreign Minister Raphael Tuju said, reading a joint communique.

Kenya and other African countries are eager for investment from China, which offers aid without demands for good governance, unlike Western donors.

Hu reiterated China’s stance of non-intervention in other countries, which critics say allows Beijing to turn a blind eye to human rights abuses, corruption and political repression.

"We pursue a policy and ... the principle of non-interference in others’ internal affairs," Hu told reporters.

Last year, China handed Kenya $36,51m in aid, mainly to modernise its state-run power firm.

China’s offer of "no strings" aid may be welcomed in the east African country, under Western pressure to tackle rampant corruption. But critics say a flood of cheap Chinese imports is the price Kenyans pay for Beijing’s "good will".

"We want the trade between us to grow," Trade and Industry Minister Mukhisa Kituyi told reporters. "But we want to see more ’made in Kenya’ available in China," he said, urging China to drop its opposition to a preferential trade deal between African textile producers and the US.

China’s exports to Kenya were worth $457 million in 2005, a 31% increase on the previous year, while imports from Kenya rose only 4% to $17,6m.

Kenyan businessmen say this huge imbalance could be offset if China would use its expertise to help foster domestic industry and encourage its expanding middle class to visit Kenya’s scenic game parks and beaches.

"If we could only attract 1% of the Chinese population to travel to Kenya as tourists, imagine the huge amounts to be earned in foreign currency," one commentator, George Mutua, wrote in the Daily Nation.

Kenya was the final stop of a tour that has taken Hu to the US, Saudi Arabia, Morocco and Nigeria.


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http://news.yahoo.com/s/ap/20060430/ap_on_...HE0BHNlYwN0bWE-





China's Church Defies Vatican Objections
By ALEXA OLESEN, Associated Press WriterSun Apr 30, 11:48 AM ET

China's state-sanctioned Roman Catholic Church ordained a new bishop Sunday, rejecting the Vatican's request to delay the appointment and threatening efforts to restore official ties between the sides after five decades.

China's Foreign Ministry defended the official church's right to ordain bishops without Vatican input and called the Holy See's criticism of such appointments "groundless."

The ordination could damage recent efforts to restore Sino-Vatican ties, cut in 1951 after the Communist Party took control in China. One of the stumbling blocks in improving relations has long been a dispute over who has the authority to appoint bishops.

"The recent ordination of bishops at some diocese have been unanimously well-received by church members and priests," the Foreign Ministry said in a faxed statement. "The criticism toward the Chinese side by the Vatican is groundless."

China's church — the Chinese Patriotic Catholic Association — held a ceremony for the new bishop, Ma Yinglin, in the city of Kunming in southwestern Yunnan province.

Hong Kong Cable TV showed Ma wearing his new bishop's hat and carrying an ornate gold staff as he waved to the faithful.

Before the ceremony, the TV report showed a long line of clergy in white robes walking into a church with a Chinese-style sloping roof with yellow tiles. Security was tight, with police checking the invited audience at the entrance.

Outside the church, ethnic minorities from Yunnan performed, with dancing women on one side of the sidewalk twirling and clapping their hands as men on the other side played banjo-like instruments.

"We are extremely happy to participate in Father Ma Yinglin's ordination," an unidentified dancing woman wearing an ornate headdress decorated with silver balls told the TV station. "He's been a big help to us. This year when we built a new church, he gave us part of the money."

One middle-aged man in a brown blazer told the TV station he also was pleased with Ma's ordination.

"I think he has a lot of prestige. In the hearts of the faithful here, we feel really good about the way he treats people and how he handles things for everyone," said the man, who was not identified.

AsiaNews, a Vatican-linked news agency, has reported that the Vatican opposed Ma because he does not have enough pastoral experience and he is too close to leaders of the official Chinese church.

In Hong Kong on Sunday, Vatican-appointed Cardinal Joseph Zen told reporters the Vatican has yet to make a final assessment of Ma and wanted China to hold off on his appointment until Rome could make a decision.

"The Vatican has said that the ordination should be suspended for now but not canceled," Zen said.

But Liu Bainian, vice chairman of the Chinese Patriotic Catholic Association, told Hong Kong's ATV news Sunday that Ma's ordination should not involve the Vatican.

"The Vatican and China don't have diplomatic relations so this (appointing Ma) is China's sovereign authority," Liu told ATV. "The Vatican didn't oppose this so we should keep moving forward."

Hong Kong's cardinal has said Sino-Vatican discussions are ongoing about restoring ties. Zen has said that if relations were re-established, the pope would be willing to allow Beijing to express an opinion about that appointments of bishops.

But he has said the Vatican should have the final say.

The Foreign Ministry, however, called on the Vatican to respect's the state-sanctioned church's authority.

"We hope the Vatican can respect the will of the Chinese church and the vast numbers of its priests and church members so as to create a good atmosphere for the improvement of Sino-Vatican ties," the statement said.

Hong Kong, a former British colony now ruled by China, still enjoys religious freedom and the clergy obey the Vatican. But Catholics in the mainland are only allowed to worship at churches run by the Chinese Patriotic Catholic Association.

However, millions of worshippers belong to underground churches loyal to the Vatican. Those who meet in such churches are frequently harassed, fined and sometimes sent to labor camps.

___

Associated Press reporter William Foreman in Hong Kong contributed to this report.

SMALL STEPS FORWARD FOR U.S.-CHINA TIES - BONNIE S. GLASER (BALTIMORE SUN, APRIL 27): The summit between President Bush and Chinese President Hu Jintao should not be condemned as a failure.
http://www.baltimoresun.com/news/opinion/o...-oped-headlines

http://www.mehrnews.ir/en/NewsDetail.aspx?NewsID=318875

$100b Iran-China energy deal ready to be signed: Chinese ambassador
TEHRAN, April 29 (MNA) – Chinese Ambassador to Tehran Lio G. Tan has said that the oil and gas deal between Iran and China has been thoroughly studied by experts and is ready to be signed.
The Chinese ambassador was clearly referring to an energy agreement between Tehran and Beijing which is worth over 100 billion dollars.

“No country can prevent the deal,” the ambassador told the Mehr News Agency correspondent in Tehran last week.

When asked whether China was under U.S. pressure not to sign the deal, Lio responded by asking, “Would the U.S. export oil to us if it didn’t let you (Iranians) give it to us?”

The ambassador said that even if there were no dispute over Iran’s nuclear program, the U.S. would have tried to halt the deal, but China will not be swayed.

He noted, “For example, can you find a time since the victory of the Islamic Revolution that the U.S. has not interfered in your country’s affairs?”

He put China’s annual oil imports from Iran at over 10 million tons.

A delegation from Iran’s Oil Ministry is due to visit China soon to conclude the huge oil and natural gas deal.

A memorandum of understanding was signed in October 2004 between Iran and Sinopec, China's largest refiner, to buy 250 million tons of liquefied natural gas (LNG) over 25 years.

In exchange for developing Yadavaran, one of Iran's largest onshore oil fields, China would agree to buy 10 million tons of liquefied natural gas a year for 25 years beginning in 2009.

RA/MS/HG

End

http://www.truthout.org/docs_2006/050106T.shtml

How China Is Winning the Oil Race
By Jon D. Markman
TheStreet.com

Thursday 27 April 2006

Is America too ethical to have cheap gasoline?

That is the inescapable question presented to US investors and policy makers as pump prices soar after a state visit by Chinese President Hu Jintao.

The US is the world's greatest consumer of energy at present, but China is the world's fastest-growing consumer. That puts us in direct competition for any new sources of crude oil, natural gas, coal and uranium that materialize through exploration and discovery, not to mention any current sources that profit-seeking producers decide to put up for grabs.

Increasingly, new energy sources that China is acquiring are in countries that Americans find distasteful. Many of them are in Africa, in countries with horrific human-rights records such as Sudan, Chad and the Republic of the Congo. And much of the energy is controlled by rapacious despots in the Central Asian republic of Kazakhstan and in Southeast Asia's Myanmar.

Energy acquisition is a zero-sum game in which there are winners and losers. Any new energy that China obtains for its fast-growing economy is unavailable to us forever. So you just have to wonder whether the US's antipathy for dealing with the worst of the world's rogue states has led inexorably to $4-a-gallon gasoline this spring.

The New Colonial Power

Dan Zhou, chief analyst at CEB Monitor Group in Beijing, points out that China has emerged as an attractive partner in Africa and Central Asia in four ways. Its intensifying demand drives up prices for its products, which are largely raw materials such as oil, zinc and copper. It sets virtually no standards for political transparency or economic reform to get deals done. It ignores internal human-rights abuses as an impediment to deal-making. And it is a one-stop shop, offering not just investment, trade, skilled workers and military weapons but also diplomatic protection in the form of its United Nations Security Council veto.

China's hunt for oil in Africa has made it essentially the new colonial superpower in the region, surpassing the memories of prior imperial forces such as Belgium, Italy, the Netherlands, Great Britain and France. And it has achieved that status in record time. Trade between China and Africa, which totaled $10 billion in 2000, soared to $39.7 billion in 2005. According to research by CEB Monitor, here is a guidebook of China's assets in the region:

Sudan: China has a $4 billion investment in the country widely believed to have the largest untapped oil reserves in Africa. The China National Petroleum Corp. has a 40% stake in Greater Nile Petroleum, which owns oil fields, a pipeline, a large refinery and a port. Last year, China purchased more than half of Sudan's oil exports. Conversely, Sudan accounted for 6% of China's oil imports, about 200,000-plus barrels a day.


Angola: Offshore wells have made this Africa's second-largest oil producer. Through February of this year, Angola accounted for 13% of all oil imports to China - making it the country's main supplier. China has committed at least $3 billion in loans to Angola for additional oil rights, and it has supplied engineers and trained workers to develop fields. China is now Angola's largest aid donor as well.


Nigeria: This is Africa's largest oil producer, and until recently it has not been a major supplier to China. However, China's largest publicly held oil company, Cnooc, bought a 45% stake in a Nigerian oil-and-gas field for $2.27 billion last month and has also bought 35% of an exploration license in the Niger Delta for $60 million.


Elsewhere in Africa: Cnooc has been active in Equatorial Guinea, Chad and Gabon, it has made investments of $170 million in the mines of Zambia, and it has become a major weapons supplier and trading partner of Zimbabwe, which is run with unbounded corruption by global outcast Robert Mugabe.
A Less Meddlesome Buyer

In Latin America, the story is much the same: China is increasingly becoming the partner of choice for repressive, paranoid or regionally ambitious regimes that want to buy guns and tanks with their oil and ore revenue.

According to The Los Angeles Times, the Bush administration held talks with the Chinese to encourage them to curb their role in training and advising forces to the south of the US This is getting to be a problem, as the region - fabulously rich in metal, energy and agricultural resources - is increasingly run by ideologues willing to snub US interests and seek less meddlesome buyers.

China is now Latin America's second-largest trading partner, surpassing Europe. From 2001 to 2006, exports from the region to China rose more than 500%. In 2004 alone, Hu signed letters of intent worth $100 billion over the next 10 years, according to published reports. Here are the key developments by country, according to CEB Monitor:

Brazil: The largest South American country exports iron ore, soybeans, cotton, oil and sugar to China and jointly develops satellites and aerospace equipment. China has promised $10 billion in additional investment in the short term.


Argentina: China has signed agreements offering $20 billion in investment over 10 years. Cnooc is developing an offshore oil field.


Venezuela: This is the third most important source of foreign oil to the US, but political and social disputes have led strongman Hugo Chavez to seek alternative partners. He plans to double oil exports to China to 300,000 barrels a day, about a fifth of the 1.5 million barrels a day that are sent to the US. The Chinese are buying stakes in several oil fields, making their output unavailable to U.S. consumers.


Ecuador: This country is a top-three producer of oil for the West Coast of the US. The Chinese just purchased one oil field and are in negotiations for more.
Meanwhile, in the Middle East, Hu has found in Saudi Arabia another repressive regime that wishes to ease away from a highly dependent relationship with the US. He visited in January, and turned around and visited again this month on his way home from Washington, with weapons sales and technology transfer high on the discussion list. China gets an eighth of its oil imports from the Saudis, and trade has increased ninefold since 2000 to $14 billion.

As you might expect, Iran is China's fastest-rising partner in the region. There have been unconfirmed reports that Hu has committed to spend $70 billion to $100 billion to develop a single large oil field in Iran, about a fifth of which involves a $20 billion order to purchase liquefied natural gas over the next 25 years. Zhou says that one Chinese company is expanding Tehran subways, another is building out the city's fiber-optic networks, and others are setting up auto and electronics factories. It probably won't be long before Iran becomes China's largest source of imported oil; this would put its economic and political interests directly in opposition to U.S. politicians and consumers.

Neighbors: Theirs and Ours

And finally we get to Central Asia republics, which formerly belonged to the Soviet Union, all nestled up against China's back door. They deliver almost 500,000 barrels of oil a day through pipelines and tankers. This has been a boon to the commissars of Kazakhstan, where gross domestic product has reached $56 billion due to the development of its robust energy fields by U.S., European and Russian explorers. The country shares a border with the gigantic Xinjian province of China and has developed fast-expanding bilateral trade, not just in oil and gas but also in cement and small manufactured goods.

Of course, the Chinese have not left democratic countries' resources off its shopping list. A couple of years ago, it bought a large stake in the big Canadian miner Noranda, and it has dozens of supply relationships with individual Alberta and Saskatchewan oil, gas and coal producers. No rock is left unturned, so to speak; a venture capitalist in my Seattle office building has helped Chinese entrepreneurs acquire privately held coal, gold and silver mining interests throughout the western US.

For stone-cold US investors, the obvious play here is to simply tag along by taking positions in foreign and domestic companies supplying the Chinese juggernaut, whether they are base metal producer Falconbridge in Canada; a producer of Turkish energy like Toreador Resources of Texas; a producer of Venezuelan oil and gas like Harvest Natural Resources; or the two big Chinese energy companies Cnooc or China Petroleum & Chemical.

For consumers, outraged indignation is about the best you can do, along with new personal choices about limiting the use of fossil fuel. China has no incentive to bend to U.S. demands to force change on its repressive foreign energy partners. And our politicians are unlikely yet to ease up on rules preventing US companies from participating in the sort of bribery and weapons brokerage that has become de rigueur for doing business in the equatorial zone where most new energy sources are being discovered.

So this really is just another case of joining 'em when you can't beat 'em. Shake your fist at the Chinese if you must, but also continue to buy global miners and drillers on dips in this bull market for commodities, sell your SUV, move closer to work, install solar energy panels and make peace with nuclear energy.



--------------------------------------------------------------------------------
At the time of publication, Markman had no positions in stocks mentioned in this column.
Jon D. Markman is editor of the independent investment newsletter, The Daily Advantage, and writes a weekly column for CNBC on MSN Money that is republished on TheStreet.com.

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http://www.atimes.com/atimes/China_Business/HE02Cb03.html
China follows world trend in raising rates
By Laurence Lau

The action by China's central bank in raising lending rates to 5.85% would not have been so important if it had not come at a time when the United States is doing the same - and may do it again. With interest rates already climbing in the US and Europe, and with monetary officials starting to tighten policy in Japan, China seems to be joining the world's central bankers in trying to gain control of speculation that has driven up prices of such assets as gold and real estate.

The Chinese action aims to slow a spectacular surge in investment, and it may potentially brake China's voracious appetite on world markets for oil and other commodities. From steel mills and auto factories to luxury apartment buildings and plush office complexes, China has been engaged in a nationwide building boom fueled by easy loans. New loans soared at least 61% in the first quarter of this year, causing investment in factories and other fixed assets to climb 29.8%.

The boom in lending and investment, which has contributed to China's rapidly rising exports, pushed growth in the economy to 10.2% in the first quarter. That was high even by China's extraordinary standards - so strong that President Hu Jintao himself warned in April that the country needed efficient, high-quality development and not "excessively rapid economic growth". Premier Wen Jiabao also warned that China would move to tighten controls on real estate and lending.

One can understand why China needed to raise rates. However, it came about in an environment in which its currency is also appreciating. The rates-squeezing movement in the United States and the European Union has also forced second-tier players, such as the smaller Asian economies, to follow suit. Now we have a situation where most stock markets, interest rates and currencies are on an uptrend. The exception is the US, where the dollar could come under more pressure.

Usually higher rates would stifle equity markets, but that mechanism seems to be ineffective for the time being. This is even more surprising in that oil prices are also stubbornly high, not to mention other commodities, including gold. Long-term observers of gold would note that gold rallies tend to coincide with long periods where returns from other asset classes are diminished. Again, that does not seem to apply for now.

Growth in equity markets will eventually slow because of higher rates, but investors are also attracted to potential gains in respective countries' currencies. So what gives?

These are the important conclusions:

1. The US is printing buckets of money. To finance consumption in the US, the number of dollars in circulation has to rise. As long as there are willing holders of US Treasury bonds, nothing really bad will happen.

2. More funds are chasing all kinds of assets. The result is higher demand for all commodities, whose supplies are limited, thus pushing prices higher. Hence one can argue that in every case assets are rising because of higher dollarization, not productivity values. To that end, timber and palm-oil prices should have a lot more room to rise in the foreseeable future.

3. Investors are still pouring funds into stocks in almost all markets, chasing equity and currency gains at the expense of the US dollar. They will continue to do that until the dollar drops substantially, thus improving actual returns of investors (hedge funds included).

4. Rates cannot continue to rise without something happening to asset prices. Already equity markets in China are among the worst first-quarter performers. Surprisingly, equity prices in the United States have surged. The inevitable will happen: there will be more rate hikes in the US, and the bottom will fall out.

5. While I have been a believer in the resilience of the US dollar, it appears that the moon and stars have aligned to force the issue. If the US Federal Reserve tries to delay a substantial correction, it will have no choice but to raise rates again. The next rate increase may still not be sufficient to derail the status quo. I figure a increase of 150 basis points from now should do it.

6. What China is doing in raising rates is more to protect its domestic overheated economy. Additionally, China will allow for the yuan to appreciate gradually. Both will have a depressing effect on Chinese stocks this year.

7. Smaller emerging and developing markets, such as Singapore, Malaysia, Thailand, Indonesia and Hong Kong, will be forced to follow suit on any US/China rate increases. However, their stock markets would have a better chance of rising further, having recovered from the 1997-98 crash. A substantial correction in the dollar would spell a temporary end to their bull runs, as investors would then be able to lock up gains and cash out.

Is there any way the US dollar could stave off devaluation of 15-20% or more from its current values? Not this time, as every single asset class seems to be ganging up to push the dollar lower. How many more rate increases can the Fed make to support the dollar without derailing the US domestic economy?

Oil prices can stay high while rates rise, and equity prices rise because demand generally comes from real productivity demand. Even if you pay a higher price for a commodity, it still works because the product used generates sufficient improvement in productivity in such countries as China and India.

Consuming nations such as the US and Japan will have to bear the burden, as that will eat into margins without sufficient improvements in productivity. For Japan, the case is slightly different because it is finally emerging from its deep, 13-year recession. Hence the economy can withstand many more rate increases from it "zero rate" base.

Chinese officials were probably not worried about inflation, given that the consumer price index in China was just eight-tenths of a percent higher in March than a year earlier. That is a luxury the Fed does not have in the US. Meanwhile, the smaller Asian nations should be able to better cope with inflation via their appreciating currency.

Laurence Lau has more than 18 years of experience in business/finance. Born in Malaysia, he has worked in Sydney, Singapore, Hong Kong and Kuala Lumpur. He was head of research for two securities firms and a portfolio manager for a UK firm.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing .)

http://www.busrep.co.za/index.php?fSection...ticleId=3226877

African oil deals quench Beijing's thirst for energy sources
May 2, 2006

By Bogonko Bosire

Nairobi - Chinese president Hu Jintao wrapped up his trip to Africa at the weekend after clinching oil deals that highlighted Beijing's search for fresh energy sources to power its booming economy.

As Hu headed home after a five-nation tour, critics argued that China's demand for energy and other resources was helping unsavoury African governments heavily criticised by the international community.

Under one deal, state-owned oil company Cnooc will explore six blocks off the coast of Kenya, a country grappling with graft. It will also buy a 45 percent share in an oilfield in Nigeria, where oil-related clashes have recently intensified.

Last year China bought 38.47 million tons of African oil, representing about 30 percent of its total imports.



China inked deals to improve the host countries' floundering economies and shoddy infrastructure, prompting a cautious welcome from the Kenyan Standard newspaper.

"This might be an answer for the parsimony and intransigence shown in the recent years by our traditional development partners, who have often used aid as a form of blackmail."

But critics have accused Beijing of doing business with undemocratic regimes, notably Sudan, an oil-rich nation that has for several decades used oil revenues to wage deadly successive wars on dissent.

"When Western governments try to use economic pressure to secure human rights improvements, China's no-strings rule gives dictators the means to resist," said Human Rights Watch's Richard Roth. - Sapa-AFP

The Chinese nuclear stockpile appears to be only half as big as previously thought, according to a new overview published in the Bulletin of the Atomic Scientists. Up to 130 warheads may be deployed out of a total stockpile of some 200 warheads. Several new weapon systems are under development which the Pentagon says could increase the arsenal in the future, but past US intelligence projections have proven highly inflated and inaccurate. The new overview will be followed by a more detailed report published by the Federation of American Scientists and the Natural Resources Defense Council this spring.

See also: Chinese Nuclear Submarine Cave Discovered



Senior Director

for Corporate, Foundation and Public Outreach

Federation of American Scientists

www.FAS.org

202-454-4673

http://www.atimes.com/atimes/China_Business/HE04Cb01.html

China gets energized over ethanol
By Matt Young

SAO PAULO - Even knowing that Brazil heavily uses ethanol in transportation doesn't prepare one for the startling sight of roadside vendors selling beer to motorists during a recent rush hour traffic jam in Sao Paulo.

But the fact remains that many of the cerveja-swilling drivers had more ethanol in their tanks than in their bellies. The highway was full of vehicles required by the Brazilian government to operate on at least 20% ethanol, causing less pollution and likely less economic instability than their gasoline-fueled counterparts. Many cars were "flex-fuel" vehicles, which can be filled with either gasoline or ethanol at any one of 29,000 Brazilian fueling stations (flex-fuel engines are designed to run on arbitrary combinations of gasoline and ethanol, provided at least 20% ethanol is present).

Now China appears to want a trade deal that would allow it to sample - and perhaps help ultimately reproduce - Brazil's success with alcool, as ethanol is called in Portuguese. With an economy booming at a 10% growth rate, transforming the world's most populated country from a nation of peasants into one of middle-class consumers, China's dependency on oil and gasoline is growing untenable.

With the price of oil hovering at record levels, China is looking seriously at alternative fuel sources, and Brazil's experience with ethanol is attracting serious notice in Beijing.

"I just came back from Brazil last Friday," said Dehua Liu, one of China's foremost experts on ethanol, who was appointed by the National Development and Reform Commission to investigate its potential viability as a fuel source. "I guided some people from the Ministry of Science and Technology. In July, another team including ... China ethanol producers and central government [officials] want to visit Brazil again.

"I think in the coming trip, we will travel to Brazil and maybe talk about the possibility [of buying] some ethanol from Brazil for China," said Liu, adding that it would probably be a modest amount to start with.

Until now, China's relationship with fuel-grade ethanol, particularly Brazilian ethanol, hasn't developed beyond flirtation. While China has been aware of the ethanol alternative for some time - experimentation with ethanol was under way in nine provinces by the end of last year - the country has had virtually no relationship with Brazil's ethanol industry, which has developed into an empire over the past 30 years. That has begun to change as Chinese and Brazilian ethanol experts appear to be on their way to a committed trade relationship.

"Many Chinese companies and also the central and local governments are very interested in the Brazilian experience to use ethanol and produce ethanol," said Liu, a professor in the department of chemical engineering at Beijing's Tsinghua University.

Only a couple of months earlier, Alfred Szwarc, a consultant for Unica, which represents Sao Paulo's enormous sugar-cane and alcohol industries and fights to open foreign markets to them, had been concerned that China was ignoring Brazil's offers to establish trade in fuel-grade ethanol.

"I think they were more interested in developing their domestic industry than importing [refined ethanol] from Brazil," said Szwarc, one of his country's foremost authorities on the bio-fuel. "We said, okay, we don't want to compete with your farmers or ethanol companies; however, we would like to be considered preferential partners. We had people going there and people coming here just on exploratory missions ... but as far as I know we didn't make much progress in practical terms."

Actually, Liu said, the more tepid response was coming from the Brazilians. He said he tried to make trade headway by contacting Brazilian ethanol trade officials last year on behalf of Henan Tianguan Group, one of the biggest Chinese producers of the bio-fuel. He said he got nowhere.

"They were waiting for a [price] quotation," Liu said. "Then I didn't get any response."

But whichever country was ignoring the other in the past, it appears now that the two are set for a collision course resulting in a real ethanol deal. "Whenever it's needed, Brazil could become a preferential supplier of ethanol to China if China needs to import," Szwarc said.

Emulating Brazil's ethanol success
Indeed, China will need to import ethanol - at least initially - if it plans on fueling its automotive needs with anything other than a trickle of the bio-fuel. From 2000-05, courtesy of about a dozen plants, China developed a million tons per year of ethanol production capacity, which it plans to double by 2010, Liu said. But China's gasoline consumption already is in the tens of millions of tons annually.

Liu estimated that by 2020, power generation by renewable energy will make up 10% of the total, with biomass fuels such as ethanol being only a portion of that.

"This is why China's government and many ethanol producers are interested in the Brazilian experience," Liu said.

And the Laotian experience. Already, Henan Tianguan Group has entered into a contract with the government of Laos to lease 15 square kilometers of land for the production of cassava-based ethanol, Liu said.

Ultimately, however, if China were to emulate Brazil's ethanol success liter-for-liter, it would have to develop self-sufficiency, which takes dedicated farming space.

"My city is a big producer of cana," or sugar cane, said Felipe Fischer, a 23-year-old Brazilian university student from Minas Gerais. "You need to have this space. It's not like oil where you drill the ground and the oil comes up. You need to plant, so you need enormous [land] areas. But China is a big country ..."

And it's a big country with a variety of crops other than sugar cane, several of which, including corn, cassava and rice, can be used to produce ethanol. In fact, 80% of China's current ethanol production is derived from these three crops, Liu said.

While China has some logistical advantages in producing ethanol - and other drawbacks (such as needing to feed the world's most populated sovereign state, first and foremost) - the country could be ripe to become another world bio-fuel leader, based on historical similarities between the two nations.

In 1975, Brazil imported about 85% of its oil needs and was hurt badly by that decade's oil shocks. At that time, a strong centralized military government was in power, and acted decisively to help develop the technology for vehicles to run on 100% ethanol or gasoline-ethanol blends.

"China has a central government that defines policies in a similar way [to what] we had back in 1975 in Brazil," Szwarc said. "It centralized decisions in terms of energy. China already has started an ethanol program and is benefiting from it. The situation is not exactly like Brazil, but to some extent I think [Brazil's experience] could be replicated in China."

The saying "be careful what you wish for" may apply here. With oil prices remaining sky-high, China's leadership may well decide to grow its own ethanol supply or just import the alternative fuel extensively. And while Brazil's ethanol experience has largely been a pleasant one, surprisingly, that isn't particularly the case at the moment.

"Today, the price of alcool is higher than when the flex system started," said Renato Astur, a salesman with Caoa Ford, a car dealership in Sao Paulo. "Now, the people who buy [flex-fuel cars] don't see a big advantage."

Partly, this is because ethanol has a lower energy content per liter than gasoline does. Drivers can travel about 10 kilometers per liter of gasoline in Brazil, compared with only 7 per liter of ethanol, Astur said. So the price of alcool has to be 70% of the price of gasoline, or less, for consumers to see a financial advantage; of late, it has been greater than this.

And while for the most part the environmental benefits of ethanol are clear, including the fact that it is a minimally toxic fuel, improves air quality where it is widely used, and biodegrades rapidly, Fischer notes that large-scale ethanol production can harm soil because of the need to plant the same crops again and again, depleting ground nutrients.

Fischer acknowledged, though, that ultimately people aren't motivated by the environment to invest in ethanol. It's money that makes the world's wheels go around, and convenience.

Astur said: "If tomorrow we don't have gas, we can put in alcohol. If we don't have alcohol, we can put in gas." For a man who struggled to speak English, Astur flawlessly described why Brazil's success with ethanol has become the envy of nations worldwide. China's envy, at least, is now morphing into action.

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

http://www.atimes.com/atimes/China_Business/HE04Cb02.html
Beijing's new driving spirit

BEIJING - China is working on fiscal policies to encourage production of biological energy - including plant-derived ethanol and methane - as substitutes for oil, a move experts say would help China reduce its reliance on oil and build an environmentally friendly society.

Zhu Zhigang, vice minister of finance, told Xinhua news agency in an exclusive interview that the ministry is working on policies that will enable the government as well as energy consumers to share the cost and risks of bio-energy production in case oil prices drop too low for the bio-energy business to be profitable.

Zhu said the ministry is considering a plan to provide subsidies to a few selected companies specializing in bio-energy production as demonstration projects before the mechanism is created for sharing cost and risk. But he declined to say how much money the government will spend in the coming years on bio-energy projects.

Bio-energy mainly refers to ethanol, made from sugar cane or other carbohydrate sources, and methane; these fuels are regarded as environmentally friendly and renewable.

China has increased its annual production capacity of fuel ethanol to 1.02 million tons per year, thanks to direct funding from the Finance Ministry, preferential tax policies and subsidies, he said. Fuel ethanol has been produced in northeastern China, central China's Henan province, northern China's Hebei province and eastern China's Anhui, Shandong and Jiangsu provinces.

So far in China, mainly corn (maize) and wheat have been used as raw materials to make fuel ethanol, and the ethanol has been purchased and mixed with gasoline by the country's state-owned oil producers, including Sinopec.

Zhu said the ministry has allocated 2 billion yuan (US$250 million) for those ethanol projects over the past five years, which were launched mainly to solve the problem of corn surpluses in the northeast, China's major corn-producing area. The corn-for-ethanol projects increased the market demand for corn, and the market prices of corn have been increasing gradually in the past several years, the vice minister said. The existing projects have made China the world's third-largest ethanol-fuel producer.

Shi Yuanchun, of the Chinese Academy of Sciences, said China should do more to increase production of bio-energy to catch up with the United States, the European Union, Brazil and India. China should study ways to manufacture ethanol using stalks and plants that can be grown on wasteland and low-quality land not suitable for grain production, said Shi, former president of China Agriculture University.

These plants include sugar grass, which is suitable for salina (salt marsh) and other low-quality land in 18 provincial areas north of the Yellow River and Huaihe River basins. Such lands total 33.34 million hectares, and one-fifth of them would be enough to produce 20 million tons of ethanol, said Shi.

In addition, China produces 1.5 billion tons of stalks a year as byproducts of grain production, which can be used to produce 370 million tons of ethanol. Bio-energy is environmentally friendly and renewable, and the fast-growing bio-energy sector will create enormous job opportunities for farmers, Shi said.

Sweet sorghum, cassava and other materials are also possible raw materials for ethanol production. Industry observers say that although there is no technology currently for producing ethanol from sweet sorghum, Thailand has produced it from cassava (tapioca) and there is no reason China could not emulate this. A recent Reuters story noted that a black market has recently sprung up to import tapioca chips from Thailand into southern China for purposes of ethanol production.

The southern China region has long produced drinkable spirits containing high ethanol content, and the process for producing fuel ethanol is similar, though it is typically conducted on a larger scale and adds a dehydration step at the end to make the ethanol combustible.

Qiao Yingbing, an expert with oil giant Sinopec, said China's consumption of crude oil totaled 323 million tons in 2005, including net crude-oil imports of 119 million tons. Increasing bio-energy production and consumption will help ease the country's oil shortage and help reduce air pollution, as the oil substitutes are cleaner.

Various problems are associated with expansion of the bio-fuel industry. Cultivation of crops for ethanol production could displace food crops, reducing food production, particularly if ethanol remains as profitable as it is at present; if this situation continues for a long period, it could lead to the nation's fuel-import dependency being replaced by a food-import dependency.

Also, currently high oil prices have led the national government to scrap subsidies for the ethanol industry, because subsidies are not needed when gasoline prices are high. Experts say that with present technology, fuel-ethanol production becomes economically viable when oil prices are more than $40 a barrel. However, it remains possible that oil prices could drop in the future, leading to the industry becoming non-viable, and if the ethanol sector becomes dependent on subsidies over the long term, this could increase the government's fiscal burden and displace needed social-services spending.

(Asia Pulse/XIC)

http://www.atimes.com/atimes/Asian_Economy/HE04Dk01.html
Baby steps to a common Asian currency
By Shehla Raza Hasan

KOLKATA - The concept of an Asian Currency Unit (ACU) was resurrected last month by the Asian Development Bank (ADB) and will be considered again at the bank's annual meeting early this month in Hyderabad, India. After that it could be launched as early as the end of June.

The unit was born as a concept almost 10 years ago, prior to the Asian currency meltdown. It is a notional unit of exchange based on a "basket" or weighted average of currencies used in the 10 member states of the Association of Southeast Asian Nations plus South Korea, China and Japan (ASEAN plus 3).

It was primarily mooted to help develop regional bond markets and promote monetary cooperation among Asian economies. This idea, contemplated on and off over the years, got a big boost last month, and the ADB seemed definitely committed. The launch was held up by the need to settle some divisive views and political anxieties:
Inclusion of the currencies of Taiwan, Hong Kong, Australia and New Zealand, an idea strongly contested by China and the ASEAN states.
Exclusion of India in the first round of talks. It is important for India to be part of the initial negotiations so that it reflects the interests of Indian business. It is believed that Singapore, a strong ally of India, is pushing for its inclusion in the first stage of talks, which will develop the concept of the unit.
Need for consensus relating to the weighting and components of the ACU based on countries' share of nominal gross domestic product (GDP) as well as trade volume, the level of capital flows or convertibility of their currencies.

Some of the long-term issues that need attention are:

Hegemony of stronger states. Smaller Southeast Asian states allegedly feel threatened by China's growing economic power and Japan's isolationist economic policy. They also question whether the currencies of Australia and New Zealand should be included with India in the second round. It is argued that it was impossible to replicate the euro experience because Europe had sorted out the question of hegemony long before the question of a single currency was mooted.

Substantial diversity in Asian economies. Critics also point out that the concept of Asia has been defined only by its geography. There is a substantial gap in the growth and development of countries within this region. Cambodia and Laos have a substantial chunk of population below the poverty line.

The euro experience - a good learning process. The architects of the ACU are making efforts to point out that they are not trying to make the ACU the Asian equivalent of the euro. The unit would merely be an indicator of exchange rates, with no exchange-market interventions. There is also talk of changing the name to "Asian currency index" to set it apart from the European Currency Unit, which was the precursor of the euro.

The primary purpose of the ACU would be to facilitate the development of an Asian multi-currency bond market, strengthening of capital markets to make them resistant to external shocks. The ACU would reflect how the region's currencies as a whole move against the dollar and the euro and how each currency in the ACU moves against the average level of participating currencies. The evolution of the euro could at best be a good learning process.

The ideal preconditions that existed in Europe prior to the introduction of the euro, but either don't exist in Asia or are only emerging, were pointed out by Roberto F De Ocampo, former Philippine finance secretary:
High trade interdependencies.
Common acceptance of basic political and social values (democracy, a market economy with a strong welfare state).
Fairly even economic development and comparable living standards.
Strong commitment to solidarity.

The past few years have witnessed higher trade interdependencies in East Asia than ever before. Reportedly, this is happening at a much faster rate than Europe ever experienced. Trade volume among the ASEAN plus 3 countries has swelled, with trade between China and ASEAN poised to reach US$200 billion before 2010. Trade between India and China increased more than 12 times over the past five years.

Financial analysts point out that it will not be long before ASEAN plus 3 set up a mechanism for exchange-rate stability, not necessarily for safeguarding financial stability in Asia but purely for self-interest. Japan is a proactive member of the club, as Tokyo is not too comfortable with China's emergence and the fact that the yen may be overshadowed by the yuan. It has shed its isolationist tendencies for this reason.

It is therefore understood that several steps need to be taken toward creation of a unified currency structure in Asia. Certain absolutely necessary requirements are information exchange and policy dialogue on surveillance, initiation of a central reserve pool for financing the liquidity needs of member countries, and cooperation in developing suitable mechanisms for regulation and supervision.

Nevertheless, this initial step toward a single common currency needs to be preceded by a common single market. The benefits of an eventual single currency are numerous. It will increase market transparency by making prices more easily comparable. Cross-border transactions will also become more attractive as market operators will no longer be exposed to exchange-rate risks, and costs associated with currency conversion will be eliminated.

The single market will become one of the main pillars of economic and monetary integration. However, any expectations of a common Asian currency in a holistic sense is a long way off. This trend, which began in East Asia, will have to be popularized in the more difficult terrains of South and Central Asia. The toughest challenge will perhaps come when it is time for West Asia to be part of the system.

Shehla Raza Hasan is a freelance writer based in Kolkata.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

http://www.atimes.com/atimes/China_Business/HE05Cb04.html

SPEAKING FREELY
The geography and politics of Eurasian energy
By Richard Giragosian

Speaking Freely is an Asia Times Online feature that allows writers to have their say. Please click here if you are interested in contributing.

WASHINGTON - There have been many analyses of the geopolitics of Eurasian energy. A fresh approach to the topic emerges if we deconstruct the term "geopolitics" into its two strands, thereby separating the "geography" from the "politics" of the geopolitical perspective. This approach reveals that the two trajectories are contradictory with respect to energy security or, more precisely, energy insecurity in Eurasia.

The geographical trajectory is seen in the complex and competing calculus of energy-producing states, energy-transit states, and



energy-consuming states. All face the shared challenges and legacies of geography: vast territories, vulnerable pipelines and
centrifugal tendencies. And within a new security landscape post-September 11, 2001, there has also been a profound shift in geography, with remote regions gaining a newly enhanced and elevated strategic significance. But this new strategic importance is driven by geography, not energy.

It is proximity, not pipelines, that presents the new priority. And it is geography that projects the influence and propels the impact of Eurasian energy. But this geography is now two-dimensional: no longer looking strictly westward but also eastward. Eurasian energy is more than ever an Asian, and no longer solely a Western, concern, and Eurasia's energy states can be increasingly seen as Asian powers.

China's energy imperative
Most traditional assessments of China's energy strategy miss a fundamental point and often start from a mistaken premise. Specifically, unlike analyses warning of the "rise of China", that country's energy policies are actually rooted more in a position of weakness and worry than one of overt aggression and ambition.

This weakness is demonstrated by a serious imbalance between the location of China's energy resources and its main centers of energy demand, and reflected in the overwhelming vulnerability of the country's access to external energy supplies. This inherent weakness defines the core of Chinese energy strategy and, most important, results in two distinct needs: for greater energy imports and for a modern infrastructure able to span great distances. Again, geography is key.

Second, Chinese energy strategy is still mainly defensive, rooted in the strategic fear that the United States will seek to block or contain China's pursuit of energy resources in an attempt to weaken or destabilize the regime. Further, China sees regional maritime security as a pressing priority, compounded by its vulnerability in the Strait of Malacca, which accounts for the passage of four-fifths of all Chinese oil imports. Thus, although China's energy strategy is increasingly active and assertive, it remains offset by an inherently defensive approach. And again, geography is key.

But there is more to Chinese energy strategy than simply meeting rising energy demand. Although it is logical that adequate energy supplies are essential for continued economic growth, there is an important corollary political consideration as well.

This political dimension to energy strategy is demonstrated by the reliance of the Chinese state on economic growth to garner political stability and regime legitimacy. In this way, any threat to the delicate linkage between secure energy supplies and sustained economic growth is seen as a threat to the legitimacy and security of the state. Thus China's energy policy is one of political legitimacy as much as economic growth.

From this perspective of strategic security, energy is everything. Energy is crucial for economic growth, which, in turn, is essential for both political stability and geopolitical (and military) power. Therefore, this pursuit of energy security is actually a pursuit of both economic and political security. Politics is also key.

A second political component is seen in China's relations with Russia and other Eurasian states. It is both the Chinese reaction to the nearby US military presence and to US policies emphasizing democracy promotion and regime change that add another political dimension to energy in Eurasia, rooted in a shared interpretation to the "revolutions of fruits and flowers" in Central Asia.

Moscow sees these developments not as democratic victories of people power, but as externally financed assaults on Russia's traditional and even natural spheres of influence. Beijing sees these developments as part of a broader US strategy of encirclement, aimed at curtailing China's expanding economic, political and energy ties. And the authoritarian Eurasian states themselves see the promotion of "regime change" as direct threats to the survival of their regimes. Here, again, politics is also key.

Russia reasserts power with energy lever
Turning to Russia, we can see a steady reassertion of Russian power and influence within the former Soviet space, or the "near abroad" from Moscow's vantage point. Most effectively, we see a Russian utilization of a more sophisticated and subtle leverage based on energy dependence, with overarching goals of regaining its former "great power" status and recovering its geopolitical relevance.

Energy has emerged as a tool for strategic leverage, in effect replacing the traditional Russian reliance on the "hard power" of its military with a new "softer power" of energy.

This Russian use of energy as leverage consists of three components, each of which is also driven by geography. First, it has supplemented, and in some cases even projected, an effective reassertion of Russian power and influence within the so-called "near abroad". Most notably, this can be seen in the Russian dominance over the energy sectors of much of the South Caucasus and Central Asia.

Second, it has featured the use of energy as a tool for strengthening state power, empowering Russia's status as a regional and as an Asian power, as well as actually financing the Russian state. And third, it has offered Moscow an attractive way to restore its international position and regain its geopolitical relevance, especially in Western eyes.

There is also a broader strategic dimension to Russian energy strategy, viewing energy as an integral part of an overall projection of power and position. In this way, it is energy that most clearly marks a shift toward Asia and away from Europe. Again, we see geography playing a driving role.

But Russian energy also faces a fundamental weakness. Despite the tactical gains from the use of energy as leverage, Russia's energy sector remains beset by four serious shortcomings: it has no unused capacity; its oil is relatively expensive to produce; it has limited pipeline capacity; and it is still far from being a global energy player. Therefore, Russian energy strategy is predominantly driven by weakness and need.

There is another interesting aspect of the Russian view of energy security. While the traditional Western, or US, interpretation of ideal energy security is defined by ensuring unimpeded access to energy supplies from a diversified set of suppliers, the Russian view is different. From the Russian perspective, energy security is defined by "energy as security" or, more specifically, energy as an element of security policy.

The Eurasian paradox: The centrality of legitimacy
In the broadest sense, however, Eurasian security and stability remain dependent more on internal challenges and local politics than on grand geopolitics.

These predominant internal challenges range from an overall deficit of democracy, and the related predominance of "strongmen over statesmen", to economic mismanagement and widespread corruption. Each of these challenges significantly impedes the reform efforts of these states in transition, thereby contributing to a significant loss in state power. And the solution to each of these challenges is also largely local and political, not geopolitical, in nature.

These internal constraints are also exacerbated by the reality of Eurasian energy, however, as seen in the vital role of energy wealth fueling networks of corruption and fostering elite patronage. The paradox lies in forging a balance between the need for energy from Eurasia and the imperative for crafting policies capable of confronting the deepening corruption, socioeconomic disparities and democratic deficits in Eurasia.

The paradox also stems from the need to engage and encourage energy security in regions still landlocked in a political sense, hobbled by closed political structures and coercive political systems. The first lesson from this Eurasian paradox is the centrality of legitimacy for security and stability. And the second lesson is that policies of engagement limited only to military relations, counter-terror, or energy contracts can do little to address the core fragility of these Eurasian regions at risk.

Thus it is the dynamic imperatives of Eurasian geography and politics that matter most. It is no longer an era of grand geopolitics, but a time for local politics. And the real path to security in Eurasia lies within the Eurasian states themselves.

Richard Giragosian is a Washington-based analyst specializing in international relations and military security in the former Soviet Union, the Middle East and the Asia-Pacific region.

Speaking Freely is an Asia Times Online feature that allows writers to have their say. Please click here if you are interested in contributing.

http://www.atimes.com/atimes/China_Business/HE09Cb02.html

Fujian woos a skeptical Taiwan
By Ting-I Tsai

TAIPEI - Shortly after Taiwan President Chen Shui-bian announced in January that he would harden Taiwan's China policy, China's President Hu Jintao traveled to Fujian province, just across the water from Taiwan, to shake hands with Fujian-based Taiwanese businessmen. About two months later, Hu's support for Fujian's development was revealed in a clause written into China's 11th five-year plan, which talked about "supporting the economic developments of the [Taiwan] Strait's west coast and any area with a concentration of Taiwan businessmen". This has come to be known as the Western Shore Economic Zone scheme.

Fujian, a province located between the Pearl River Delta and the Yangtze River Delta, has been relatively left behind those two areas' rapid economic growth. But provincial authorities believe that they have finally found a way to boost Fujian's economy: by linking its future to China's unification with Taiwan. Whether the policy can accomplish anything, however, depends on how the province improves its infrastructure and what kind of preferential treatment the State Council grants Taiwanese investors, observers suggest.

"The preferential treatment will count for little if the economic zone doesn't lead to commercial success," Chen Te-sheng, research fellow at the Institute of International Relations at Taiwan's National Chengchi University, said.

Because of the common language (Minnanese, the dialect spoken in most of Fujian, is extremely similar to Taiwanese, though the identification of the two has become politicized) and deep family ties with Taiwan, Fujian province was one of the first investment areas entered by Taiwanese businessmen in the early 1980s. In light of the province's geographic location next to Taiwan, its capital Xiamen was named as one of China's first four special economic zones in 1980.

But bureaucratic corruption and a lack of direct transport links with Taiwan eventually forced many Taiwanese investors to relocate. According to figures from Taiwan's Investment Commission, more than 90% of Taiwanese investment is concentrated in six of China's coastal provinces, including Guangdong, Jiangsu, Fujian, Zhejiang, Hebei, and Shandong. But investment in Fujian has accounted for less than a tenth of total investment since 1996. By the end of last October, Taiwanese investment in Fujian had reached US$3.9 billion, about 8% of total investment, compared with Jiangsu's 44% and Guangdong's 28%. Based on China's figures, Fujian received $7.5 billion of contracted foreign investment in 2004, from all countries, compared with $36.1 billion to Jiangsu and $19.4 billion to Guangdong.

"Fujian has a reputation of failing to implement market-economy polices, instead it emphasizes politics," explained a senior official at Taiwan's semi-official Straits Exchange Foundation (SEF), who spoke on condition of anonymity. "Corruption is another issue. The Yuanhua case is just one [example]," the official added. In that notorious case, broken in 2000-01, the Yuanhua Group smuggled cars, luxury goods, oil and other goods into Fujian's Xiamen city, cheating the state of about $4 billion.

Thousands of government officials were involved: Lai Changxing, the chairman of Lianhua group, had corrupted them by such means as wining and dining them, hiring their children, or secretly filming them cavorting with hostesses at his "underground palace", known as the "Little Red Mansion". Allegedly, Lai even attempted to bribe then-premier Zhu Rongji to the tune of $2 billion. But Zhu responded by sending hundreds of police investigators from outside the province to Fujian, and dozens of officials were shot in the ensuing crackdown.

Complaints about local government corruption are widely circulated among Fujian-based Taiwan businessmen. The chairman of the Fuzhou Chamber of Trade, Hsu Jiun-Da, was arrested and interrogated for a week in 2002 after he publicly criticized the local government's performance. Hsu, a Taiwanese businessman who once operated a textile factory and invested in a hospital there, has been withdrawing his investment from the province.

Another former Fujian-based businessman, Huang Rui-sin, noted, "It is always difficult to get through Fuzhou customs, but that's never the case in Beijing, Shanghai [or] Shenyang."

Based on SEF statistics, some 250,000 Taiwanese residents have lived in Guangdong province, with the same number having lived in the Yangtze River Delta. This compares to 80,000 to 90,000 Taiwanese residents in Fujian.

Frustrated by the neighboring provinces' rapid development, Fujian Communist Party Secretary Lu Zhangong officially introduced the policy of promoting China's unification with Taiwan in January 2004 as a way to encourage Taiwan investment. The policy was eventually endorsed by the central government after a two-year campaign.

Under Fujian's development plan, it will pursue closer commercial ties, direct transport links, direct tourism exchanges, comprehensive agricultural cooperation and cultural interaction with Taiwan. The economic zone will "promote the better use of resources in east China and enhance [the region's] overall economic strength", Wang Xiaojing, then executive vice governor of Fujian, said in 2004.

As part of the provincial government's efforts to promote itself to Taiwan, it now holds eight major promotional events a year, covering tourism, agriculture, textiles, trade and forestry. To make it easier for Taiwan businessmen to take part, they are allowed to apply for visas when they arrive in Xiamen and Fuzhou rather than applying in advance. Certain Taiwan fruits can also be imported free of tariffs. In addition, more agricultural investment parks, where Fujian is seeking to attract Taiwanese farm technology, are being established. However, a decision on whether to establish a free trade zone is still under discussion.

Shortly after the policy's announcement, Ming-da Photonics, which produces light-emitting-diode (LED) monitors, invested $50 million in Xiamen. The company's chairman, Tung Sheng-nan, said he was honored to shake hands with Hu Jintao three times on a visit to Fujian this January. Tung, a former city mayor of Taiwan's high-tech Shinjeou city, declined to talk about his company, but said it was backed by US money. But apart from from Ming-da, few companies have shown an interest in Fujian following the new policy direction.

"Taiwan investors should wait for preferential treatment granted by the State Council, as promises from local governments might not materialize," said Wu Shiuan-miao, vice-chief financial officer at Taiwan's Cheng Shin Tire, which invested in Fujian in the early 1990s.

Commenting on whether the province would achieve anything with the plan over the next five years, Li Fei, a research fellow at Xiamen University, said that would depend on Taiwan's attitude. Li argued that if Taiwan could expand the "three mini links" between Taiwan's offshore islands and Fujian's ports, without there being links to other areas on the Chinese mainland, Fujian would definitely benefit.

The "three mini links" were introduced by Taiwan in 2001, allowing residents and cargo to travel between Taiwan's offshore islands of Matsu and Kinmen (which actually belong to the part of Fujian province administered by Taiwan) and the cities of Fuzhou and Xiamen on the mainland.

Traffic from the two Chinese cities is also entitled to make the journey in the opposite direction. Beijing was not very cooperative about the links in their first two years of operation. According to statistics from Taiwan's Mainland Affairs Council, 45 Chinese boats and 1,041 Chinese visited Taiwan in 2001, compared with 137 Taiwanese boats and 11,729 Taiwanese who traveled to China. The links became warmer in 2004, when 1,803 Chinese boats and 18,607 Chinese traveled to Taiwan. Some 1,595 Taiwanese boats and 258,243 Taiwanese passengers traveled to China in the same period.

Reviewing Fujian's development potential, the SEF official said, "If the area can really create a thriving commercial zone, Taiwan businessmen will definitely go. They are very perceptive."

Lin Chu-chia, a professor of economics at National Chengchi University, said Fujian had to target new industries, such as banking and insurance, to enhance its "uniqueness". In addition, he said the province should make it easier to do business there, by such means as granting multiple-entry visas and money exchange facilities to businessmen. Taiwan's former prime minister Vincent Siew, on the other hand, suggested Taiwan take advantage of the idea and establish a "cross-strait common market", similar to the European Union common market.

A more negative view about China's new Fujian plan was expressed by Taiwan's Mainland Affairs Council, which argued that the west coast project "would simply suck out Taiwan's economy" and relegate China-Taiwan relations to the province-to-province level. However, Chen Te-sheng, a research fellow at the Institute of International Relations at National Chengchi University, said the council should not be worried about the new policy.

In the long term, observers in Taiwan believe Fujian's main aim is not unification, but promoting its own economy. Nonetheless, this fits nicely with Beijing's policy of using the economy to accomplish its strategic goals with respect to Taiwan. "China has been quietly laying the foundations for its 'One China' policy using the economy," said a Taiwan senior government official. That means the central and provincial governments both have a stake in making Fujian's new policy work.

Ting-I Tsai is a Taipei-based freelance writer.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

http://www.atimes.com/atimes/China_Business/HE09Cb01.html

New port push includes Fujian

BEIJING - China's port and shipping facilities are to be upgraded to include two major new regions, the Ministry of Communications has announced.

Communications Minister Li Shenglin said the two additional port groups are on the mainland side of the Taiwan Strait in southern Fujian province; and in Hainan and southern Guangdong. Li announced the plans in a special interview with China Daily at a recent sea transport forum in the port city of Tianjin.

Five port "clusters", rather than the existing three surrounding Shanghai, Shenzhen and Tianjin, will be prioritized as part of a new port-development plan. The plan is part of an effort to match the national 2006-10 social and economic development program, Li said.

Li said China's seaports and their relatively easy access to containerized shipping and industrial materials had been a major factor in transforming the nation's economy. "Shanghai, Shenzhen and Tianjin have already been built into national ocean transportation hubs," he said.

Shanghai, at the mouth of the Yangtze River, is the largest business city in China, serving the versatile urban economic network across the Yangtze River Delta. Shenzhen is becoming an increasingly important support center for Hong Kong, and is in itself leading many smaller ports on the Pearl River Delta, where China's largest group of exporting manufacturers are located. Tianjin, close to Beijing and a key link of all the seaports around the Bohai Bay, is vital to the economy of northern China.

However, Li said the two newly planned port clusters would be of no less importance.

The southeastern port cluster would be built around Xiamen, a business center of southern Fujian, joined by Fuzhou, Quanzhou, Putian and Zhangzhou. Zhangzhou will serve as a destination for China's imports of crude oil and natural gas, and the others will mainly handle containers.

The Fujian port blueprint is part of the central government's scheme known as the Western Shore Economic Zone of the Taiwan Strait. This plan was intended to help develop economic ties between the Chinese mainland and Taiwan. Li said this would anticipate free-trade relations between the mainland and Taiwan, which he said would benefit business communities on both sides of the strait, although there has been little progress so far.

Xiamen is already a large port. Mayor Zhang Changping recently expressed the municipal government's will to boost its annual throughput from 70 million tons to 100 million tons.

In southwestern China, Zhanjiang, Fangcheng and Haikou will form a system of container transportation. Zhanjiang, Haikou and other ports will also serve as places to download and reserve imported crude oil and natural gas. And Zhanjiang, Fangcheng and Basuo have been designated to become ports to import mineral resources. Passenger transport infrastructure will also be improved in Zhanjiang, Haikou and Sanya in the coming five years, according to the national program.

Li said the newly drafted port-development plan was aimed at "expanding the transportation capacity of the Chinese coast to match the economy's fast growth". He forecast that China's ocean-cargo-handling capacity will rise from 3.8 billion tons in 2005 to 5 billion tons in 2010, and that its coastal throughput of containers, as measured in TEU (20-foot equivalent units), will grow from 74.41 million in 2005 to 130 million in 2010.

Chai Haitao, a researcher with the International Trade Research Academy of the Ministry of Commerce, said the plan for the new round of port expansions had been undertaken to anticipate future economic development in China and the world. Chai predicted that China's foreign trade would grow at an annual rate of 15% from 2006-10, so that almost all of China's major seaports would undergo expansion in the next few years.

Meanwhile, the International Monetary Fund has predicted that the world's economy will grow at an annual rate of 4.2% during 2006-09, relatively higher than that during the 2001-05 period. The IMF also predicted that over the next five years, China would continue to be the world's economic engine, with annual growth of no less than 8%.

China has been the world's biggest cargo producer since 2004, with Shanghai being the world's largest port in terms of handling tonnage. Ten of the world's 25 largest seaports are already in China.

(Asia Pulse/XIC)

http://www.timesonline.co.uk/article/0,,25...2171245,00.html



The Times May 09, 2006


Greed for energy threatens to dam legendary gore
By Jane Macartney

Tens of thousands fear they will be displaced if China's latest project takes a leap forward







WITHIN days China will pour the final concrete of the massive Three Gorges Dam across the Yangtze River.

But completion of one of the great engineering feats of our time will not satisfy the country’s energy-hungry developers. They will merely turn their attention to one of the deepest and most dramatic gorges on earth — Tiger Leaping Gorge — 900 miles (1,500km) upstream.

China confirmed yesterday that another 80,000 people will be moved this year from areas to be flooded behind the Three Gorges Dam. They are among about 1.3 million being displaced.

Tens of thousands more now fear that their homes will be flooded in the new project. Environmentalists are appalled. But engineers regard a dam across Tiger Leaping Gorge as crucial for the success of the Three Gorges project, which has a small reservoir compared to the enormous flow of the river. Their plan is to add 12 dams upstream from the Three Gorges Dam. The one across Tiger Leaping Gorge would provide the largest reservoir and help most to regulate the river’s flow.

Surveys have been going on for 18 months and construction of the proposed 278m-high (912ft) dam could begin as early as 2008. It would dwarf the 180m-high barrier at the Three Gorges. The reservoir would back up for 125 miles.

Ma Jun, an environmental consultant from Beijing and author of the influential book China’s Water Crisis, recognises the value of the project. “For every drop of water stored, it would add more value for hydropower generation than any other reservoir in China or perhaps the world,” he said.

But he is no fan of the plan. Although the dam would leave the 30m chasm across which tigers of legend leapt, he wondered how the gorge would look with a concrete wall across it. “The beauty of this place is unique,” he said.

The ten-mile gorge is an important tourist attraction and the setting is breathtaking. Mountains soar more than 3,500m above the river to create a deep defile touched by the sun only at midday.

It falls within a Unesco World Heritage-listed site that harbours great botanical riches as well as ethnic minorities who have farmed along the steep hillsides for centuries, but are now threatened.

Damming the thundering river, called the Jinsha along the upper reaches, could force up to 100,000 people out of their ancestral homes. Most are from the Naxi minority, the last people to use a system of pictographic writing, who farm corn and wheat along the fertile banks. They would have to move north, to a Tibetan area where the altitude and harsh climate mean that the staples are such unfamiliar crops as barley and potatoes.

Liao Qunzhong is a farmer who has lived in Tiger Leaping Gorge all his life and hires out his mule to tourists eager to follow an ancient tea-trading path through the gorge that once supplied Tibet with tea from southern China.

“If we have to move north how will we fit in with people from another community? They will not accept us. We will be strangers,” he told The Times. Such worries weigh little with the Huaneng Group, the largest independent power producer in China, which is run by Li Xiaopeng, a son of the former premier, Li Peng. A dam in Tiger Leaping Gorge would block silt being carried down into the reservoir behind the Three Gorges Dam, thus extending the working life of the power station.

Mr Ma is calling for a free and open debate before any decision is taken. “We must make a balanced trade-off,” he says. “We want a transparent process. How can we face questions from our children if our decision is not based on a scientific and democratic process?” But officials in southwestern Yunnan province appear to favour the traditional approach, that of top-down government whereby decisions are simply announced by those who believe they know best.

Not everyone is waiting for a decision, however it is made. Some farmers in Tiger Leaping Gorge believe that they will receive 100 yuan (£6.70) a square metre in compensation for their homes and are busy extending their houses.

Further upstream, at the First Bend of the Yangtze, farmers have taken the law into their own hands, refusing to allow engineers access to the area to take preliminary measurements and effectively put a stop to preparatory work. Others, certain that the dam will not touch their land, are looking on the bright side. Xiao Yang, a driver, said: “The dam will bring progress for us. And tourists will still come, if not to look at the gorge then to look at the dam just like they visit the Three Gorges Dam.”

THE TIGER LEGEND

Among the deepest of river canyons, it contains a series of rapids stretching for 15km (9 miles) beneath towering cliffs

The peaks on either side, Jade Dragon Snow Mountain and Haba Snow Mountain, are both higher than Mont Blanc

Legend holds that a tiger evaded hunters by leaping across the gorge’s narrowest section, 30m (98ft) wide at its base

Tourists hiking the length of the gorge require at least two days

The proposed dam would displace 100,000 people and destroy 200 species of plants and animals

No tigers have been seen near the gorge since the 1950s

Read Jane Macartney's weblog here

- Chinese capital launches Internet cafe crackdown
http://www.spacewar.com/reports/Chinese_ca..._crackdown.html

Beijing, (AFP) May 12, 2006 - China's capital Beijing has launched a campaign to bar minors and those thought to be accessing "unhealthy" content" from the city's internet cafes, state media said Friday.

- US Focused On China Currency Reform
http://www.sinodaily.com/reports/US_Focuse...ncy_Reform.html

Beijing (UPI) May 16, 2006 - The U.S. Treasury Department's first permanent representative overseas Thursday stressed the urgency of working with China on currency reform, a day after the Bush administration said it would not brand the economic powerhouse a currency manipulator that seeks to gain unfair trade advantages.

http://www.timesonline.co.uk/article/0,,5-2181995,00.html

The Times May 16, 2006

Chinese juggling with yuan risks the wrath of Europe and Japan
By Jane Macartney in Beijing and Gary Duncan

CHINA allowed its currency to break through the watershed of eight yuan to the dollar to its highest in a decade yesterday, but left room for scant if any gains against the euro and the yen in a policy that could vex Europe and Japan.

The Chinese central bank, set yesterday’s yuan central rate at 7.9982 against the dollar — the first time that it has gone past eight since the authorities revalued the yuan by 2.1 per cent last July.

The move to let the yuan rise to the key level came after a decision last week by Washington not to accuse Beijing formally of manipulating its currency. That will have enabled Beijing to feel greater freedom to allow the yuan to climb without seeming to bow to US pressure.

Economists now expect China to allow the currency to appreciate at a faster pace.

The yuan has risen by about 1.4 per cent against the dollar since last July, but, in a trend which could trigger a backlash against Beijing from Europe or Japan, the yuan has weakened sharply against both the euro and the yen since late last year.

The yuan’s continuing slide against its European and Japanese rivals adds to China’s already huge competitive advantage in those economies. It also adds to economic stress on the eurozone and Japan from the dollar’s slide, forcing the euro and yen to bear more of the burden of adjustment.

With the yuan’s losses against the euro and yen mirroring those by the dollar, at 9 per cent and 7 per cent respectively over the past six months, the trends underline the theoretical nature of China’s supposedly new exchange rate link to a currency basket. In practice, the yuan remains effectively pegged to the dollar.

One reason for this strategy by Beijing is the intensity of US pressure. Europe and Japan have traditionally adopted more subtle means. But economists sounded warnings that this tolerance might not last indefinitely if a weakening dollar continues to take the yuan lower, adding to the trade disadvantages for Europe and Japan.

“Eventually, someone in Brussels or Tokyo is going to notice this and China’s currency valuation will become politicised in other parts of the world,” Carl Weinberg, of High Frequency Economics in New York, said.

Other analysts disagree. Yesterday there was little sign of immediate tensions emerging as Charlie McCreevy, the European Internal Market and Services Commissioner, and Jin Renqing, the Chinese Finance Minister, ended a day of talks with a joint statement that only emphasised China’s commitment to press ahead with reform of its currency regime.

http://www.atimes.com/atimes/China/HE17Ad01.html
Beijing's 'soft power' offensive
By Purnendra Jain and Gerry Groot

ADELAIDE - Carrots and sticks, inducements and force, are the two sides of effective diplomacy. In recent international-relations literature, both popular and academic, these two tools of diplomacy have increasingly been described as "hard" and "soft power". Hard power is the ability of one nation to use its military power and economic strengths to coerce or buy compliance. Soft power, according to Harvard Professor Joseph Nye, who coined the term, "is the ability to get what you want by attracting and persuading others to adopt your goals".

Military power alone is no longer sufficient for nations to project their might. Today more than ever, governments also need to use subtle and effective soft power to deal with terrorism and other global challenges. Nye, who was assistant secretary of defense under US president Bill Clinton, has been on a major media campaign to persuade the current US administration of President George W Bush to use soft power to complement its hard power, especially in the wake of September 11, 2001.

Significantly, the concept of soft-power advocacy has made a strong impression in China, especially after some agitation by at least one Shanghai think-tank. Most recently, Chinese Communist Party leaders have put in place an initiative to enhance soft power and thus China's global influence.

Beijing established what it calls the Confucius Institute with a mission to promote the Chinese language, culture and a range of other aspects of learning about China, including its business environment. Several of these institutes have already been established around the world, in such places as Japan, Australia, Sweden and the United States, and Beijing aims eventually to open some 100 of them.

The choice of the name is instructive, since for years it was Communist Party dogma that Confucianism held back China's development. In recent years, however, Confucianism has undergone a kind of political resurrection in China, and in any case has a no threatening connotations. A "Mao Zedong Institute" probably would not be welcomed in most countries.

China is obviously pursuing this course to increase its legitimacy as an emerging superpower. President Hu Jintao and company are far from threatening US global influence quite yet, but they certainly want to outperform Japan and provide competition to an emerging India. Chinese leaders' desires for national revival (fuxing zhongguo) includes returning to economic-superpower status, with all the cultural influence that implies - in other words, re-establish the position China had before a rising Europe began to eclipse it in the 18th century.

A national mission to spread Chineseness
The National Office for Teaching Chinese as a Foreign Language, or Hanban, has a national mission to spread the teaching of Mandarin and Chinese culture around the world. In many ways it is patterned after Germany's Goethe Institute or France's Alliance Francaise. The Chinese government recently committed nearly US$25 million a year for the teaching of Chinese as a foreign language.

Significantly, these the Confucius Institutes differ in significant ways from the long-established agents of French and German culture. Those European organizations are government agencies and fully dependent on state funds for their operations, but they locate their offices in normal commercial locations wherever their governments can rent appropriate space. There is no attempt to integrate them into their host societies via institutional link-ups. In contrast, the Confucius Institutes are being incorporated into leading universities and colleges around the world as well as being linked to China not only by their Hanban connections, but also by supportive twinning arrangements with key Chinese universities. The London School of Economics, for example, is setting up an institute using arrangements under which it will cooperate with the equally prestigious Qinghua University in Beijing.

In the US, Confucius Institutes have been affiliated with the University of Maryland, near Washington, DC, the Chicago public school system, and San Francisco State University. Not only will the Confucius Institutes immediately benefit from the prestige and convenience of becoming parts of existing campuses, the latter will also have a vested interest in supplying the institutes with staff and funds.

The foreign partners of the Confucius Institutes will have a key stake in the institutes' finances. One obvious way of covering the costs is to offer courses appealing to people who simply want to learn more about China and things Chinese and others who want to gain insights that help them get a piece of the action in China's booming economy. It is also the attractiveness of these growth rates and their implications that seems to be the key driver attracting foreign universities not only to go along with the Hanban initiative, but also to compete for such an institute on their campuses.

This enthusiasm is tempered with some risks, financial and otherwise, that the Hanban's conditions entail. For example, the contracts call for the foreign partners to acknowledge Beijing's one-China policy. This demand may at present be little more than formulaic, but it has an inherent potential to trip up the foreign hosts should they attempt to enter arrangements with Taiwanese partners or the Taiwanese government in circumstances that Beijing finds unacceptable. The more successful the institutes, the more potential for them to be used as agents of Beijing's foreign policy in future.

Such conflicts may, of course, never come to pass, but the current enthusiasm of foreign institutions to enter into arrangements with the Hanban seems much more predicated on what they might be able to get out of the arrangements in future than what is obviously on available at present. The Hanban is not offering much more than hints at possible benefits in the way of access to Chinese markets or useful political connections, while the costs to and the obligations of the foreign partners are evident.

At present, it seems much more like trying to get a foot in the door in the hope of some as yet unclear payoff later. The amount of prestige a Confucius Institute might bring to the foreign partner is also unclear but also seems dependent on the great promise of the Chinese economy.

For the Hanban, the benefits of the institutes in terms of gaining immediate prestige for China as well as access to offices in prime locations, skilled staff and good connections are obvious. Also clear is the potential to use the institutes for the long-term building of Chinese soft-power influence, in part because of the initial advantages. The institutes are a small but significant part of what seems to be the equivalent of a soft-power offensive via the promotion of language and