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-MARCH, 1999- |
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FACING UP TO TOUGH
TIMES
Zhu Rongji delivers
some stark truths
By Jim Erickson and David Hsieh/Beijing
ZHU RONGJI HAS YET to solve his country's many economic problems, but he has at least made its leaders thoroughly aware of what they are. During his report to the National People's Congress (NPC) last week, the no-nonsense premier dispensed with the usual rhetoric and euphemisms to deliver a starkly pragmatic assessment. "Unprecedented and grim" was how he summed up an economy hit by declining exports, flagging domestic consumption and rising unemployment. "What I am dissatisfied with is that I have not done a good job," he later told journalists.
Characteristically, Zhu was being hard on himself. On becoming premier -and President Jiang Zemin's right-hand man -a year ago, he had promised to implement a radical program of industrial and bureaucratic reform that would have been ambitious under ideal circumstances. Amid Asia's Crisis, it is proving nearly impossible. From 12% in 1994, China's GDP expansion slid to 7.8% last year. It is expected to drop to 7% this year.
Zhu's chief dilemma is how to balance growth, reform and social stability amid a hostile international economic environment. His response has been Keynesian. Through a $750-billion government infrastructure spending program (financed largely by bond sales), Chinese authorities hope to maintain employment and domestic consumption even as millions of jobs are eliminated from moribund state-owned enterprises. Deflation remains a threat as failing state factories churn out unwanted goods.
In new government initiatives to spur the crucial domestic economy, state banks will provide more credit for the purchase of major consumer durables such as cars and appliances. The use of credit cards will be encouraged. In rural areas, electricity rates may be cut to boost purchases of electric machinery for farm production. Funds are also being made available to local governments for unemployment insurance and job retraining. But the pump-priming will push the budget deficit up 56% to $18.2 billion, the largest under Communist rule, albeit still below international norms.
Some reform programs have obviously slipped. The widespread introduction of private home ownership has been delayed. But other efforts are proceeding, Zhu told China's legislature. The number of ministries has been shrunk by a quarter, and the military has been ordered out of its extensive businesses. Though economic modernization could dampen growth in the short term, Beijing seemed determined to press ahead with the overhaul. "Our aim is to eliminate one third of money-losing state enterprises this year and another third next year," said Sheng Huaren, minister of the State Economic and Trade Commission. Some 2,300 large and medium-sized enterprises are in the red.
The NPC formally enshrined Deng Xiaoping Theory in the Constitution, putting the late patriarch's economics-oriented pragmatism on a par with Marxism-Leninism-Mao Thought. The Congress also wrote the "rule of law" into the charter, passed landmark legislation to protect private business and property, and approved new rules on contracts. Amid sliding overseas investment, the legislature relaxed foreign-ownership restrictions. Shanghai will fully open its private companies - and not just state enterprises - to joint ventures with foreign partners.
Another surprise was Zhu's empathetic prescription for handling growing social unrest, much of it fomented by laid-off workers and fueled by anger, particularly in the countryside, over official corruption. "Under no circumstances should we intensify [public demonstrations] by handling them in an oversimplified or crude way," Zhu said. "Still less should we use dictatorial means against the people." June 4 marks the 10th anniversary of the traumatic Tiananmen crackdown.
Legislators gave the premier's report an approval rating of 98.4%. "There have been improvements," said Lu Guiyan, a deputy from Yunnan province. "The government has become more efficient." Even so, it is unclear if reform will continue to play in the provinces. Beijing has been trying to rein in excesses of regional leaders by cracking down on corruption and tax evasion, and by controlling fees and taxes imposed by local party bosses. Zhu's controversial anti-graft campaign seemed to be gaining converts in the capital. Han Zhubin, China's top corruption-buster, had been given a no-confidence vote by a third of NPC delegates in 1998, but this year the naysayers fell to 12%.
Zhu will soon face a tougher audience. Next month, he travels to the United States amid growing strains in bilateral ties. Disputes range from human rights and trade to charges of nuclear espionage by China - which the premier dismissed as a "fallacy" stemming from a power struggle in American politics.
"In the past, both China and the U.S. have experienced periods when people treated even the grass and trees as enemies and everybody was afraid of being accused by others," said Zhu during a post-NPC press conference, which he handled with good humor and equanimity. Judging by his own willingness to accept blame for policy failings, Zhu may cast the first stone - at himself, if that is what it takes to achieve his goals.
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China Evacuates Belgrade's Embassy Staff
BEIJING, Mar. 26, 1999 -- (Agence France Presse) China has begun evacuating non-essential personnel from its embassy in Belgrade, state media said Friday.
Family members of Chinese diplomats, teachers and 27 students left Belgrade on Wednesday and arrived in Romania Friday, Xinhua news agency said in a dispatch from Bucharest.
The group, the first to be evacuated from China's embassy in Yugoslavia, was staying in the Chinese Embassy in Romania.
China on Friday intensified its onslaught against NATO air strikes in Yugoslavia, calling on the international community to protest the "barbarity."
President Jiang Zemin, who is touring Europe, and other Chinese leaders have demanded an immediate halt to the NATO air strikes. ( (c) 1999 Agence France Presse)
By Agence France Presse
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U.S. Senators Offer Law To Help Taiwan Defense
WASHINGTON, Mar. 25, 1999 -- (Reuters) Two key senators offered legislation on Wednesday to increase U.S. military cooperation with Taiwan and bolster its defenses in light of what they said was a growing threat from China.
Senate Foreign Relations Chairman Jesse Helms, a North Carolina Republican, and Senator Robert Torricelli, a New Jersey Democrat, teamed up to sponsor the Taiwan Security Enhancement Act.
The bill, introduced in a growing congressional climate of hostility toward China amid spying charges, would authorize the sale to Taiwan of a broad array of defense items, including missile defense systems and advanced air-to-air missiles.
It also seeks to strengthen the process for defense sales to Taiwan, Helms said, requiring the president to report to Congress annually on Taiwan's defense requests and to justify any rejections of arms sales to Taiwan.
"Some will call this bill provocative, they will claim that doing these things will upset the U.S. relationship with China," Helms said. "Many of the things called for in this legislation must be done at the earliest possible time."
"China's behavior is a clear warning, and it is time for the United States to be much more serious about maintaining a posture of deterrence in the western Pacific," he said.
The bill's introduction follows the 429-1 approval on Tuesday by the House of Representatives of a measure reaffirming the U.S. commitment to helping Taiwan defend itself.
That bill calls on the president to seek an official Chinese renunciation of force against Taiwan, which Beijing considers a renegade province, and restate the U.S. commitment to the 1979 Taiwan Relations Act.
The moves come a few weeks before Chinese Prime Minister Zhu Rongji visits Washington for talks with President Bill Clinton and follows recent allegations that China stole U.S. nuclear secrets in the 1980s that enabled it to improve its military capabilities. China has strongly denied those charges. ( (c) 1999 Reuters)
By Reuters
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Chinese Newspaper Swipes At Washington's McCarthyists
BEIJING, Mar. 22, 1999 -- (Reuters) China's Communist Party newspaper took a swipe on Monday at what it sees as an anti-Chinese mood in Washington, depicting critics of Beijing as neo-McCarthyites with tunnel vision.
A cartoon in the People's Daily showed a frog croaking and looking up from the pit of a dark well while sitting atop Uncle Sam's hat emblazoned with stars and the Chinese character for McCarthy.
The Chinese saying "a frog in a well" is a derogatory remark for a person with a limited outlook.
U.S. Senator Joe McCarthy made a career of hunting down Communists in the 1950s, and the word "McCarthyism" derives from his name. It is defined in the dictionary as "the use of tactics involving personal attacks on individuals by means of widely publicized indiscriminate allegations, especially on the basis of unsubstantiated charges."
Sino-U.S. relations have been dogged by a series of disputes in the last few months over alleged Chinese human rights abuses, close American ties to Taiwan and allegations that China stole U.S. nuclear secrets.
China vehemently denies the nuclear theft charge. Prime Minister Zhu Rongji, who is scheduled to visit the United States in April, called it "a tale from the Arabian Nights."
In 1997, China was accused of donating to U.S. election campaigns.
The People's Daily caricature came with a poem, which read in part as follows:
The myth of "donorgate" has gone bankrupt
The strange case of "stealing secrets" erupts
... Learning from McCarthy with one's heart and soul
Stirring up demons to make trouble while masquerading as a hero. ((c) 1999 Reuters)
By Reuters
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President Jiang Ignores Roman Protesters
ROME, Mar. 22, 1999 -- (Agence France Presse) A small but vocal group of protestors chanted slogans at President Jiang Zemin on Monday as he arrived for talks with an Italian political leader at the start of an official visit to Rome.
"Freedom" and "The time has come for change" shouted around 20 demonstrators gathered outside the Italian parliament, where Jiang came to hold talks with National Assembly speaker Luciano Violante.
Jiang remained expressionless as they continued to chant when he left the building, with the protestors kept behind barriers some 50 meters (yards) from the parliament across a sealed-off square.
"Shame on you Jiang Zemin. Shame on you Italy and Europe" read a huge banner which the demonstrators held up, alongside a replica of the Statue of Liberty with the label, "Democracy for China."
Security officials were unimpressed by the protest, organized by the Italian Radical Party. "This is about what we expected," said one official as Jiang left for his next appointment.
Earlier Monday leading Chinese dissident Wei Jingsheng (pictured at a Brussels press conference March 18) joined another demonstration of about 10 people in another part of the city, saying Jiang's visit to Italy, Switzerland and Austria was "an insult to human rights."
Italian officials are playing down the protests in Rome. "We are a country of free speech. Of course people can say what they want here," Carlo Bruni, Rome's ambassador to Beijing said.
Another demonstration was planned later in the day by a Tibetan group, again in front of the Italian parliament. ( (c) 1999 Agence France Presse)
By Agence France Presse
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'Yellow Peril' Novelist Calls For More Tibet Rights
BEIJING, Mar. 22, 1999 -- (Agence France Presse) One of China's best-known authors has broken a major taboo, slamming the government's policy on Tibet and advocating more say for ethnic minorities in determining their own fate.
Wang Lixiong, author of "Yellow Peril," in which a modern China is devastated by civil war, said independence was not feasible for Tibet. But he was for "letting ethnic minorities shake off the guidance of their elite and choosing their own future."
"This could be the way out of resolving problems involving minorities," Wang wrote in the bimonthly magazine Strategy and Management. "China's political reform in future needs to consider this."
He said nationalism was growing in the Himalayan region and could split China.
"China's control over Tibet is stable," he said. "But underneath the stability, there exist serious hidden dangers."
It was unclear if Wang's essay had to do with his recent detention in the northwestern Muslim region of Xinjiang.
Xinjiang police freed Wang on March 11 after detaining him for one month, accused of revealing state secrets, according to a Hong Kong-based human rights group.
Wang's mother said the 45-year-old author had returned to Beijing from Xinjiang, but he was not available for comment.
"He cannot answer any phone calls during this period. He is resting," the mother said.
She declined to say why, but police are known to tell detainees not to talk to reporters after their release.
In his essay, "Tibet -- China's soft rib in the 21st century," Wang said Hong Kong was not China's first experiment with the "one country, two systems" formula.
The formula, which promised the former British colony autonomy when it returned to Chinese sovereignty in 1997, was applied in Tibet in 1951, but it did not work and ended in an bloody uprising in 1959, Wang said.
He criticized the Chinese government for doing too little to win over the international community on the issue of Tibet, while the globe-trotting Dalai Lama had gained widespread sympathy in the West and won the Nobel Peace Prize in 1989.
The Dalai Lama, the target of vitriolic criticism from Beijing, advocates autonomy for the homeland he fled in 1959. He accuses Beijing of flooding Tibet with ethnic Han Chinese settlers and destroying its ancient culture.
Wang said Beijing's control over Tibet was not as firm as in the Muslim region of Xinjiang or Inner Mongolia because it did not send enough Han Chinese to the Himalayan region due to harsh living conditions there.
Han Chinese account for 2.8 percent of Tibet's population and Beijing caused itself trouble by denouncing the Dalai Lama, who is worshipped by Tibetans as a god-king, he said.
A "fairly high" ratio of Tibetan cadres are religious and torn between the Communist Party and the Dalai Lama, he said.
Wang's "Yellow Peril" is one of the best-selling novels in the Chinese-speaking world, but for years he was known simply as "Bao Mi," or "kept secret," for his own protection because of his book's depiction of a doomsday scenario for China.
In the book, civil war erupts between north and south China -- with Nationalist-ruled Taiwan backing the south -- and ends in nuclear conflict and millions of starving refugees spilling across the borders.
Wang came forward to take credit for his work only in February 1998, almost seven years after the political novel went on sale in Taiwan and Hong Kong.
China banned Wang's novel but thousands of pirated copies have been sold across the country. ((c) 1999 Agence France Presse)
By Agence France Presse
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Anti-China Rhetoric Poses Great Security Risk, Claims Perry
HONG KONG, Mar. 22, 1999 -- (Reuters) Former U.S. defense secretary William Perry warned on Monday that growing anti-China rhetoric in Washington posed one of the greatest risks to security in the Asia Pacific.
Perry said during a visit to Hong Kong that the Sino-U.S. relationship was at its most worrisome point in many years.
"I cannot point to a time in recent history when I was more concerned about the U.S.-China relationship based on what is going on in Washington today," Perry told the Asia Society.
"Above all I would like to see a moderation of the rhetoric that persists in referring to China as an enemy," he added.
"If we treat China as an enemy it will surely become one."
Opposition to the U.S. policy of China engagement seems to be growing and could yet gain ascendancy, destroying a pillar of Asian stability and security over the past two decades, he said.
"One consequence of this stabilizing influence is that the region has not yet had a major arms race that allows a larger share of the resources in the region to be used for economic development," Perry added.
If the other U.S. pillars of stability fell -- heavy troop deployment in the region and security pacts with Japan, South Korea and Australia -- an arms race would overtake Asia, he said.
Taiwan, the most volatile flash-point in Asia, has become more dangerous after U.S. allegations of Chinese nuclear espionage and signs of a Chinese buildup of missiles aimed at Taiwan, he added.
"All this acrimonious debate is complicated by the fact our engagement policy is an inextricable mixture of economic policy and security policy," Perry said.
Defending engagement as the best long-term approach to China, he said a robust trading elationship should not encompass the export of U.S. military technology or so-called "dual use" technology with the potential for military application.
He also stressed that a missile-defense system being developed by the United States -- another strain on Sino-U.S. ties -- had a relatively small "footprint."
"It is misleading to think of a theater-wide defense system in a theater as large as this one (Asia)," he said.
China is concerned the theater defense system would be extended to include Taiwan under its umbrella.
Perry also voiced security concerns for South Asia where India and Pakistan conducted tit-for-tat nuclear tests last year.
"I believe it is only a matter of time before they deploy nuclear-tipped ballistic missiles," Perry said.
"I believe there is a real danger some of the Indian and Pakistani weapons will be fired in anger." ((c) 1999 Reuters)
By Reuters
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Portugal's President Says Macao Culture Will Survive
MACAO, Mar. 22, 1999 -- (Reuters) Portuguese President Jorge Sampaio said on Monday Macao's reversion to Chinese rule will not mean the end of Macanese culture, the unique 400-year-old blend of Portuguese and Chinese influences.
The Dec. 19 handover "can in no way be seen as the end of Macao and the communities that both here and throughout the world consider this their homeland," Sampaio told a gathering of about 1,500 people of Macanese descent.
Macanese is the customary term for Macao's minority of mixed Chinese and Portuguese extraction, which account for about 2.3 percent of the territory's 430,000 residents, or about 10,000 people.
It also often refers to local Chinese having a close affinity with the Portuguese culture.
Sampaio, whose five-day official visit to Macao ended on Monday evening, described Macao as a "communion" between Europe and Asia.
Macao, which was settled by the Portuguese around 1557, reverts to Chinese administration at midnight on Dec. 19.
Portugal relinquished sovereignty over the tiny 21-square kilometer enclave in 1974, but has continued to handle administration of the territory. After the handover, it will become an autonomous Special Administrative Region of China, with status much the same as Hong Kong.
Macao's post-handover constitution, the Basic Law, protects the cultural identity of the Macanese. Beijing has pledged it will respect the Macanese community's wish to keep their Portuguese nationality beyond the handover.
"Powers and empires change," the Sampaio said. "The nature of their people, generated and strengthened by history, shall remain in history."
His remarks came at the Third Reunion of the Macanese Communities, which drew Macanese from as far as the United States. The organizing group has pledged to continue the reunion after the handover. ((c) 1999 Agence France Presse)
By Agence France Presse
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Vatican Holds Olive Branch To China
VATICAN CITY, Mar. 22, 1999 -- (Reuters) A top Vatican diplomat, speaking as President Jiang Zemin made an official visit to Italy, said on Monday the Holy See was willing to re-think its relations with Taiwan in order to forge ties with Beijing.
Vatican Foreign Minister Archbishop Jean-Louis Tauran, holding out the Vatican's latest olive branch to Beijing, also said the Vatican would not interfere in China's internal relations if ties were forged.
"We are aware that in order to normalize our relations with Beijing we will have to modify the form (of relations) with Taipei," he told Milan's Corriere della Sera newspaper.
"We are willing to negotiate," Tauran said when asked about Beijing's insistence that the Vatican sever ties with Taiwan before talks on links with China can begin.
With the Vatican and Vietnam inching towards diplomatic ties, China and North Korea are virtually the only major communist countries with no links to the Holy See.
Unlike most heads of state or government who visit Italy, Jiang is not expected to have any contacts with the Vatican.
Italian officials, including Prime Minister Massimo D'Alema, have promised to try to persuade Jiang that it would be in China's interests to forge links with the Vatican.
Beijing does not allow its Catholics to recognize the Pope's authority. Catholic officials say there are some four million members of the state-controlled church in China but as many as eight million others worship underground and recognize the Pope.
Beijing sees the Vatican's desire to have a free hand in appointing bishops as interference in its internal affairs, but Tauran said this was a matter of religion and not politics.
Tauran said the Vatican's Embassy to China had been forced to shut down in Beijing in 1951 and had not done so of its own accord. It eventually re-opened in Taiwan.
In 1972, the Vatican reduced the status of its diplomatic ties in Taiwan by not replacing a departing ambassador and leaving only a secretary as charge d'affaires.
Last month, Vatican Secretary of State Cardinal Angelo Sodano said the Holy See was willing to "move its embassy back to Beijing, not tomorrow, but tonight," if Beijing allowed it.
The Vatican is one of 28 countries which recognize Taiwan's Nationalist-ruled Republic of China instead of the communist People's Republic of China.
The Nationalist government has clung to sovereignty of Taiwan since losing the mainland to communist forces in 1949 and has long counted the Catholic Church among its closest friends.
Pope John Paul wrote a heartfelt personal letter to late Chinese leader Deng Xiaoping in 1983 asking to establish direct contacts to improve relations with the Vatican but Deng never responded, according to a new book.
The letter is contained in a new biography of the Pope by U.S. historian George Weigel, due to be published later this year. The biography, which Vatican officials call "authoritative" although not formally authorized, is called "Witness to Hope: The Life of Pope John Paul."
According to the book the Pope referred to Taiwan in his letter as "a long and complicated situation in which the Holy See has found itself, through a series of events, not always dependent on its own will."
Last week, China's Foreign Ministry brushed aside speculation that Jiang would meet Papal officials in Rome. ( (c) 1999 Reuters)
By Reuters
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President Jiang Zemin's handlers are stepping up their attempts to build a personality cult around their boss. A source within the group preparing for China's 50th anniversary celebrations in October says the president's men want large portraits of their boss displayed prominently during the day-long affair. They will most likely be carried along the parade route, held aloft by some of the 20,000 participants in the celebration. Jiang's entourage will be atop the Tiananmen Gate to review the parade - whic h is almost sure (although it's not been announced publicly yet) to include a show of military hardware. That sort of review hasn't been seen since 1984, when Deng Xiaoping once reviewed the troops at Tiananmen from his Red Flag limousine.
Restive critics are increasingly worried that Jiang is trying to exploit the very tactics his mentor, Deng, tried to minimize. Consider, along with the anniversary plans, the possible publication of the first volume of the selected works of Jiang either i n this auspicious year or at the beginning of the new millennium; the political predominance given his teachings on "Talk Politics"; and the constant reference to him in the press as the country's "core" - and you see reason for concern.
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KIM TO KIM: SEE YOU IN BEIJING
Within Seoul's diplomatic circles, there is strong speculation that President Kim Dae Jung is pushing for a summit with Kim Jong Il when the northern leader visits Beijing, most likely in September. There is no indication of how either the reclusive Kim or China view the plan. But Kim Dae Jung is under pressure to show tangible and positive results from Pyongyang before his "Sunshine Policy" of engaging the North loses its shine. Some South Koreans are beginning to ask if it is worth providing North Korea with millions of dollars in aid, much of it in hard-to-come-by hard currency, without some sort of tangible results. And while his American allies are trumpeting fears about the North's de velopment of nuclear capabilities and missile programs, the Blue House sees the threat as years away from becoming a reality. Kim is operating on another level: he wants to leave office as the president who broke through the barrier that has kept the Kore ans divided for more than fifty years.
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Three Gorges Dam Project In Financial Difficulties
BEIJING, Mar. 16, 1999 -- (Agence France Presse) Authorities charged with managing China's mammoth Three Gorges Dam project are reporting "difficulties in financing" that is running into the billions of dollars, state media reported Tuesday.
Officials from the China Yangtze Three Gorges Project Development Corp. (CTGPC) have confirmed only 55 billion yuan ($6.6 billion) of the estimated 80 billion yuan in necessary funding, the Xinhua news agency said.
Managers are now being confronted with a 25 billion yuan cash shortfall.
The "second phase" of construction, through the 1998-2003 period, on the world's largest hydroelectric project will involve total costs almost double those incurred between 1993-1997, leading to "certain difficulties in financing," the report cited an unnamed CTGPC official as saying.
The CTGPC will be forced to seek some 11 billion yuan in commercial bank loans and a further 11 billion yuan from the issue of corporate bonds and the stock market in a desperate funding drive.
Another three billion yuan is expected to be raised in foreign currency through foreign bank loans, the news agency reported.
When it becomes partly operational in 2003, officials expect the Three Gorges Dam to generate revenues of more than 67 billion yuan within five years.
The hydroelectric dam will have projected annual production of more than one billion megawatts of electricity when fully completed in 2010.
The dam is expected to carry a final price tag of more than 200 billion yuan ($24 billion). ( (c) 1999 Agence France Presse)
By Agence France Presse
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Dissident Released After Parliament Closure
BEIJING, Mar. 16, 1999 -- (Agence France Presse) Dissident Miao Xike, detained in the lead up to the opening of the National People's Congress (NPC), has been released following the close of China's annual parliamentary session.
"Police released me on Monday afternoon at the time of the closing of the NPC," Miao said Tuesday from his home in southern Shenzhen.
Miao was taken in for questioning on March 3, two days before the opening plenary session of the NPC, which convenes in Beijing once a year for about two weeks and is frequently the site of petitions and protests.
Miao was detained in front of the Great Hall of the People, the seat of China's parliament, during last year's NPC session after unfurling a banner and shouting slogans demanding the institution of democracy in China.
Police stationed in front of the Great Hall this year removed at least two others for undisclosed reasons.
Wu Yilong, a member of the outlawed China Democracy Party (CDP) who had been detained in eastern Hangzhou city at the end of February, was released Saturday after being sent to his home town in eastern Anhui province, the Information Center of Human Rights and Democratic Movement in China reported.
But four other members of the CDP in central Wuhan remained in detention Tuesday, three weeks after police detained them, family members said.
Lu Xinhua, Chen Zhonghe, Xiao Shichang and Jiang Hansheng were taken into custody after attempting to organize a CDP national congress in Wuhan, despite heavy prison terms handed down to the party's three principle leaders in late December.
"I fear that they may be formally arrested," Jiang Baomin, the father of Jiang Hansheng, said by phone.
Under Chinese law, suspects can legally be held for up to one month before being formally arrested or charged with a crime. ( (c) 1999 Agence France Presse)
By Agence France Presse
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THIS WAY, CHINA
Beijing may soon join the WTO
By Alejandro Reyes and Sam Gilston/Washington
WHEN U.S. TRADE REPRESENTATIVE Charlene Barshefsky touched down in Beijing on March 2, she became the third senior American official - after Deputy Treasury Secretary Lawrence Summers and Secretary of State Madeleine Albright - to visit China in as many weeks. Washington is making a big push to break the longstanding deadlock in talks on China's 12-year quest for membership in the World Trade Organization (WTO). The goal: to come up with some kind of deal by the time Premier Zhu Rongji tours America next month.
Time is running out. "The longer China delays, the harder it will be for China to get in the system because the obligations keep growing and expanding," warns Barshefsky. The WTO launches the Millennium Round of new negotiations next year. While most members favor accession for China, the U.S. insists that Beijing come in on "commercially meaningful" terms. That means Chinese action on areas of concern, among them agriculture, textiles and apparel, distribution and transparency. Also under dispute: whether China is admitted as a developing country, as it wants, or as a developed nation, as Washington says it effectively is because of the size of its economy.
After his impeachment ordeal, U.S. President Bill Clinton desperately wants to prove he remains an effective leader. And coming to terms with Beijing is one tangible achievement that both sides can use to show that Sino-U.S. ties remain on track. Relations are looking rocky over U.S. criticism of China's human rights record and a U.S. proposal to include Taiwan in a new missile defense scheme. Barshefsky has indicated that the U.S. is ready to give Beijing extra time to phase in its compliance with WTO rules and American demands. For its part, Beijing is expected to try to level the playing field for foreigners and improve market access. In an interview with Asiaweek last month, Stanley Roth, America's point man for East Asia, praised the Chinese for some progress on these issues.
One problem is that the U.S. Congress, where China has some powerful enemies, must approve permanent most-favored-nation for the mainland. The Chinese want MFN - which guarantees preferential tariff rates and other concessions - as part of a deal. America's business community must also be persuaded that China will indeed live up to its obligations. Should all else fail, Beijing may be accorded some kind of "special observer" status with voting rights that would essentially be WTO membership in all but name. Chinese may see such a compromise as demeaning. But with a new round of trade negotiations looming, it may be the best option they have.
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STORMY WATERS
AHEAD
Widening differences dog China and the U.S.
By Todd Crowell and David Hsieh/Beijing
AS SHE LEFT BEIJING, Madeleine Albright had Charles Dickens on her mind. "In our relations with China, these are neither the best of times nor the worst of times," said the U.S. secretary of state, quoting the Victorian English novelist. That put the best of faces on her testy three-day "working visit" to China last week. The atmosphere contrasted sharply with the friendly aura that surrounded the last prominent American to visit the country, President Bill Clinton.
A sequence of events had raised bilateral tensions. Just before Albright landed in Beijing, her State Department castigated China in its annual human-rights report. "The [Chinese] government's record deteriorated sharply beginning in the final months of [1998] with a crackdown against organized political dissent," said the document. It criticized Beijing's "very limited tolerance of public dissent, fear of unrest, and the limited scope or inadequate implementation of laws protecting basic freedoms."
In Washington, the Senate voted 99-0 to urge the Clinton administration to renew its sponsorship of a motion to censure China at the upcoming annual meeting of the U.N. Commission on Human Rights. After seven consecutive failures, the U.S. decided not to sponsor last year. That helped smooth Clinton's China visit last June. At a Senate hearing, Albright was non-committal when asked what the administration would do this year.
If those moves provoked the Chinese, their actions angered the Americans too. Only hours before Albright's Feb. 28 arrival, authorities sentenced Peng Ming, eccentric founder of a quasi-political forum, to 18 months' detention for allegedly visiting prostitutes in Beijing. Days earlier, Wu Yilong, an ally of jailed China Democracy Party organizer Wang Youcai, was arrested at his Hangzhou home.
Fueling the fires was the release of a U.S. Congressional report. It alleges that China has been stealing missile-guidance systems and misusing civilian technology for the military. Last week, the administration blocked the sale of a $450-million communications satellite to a company linked to the Chinese armed forces. The developments signaled that China's access to U.S.-made dual-use technologies would be scrutinized much more closely.
Other security issues are straining the relationship. The Chinese have become obsessed with growing American talk of using a proposed anti-missile system to defend Japan, South Korea and perhaps even Taiwan. Proponents recently cited a Pentagon survey alleging that China was aiming more missiles at the island. Another report, however, said deployments had not changed significantly since the 1996 missile crisis in the Taiwan Strait.
Beijing continues to fret about new Japan-U.S. military cooperation guidelines, soon to be ratified by the Diet. Ozawa Ichiro, the shoot-from-the-hip leader of Japan's Liberal Party, now a ruling-coalition partner, said during a visit to China last week that Tokyo must spell out what the contentious term "areas surrounding Japan" meant, in relation to defense cooperation with the U.S. He stunned his hosts by saying they "obviously include China and Taiwan."
The widening Sino-American trade balance - now $57 billion in China's favor, by U.S. reckoning - is another source of friction. Though the Clinton administration has stepped up the pace of its talks with the Chinese on World Trade Organization (WTO) admission, Congress may introduce legislation requiring its approval of U.S. support. That could spell trouble for the administration's desire to expedite the talks ahead of Premier Zhu Rongji's visit to the U.S. next month.
Weighed down by such bulky baggage, Albright met with President Jiang Zemin, Zhu, Vice Premier Qian Qichen and Foreign Minister Tang Jiaxuan. At her departing press conference, she said "the most difficult topic" was human rights. The evening before, the official Xinhua News Agency released an extensive, scathing critique of American shortcomings. It urged the U.S. to "keep its eyes on its own human-rights situation." The Americans were berated for high violent crime, juvenile delinquency, racism, homelessness, child abuse, overcrowded prisons and police brutality.
As America's top diplomat, Albright tried to be conciliatory in public. Asked if multi-party democracy was the only solution to China's human-rights dilemmas, she replied that "as a political scientist, [I feel] a multi-party system is a prerequisite of an open society." Missile defense systems were at the "hypothetical" stage, Albright said. And on China's WTO entry, she reiterated the U.S. view that it must be commercially viable. She hoped it would come soon.
Tao Wenzhao, a U.S. expert at the Chinese Academy of Social Sciences, says the two sides are far apart on many issues. "China has its own timetable for political reform and the building of democracy and rule of law," he says. Tao was especially critical of Ozawa: "If you pursue ambiguity, Beijing will look the other way. But if you insist that Taiwan is a part of your strategic calculation, then it cannot but oppose you."
Despite all the dissonance, Albright insisted that Washington remains committed to building a constructive, strategic partnership with China. She said: "Our relationship, while still short of this goal, has reached the point where it can withstand even sharp disagreements." It will have to, given the high profile of Zhu Rongji's upcoming trip.
HEAVY BAGGAGE
Primary points of contention between the two giant powers:
- The U.S. plans to develop an
anti-ballistic-missile system and possibly deploy it in Northeast Asia.
- China is continuing its crackdown, begun late last year, against dissent.
- The bilateral trade balance continues to widen in China's favor and
differences remain over the terms for Beijing's admission to the WTO.
- The U.S. alleges that China is stealing high-tech secrets as well as
appropriating dual-use technology for military purposes.
- Closer defense cooperation between Japan and the U.S. worries - and riles -
the Chinese.
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NOW COMES THE HARD
PART
Global financial liberalization measures are officially in place. What does
it all mean to you?
By Alejandro Reyes
FOR CHAN WAI-KWAN, secretary general of the Hong Kong Coalition of Service Industries, March 1 was a banner day. That was when the World Trade Organization's Financial Services Agreement came into force. While the occasion came and went with hardly any hoopla, the market-opening initiative could have wide-ranging implications for the world's banking and finance sector. "The more modern and advanced financial institutions can have greater access to less-developed countries," says Chan. "American and European banks will have more business. Consumers in Asia and Latin America have traditionally been badly treated in terms of banking needs. That will change. The agreement will benefit everybody."
Well, maybe not everyone. Local finance houses unable to change and compete may get steamrolled by foreigners. "Banks will fall like a pack of cards," worries Filipino management guru Washington SyCip. Other critics fret about foreigners taking over their country's financial system. Says former Indonesian finance minister Mar'ie Muhammad: "The growing strength of foreign firms is not always welcomed by the political and business communities in Southeast and East Asia because of the inclination towards stronger nationalist sentiments." That is why most signatories, including those from Asia, have not opened their markets all the way (see table, page 52). But some pledges are understood to be temporary and could be reopened when the agreement is reviewed.
Like it or not, financial liberalization is here to stay. Seventy governments, accounting for more than 95% of the global financial services market, have signed on to the accord, which covers all three major parts of the sector - banking, securities and insurance. Eighteen economies, including Australia, Brazil and the Philippines, failed to secure legislative ratification by Jan. 29. The deadline has now been extended to June 15 this year. "Despite the crises in the world, no one has withdrawn from the pact, and those countries that have not accepted are confidently expected to do so," says David Hartridge, director for trade in services of the World Trade Organization. Under WTO rules, all 134 members, whether or not they have accepted the agreement, can take advantage of the market-opening and other commitments of the signatories.
Remarkably, the agreement's implementation has not been greeted with protests in Asia. That is mainly because the regional crisis has already felled many local banks. In Indonesia, restructuring is only just beginning as the government wrestles with deciding which banks to close and how to restructure surviving ones and make the industry transparent and accountable. In Thailand, banks are struggling to stay afloat, as the estimate of non-performing loans in the system rises to as high as 55%.
Zhang Anming, a trade expert at the City University of Hong Kong, prefers to stress the positive. "The agreement will bring very real benefits such as better risk management, product diversification, increased customer choice and greater access to foreign markets, capital and technology for the economies who subscribe to it," he says. Philippine Central Bank Deputy Governor Alberto Reyes, who represented his country in the WTO negotiations, agrees. He expects more foreign companies to invest in the Philippines, offering new products and services using the latest technology at competitive prices. "Our people will be trained and will learn, and customers will get more for their money," says Reyes. What about local companies? "Interaction with [foreigners] will help them improve," says Chan.
Major Western financial institutions, particularly newly merged giants such as Citigroup, will certainly be among the big winners. But not Japan's behemoths - at least not yet. Faced with crisis at home, institutions like Tokyo-Mitsubishi Bank are retreating from foreign markets. In any case, Asia should not expect a huge influx of foreign players soon. Yes, investors are making moves in countries battered by the Asian Crisis. But acquisitions are one thing, developing new business amid deep recession is another. Besides, says Watanabe Kenichiro, a researcher at the Japan Center for Financial Reform, "what the agreement does not and cannot address are the invisible barriers, like the special relationships between Japanese companies that have been nurtured over the years and have long been accepted as the backbone of Japan's corporate world."
There is also the question of whether the signatories would live up to their commitments. An early test: Japanese pledges about its insurance sector. U.S. Trade Representative Charlene Barshefsky has accused Japan of failing to live up to a bilateral agreement to open the lucrative market. Under the deal, the U.S. was supposed to retain the niche its companies have in the so-called "third sector" or segment for specialized products such as cancer cover, while Japan opened other sectors first. But Barshefsky says Tokyo has started opening up the specialized market before fully implementing reforms elsewhere. The American Council of Life Insurance recently called Japan the "least cooperative" of America's foreign insurance trading partners, while praising Taiwan and South Korea. Barshefsky is threatening to take the matter to the WTO.
In the short term, other Asian countries are not expected to figure in WTO arguments. The Crisis has forced them to make even wider commitments. The Philippines is currently offering 60% foreign participation in its finance sector. That proportion will fall to 51% when Manila ratifies the WTO pact. Economies under the supervision of the International Monetary Fund (IMF), such as Thailand and Korea, are more generous. "What the WTO is putting out in terms of policy is not going to have as much weight with the Thai government as what the IMF is saying," reckons Jeff Earhart of Seamico Securities in Bangkok. To the WTO, Bangkok pledges a relaxation of a regulation allowing only 25% foreign investment in local banks and finance companies. But up to 100% foreign ownership is now permitted for a 10-year period. Down the road, Thailand can roll back the ceiling and not be in violation of its WTO commitments.
The next WTO ministerial conference is due in Seattle in November. The U.S. is the prime mover of a Millennium Round of new trade and services negotiations. On the agenda: e-commerce, government procurement, agriculture, intellectual property rights, labor issues and the environment. American pressure is crucial to trade deals - the U.S. stalled the financial-services agreement until other countries improved their offers. But the loss of presidential "fast-track" authority to implement trade pacts without reference to Congress has diminished Washington's clout. "The Financial Services Agreement is a good one, but it is not the final one," says trade expert Zhang in Hong Kong. "There is an opportunity now in the year 2000 to further the market opening not only of financial services but of all other service sectors." With luck, that would mean better and cheaper services from the strongest and most efficient local and foreign provider.
--With bureau reports from Tokyo, Washington, Manila, Bangkok and Hong Kong
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HERESY WORKS ...
SO FAR
Currency controls brought Malaysia stability
By Arjuna Ranawana/Kuala Lumpur
SIX MONTHS AGO, PRIME Minister Mahathir Mohamad announced "a steel ring" of currency controls to protect his country from speculators, and pessimists predicted doom. "The imposition of controls . . . if sustained, will depress Malaysia's future growth prospects," U.S. rating agency Standard & Poor's intoned as it slashed Kuala Lumpur's sovereign debt rating to just above junk. Foreign stock market investors, suddenly barred from pulling out funds for a year, wrote off their money as lost. Local businesses also quailed. "There were concerns that there would be a shortage of U.S. dollars, that there would be lots of red tape to deal with, and that there would be increased corruption," says Paul Low, president of the Federation of Malaysian Manufacturers. Six months later, Malaysia is still standing. "Now we know these fears were unfounded," Low says.
When Kuala Lumpur fixed the value of the Malaysian ringgit at 3.8 to the U.S. dollar, banned its circulation abroad, required official permission to remit more than 10,000 ringgit ($2,632) outside the country, and barred foreign investors in stocks, bonds and properties from removing their funds for a year, he flew in the face of free-market dogma. The heretical policy was a gamble. It imposed exchange rate stability and allowed the government to cut crippling interest rates, but it risked scaring away badly-needed foreign capital, encouraging a currency black market and removing pressure for reform. But for business people in factories and offices, the currency controls have proven a risk worth taking. The 1,870 members of the manufacturers' federation say fixed exchange rates helped, according to a January poll, removing the need to hedge against further declines by the ringgit. Low also says managers are better able to get on with their jobs now, because "they were doing a lot of fire-fighting during the height of the currency fluctuations."
Food-processor Amoy Canning imports packing materials. The currency controls mean extra paper-work for managers, but executives say easier business conditions provided by the pegged exchange rate more than make up for that. The need for permission to remit money abroad is a hassle. But commercial banks have been given discretion to judge whether a customer request is legitimate or not, and they have taken much of the pain out of the process, says Lachman Naraindas, chief executive of Kuala Lumpur trading house Jethwani Enterprises, which imports watches from Hong Kong. "I only need to send a letter to the bank and I can make my payments - about $50,000 at a time - by telegraphic transfer," he says. Even foreign companies have few complaints. Canada-owned Aluminium Company of Malaysia, as a direct investor, is allowed to repatriate profits, and so are its expatriate staff. "Because they are taxpayers in Malaysia, they are allowed to send their savings home," says a senior executive.
On the other hand, "textbook" side effects of currency controls, such as a dollar black market, have not appeared so far. Some multinationals are said to be over-pricing imports and under-pricing exports in order to send unauthorized funds abroad - a common trick in other economies with currency controls - but officials say there is no evidence that the practice is widespread. Economists say Malaysia's strong current-account surplus has kept such problems from spreading by providing an ample supply of foreign currency. "If this had not been the trend, then there could have been problems with enforcing capital controls," says Yeoh Keat Seng, an analyst with Smith Zain Securities in Kuala Lumpur. That is not entirely good news, though. Dollars are not in high demand now with the economy in recession and imports moribund; if the economy and imports rebound, rising dollar demand could pressure the peg.
There have also been calls for the government to revalue the ringgit upwards, to between 3.50 and 3.30 to the dollar. Watch-importer Naraindas points out that the Thai baht, Korean won and Indonesian rupiah have all jumped against the U.S. dollar in the past six months. Low, on the other hand, says traders want the peg to be eased, but manufacturers want it to stay as is. Kuala Lumpur says that the peg will stay and will not be adjusted - its purpose is stability, after all - although the government recently replaced the one-year ban on investors pulling out with a graduated exit tax that declines the longer they stay in order to entice more investment.
Not everything is rosy. Some analysts say currency controls have discouraged new investment that is badly needed to restructure Malaysian companies and recapitalize its banks (although neighboring countries without controls have seen investment fall as well). U.S. ratings agency Moody's said the banking system has "taken a sharp turn for the worse as a result of the direct and indirect effects of capital and currency controls" as well as rising signs of political influence in regulation. The Kuala Lumpur stock market has plunged nearly 10% in the past week under the weight of worsening corporate earnings forecasts and rising perceptions of political risk, and foreign investors are said to be leaving as fast as they can, despite losses and having to pay huge exit taxes. Mahathir's gamble has provided stability. Deeper banking and corporate reform remains the next step.
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Embassy Bombing Comes at Worst Time for China-West Relations
BEIJING, May. 08, 1999 -- (Agence France Presse) NATO's missile attack on China's embassy in Belgrade comes at the worst possible time as far as relations between China and the West are concerned, with ties already strained by the six-week Kosovo campaign.
The attack, which killed at least three people and injured more than 20, was strongly condemned by Beijing as a "barbarian act" and a war crime that must be punished.
The UN Security Council, meeting in emergency session at China's request, expressed "shock and concern." It noted the regrets expressed and said NATO was investigating Friday night's attack.
NATO and the United States expressed regret at the accident but said the air campaign against Yugoslavia would continue.
The Chinese government in a statement said it "reserved the right to take other measures." It recalled its hostility to the bombing and missile attacks since they began March 24.
China, which doubts the existence of "ethnic cleansing" by Serb forces in Kosovo, is a permanent member of the Security Council with the right to veto any initiative over the province.
The accidental attack will complicate the search for a settlement at the UN. It happened the day after Russia and the other seven members of the G-8 group reached partial agreement on a deal to end the Kosovo crisis including the sending of an international force.
On Friday China expressed doubt about that accord, insisting that the Belgrade government had to be included in any solution to end NATO raids.
China, itself subject to international sanctions after the 1989 Tiananmen Square massacre, opposes in principle all intervention in the internal affairs of a sovereign state. It also rejects Western criticism of its human rights record and its record in Tibet.
Beijing also depicts itself, since the break-up of the Soviet Union, as one of the only powers capable of resisting the "hegemony" of the US. Fearful of encirclement, it opposes both the enlargement of NATO and military cooperation between the US and Japan.
The bombardment of Belgrade came as relations with the US were already at their lowest -- almost a year after President Bill Clinton's visit to Beijing which revived top-level dialogue after nine years of tension following Tiananmen.
At the end of April China denounced the US decision to sell two sophisticated long-range defense radar systems to Taiwan.
It has also protested a US proposal to include Japan and South Korea in a theater missile defense (TMD) system. It fears the eventual inclusion of Taiwan in TMD, which it says would constitute "an attack on Chinese sovereignty and integrity and at the same time an interference in China's internal affairs."
Washington for its part criticizes Beijing's huge trade surplus with it and suspects China of having stolen nuclear secrets.
The disputes have played a part in preventing the two countries reaching agreement on China's entry to the World Trade Organization despite major concessions offered by Premier Zhu Rongji in Washington last month.
Zhu attributed this setback to an "anti-Chinese climate" prevalent in the US. ((c) 1999 Agence France Presse)
By Agence France Presse
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China Denies 'Breakthrough' With Vatican
BEIJING, Mar. 05, 1999 -- (Agence France Presse) China on Friday denied reports in a Taiwan newspaper that it had reached a breakthrough with the Vatican to normalize its relations after four decades of stalemate.
"We are not aware of any such accord," Liu Bainian, vice-president of the state-sanctioned China Patriotic Catholic Association, said.
He also denied there were any contacts between Beijing and the Holy See.
His comments came after the United Daily News in Taiwan reported Friday that the two had reached a breakthrough in secret negotiations in a bid to re-establish relations broken off in 1957, when Beijing appointed bishops without the Vatican's agreement.
"Beijing has agreed to accept bishops appointed by the Vatican and other terms to normalize relations," the newspaper said, quoting diplomatic sources in Beijing.
The state religious bureau in Beijing refused to make any comment, referring inquiries to the Foreign Ministry, which also had nothing to say.
Catholics in China are split between the "official" church, which is recognized by the state and has four million followers, and the clandestine church with 10 million followers which is outlawed by Beijing but recognized by Rome.
Last month the Catholic Church's secretary of state, Cardinal Angelo Sodano, said the Vatican would switch its embassy from Taipei to Beijing if the Chinese communist authorities allowed.
He said the move would not mean breaking off relations with Taiwan, but would return the nunciature to Beijing, where it was before the communists seized power in China in 1949.
His comments provoked a stir in Taiwan, fearful of losing one of its only European diplomatic allies -- the other is newly-won partner Macedonia.
President Jiang Zemin is expected to visit Rome at the end of the month but no talks with the Holy See have been scheduled.
On Thursday Jiang reminded his people that religion in China came under the remit of the Communist Party.
"The religious people should abide by laws of socialist China and contribute as much as possible to the unity of the motherland," he said. ((c) 1999 Agence France Presse)
By Agence France Presse
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China and Vatican Reach Relations Breakthrough
TAIPEI, Mar. 05, 1999 -- (Agence France Presse) China and the Vatican have reached a breakthrough in normalizing relations for the first time in four decades on condition that the Holy See severs its diplomatic ties with Taiwan, a leading paper reported in Taipei Friday.
Both sides made concessions after negotiations between Beijing authorities and Vatican officials who had made "several secretive trips" to the mainland, the United Daily News said, quoting diplomatic sources in Beijing.
Beijing had agreed to accept bishops appointed to China by the Holy See, in exchange for the Vatican breaking off diplomatic ties with Taiwan, the paper said.
Beijing has not had diplomatic ties with the Vatican since 1957, as the latter recognizes Taiwan.
And Catholics in China are split between the "official" church, with four million followers, which is recognized by the state, and the clandestine church with 10 million followers which is outlawed by Beijing but recognized by Rome.
A foreign ministry spokeswoman contacted in Beijing said: "We have no comment to make."
She said she was aware of newspaper reports on the topic but refused to confirm or deny that diplomatic relations between Beijing and the Vatican were imminent.
According to the United Daily News the Holy See could still name bishops in Taiwan and maintain non-political exchanges with the Catholic Church on the island, it said.
The two countries were also planning a visit by Pope John Paul II to Hong Kong and President Jiang Zemin's trip to the Vatican, the paper added. ((c) 1999 Agence France Presse)
By Agence France Presse
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President Jiang Claims HK Legal System 'Remains Unchanged'
BEIJING, Mar. 05, 1999 -- (Agence France Presse) In his first remarks since an explosive row over the Hong Kong judiciary's independence, Chinese President Jiang Zemin said Thursday that the territory's legal system had remained "basically unchanged" since its return to Beijing's rule.
"Today's Hong Kong has witnessed no changes to its original social and economic systems or way of life, and the legal system there has remained basically unchanged," Jiang was quoted as telling government advisors from Hong Kong and Portuguese-ruled Macao.
His remarks came amid reports that some Hong Kong delegates were planning to table a motion requesting the Chinese parliament to debate a January judgement by the Hong Kong Court of Appeal that gave right of abode to mainland Chinese children born to Hong Kong residents.
They claim the court was wrong to rule that the children have the right of abode, even if the parents were unmarried at the time of birth, and want parliament to reinterpret the issue.
But analysts said Beijing seems to want to keep the matter on the sidelines of the National People's Congress (NPC) meeting to avoid accusations that it is interfering with Hong Kong's autonomy.
They said a Court of Final Appeal statement last week clearing up another controversial aspect of the ruling regarding the relationship between the judiciary and the Chinese parliament had appeased the central government.
"'One country, two systems' is a fundamental principle which the central government will unswervingly adhere to," Jiang said Thursday, referring to the formula under which Beijing has promised Hong Kong a degree of autonomy.
"In both interior areas and Hong Kong, we must conscientiously safeguard this principle when we do anything or handle any problems, and must not do any harm to it," he stressed.
Xinhua said Jiang went on to praise the Hong Kong government headed by Chief Executive Tung Chee-hwa for its outstanding work in preserving prosperity and stability.
He also said the handover of Macao on Dec. 20 would be another significant event in the history of the Chinese nation.
Jiang said the situation in Macao remains stable and will lead to a smooth transition, while the Chinese and Portuguese sides have in general maintained fine relations of cooperation despite the existence of a few pending issues for the transitional period.
He did not say what the pending issues were.
In the run-up to the handover, Macao has been rocked by violence as triad crime groups battle for control of the enclave's gambling and prostitution rackets.
Beijing has said it will station up to 1,000 soldiers in the territory after the handover.
Macao has been under Portuguese control since 1557. ((c) 1999 Agence France Presse)
By Agence France Presse
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Taiwan: China's Military Threat 'Far Greater' Than Claimed
TAIPEI, Mar. 05, 1999 -- (Reuters) Taipei said on Thursday that the threat to Taiwan's security posed by communist China was far greater than Beijing's military budget might suggest, saying true defense spending was probably three times as much.
Taiwan's Defense Ministry declined to comment on a report in Hong Kong's South China Morning Post that China's military spending would rise 12.7 percent in 1999.
Reporting a figure expected to be made public at China's March parliament session, the Post said defense outlays would hit 104.6 billion yuan (US$12.6 billion) -- 1.8 percent above Taiwan's own T$355.8 billion (US$10.7 billion) military budget.
A spokesman for Taiwan's Defense Ministry cautioned that the figure was vastly underreported and far from credible.
"It's no secret the defense budget revealed by the Chinese communists only reflects part of their actual spending so as to avoid international criticism," said the ministry official, who asked not to be identified by name.
"Based on our long-term observations, they normally spend three times as much," the official said.
Analysts say a top priority of China's defense spending is building the capacity to use force to take Taiwan, which it has regarded as a renegade province it became estranged from the mainland at the end of a civil war in 1949.
The official said Beijing had pursued an ambitious military modernization drive focusing on high-technology warfare since the Gulf War, which highlighted China's military backwardness.
"They are upgrading their defense technology both through their own research and development as well as through overseas procurement," he said. "It's reasonable that they need lots of money to achieve this aim."
China's military threat to Taiwan was growing at a time when the island's budget is being strained by many local initiatives and a slowdown in economic growth linked to Asia's recession.
"As the Chinese communists modernize their armed forces, the threat is growing. For our part, we can only try use our limited budget to achieve maximum purposes."
President Lee Teng-hui has said Taiwan must respond as Beijing expands its arsenal of missiles that could target the island, but has not said whether Taiwan should try to join a U.S.-led anti-missile system under development.
Washington's Theater Missile Defense concept has outraged China, condemning it as an aggressive tool of containment.
Unlike China's defense spending, Taiwan's will shrink 8.2 percent in the coming year, losing its traditional position as the top spending priority.
Social welfare now will be the biggest expense, reflecting the shifting priorities of a fast-democratizing society.
A recently published U.S. Pentagon report said China was building a major force of ballistic and cruise missiles near its coasts and could present an overwhelming military threat to Taiwan in five years. ((c) 1999 Reuters © 1999)
By Reuters
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China Warns U.S. On Asian Missile Defense Umbrella
BEIJING, Mar. 05, 1999 -- (Reuters) A senior Chinese official warned the United States on Friday that any attempt to shelter Taiwan under a missile defense umbrella would be the "last straw" and lead to serious consequences.
The official, speaking to reporters on condition of anonymity, said such as a move would result in direct U.S. military involvement in Taiwan and encourage pro-independence forces on the island.
The official said Washington's proposed Theater Missile Defense plan amounted to missile proliferation since the technologies were related.
The United States is discussing the plan with several Asian countries, including Japan and South Korea, and there have been calls in the U.S. Congress for the system to embrace Taiwan as well.
Washington has said the threat of North Korean missiles is behind its proposal.
But the Chinese official said that argument was simply a pretext by the U.S. administration to increase military arms sales to Taiwan. ( (c) 1999 Reuters)
By Reuters
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China Stays Silent Over Taiwan's Arrest Of Suspected Spies
BEIJING, Mar. 05, 1999 -- (Agence France Presse) China pleaded ignorance on Thursday of reports that two of its intelligence officers had been arrested in Taiwan for gathering military information.
"I'm not aware of any information. I can't comment," China's Foreign Ministry spokesman Zhu Bangzao told a Beijing press briefing Thursday.
Reports from Taipei said a Taiwan military intelligence bureau officer had given a Hong Kong man, who formerly worked for the intelligence bureau, information about Taiwan's major military purchase and national defense projects.
"Some people have been put into custody, but details must not be unveiled," Taiwan's Justice Minister Yeh Chin-feng told reporters.
Wang Kuang-yu, head of the Bureau of Investigation, said "there was evidence" the two men were working for China.
They were arrested in early February.
Sources close to the Bureau of Investigation were quoted as saying they suspected there were other "double agents" involved.
Taiwan and China split in 1949 at the end of a civil war are still technically at war despite commencement of civil contacts in the late 1980s. ((c) 1999 Agence France Presse)
By Agence France Presse
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Chairman Mao's Daughter Returns to Politics
BEIJING, Mar. 02, 1999 -- (Reuters) Li Na, the daughter and only child of China's late Communist Party Chairman Mao Zedong and his reviled third wife Jiang Qing, has returned to Chinese politics.
Li has been named one of 27 new members of the Chinese People's Political Consultative Conference (CPPCC), the state-run People's Daily said on Tuesday. It gave no further details.
The 58-year-old Li will sit alongside China's rich and powerful as well as the glamorous -- entrepreneurs, politicians and actresses.
The CPPCC, a relatively toothless advisory body to parliament, is scheduled to begin its annual session on Wednesday.
One Chinese political analyst said Li's return to politics in no way indicated any desire by the leadership to return to Mao's ultra-leftist days.
The move could be an attempt to appease die-hard Maoists opposed to private enterprise, the analyst said.
The ruling Communist Party has proposed elevating the status of private enterprise under landmark amendments to the constitution.
The National People's Congress, or parliament, is expected to approve the amendments at its annual session scheduled to begin on Friday.
Li was born in the revolutionary base of the Communists in Yan'an in the northern province of Shaanxi in 1940.
Mao's two daughters are surnamed Li after the Great Helmsman's alias Li Desheng. Jiang Qing's real surname is Li.
Mao's other daughter, Lin Min, is the only surviving offspring of Mao and his second wife, He Zizhen.
Li Na studied history at the prestigious Peking University from 1959-65 and was named Communist Party secretary of Pinggu county outside Beijing. She later became a deputy party secretary of Beijing.
Her father died in 1976 and her mother was arrested and given a death sentence suspended for two years in 1981 for hounding thousands to death during the 1966-76 Cultural Revolution that plunged the world's most populous nation into turmoil.
Jiang Qing, once China's most powerful and hated woman, hanged herself in 1991 at her Beijing home where she had been receiving medical treatment.
After her father's death and her mother's fall, Li was dismissed from her post and lived in difficult circumstances.
A divorcee, she married a bodyguard of former President Liu Shaoqi in 1985. ((c) 1999 Reuters)
By Reuters
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Taiwan Official Dismisses China's Missile Build-Up
CANBERRA, Mar. 02, 1999 -- (Reuters) A senior Taiwan official and expert on China's military has dismissed Beijing's reported buildup of ballistic and cruise missiles as a psychological ploy.
But Lin Chong-pin, who is vice-chairman of Taipei's Mainland Affairs Council, warned on Monday that if China was to become aggressive and "irrational" towards Taiwan, it could leave the island economically and structurally decimated.
Beijing would then find itself holding a "dead goose that used to lay the golden eggs" and governing a population determined to be rebellious.
Such a takeover would also set back China's economic reform "for at least a decade," said Lin.
Lin, from the cabinet-level council that develops Taipei's policies towards Beijing, is a published military expert on China's People's Liberation and was in Australia on a private visit.
A U.S. Pentagon report released on Friday showed China, which considers Taiwan a renegade province, was building a major force of ballistic and cruise missiles near its seacoasts and could present an overwhelming military threat to Taiwan by 2005.
Lin said Beijing was hoping to acquire and use military alternatives such as computer viruses to create havoc, electronic warfare capabilities, directed energy weapons like lasers and undirected energy weapons like electro-magnetic pulses.
"They hope to cause the minimum amount of killings and compel Taipei's government to the negotiating table and accept terms dictated by Beijing.
"That is the best scenario they could seek. Short of that they will use surgical strike capability weapons like cruise missiles, which they are developing with full speed." ((c) 1999 Reuters)
By Reuters
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Albright Sees Sun amid Stormy U.S.-China Relations
BEIJING, Mar. 02, 1999 -- (Reuters) U.S. Secretary of State Madeleine Albright wrapped up a contentious two-day visit to China on Tuesday, saying bilateral ties were on track despite fierce disputes over human rights, trade and Taiwan.
Speaking after a meeting with President Jiang Zemin, Albright reaffirmed Washington's commitment to forging a "constructive strategic partnership" with China.
"Our relationship, while still well short of this goal, has reached the point where it can withstand even sharp disagreements," she said.
But she also issued a harsh warning to Beijing over its deteriorating human rights record, saying Washington would never back away from raising the thorny issue in talks with China.
Human rights took center stage during Albright's trip, originally aimed at paving the way for an April visit to Washington by Prime Minister Zhu Rongji.
Friday's release of a damning report on China's rights violations by the U.S. State Department sparked the fire.
Beijing fuelled the controversy by detaining dissident Wu Yilong and sentencing democracy advocate Peng Ming to labor camp on the eve of Albright's arrival.
During her talks with China's leaders, Albright hammered home the need for Beijing to relax its grip on free expression and build a multi-party democracy.
Last December, three veteran activists were handed long jail terms for attempting to register the China Democracy Party to challenge communist rule.
Since then, five other opposition voices have been sent to labor camps without trial, four for allegedly hiring prostitutes.
"Trying to organize a political party is not a threat or crime, it's a right guaranteed by the Universal Declaration of Human Rights," Albright told a news conference.
"The Chinese have expressed unhappiness with our condemnations of recent unjustified arrests and trials and with last week's State Department report documenting widespread human rights violations," she said.
"But the United States will never apologize for speaking or publishing the truth."
Trade friction was also high on Albright's agenda amid mounting congressional concern with a rising U.S. trade deficit and bickering over the terms of Beijing's accession to the World Trade Organization.
Beijing is seeking WTO entry on more lenient terms granted to developing nations.
But the United States, which had a $57 billion trade deficit with China last year, says it is too big to join the WTO on the same terms as the world's poorest countries.
U.S. Trade Representative Charlene Barshefsky is scheduled to arrive in Beijing on Wednesday for new talks on China's 13-year membership bid.
"As Ambassador Barshefsky comes here to discuss a new proposal with the Chinese, there is a good chance that we can move that process forward," Albright said.
She also addressed Chinese criticism of U.S. proposals to field a Theater Missile Defense system in Asia.
The plan, aimed at protecting frontline U.S. troops from North Korean missiles, could bring Taiwan under a regional defense umbrella.
Beijing argues the shield would fuel independence sentiment in Taiwan and is a violation of a Sino-U.S. agreement on arms sales to the island.
"Instead of worrying about a decision that has not been made to deploy defensive technologies that do not yet exist, China should focus its energies on the real source of the problem: the proliferation of missiles," Albright said. ((c) 1999 Reuters)
By Reuters
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Albright Sings Praises of Open Democracy
BEIJING, Mar. 02, 1999 -- (Reuters) U.S. Secretary of State Madeleine Albright sang the praises of multi-party democracy on Tuesday and urged China's Communist authorities to end a crackdown on dissent.
Speaking at the close of her two-day visit to Beijing, Albright said political debate was necessary for healthy social development and Washington would never back off from raising the thorny human rights issue in discussions with China.
"Trying to organize a political party is not a threat or crime, it's a right guaranteed by the Universal Declaration of Human Rights," Albright told a news conference.
Since December, China has jailed three veteran activists for attempting to register an opposition party. Five other dissidents have been sent to labor camps without trial, accused of using prostitutes.
Dozens more have been detained for questioning on their activities.
"Last June our two presidents agreed to a candid dialogue on human rights. In the last two days we have seen what a candid dialogue looks like," Albright said in reference to what her spokesman described as "tough" talks.
"I made clear America's view that a society is more, not less, likely to be stable when citizens have an outlet for the peaceful expression of political views."
Albright arrived in Beijing on Sunday two days after the State Department released its annual report on human rights.
It gave low marks to China and Beijing reacted with serious displeasure. ((c) 1999 Reuters)
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State Media Plays Down U.S.-China Divisions
BEIJING, Mar. 02, 1999 -- (Agence France Presse) State media played down the deep divisions over human rights reported during talks in Beijing on Monday between U.S. Secretary of State Madeleine Albright and Foreign Minister Tang Jiaxuan.
The government-run Xinhua news agency highlighted how Tang said "bilateral relations have made important progress in many areas" and "the two sides have increased consultations and co-operation in some major international and regional issues."
Tang identified Taiwan as the most "important and sensitive" topic between China and the United States.
Beijing leaders are reportedly concerned at the possibility that the United States will include Taiwan in its proposed Theater Missile Defense system for Asia.
China has reportedly increased the number of missiles pointed at the nationalist island, which it claims. Tang said Sino-U.S. relations could only "move forward smoothly" when the joint communiqués in which the United States recognized Beijing as the government of all-China "are strictly observed."
The only hint about human rights came in Tang's reported comment that "different views on some issues caused by different national conditions should be properly dealt with on the basis of acknowledged international norms of mutual respect, consultation on an equal footing, and non-interference in each other's internal affairs.
"The history of bilateral relations proves that exchanges are better than isolation, and co-operation better than confrontation," Tang was quoted as saying. "There is no way out in confrontation and no future in returning to the past." ((c) 1999 Agence France Presse)
By Agence France Presse
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Albright Discusses N. Korea with Tang
BEIJING, Mar. 02, 1999 -- (Agence France Presse) U.S. Secretary of State Madeleine Albright discussed North Korea with her Chinese counterpart Tang Jiaxuan during a meeting in Beijing on Monday, a spokesman said.
"The secretary and the foreign minister discussed in detail the current state of play," State Department spokesman James Rubin told a news conference after the meeting.
He said talks between the U.S. and Pyongyang on the isolated Stalinist state's nuclear program and discussions between U.S. and Chinese ambassadors on four-party peace talks were mentioned during the meeting.
"North Korea is a notoriously opaque society and when foreign ministers get together they tend to try to share their best judgement as to what motivates the North Koreans and what the future might hold," Rubin said, without giving further details.
Albright has twice warned in recent weeks that North Korea remained one of Washington's deepest concerns and could be a "huge threat." ((c) 1999 Agence France Presse)
By Agence France Presse
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March 2, 1999
Taking a hard line.
With domestic politics driving both sides to hang tough, Madeleine Albright gave little and got little in Beijing. But for both the U.S. and China, her two-day visit, which concluded Tuesday, served a political purpose: "The White House is under tremendous pressure on Capitol Hill to get tough with China," says TIME Beijing bureau chief Jaime Florcruz. "But the Chinese leadership is also under pressure from its own hard-liners, who feel that Beijing has given away too much in its relations with Washington. So both sides had to maintain a hard line, and the atmosphere was pretty bad."
With the political exchange over for now, the two sides will get on with the business that binds them together -- business. U.S. Trade Representative Charlene Barshefsky arrives Wednesday to hammer out the details of agreements on trade issues, such as China's bid to join the World Trade Organization. "The obstacles there," says Florcruz, "are less about human rights than about the massive imbalance of U.S.-China trade in Beijing's favor, and opening access to China's markets." Albright played bad cop; it's up to Barshefsky to cut a deal.
-- TONY KARON
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Albright Ends China Trip Upbeat On Ties
By Christiaan Virant
March 2, 1999
BEIJING (Reuters) - Secretary of State Madeleine Albright wrapped up a contentious two-day visit to China Tuesday, saying bilateral ties were on track despite fierce disputes over human rights, trade and Taiwan.
Speaking after a meeting with President Jiang Zemin, Albright reaffirmed Washington's commitment to forging a ''constructive strategic partnership'' with China.
``Our relationship, while still well short of this goal, has reached the point where it can withstand even sharp disagreements,'' she said.
But she also issued a harsh warning to Beijing over its deteriorating human rights record, saying Washington would never back away from raising the thorny issue in talks with China.
``All told it's fair to say that in our relations with China these are neither the best of times nor the worst of times.''
Human rights took center stage during a visit to pave the way for an April visit to Washington by Premier Zhu Rongji.
Friday's release of a damning report on China's rights violations by the State Department sparked the fire.
Beijing fuelled the controversy by detaining dissident Wu Yilong and sentencing democracy advocate Peng Ming to labor camp on the eve of Albright's arrival.
During her talks with China's leaders, Albright hammered home the need for Beijing to relax its grip on free expression and build a multi-party democracy.
China held its ground, arguing each side had a different definition of rights and should focus on consultation, not confrontation.
``The two sides should expand dialogue on this issue to promote bilateral relations,'' said Foreign Ministry spokesman Zhu Bangzao. ``Different views should be handled with mutual respect and under the principle of non-interference in each others' internal affairs.''
Last December, three veteran activists were handed long jail terms for attempting to register an opposition political party. Since then, five other dissident voices have been sent to labor camps without trial, four charged with hiring prostitutes.
``Trying to organize a political party is not a threat or crime, it's a right guaranteed by the Universal Declaration of Human Rights,'' Albright told a news conference.
``The Chinese have expressed unhappiness with our condemnations of recent unjustified arrests and trials and with last week's State Department report documenting widespread human rights violations,'' she said.
``But the United States will never apologize for speaking or publishing the truth.''
Trade friction was also high on Albright's agenda amid mounting congressional concern with a rising U.S. trade deficit and bickering over the terms of Beijing's accession to the World Trade Organization.
Beijing is seeking WTO entry on more lenient terms granted to developing nations. But the United States, which had a $57 billion trade deficit with China last year, says it is too big to join the WTO on the same terms as the world's poorest.
U.S. Trade Representative Charlene Barshefsky was scheduled to arrive in Beijing Wednesday for new talks on China's 13-year membership bid.
``As Ambassador Barshefsky comes here to discuss a new proposal with the Chinese, there is a good chance that we can move that process forward,'' Albright said.
She also addressed Chinese criticism of U.S. proposals to field a Theater Missile Defense system in Asia.
The plan, aimed at protecting frontline U.S. troops from North Korean missiles, could bring Taiwan under a regional defense umbrella.
Beijing argues the shield would fuel independence sentiment in Taiwan and is a violation of a Sino-U.S. agreement on arms sales to the island.
``We oppose the use of the (North Korea) situation to strengthen military alliances and build up capabilities,'' Zhu said. ``This would not be conductive to peace to stability.''
By Reuters
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March 1, 1999
Beijing may not give a damn what we think. That much is clear from the arrest of a Chinese businessman shopping for missile components in California last week; and from the reception given Madeleine Albright when she arrived in Beijing Monday: A roundup of dissidents ahead of her arrival was followed by China's foreign minister warning the U.S. to keep out of Beijing's domestic affairs. Mounting U.S. reluctance to share militarily useful technology with China has infuriated Beijing, and the arrest of Yao Yi in a California sting operation will likely exacerbate tensions -- he had reportedly been trying to buy gyroscopes used in missile guidance system, ostensibly for use in a railway project.
Albright's traditional lecture on human rights was met with derision rather than the customary politeness. Economic reform in China has sent unemployment skyrocketing, and the consequent social unrest has Beijing reluctant to ease political control. Washington's moves to curb technology transfer and declining investment in China by U.S. firms in the wake of the Asian crisis has reduced Washington's leverage. With the U.S. concerned at the size of its trade deficit with China and Beijing feeling pressure on its exports from the Asian contagion, don't expect the atmosphere to warm up even when the talk turns to trade.
-- TONY KARON
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Albright Clashes With China Over Rights
By Jonathan Wright
March 1, 1999
BEIJING (Reuters) - The United States and China clashed over human rights Monday as Secretary of State Madeleine Albright kicked off talks with Chinese leaders with a blunt exchange of words with Foreign Minister Tang Jiaxuan.
Albright said Washington ``deplored'' Beijing's crackdown on pro-democracy activists while Tang said human rights were no excuse for ``wantonly interfering in other countries' affairs.''
``A handful of anti-China elements within the United States are going all out to interfere with and obstruct the normal development of China-U.S. relations,'' Tang said in opening remarks to reporters before the talks in Beijing.
``We've always been opposed to politicizing the human rights question and to wantonly interfering in other countries' affairs by using human rights questions as an excuse,'' he said.
But Albright said human rights were a ``question of grave concern'' and she would raise the issue with Tang.
``We have deplored the actions that have taken place recently and I will raise those issues with the foreign minister,'' she said of the crackdown on dissent that began last year and continued at the weekend with the detention or jailing of several dissidents.
As Albright arrived in China Sunday night, her spokesman James Rubin criticised the detention of dissident Wu Yilong and the sentencing of democracy advocate Peng Ming.
The detentions capped a week in which Washington and Beijing squared off on a range of unrelated issues that highlighted the complexity of a relationship President Clinton has said could become a ``strategic partnership.''
Human rights will be the most contentious U.S. concern in Albright's two days of talks, while Beijing would put the emphasis on stopping Washington even thinking about missile defenses for China's neighbors, especially Taiwan, Rubin said.
Friday, the State Department released an annual report saying human rights deteriorated sharply in China last year. Beijing said China was seriously displeased with the report.
Spats over human rights, satellite sales and defense policy show that the goodwill from summit meetings between Clinton and Chinese President Jiang Zemin in 1997 and 1998 has not led to a meeting of minds.
But Albright and Tang also said that in the long term relations had improved and that they were committed to narrowing the differences between the two countries.
``I arrive here committed to find a way to move ahead on the many core issues in our relationship. These include regional security, non-proliferation, trade, human rights and responding to global problems,'' Albright said.
``The U.S. and Chinese governments have the responsibility, standing on the high ground of our times and history and looking into the next century, to remove obstacles to the growth of our bilateral relations. I have quite high expectations for the talks today,'' added Tang.
Sunday spokesman Rubin took pains to dispel any sense of crisis in often testy relations.
``This is not a crisis-related trip... Each decision was taken on its own merits, on its own timetable,'' he said.
He was referring to the human rights report, a U.S. decision not to let a unit of Hughes Electronics Corp sell a communications satellite to a Chinese-led consortium and a Pentagon report, mandated by Congress, on Chinese missile deployments close to Taiwan.
Albright's remarks to reporters before her formal talks with Tang indicated Washington intended to separate the rights dispute from trade and other issues.
``We determined some time ago that it's not a good idea to link human rights and trade,'' she said.
``We make better progress in both if they are not linked. I will be raising human rights issues and at the same time stressing that progress on WTO accession is important,'' Albright said, referring to China's bid to join the World Trade Organization, a key issue on the U.S.-China agenda this week.
Tang defended China's human rights record, saying different countries protected their people's rights in different ways.
But he added: ``I stand ready to have an in-depth exchange of views with Secretary Albright on the human rights question and other issues of mutual interest.''
Apparently referring to the possibility that Washington will sponsor an anti-Chinese resolution at this month's meeting of the U.N. Human Rights Commission, he said: ``To backtrack in this regard will have no future.''
The United States did not sponsor a resolution last year but the U.S. Senate voted 99-0 last week in favor of a resolution at this year's session.
Albright has talks Monday with Tang, Prime Minister Zhu Rongji and Vice Premier Qian Qichen. Part of her mission is to prepare for Zhu's visit to Washington in April.
By Reuters
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