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China 2006 Review

A review of China’s most significant events in 2006 that may impact the nation’s future direction.

The CCP Quietly Strengthens Its Control in Domestic and World Political Affairs

The year 2006 was crucial for the political survival of the Chinese Communist Party (CCP) and for Hu Jintao. After taking over power in a conservative manner, he needs to start establishing his historical legacy. In 2006, Hu’s strategies included reforms that aimed at improving people’s lives and boosting the development of the country, both materially and spiritually.

Over the past year, the gaps have widened between the rich and poor and between residents of the eastern boomtowns and the slower-to-develop interior provinces. Rapid industrial development has resulted in enormous levels of environmental damage.

Corruption has grown hand in hand with the economy. When one person is found guilty, it often triggers the fall of a group of officials either as related cases or as a result of conflict with political opponents. When Chen Liangyu, a member of the Politburo and the Party secretary in Shanghai, was arrested, it led to a series of arrests in other coastal cities. Among a long list were Liu Zihua, deputy mayor of Beijing; Li Jinbao, procurator-general of Tianjin People’s Procuratorate; Xu Haifeng, procurator-general of Beijing People’s Procuratorate; and Du Shicheng, the Party secretary of Qingdao.

The amount of funds involved in corrupt schemes is measured in the hundreds of millions of yuan. Chen Liangyu, for example, was involved in the misuse of Shanghai’s social security funds for illegitimate loans and investments to the tune of as much as 3.2 billion yuan (US$410 million).

Chinese political commentator Long Yan stated that the removal of Chen Liangyu entailed the most intense conflict within the CCP in recent years. He said that anyone with common sense could see that, although the removal of Cheng Liangyu was done in the name of anti-corruption, there was, in essence, fierce political competition taking place within the Party.

On the spiritual side, Hu emphasized peaceful, harmonious development. One example is the regime’s pragmatic move toward religion in an effort to promote institutional faiths. Between April 12 and 15, 2006, China hosted an international Buddhist conference in the city of Hangzhou. With that gesture, Hu acknowledged that he recognized the common people’s need for religion.

As a sign of nonhostility toward Chinese traditions, the Chinese communist government also launched Confucius Institute language centers all over the world, 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. Beijing aims eventually to open about 100 such institutes. According to Purnendra Jain and Gerry Groot, the Chinese communist government has already committed nearly US$25 million a year for the teaching of Chinese as a foreign language.[1]{mospagebreak}

With just one year left before the 17th Chinese Communist Party Congress in the autumn of 2007, Hu is shaping his grand strategy, possibly with a new team of leaders all loyal to him. As pointed out by Francesco Sisci at Asia Times online: "The moment is crucial because the Party has to appoint one person or a group of persons to take the lead after Hu’s retirement. The congress could also initiate new political mechanisms for the promotion of leaders."[2]

Beijing Calls 2006 a "Great Harvest Year" for Its Diplomacy

While the United States has been tied up in Iraq and the world is facing threats from terrorism and nuclear weapons proliferation, Beijing is strengthening its hand. The communist government has been exercising China’s "soft power" to promote Beijing’s "rights of subsistence" to compete with human rights. In the coming years, competition between Western efforts for freedom and democratization and Beijing’s effort to build an alternative to "Western hegemony" is expected to increase around the globe.

Building a Harmonious World That Can Accommodate Dictatorship

Beijing promoted the theme of "building a harmonious world" in international affairs in 2006. In the official newspaper People’s Daily, leading the top 10 international events in 2006 was the Beijing Summit on Sino-Africa Cooperation held in Beijing from November 3 to 5. Leaders from 48 of Africa’s 53 countries participated in the conference. In the first half of 2006 alone, Hu Jintao and Wen Jiabao paid visits to 10 African countries, injecting new dynamism into Africa-China relations.[3]

In Beijing’s view, hegemonism and terrorism are the big threats to world peace. Beijing’s regime has not seen a trace of terrorism in China, but it feels threatened by the democratization efforts of the Western world that promote human rights and freedom. To combat this, Beijing proclaims "state sovereignty" and "rights of subsistence and development" as the fundamental human rights. A score of Beijing’s friends share this understanding because they also have tense relations with the United States.

Kim Jong-il visited China for eight days in January 2006. At their meeting, Hu Jintao stated, "In the presence of regional and international complexity and dramatic change, we should further deepen the relationship between the Chinese and Korean Communist Parties and between the two nations. It serves our common interest and is also good for peace, stability, and development in Northeast Asia."

Venezuelan President Hugo Chavez paid a state visit to Beijing in late August. Closer ties with China make him more confident when demonizing Washington. Chavez called for a "strategic alliance" with China to foster a "multi-polar" world and to challenge the "hegemony" of the United States. Chavez promised to increase oil exports to China to one million barrels per day by 2012, and Hu Jintao agreed to support Venezuela’s campaign for a two-year seat in the U.N. Security Council and to provide substantial economic aid.{mospagebreak}

Iranian President Mahmoud Ahmadinejad held a bilateral discussion with Hu Jintao in Shanghai on August 16, 2006. They acknowledged common understandings on many international affairs. China and Russia have been at odds with Western powers in the U.N. Security Council on how to deal with Iran’s nuclear ambitions. China has pushed for dialogue without sanctions, despite its failure to convince Iran to halt its uranium enrichment program. Beijing’s regime finds it strategic to import oil from Iran. In 2004, the Chinese state-run Sinopec and Zhuhai Zhenrong signed deals with Iran to import 360 million metric tons of liquefied natural gas (LNG) to China for 25 years.

The Sudanese government is a clear beneficiary of the Chinese regime’s "rights for subsistence." Even though over 400,000 people have been killed and more than two million civilians driven out of their homes in Darfur, the Chinese communist government does not support U.N. intervention in Sudan. China gets about 10 percent of its oil import from Sudan.

China’s support for those countries is important because China’s influence in international affairs is growing due to its increased economic power.

Growing Economic Muscle Helps Diplomacy

With its growing economic muscle, China’s regime has found it easier to make other countries listen. The fifth summit of the Shanghai Cooperation Organization (SCO) was held last June. China and Russia unveiled their ambitious plans to wield a broader regional influence, using China’s economic power and the large oil and gas reserves in Russia and Central Asia as leverage. A China-APEC summit was held last October for the 15th anniversary of China-APEC dialogue. China and APEC (Asia-Pacific Economic Cooperation) agreed to speed up the establishment of their free-trade zone. And then came the Beijing summit of the forum on China-Africa cooperation last November. Beijing’s regime promised to double its aid to Africa by 2009 and forgave US$1.38 billion in debts from 31 heavily indebted African countries. Chinese officials described these three summits as one of the most important diplomatic achievements of the year. It’s clear that the regime is actively seeking great power status in international affairs in Asia and beyond.

Soft-Power Diplomacy

Another theme adopted by Beijing’s communist regime in 2006 was "soft-power diplomacy." It followed Joseph Nye’s formula; that is, using a nation’s culture, political value, foreign policy, and economic appeal to influence other nations. Although Beijing’s communism has no appeal for the rest of the world, its newfound economic strength has prompted a surge of interest in the Chinese market, language, and culture.{mospagebreak}

In Russia, Italy, India, and other countries, China used "China Year" to promote the regime’s image. In Europe and North America, the Chinese communist government helped to open Confucius Institute language centers to attract locals studying Chinese.

Beijing suffers from a bad image due to the communist government’s poor human rights record. Using Chinese culture to promote the regime’s image may have some effect. However, as the regime continues to make news with stories of terrible human rights violations, a better image may be a hard sell. As the 2008 Beijing Olympics approaches, the communist regime’s true image is expected to come into focus.

Millions Withdraw from the Communist Party — Defectors’ Stories Tell All

There are ripples in China’s own political pond. In spite of Hu Jintao’s advocacy of the "progressive nature of the CCP member" and "eight virtues" for all civilians in 2006, the effort was basically fruitless. The Epoch Times reported that its publication of the Nine Commentaries on the Communist Party triggered an unprecedented wave of resignations from the Chinese Communist Party (CCP) and its affiliated organizations. By the end of 2006, nearly 17 million people had announced their withdrawals from the CCP and its affiliates.

On October 22, 2006, Jia Jia, former secretary-general of the Science and Technology Experts Association of Shanxi Province, walked away from a tour group in Taiwan to seek political asylum. Jia’s request for political asylum was initially rejected by Taiwan. When he was deported to Hong Kong on October 26, he found passage to Thailand and was granted refugee status by Taiwan a week later. Jia has lived in Malaysia since December 2006.

Jia has publicly exposed the truth about the millions of people in China who are quitting the Communist Party. He even published a statement renouncing his membership in the Young Pioneers and the Chinese Communist Youth organization.

Jia has said that many people, including Party officials, are cursing the Party. "I believe that the number of Party members who want to withdraw is at 95 percent," he said. "If we set up a stage on Tiananmen Square and asked the Chinese people to choose whether they wished to join the Party or to renounce their Party membership, the only people left in the Party would be the members of the Central Party Committee."{mospagebreak}

Two months prior to Jia’s defection, Yuan Shen, a veteran pilot who had served 18 years with China Eastern Airlines based in Shanghai, flew into Los Angeles International Airport at noon on August 8 with 313 passengers on board. Without any idea of how he’d face his future, Yuan decided to leave his wife, 12-year-old daughter, and a successful career in China to seek asylum. Yuan told the media that he fears for his safety if he returns to China because before the plane took off in Shanghai, he was threatened by airport security. According to Yuan, prior to takeoff, he was chatting with a ground security technician. Yuan told him about the Nine Commentaries on the Communist Party and suggested to the young man that he quit the Party. He also talked to him about the persecution of Falun Gong in China. Soon after that conversation, the young man returned with four uniformed airport police. Yuan was finally released after the crew argued with the police, telling them that the plane couldn’t leave without Yuan.

"Having one copy of the Nine Commentaries amounts to a four-year prison sentence in China," Yuan explained. The Nine Commentaries is an editorial series published by The Epoch Times that gives an uncensored history of the CCP. Since its publication, millions of Chinese have decided to quit the Party. The book is claimed to be the number one banned book in China.

The statistics published by the Global Service Center for Quitting the CCP indicate that in 2006 alone, over 10 million Chinese people quit their membership in the Party and its affiliated organizations. A total of 16.8 million had resigned by the end of 2006, averaging 30,000 withdrawals each day. According to Gao Dawei, who heads the Global Service Center for Quitting the CCP, "The Chinese Communist Party has been covering up and denying the truth of the wave of resignation all along. Defectors like Jia Jia and Yuan Shen are eyewitnesses to the truth of this historical moment."

In 2006 the center received emails, calls, and faxes from military personnel, high-ranking government officials, and the general public. Many even insist on using their real names to withdraw from the Party. According to Gao, one of those was a group of seven Party officials—including a director from an office directly under the central administration in Beijing. In March 2006, 100 desperate workers from the Grain Bureau of Wuhan, Hubei Province, signed a group statement to withdraw from the Party and submitted it to the Wuhan City Administration. The news sent shock waves all the way to Beijing. In addition, people wrote slogans encouraging resignations on paper currency, posted withdrawal statements in public areas, and cursed the Party publicly during gatherings with friends and family.

Li Tianxiao, a news commentator, says the wave of withdrawals sends a clear signal that the Chinese Communist Party is losing popularity in China. "The decay of the Party will be the end result of this wave," he says. Guo Guoding, an eminent human rights lawyer in China, has concluded that Jia’s defection is an indication that a significant number of Chinese officials are aware of the wave of withdrawals. They all know that the Party will not last long if the wave continues.{mospagebreak}

Cooling Down China’s Overheated Economy

Ever since 2003, Chinese authorities have been trying to cool down the overheated economy. However, in the first half of 2006, the economy still grew at an annual rate of 10.9 percent, a record high for the past 10 years. The growth in the second quarter was even higher at 11.3 percent. Although the economy slowed down slightly to 10.4 percent in third quarter, and was estimated at 10.3 percent in fourth quarter, the overall growth rate is gauged at 10.6 percent for the year.

The Chinese economy is primarily driven by high investments and high exports. During the first 11 months of 2006, the investment in newly added fixed assets in urban areas amounted to only 2.59 trillion yuan (US$320 million), a 34.5 percent increase over the same period in 2005. The magnitude of trade volume in 2006 totaled US$1.76 trillion, a 23.8 percent increase over that of 2005. Exports were US$969.1 trillion, a 27.2 percent increase over 2005; and imports were US$791.6 trillion, 20 percent higher than in 2005. The trade surplus grew to US$177.5 trillion, a big jump of 74 percent over the previous year.

Despite the high growth, problems within the economy persist. A country’s gross domestic product (GDP) is composed of personal consumption, investment, and net export. In 2005, China’s investment was as high as 42 percent of the GDP; it is estimated to be even higher in 2006. Exports of good and services were about one fifth of GDP. The proportion attributable to personal consumption has been decreasing in recent years. It was at 38 percent in 2005. Therefore, China’s economy is overly dependent on investment and foreign trade.

The high growth of investment has been a headache for the authorities. One major concern is investments in big projects. The amount of capital loaned from state banks that will never be paid back is already daunting and will increase even more. However, because a local official’s performance is usually evaluated on the basis of economic indicators, mainly GDP figures, the effort to scale back investment is difficult to put into practice.

Overinvestment has not only led to overcapacity in some industries; it has also consumed already limited energy resources. Wu Xiaoling, the vice governor of People’s Bank, recently pointed out that there is a vicious cycle in the current economy. In 2004, the overheated economy left behind the bottleneck industries such as electricity, coal mining, and transportation. Afterward, many electricity and transportation projects were injected with huge capital, which later led to overcapacity. She also mentioned some unsustainable factors in the growth mode, such as that many investment projects were completed at a heavy cost to the environment.{mospagebreak}

In August 2006, the authorities launched a series of measures to slow down fixed-asset investment, especially in the real estate industry. At the State Council executive meeting in October, Premier Wen Jiabao stressed that the top priority for the fourth quarter and the 2007 macroeconomic adjustment is to control the amount of fixed-asset investment, improve the structure of investments, and tighten real estate development in each city. Although the central bank has already twice raised the bank interest rate, economists were concerned that the increase was not large enough to have an effect. At the same time, the government is afraid that raising the interest rate of the Chinese currency renminbi too high will result in huge amounts of foreign capital coming to China, pushing the exchange rate of the renminbi even higher.

The huge foreign trade volume and trade surplus is in sharp contrast to the low percentage of domestic consumption. Therefore, the goods and services produced by hundreds of millions of Chinese people have mainly benefited foreigners. One reason for low domestic consumption is the low wages paid for labor. This is deemed necessary for an export-oriented economy, especially when exports consist predominantly of labor-intensive products.

The structural problem also exists with income distribution. For the past decade, Chinese authorities has been trying to stimulate domestic private spending. However personal consumption as a percentage of GDP has dropped 8 points in the period from 1999 to 2005, and continues to decline. In 1996, household savings were still about 20 percent of GDP; the number dropped to 16 percent in 2005. At the same time, the savings ratio of government and enterprises has collectively increased from 18 percent in 1996 to 26 percent in 2006. These figures offer a vivid picture of the current Chinese economy: The communist government and enterprises are taking away a bigger and bigger share of the pie. That’s why personal consumption has been so low.

In the financial sector, bad debts continue to be a serious issue. The China Banking Regulatory Commission (CBRC) reported that until the end of September 2006, the Non-Performing Loans (NPLs) in the banking system remained at 12.74 trillion yuan (US$1.6 trillion), 7.3 percent of the total bank loans. The NPLs in the Big Four state banks were as high as 1.05 trillion yuan (US$0.13 trillion), 9.3 percent of the total bank loans. Although the official statistics show that bad debts are gradually decreasing, the number is still astronomical. Jiang Dingzhi, vice director of CBRC, reported that the NPLs are showing a trend of piling up, urging the commercial banks to strengthen the control of loans and expedite financial reforms. However, overseas scholars still doubt the official statistics. Gordon Chang, the author of the book Coming Collapse of China, estimated that the NPLs may be as high as 40-50 percent of total bank loans in China.{mospagebreak}

What the imbalance in the economic structure boils down to is that the nation’s wealth has shifted away from the majority of the population to government organizations and business enterprises. Not only is the per capita disposable income level at a low level, unemployment has became one of the most serious crises in the economy. In 2006, 1.24 million college graduates could not find a job. In rural areas, more than 100 million people are unemployed. It was estimated that in 2008, the number of urban unemployed may exceed 50 million. From 1992 to 2006, the total population increased by 140 million, with 100 million joining the active labor force. However, there has been little change in the total employed population. The added 100 million active laborers are either unemployed or under-employed, with no steady income and no social security.

At the same time, heavy taxation has adversely affected the development of private enterprises. From 1999 to 2004, more than 7.7 million individual entrepreneurs disappeared. In 2005 alone, 300,000 corporate enterprises were shut down. But 2006, on the other hand, was a year of harvest of fiscal revenue, which exceeded 4 trillion yuan (US$500 billion)—24 percent of the GDP, compared with the percentage of total labor income decreasing to 15 percent of GDP.

In 2006, various aspects of potential crises within the economy continued to accumulate. It is fair to say that after almost three decades of "reform," the economy is still showing a rosy face by charging forward at a high speed on a bumpy road but is out of balance—at a tremendous cost to the welfare of most of the population, the nation’s resources, the environment, and social stability.


Before the year’s end, China-U.S. trade had reached US$328 billion, making China the second largest trading partner of the United States (only after Canada). In the first 11 months of 2006, China’s trade surplus with the United States surged from US$185.3 billion to US$213.5 billion compared to the same period a year earlier. This represents an increase of US$28.2 billion or 13.2 percent. Beijing has accumulated a staggering foreign reserve of over US$1.0 trillion, the major portion of which was invested in U.S. treasury bonds.

Although the United States has been pressuring China to revalue its currency so as to rebalance the bilateral trade, China also holds the United States hostage and can threaten to dump the U.S. dollar to make the dollar fall sharply. The U.S. delegation headed by Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke visited China in December for the inaugural meeting of new "strategic economic dialogue." China’s state-owned media interpreted the visit as an indication of China’s rising significance. The U.S. delegation failed to secure a single concession on Chinese currency revaluation.{mospagebreak}

China’s trade with the European Union reached US$250 billion last year, so China also remained the European Union’s second largest trade partner.

Soaring Medical Costs: The Top Social Issue in China

Poor Health Care Coverage

Mr. Shen, a retired worker in Beijing earns 1,000 yuan (US$125) in retirement income each month. In an interview with Voice of America, Shen said if he has even a minor ailment, it will cost him a few hundred yuan to visit the doctor, which is too costly for him. So he usually buys some medicinal vegetables to cook in soup on his own, or goes to a drug store to get some over-the-counter medicine. Shen’s practice is a common phenomenon among most Chinese citizens without medical insurance. In a survey about China’s current medical system, conducted by China Youth Daily, 90 percent of the 733 who were surveyed said they were not satisfied.

In the 2007 Social Blue Book (also called 2007: The Analysis and Forecast of China’s Social Situation), published on December 25, 2006, by the Chinese Academy of Social Sciences, Chief Editor Li Peilin says "soaring medical costs have plunged many rural and urban Chinese into poverty." The book was based on a survey that the Chinese Academy of Social Sciences conducted from March to July 2006. The survey covered 7,140 households in 28 provinces, municipalities, and autonomous regions.

According to the Blue Book, for the first time, soaring medical costs was listed as the number one social issue in China. Medical expenses had risen to 11.8 percent of household consumption, surpassing education and transportation. According to Xinhua News, statistics from the Health Ministry show that one-third of poor rural patients in China choose not to go to the hospital when they are sick, and 45 percent of hospitalized farmers ask to be discharged before they have recovered.

The Blue Book showed that in the countryside, basic health insurance coverage and comprehensive coverage is at 6.5 and 3.3 percent of the population, respectively. Almost everyone surveyed was unhappy about the medical charges they received and complained about the lack of effective controls.

The Widening Gap Between the High and Low Income Groups

Also in the Blue Book, Li Peilin indicated that the income ratio of the top 20 percent of the population versus the lowest-earning earners has reached 18 and the gap continues to widen.{mospagebreak}

As the income gap widens, the Chinese people are widely lowering their estimation of their own social and economic statuses, according to Li. Over half of the Chinese people believe they belong to the lowest or middle-to-lower class.

The Chinese self-estimates of a "middle class" rating are not only lower than those of the developed nations, including the United States, France, and Japan, but also lower than those of developing countries such as Brazil and India.

This phenomenon is the result of very rapid change in the distribution of China’s wealth and the ever-widening income gap, said Li. Many people are puzzled by the unfairness of the income-distribution system. As a result, particular attention must be paid to this issue.

Li stated that not only must the distribution results be readjusted, but also a system for fair opportunities and fair power must be established. If fair opportunities cannot be guaranteed, simply adjusting the income distribution to make it more equitable will not completely eliminate the dissatisfaction of the people, he said.


When Premier Wen Jiabao spoke at a conference in 2004 on the re-employment of laid-off workers, he stated that unemployment was to be a top priority for his administration. Two years later, according to the Blue Book, unemployment ranked second place in social concerns.

In a BBC news report on July 17, 2006, the Zhejiang Television Station published an ad to hire 147 cashiers for a highway in northern Zhejiang Province. Seven hundred and twenty out of 1,600 people who applied were college graduates. The cashier worked three shifts a day and made an annual income of 20,000 yuan (US$2,500). That means that five college graduates applied for each cashier position that only required high school skills.

The Xinhua News Agency claimed that the urban unemployment rate stood at 4.1 percent for the first nine months in 2006. However, many experts have questioned the accuracy of China’s officially published unemployment rate and wonder about the disputable technical definitions: whether it includes xia gang—people who became jobless due to the closing and restructuring of inefficient state-owned enterprises (SOEs), or people in their 40s who took early retirement packages and were bought out from their jobs. The BBC has reported that some analysts think the unemployment rate may be as high as 11.5 percent to 18.5 percent.{mospagebreak}

A newly emerging jobless classification is the college graduate. "Graduation equates to joblessness," has become common knowledge. The estimated number of college graduates in 2006 was 4.3 million, twice as many as in 2003 while the market demand was for only 1.5 million plus 0.7 million government municipal employee positions. This left two million graduates facing unemployment last year. As a result, many college graduates took low-paying jobs with a monthly salary averaging 1,000-2,000 yuan (US$125-$250) and could barely cover their basic living expenses.

The Acceleration of Corruption

According to a Voice of America (VOA) report on December 6, 2006, a survey by the Central Committee Party School of China (CCPS), the highest-ranked school for CCP ideology, shows that CCP cadres acknowledge that corruption is a major roadblock in China’s development—the "big enemy" of China’s social harmony.

The CCP’s Research Group for a Harmonious Socialist Society recently conducted a survey of 300 cadres who are leaders of departments or prefectures or their equivalents. The survey results indicated that corruption is the highest-priority issue, second only to the issue of social security.

The Journal of the Party School acknowledged that even though measures were taken, corruption in 2006 continued to spread like the plague in China and involved higher ranking officials, larger amounts of money, and has grown from an individual activity to systematic corruption.

"Like many other phenomena that occur during social development, corruption exists not just in China. It occurs in democratic countries as well as in authoritarian nations, although the systematic and widespread corruption is an issue unique to China," concluded an article published in the CCP’s newspaper Study Times.

Cao Changqing, former associate editor-in-chief of the Shenzhen Youth Daily and a Chinese political commentator living in the United States, responded when interviewed by VOA: "When Beijing stresses that stability is the top-most priority, it implies that society is already very unstable. Now it widely promotes the construction of a ‘harmonious society.’ It shows that China’s society is rather inharmonious. The widespread corruption largely accounts for the lack of harmony in the society."

Cao said to VOA that China’s corruption is not limited to the ruling Party. Today’s China is full of both "hardware" and "software" corruption.{mospagebreak}

Hardware corruption is the corruption of the whole system. Nowadays there is not only a lack of ethics among individuals, but the whole system is corrupt. There is no rule of law, effective supervision, or planned elections.

In China, there is no independent judicial system. This is by itself a manifestation of corruption, Cao said. Such hardware corruption not only fails to suppress corruption, but also provides nutritious soil and favorable conditions for corruption.

Cao also points out that the "software" factors that nurture corruption include the lack of rule by law and the lack of individualism in China’s traditional culture.

After experiencing 10 years of "Cultural Revolution," China witnessed the emergence of the "Party Culture," which magnifies the worst elements in China’s traditional culture and pushes them to the extreme, Cao continued. As a result, people mistrust and deceive one another. The ultra-selfishness and dishonesty fill every corner of society.

The Sixth Plenary Session of the 16th CCP Central Committee held in Beijing from October 8-11, 2006, discussed and passed "decisions on key issues in building a socialist harmonious society." A nationwide campaign to "build a socialist harmonious society" followed afterward.

People are wondering how China can achieve "harmony" given the list of serious ongoing social issues. Cao told VOA, "They need a fundamental reform of the system: election, freedom of the press, and an independent legislative system."

Water Shortages and Air Pollution Top China’s Environment Problems

While a Chinese citizen consumes less than half of the world average for energy, China’s energy intensity per unit of GDP is 50 percent more than the world average [4].

Many ecological problems have developed in China over the past several years. Among the two most challenging in 2006 were water shortage and air pollution.{mospagebreak}

China has an estimated 26,000 active coal mines, which emit approximately 13.5 billion cubic meters of methane. In addition, China is the largest emitting country of black carbon (BC) in the world, releasing 17 percent of global BC emissions, which is believed to be the second most important global warming gas after CO2. Most of BC emissions are produced by burning crop residues, a common practice in rural China. Although the Asia Development Bank started a US$77 million project helping villagers to use village scaled gasifiers in Henan, Hubei, Jiangxi, and Shanxi provinces, the problem is far from being solved.

More than one million Chinese die from respiratory diseases due to severe air pollution each year, costing the equivalent annual salaries of five million people. China’s regional haze, largely caused by coal combustion and burning agricultural wastes, is depressing 70 percent of crops by up to 30 percent [5].

Among the 660 cities in China, 400, or over 60 percent, are short of water. Among these 400, 130 are seriously short of water. Many methods have been used to lower water usage: a quota for city dwellers, higher prices for water, education, and some permanent construction to solve the problem once and for all, such as the ambitious south-to-north water project.

The year 2006 saw the continuing construction of the south-to-north water project that will take water in three canals from the Yangtze Basin and carry it 3,000 km (1864 miles) to the Yellow, Huai, and Hai river basins in the north. Many have criticized this US$60 billion project for using outdated and inaccurate assumptions, exaggerating water consumption predictions, and neglecting to perform an integrated resource plan that compares the full costs, benefits, and risks [6].

On top of this, water projects, including dam building, have increasingly caused conflict among communities refusing to be resettled and from environmentalists demanding more transparency in the decision-making process.

China stands at a crossroad—the choices made today will determine the country’s ability to stem the growing political, economic, social, and environmental problems in the future.

Leon Chao, Ann Lee, and Xiao Tian are correspondents for Chinascope.

[1] Beijing’s ‘soft power’ offensive By Purnendra Jain and Gerry Groot  at
[3] People’s Daily, January 8, 2007
[5] China Environment Series, Issue 8, 2006, page 61.
[6] Global Water Partnership, 2005,